UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(RULE
14a-101)
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment
No. )
Filed
by the Registrant ☒
Filed
by a Party other than the Registrant ☐
Check
the appropriate box:
| ☐ |
Preliminary
Proxy Statement |
| ☐ |
Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ☒ |
Definitive
Proxy Statement |
| ☐ |
Definitive
Additional Materials |
| ☐ |
Soliciting
Material Pursuant to Section 240.14a-12 |
Sigma
Additive Solutions, Inc.
(Exact
name of registrant as specified in its charter)
N/A
(Name
of person(s) filing proxy statement, if other than the registrant)
Payment
of Filing Fee (check the appropriate box):
| ☒ |
No
fee required. |
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| ☐ |
Fee
paid previously with preliminary materials |
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| ☐ |
Fee
computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. |
SIGMA
ADDITIVE SOLUTIONS, INC.
3900
Paseo del Sol
Santa
Fe, New Mexico 87507
TO
THE STOCKHOLDERS OF Sigma Additive Solutions, Inc.:
You
are cordially invited to attend an Annual Meeting of the stockholders of Sigma Additive Solutions, Inc., a Nevada corporation (referred
to herein as “SASI,” “Sigma,” the “Company,” “we,” “us”
or “our”), which will be held virtually, via live webcast on December 28, 2023, at 10:00 a.m. Mountain
Time. You will be able to attend the Annual Meeting by first registering at http://www.viewproxy.com/Sigma/2023/htype.asp no later than
December 27, 2023, at 11:59 p.m. Eastern Time. After registering, you will receive a meeting invitation and password via e-mail
with your unique link to join the meeting. Stockholders will be able to listen, vote and submit questions during the virtual Annual Meeting.
At
the Annual Meeting, our stockholders will be asked to consider and vote upon a proposal, which we refer to as the “Acquisition
Proposal,” to approve the issuance of shares of our common stock pursuant to that certain Share Exchange Agreement dated October
12, 2023 (as amended from time to time, the “Exchange Agreement”) among Sigma, NextTrip Holdings, Inc. (“NextTrip”),
NextTrip Group, LLC, the parent company of NextTrip (the “NextTrip Parent”), and William Kerby, in the capacity as
the “NextTrip Representative”, in exchange for all of the issued and outstanding capital stock of NextTrip. We refer
to the exchange as the “Acquisition” and to the shares of our common stock issuable pursuant to the Exchange Agreement
as the “Exchange Shares.” A copy of the Exchange Agreement is attached to the accompanying proxy statement as Annex
A. In connection with the Acquisition, we are asking our stockholders to approve amendments to our Amended and Restated
Articles of Incorporation (the “Articles of Incorporation”) as reflected in the form of Certificate of Amendment
to the Articles of Incorporation attached as Annex B to the accompanying proxy statement (the “Amendment”).
Upon
the closing of the Acquisition, the NextTrip Parent’s members, which we sometimes refer to as the “NextTrip Sellers,”
will be issued a number of Exchange Shares equal to 19.99% or our issued and outstanding shares of common stock immediately prior to
the closing of the Acquisition. Under the Exchange Agreement, the NextTrip Sellers will be entitled to receive additional Exchange Shares,
which are referred to as the “Contingent Shares,” subject to NextTrip’s achievement of future milestones specified
in the Exchange Agreement. The Contingent Shares, together with the Exchange Shares issued at the closing of the Acquisition, will not
exceed 6,000,000 shares of our common stock. Assuming all the business milestones are achieved and no other change in our outstanding
shares as of September 30, 2023, the NextTrip Sellers will receive Exchange Shares equal to approximately 88.5% of the outstanding shares
of our common stock immediately following the issuance of all the Exchange Shares and Sigma stockholders as of immediately prior to closing
of the Acquisition will retain the balance of approximately 11.5% of such outstanding shares. Following the closing of the Acquisition,
and subject to stockholder approval, the Company will change its corporate name to “NextTrip, Inc.” References to NextTrip,
Inc. mean the Company following the Acquisition and such name change.
Apart
from the Acquisition, Sigma entered into an Asset Purchase Agreement with Divergent Technologies, Inc. (“Divergent”),
dated October 6, 2023, pursuant to which Sigma has agreed to sell to Divergent certain assets, consisting primarily of patents,
software code and other intellectual property (the “Asset Sale”). It is anticipated that the Asset Sale
will take place promptly after the closing of the Acquisition.
Sigma’s
common stock is listed on The Nasdaq Capital Market under the symbol “SASI.” We currently expect that the trading symbol
for the common stock will be changed in connection with the Acquisition to better align with the new name of the Company.
In
connection with its evaluation of the Acquisition, the board of directors of Sigma (the “Board”) engaged Lake Street
Capital Markets, LLC (“Lake Street”) to act as its financial advisor. Lake Street has rendered its opinion
that, based upon and subject to the assumptions, limitations and qualifications set forth in their opinion, the issuance of the Exchange
Shares to the NextTrip Sellers under the Exchange Agreement is fair, from a financial point of view, to Sigma. A copy of Lake Street’s
written opinion is attached as Annex C to the accompanying proxy statement.
At
the Annual Meeting, our stockholders will be asked to consider and vote upon:
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1) |
the
Acquisition Proposal to approve the issuance of the Exchange Shares in exchange for all the capital stock of NextTrip and the other
terms and conditions of the Exchange Agreement and the transactions contemplated thereby; |
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2) |
the
approval of the Amendment to (a) change the Company’s corporate name to “NextTrip, Inc.” (the “Name Change”
and the “Name Change Proposal”) following completion of the Acquisition; |
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3) |
the
approval of the Amendment to increase the authorized shares of our common stock (the “Capital Increase” and “Capital
Increase Proposal”) from 1,200,000 shares to 100,000,000 shares; |
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4) |
the
election of two Class III directors (the “Election of Directors Proposal”) to serve until the 2026 annual meeting
of stockholders and until their respective successors are duly elected and qualified, subject to their earlier death, resignation
or removal; |
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5) |
the
approval, on a non-binding advisory vote basis, of the compensation payable to Sigma’s named executive officers as disclosed
in the accompanying proxy statement (the “Say on Pay” and the “Say on Pay Proposal”); |
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6) |
the
recommendation, on a non-binding advisory vote basis, of the frequency of future advisory votes on executive compensation (the “Frequency
of Say on Pay” and the “Frequency of Say on Pay Proposal”); |
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7) |
the
approval of the Sigma Additive Solutions, Inc. 2023 Equity Incentive Plan (the “Equity Incentive Plan” and the
“Equity Incentive Plan Proposal”); |
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8) |
the
ratification of Haynie & Company as our independent registered public accounting firm for our fiscal year ending December 31,
2023 (the “Ratification of Accountant Proposal”); |
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9) |
the
adjournment of the Annual Meeting by the Chairman thereof to a later date to permit further solicitation and vote of proxies if,
based upon the tabulated vote at the time of the Annual Meeting, there are not sufficient votes to approve the Acquisition Proposal
or the Amendment (the “Adjournment Proposal”); and |
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10) |
the
transaction of such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. |
Each
of these proposals is more fully described in the accompanying proxy statement, which each stockholder is encouraged to carefully read
and consider.
We
are providing the proxy statement and accompanying proxy card to our stockholders in connection with the solicitation of proxies to be
voted at the Annual Meeting and at any adjournment or postponement of the Annual Meeting. Whether or not you plan to attend the Annual
Meeting, please take the time to vote by one of the means described in the accompanying proxy statement. YOUR VOTE IS VERY IMPORTANT.
Thank
you for your participation. We look forward to your continued support.
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Sincerely, |
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| December 1, 2023 |
/s/
Jacob Brunsberg |
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Jacob
Brunsberg
President
and Chief Executive Officer |
SIGMA
ADDITIVE SOLUTIONS, INC.
3900
Paseo del Sol
Santa
Fe, New Mexico 87507
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS.
To
Be Held on December 28, 2023
YOUR
VOTE IS VERY IMPORTANT.
PLEASE
VOTE YOUR SHARES PROMPTLY.
NOTICE
IS HEREBY GIVEN, that you are cordially invited to attend an Annual Meeting (the “Annual Meeting”) of stockholders
of Sigma Additive Solutions, Inc., to be held virtually, via live webcast
The
purpose of the Annual Meeting is to consider and vote upon:
1)
the Acquisition Proposal – approval of the issuance of the Exchange Shares in exchange for all the capital stock of NextTrip and
the other terms and conditions of the Exchange Agreement and the transactions contemplated thereby;
2)
the Name Change Proposal – the approval of the Amendment to change the Company’s corporate name to “NextTrip
Inc.” following completion of the Acquisition;
3)
the Capital Increase Proposal – the approval of the Amendment to increase the authorized shares of our common stock from
1,200,000 to 100,000,000 shares;
4)
the Election of Directors Proposal – the election
of two Class III directors to serve until the 2026 annual meeting of stockholders and until their respective successors are duly elected
and qualified, subject to their earlier death, resignation or removal;
5)
the Say on Pay Proposal – the approval, on
a non-binding advisory vote basis, of the compensation payable to Sigma’s named executive officers as disclosed in the accompanying
proxy statement;
6)
the Frequency of Say on Pay Proposal – the
recommendation, on a non-binding advisory vote basis, of the frequency of future advisory votes on executive compensation;
7)
The Equity Incentive Plan Proposal – the approval
of the Sigma Additive Solutions, Inc. 2023 Equity Incentive Plan;
8)
the Ratification of Accountant Proposal –
to ratify the appointment of Haynie & Company as our independent registered public accounting firm for our fiscal year ending December
31, 2023;
9)
the Adjournment Proposal – the approval of
the adjournment of the Annual Meeting by the Chairman thereof to a later date to permit further solicitation and vote of proxies if,
based upon the tabulated vote at the time of the Annual Meeting, there are not sufficient votes to approve the Acquisition Proposal or
the Amendment; and
10)
the transaction of such other business as may properly
come before the Annual Meeting or any adjournment or postponement thereof.
The
accompanying proxy statement and our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which is part of
these proxy materials, can be accessed directly at the following Internet address: http://www.viewproxy.com/Sigma
Only
holders of record of the Company’s common stock at the close of business on November 20, 2023, or the “Record Date,”
are entitled to notice of the Annual Meeting and to vote and have their votes counted at the Annual Meeting and any adjournment or postponement
of the Annual Meeting. We intend to mail these proxy materials beginning on or about December 1, 2023 to all stockholders of record
entitled to vote at the Annual Meeting.
A
complete list of the stockholders entitled to vote at the Annual Meeting will be available for examination during regular business hours
for the ten (10) days prior to the Annual Meeting by request. You may email us at frank.orzechowski@sigmaaddditive.com to coordinate
arrangements to view the stockholder list.
After
careful consideration, the Board unanimously recommends that you vote, or instruct your broker or the agent to vote:
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“FOR”
the Acquisition Proposal; |
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“FOR”
the Name Change Proposal; |
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“FOR”
the Capital Increase Proposal; |
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“FOR” each of the individuals nominated
for election as Class III directors pursuant to the Election of Directors Proposal; |
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“FOR”
the Say on Pay Proposal; |
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“EVERY
THREE YEARS” on the Frequency of Say on Pay Proposal; |
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“FOR”
the Equity Incentive Plan Proposal; |
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“FOR”
the Ratification of Accountant Proposal; and |
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“FOR”
the Adjournment Proposal, if presented. |
YOUR
VOTE IS IMPORTANT
WHETHER
OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, WE ENCOURAGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE (1) THROUGH THE
INTERNET, (2) BY PHONE OR (3) BY MARKING, SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED.
You may revoke your proxy or change your vote at any time before the closing of voting at the Annual Meeting. If your shares are held
in the name of a bank, broker or other nominee, please follow the instructions on the voting instruction card furnished to you by such
bank, broker or other nominee, which is considered the stockholder of record, in order to vote. As a beneficial owner, you have the right
to direct your broker or other agent on how to vote the shares in your account. Without your instructions, your broker can vote your
shares only with respect to routine matters such as the Name Change Proposal, the Ratification of Accountant Proposal and the
Adjournment Proposal. Without your instructions, your broker or other agent cannot vote on the Acquisition Proposal, the Capital
Increase Proposal, the Election of Directors Proposal, the Say on Pay Proposal, the Frequency of Say on Pay Proposal or the
Equity Incentive Plan Proposal.
If
you fail to return your proxy card, grant your proxy electronically over the Internet, submit your vote over the phone, or vote virtually
at the Annual Meeting, your shares will not be counted for purposes of determining whether a quorum is present at the Annual Meeting.
If you are a stockholder of record as of the Record Date, voting virtually at the Annual Meeting will revoke any proxy that you previously
submitted. If you hold your shares through a bank, broker or other nominee, you must obtain from the record holder a valid “legal”
proxy issued in your name in order to vote virtually at the Annual Meeting.
We
encourage you to read the accompanying proxy materials carefully. If you have any questions concerning the Acquisition, the Annual Meeting
or the accompanying proxy materials, would like additional copies of the proxy materials or need help voting your shares of common stock,
please contact our Chief Financial Officer and Secretary, Frank Orzechowski, at (203) 733-1356 or frank.orzechowski@sigmaadditive.com.
Thank
you for your participation. We look forward to your continued support.
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By
Order of the Board of Directors, |
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Sigma
Additive Solutions, Inc. |
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|
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/s/
Jacob Brunsberg |
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Jacob
Brunsberg |
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President
and Chief Executive Officer |
TABLE
OF CONTENTS
| ANNEX
A |
Share
Exchange Agreement, dated October 12, 2023 by and among Sigma Additive Solutions, Inc., NextTrip Holdings, Inc., NextTrip Group, LLC
and William Kerby, in the capacity as the NextTrip Representative, as amended by the First Amendment thereto dated as of November
19, 2023. |
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| ANNEX
B |
Form of Certificate of Amendment to Amended and Restated Articles of Incorporation |
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ANNEX
C
|
Opinion of Lake Street Capital Markets, LLC |
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| ANNEX
D |
Sigma Additive Solutions, Inc. 2023
Equity Incentive Plan |
FORWARD-LOOKING
STATEMENTS
This
proxy statement, including information incorporated by reference into this proxy statement, contains forward-looking statements regarding,
among other things, Sigma’s plans, strategies and prospects, both business and financial. Although Sigma believes that its plans,
intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, Sigma cannot assure you that
we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties
and assumptions including, without limitation, the factors described under “Risk Factors” in this proxy statement
and from time to time in Sigma’s other filings with the Securities and Exchange Commission, or the “SEC”. Many
of the forward-looking statements contained in this presentation may be identified by the use of forward-looking words such as “believe”,
“expect”, “anticipate”, “should”, “planned”, “will”, “may”, “intend”,
“estimated”, “aim”, “on track”, “target”, “opportunity”, “tentative”,
“positioning”, “designed”, “create”, “predict”, “project”, “seek”,
“would”, “could”, “continue”, “ongoing”, “upside”, “increases”
and “potential”, among others. Important factors that could cause actual results to differ materially from the forward-looking
statements we make in this proxy statement and the materials incorporated by reference herein are set forth in other reports or documents
that we file from time to time with the SEC, and include, but are not limited to:
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● |
the
occurrence of any event, change or other circumstances that could give rise to the termination of the Exchange Agreement; |
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the
ability to maintain the listing of NextTrip, Inc. common stock on Nasdaq following the Acquisition; |
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expectations
as to when the Acquisition will close; |
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changes
adversely affecting the business of the Company or NextTrip before or after the Acquisition; |
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management
of NextTrip, Inc.’s growth; |
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general
economic conditions; |
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NextTrip,
Inc.’s business strategy and plans; |
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the
result of future financing efforts; and |
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and
the other factors summarized under the section entitled “Risk Factors.” |
You
are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this proxy statement.
All forward-looking statements included herein attributable to any of Sigma, NextTrip, the NextTrip Parent or any person acting on any
party’s behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.
Except to the extent required by applicable laws and regulations, none of Sigma, NextTrip and the NextTrip Parent have any obligation
to update these forward-looking statements to reflect events or circumstances after the date of this proxy statement or to reflect the
occurrence of unanticipated events.
SUMMARY
TERM SHEET
This
Summary Term Sheet provides an overview of material information regarding the proposed Acquisition and may not contain all of the information
that is important to you. You should carefully read this entire proxy statement, including the Exchange Agreement attached as Annex
A and the written opinion of Lake Street relating to the Acquisition attached as Annex C, for a more complete
understanding of the Acquisition and the Exchange Agreement and related matters. You may obtain the information incorporated by reference
into this proxy statement without charge by following the instructions in the section titled “Where You Can Find More Information”
beginning on page 124.
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The
Acquisition (page 32) |
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Sigma,
NextTrip, the NextTrip Parent, and the NextTrip Representative have entered into the Exchange Agreement. The Exchange Agreement provides
for our acquisition of all the capital stock of NextTrip in exchange for our issuance to the NextTrip Sellers the number of shares
of our common stock equal to 19.99% of the outstanding shares of our common stock immediately prior to the closing of the Acquisition
(the “Closing Shares”), plus additional Contingent Shares upon NextTrip’s achievement of milestones specified
in the Exchange Agreement as follows: |
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Milestone |
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Date
Earned |
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Contingent
Shares |
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Launch
of NextTrip’s leisure travel booking platform by either (i) achieving $1,000,000 in cumulative sales under its historical “phase
1” business, or (ii) commencement of its marketing program under its enhanced “phase 2” business. |
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As
of a date six months after the closing date |
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1,450,000
Contingent Shares |
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Launch
of NextTrip’s group travel booking platform and signing of at least five (5) entities to use the groups travel booking platform. |
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As
of a date nine months from the closing date (or earlier date six months after the closing
date)
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1,450,000
Contingent Shares |
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Launch
of NextTrip’s travel agent platform and signing up of at least 100 travel agents to the platform (which calculation includes
individual agents of an agency that signs up on behalf of multiple agents). |
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As
of a date 12 months from the closing date (or earlier date six months after the closing date) |
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1,450,000
Contingent Shares |
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Commercial
launch of PayDelay technology in the NXT2.0 system. |
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As
of a date 15 months after the closing date (or earlier date six months after the closing date) |
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1,650,000
Contingent Shares, less the Exchange Shares issued at the closing of the Acquisition |
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Alternatively,
independent of achievement of the foregoing milestones, for each month during the 15-month period following the closing date
in which $1,000,000 or more in gross travel bookings are generated by NextTrip, Inc., to the extent not previously issued, the Contingent
Shares will be issuable in the order indicated above up to the maximum Exchange Shares issuable under the Share Exchange Agreement. |
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In
no event, however, will the Contingent Shares, together with the Closing Shares, exceed 6,000,000 shares of our common stock, subject
to adjustment in the event of future stock splits, reverse stock splits and similar events. |
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Our
stockholders immediately prior to the closing of the Acquisition will continue to own their shares of our common stock. As a result
of the Acquisition, NextTrip will become a wholly owned subsidiary of Sigma, which, subject to stockholder approval of the Name Change
Proposal, will change its name to “NextTrip, Inc.”
Assuming
all the milestones are achieved and no change in our outstanding shares as of September 30, 2023, the NextTrip Sellers will receive
Exchange Shares equal to approximately 88.5% of the outstanding shares of our common stock immediately following the issuance of
all the Exchange Shares and Sigma stockholders as of immediately prior to closing of the Acquisition will retain the balance of approximately
11.5% of such outstanding shares.
The
Exchange Shares will be issued without registration under the Securities Act of 1933, as amended (the “Securities Act”),
in reliance upon an exemption from registration for transactions not involving a public offering and, as such, will constitute “restricted
securities” within the meaning of Rule 144 under the Securities Act.
The Exchange Agreement provides that in the
event our stockholders approve the Acquisition Proposal but not the Capital Increase Proposal, to the extent that we do not have
sufficient authorized shares of common stock available for issuance of the Exchange Shares, in lieu thereof, we will issue shares
of a new series of convertible preferred stock in form and substance satisfactory to the NextTrip Representative which, among other
things, will provide for voting on an as-converted basis and will be automatically converted (on a one-for-one basis) into shares
of our common stock once stockholder approval for an increase in our authorized shares of common stock has been obtained. |
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NextTrip
Holdings, Inc. (page 78) |
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NextTrip
is a closely held, innovative technology company engaged in building next-generation solutions to power the travel industry based
upon its proprietary NXT2.0 booking technology platform acquired in June 2022. Previously, this technology powered the business of
Bookit.com, an online leisure travel agent generating over $450 million in annual sales as recently as 2019 (pre-COVID-19 pandemic). |
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Management
following the Acquisition (page 33) |
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Neither
Sigma nor any of its affiliates has an ownership interest in or is otherwise affiliated
with NextTrip or its affiliates and, except for the Acquisition, there have been no transactions
or dealings between Sigma and the other parties to the Exchange Agreement or their affiliates
during the periods for which financial statements of the parties are included in this
proxy statement. |
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Jacob
Brunsberg, our current President and Chief Executive Officer, will resign from such position upon the closing of the Acquisition.
William Kerby, the co-founder and Chief Executive Officer of NextTrip, and Donald P. Monaco, a member of the Board of Managers
of the NextTrip Parent, will be appointed as Chief Executive Officer and as a director, respectively, of NextTrip, Inc.
It is anticipated that four of the five current directors, including Mr. Brunsberg, and the Chief Financial Officer of Sigma will continue to serve
in the same capacities with NextTrip, Inc. and that the executive officers of NextTrip will continue to serve as its executive officers
following the acquisition. |
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Stockholders’
Meeting (page 10) |
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At
the Annual Meeting to be held virtually, via live webcast on December 28, 2023, at 10:00 a.m. Mountain Time, our stockholders
will be asked to approve the issuance of the Exchange Shares and other terms and conditions of the Exchange
Agreement and the transactions contemplated thereby. Our stockholders also will be asked to approve the related Name Change Proposal
and the Capital Increase Proposal, as well as the Election of Directors Proposal, the Say on Pay Proposal, the Frequency of Say on Pay Proposal, the Equity Incentive Plan Proposal, the Ratification
of Accountant Proposal and, if presented, the Adjournment Proposal. |
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Financial
Accommodations (page 33) |
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Subject
to certain limitations, NextTrip agrees in the Exchange Agreement to provide us with a line of credit of up to $400,000, which
may be used to support our business and operations, pay transaction expenses and other liabilities. |
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Nasdaq
Listing (page 33) |
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Our
common stock is listed on The Nasdaq Capital Market, or Nasdaq, under the symbol “SASI.”
We currently expect that the trading symbol for our common stock will be changed after the Acquisition to better align with the new name of the Company. The closing of
the Acquisition is subject to the satisfaction of Nasdaq’s standards for continued
listing of NextTrip, Inc. common stock, among other conditions referred to below.
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Certain
Covenants (page 36) |
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The
Exchange Agreement contemplates that following the Acquisition we will sell certain patents, trademarks and other intellectual property
pursuant to the previously announced Asset Purchase Agreement, dated as of October 6, 2023, with Divergent Technologies, Inc.,
or Divergent. The Exchange Agreement also contains customary covenants of the parties regarding the operation of their respective
businesses pending the closing of the Acquisition or termination of the Exchange Agreement. |
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Closing
Conditions (page 38) |
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The
closing of the Acquisition is subject to our stockholders’ approval of our issuance
of the Exchange Shares in connection with the Acquisition, as well as other customary conditions.
We currently expect that the Acquisition will be completed promptly following the Annual
Meeting if the Acquisition is approved.
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Our
Board’s Recommendations (page 82)
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Our
Board of Directors has unanimously approved the Exchange Agreement, the Acquisition
and the other transactions contemplated thereby and the related Amendment of our Amended
and Restated Articles of Incorporation and recommends that our stockholders approve the issuance
of the Exchange Shares in the Acquisition and other terms and conditions of the Exchange
Agreement and the transactions contemplated thereby and the Amendment.
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Opinion
of Lake Street Capital Markets, LLC (page 48) |
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Lake
Street Capital Markets, LLC has provided a written opinion, dated October 12, 2023,
to our Board of Directors to the effect that, as of the date of the written opinion and based
on and subject to the matters described in the written opinion, the issuance of the Exchange
Shares to the NextTrip Sellers under the Exchange Agreement is fair, from a financial point
of view, to Sigma. |
QUESTIONS
AND ANSWERS ABOUT THE PROPOSALS AND THE ANNUAL MEETING
The
following are answers to some questions that Sigma stockholders may have regarding the Acquisition Proposal, the Name Change Proposal,
the Capital Increase Proposal and the other matters being considered at Sigma’s Annual Meeting of Stockholders, which is referred
to herein as the “Annual Meeting.” We urge you to carefully read the remainder of this proxy statement because the
information in this section does not provide all the information that might be important to you with respect to the Acquisition and the
other matters being considered at the Annual Meeting. Additional important information is also contained in the Annexes to this proxy
statement and in the documents incorporated by reference herein.
| Q: |
Why
am I receiving this proxy statement? |
| |
|
| A: |
The
Board is soliciting your proxy to vote at the Annual Meeting because you owned shares of
Sigma common stock at the close of business on November 20, 2023 (the “Record
Date”) for the Annual Meeting and are therefore entitled to vote at the Annual
Meeting. This proxy statement summarizes the information that you need to know in order to
cast your vote at the Annual Meeting. You do not need to attend the Annual Meeting to vote
your shares of Sigma common stock.
|
| |
Under
rules adopted by the SEC, we have mailed the full set of our proxy materials, including this proxy statement, the proxy card and
our Annual Report on Form 10-K for the year ended December 31, 2022, to our stockholders of record as of the Record Date, beginning
on or around December 1, 2023. The proxy materials are also available to view and download at http://www.viewproxy.com/Sigma/2023. |
| |
|
| Q: |
When
and how will the Annual Meeting be held? |
| |
|
| |
The
Annual Meeting will be held virtually at 10:00 a.m. Mountain Time on December 28,
2023. In order to attend the meeting, you must register at http://viewproxy.com/Sigma/2023/htype.asp
by 11:59 p.m. Eastern Time on December 27, 2023. You will not be able to attend
the Annual Meeting in person.
|
| Q: |
How
do I attend and participate in the Annual Meeting online?
|
| A: |
The
Annual Meeting will be a completely virtual meeting of stockholders and will be webcast live
over the Internet. Any stockholder can attend the virtual meeting live by registering at
http://www.viewproxy.com/Sigma/2023/htype.asp. The webcast will start at 10:00
a.m. Mountain Time. Stockholders as of the Record Date may vote and submit questions while
attending the Annual Meeting online. You will not be able to attend the Annual Meeting in
person. Stockholders attending the Annual Meeting online will be afforded the same rights
and opportunities to participate as they would at an in-person meeting.
|
| |
To
enter the Annual Meeting, you will need the control number, which is included in your proxy
materials if you are a stockholder of record of shares of our common stock or included with
your voting instructions and materials received from your broker, bank or other agent if
you hold your shares of common stock in a “street name.” Instructions on how
to attend and participate are available at http://www.viewproxy.com/Sigma/2023/htype.asp.
We recommend that you log in a few minutes before 10:00 a.m. Mountain Time to
ensure you are logged in when the Annual Meeting starts. The webcast will open 15 minutes
before the start of the Annual Meeting.
If
you would like to submit a question during the Annual Meeting, you may log in to the virtual meeting using your control number, type your question into the “Ask a Question” field, and click “Submit.”
|
| |
|
| Q: |
What
happens if there are technical difficulties during the Annual Meeting? |
| |
|
| A: |
We
will have technicians ready to assist you with any technical difficulties you may have accessing
the Annual Meeting, voting at the Annual Meeting or submitting questions at the Annual Meeting.
If you encounter any difficulties accessing the virtual Annual Meeting during the check-in
or meeting time, please refer to the technical support information located at http://www.viewproxy.com/Sigma/2023/htype.asp.
If
we experience technical difficulties at the Annual Meeting and are not able to resolve them within a reasonable amount of time, we
will adjourn the Annual Meeting to a later date and will provide notice of the date and time of such adjourned meeting at http://sigmaadditive.com/investors/proxy-materials
and in a Current Report on Form 8-K that we will file with the SEC. For additional information on how you can attend any postponement
or adjournment of the Annual Meeting, see “What happens if the Annual Meeting is postponed or adjourned” below. |
| |
|
| Q: |
Will
a list of record stockholders as of the Record Date be available?
|
| A: |
For
the ten days prior to the Annual Meeting, the list of stockholders of record on the Record
Date will be available for examination by any stockholder of record for a legally valid purpose
by request. You can contact our Chief Financial Officer and Secretary, Frank Orzechowski,
at (203) 733-1356 or at frank.orzechowski@sigmaadditive.com to coordinate arrangements to
view the stockholder list.
|
| Q: |
On
what matters will I be voting? |
| |
|
| A: |
Sigma,
NextTrip, the NextTrip Parent, and the NextTrip Representative have entered into the Exchange
Agreement dated as of October 12, 2023 pursuant to which Sigma has agreed to issue the Exchange
Shares in exchange for all the capital stock of NextTrip, which we refer to as the Acquisition.
A copy of the Exchange Agreement is attached to this proxy statement as Annex A,
and Sigma encourages you to read it in its entirety.
Sigma’s
stockholders are being asked to consider and vote upon proposals relating to the Acquisition; specifically, to adopt and approve
the Acquisition Proposal, the Amendment to effect the Name Change and the Capital Increase, which, among other things, provide
for: (a) issuing the Exchange Shares; (b) changing the Company’s name to “NextTrip, Inc.” following the Acquisition;
and (c) increasing the authorized shares of our common stock from 1,200,000 to 100,000,000 shares. Sigma’s stockholders are also being asked to approve the election of two
Class III directors, the Say on Pay Proposal, the Frequency of Say on Pay Proposal, the
Equity Incentive Plan Proposal and the Ratification of Accountant Proposal.
Sigma’s
stockholders may also be asked to consider and vote upon the Adjournment Proposal to authorize the Chairman of the Annual Meeting
to adjourn the Annual Meeting to a later date or dates to permit further solicitation and vote of proxies if, based upon the tabulated
vote at the time of the Annual Meeting, there are not sufficient votes to approve the Acquisition Proposal or the Amendment.
|
Stockholders
are encouraged to vote as soon as possible after carefully reviewing this proxy statement and the Annexes attached hereto. If Sigma stockholders
fail to adopt and approve the Acquisition Proposal, the Acquisition cannot be completed.
| Q: |
Why
is Sigma proposing the Acquisition? |
| |
|
| A: |
Based
on a lengthy and extensive evaluation of possible strategic transactions, due diligence investigation of NextTrip and the industry
in which it operates, including the financial and other information provided by NextTrip, our Board of Directors believes
that the Acquisition will provide Sigma stockholders with an opportunity to participate in the future growth potential of NextTrip.
The Asset Sale as contemplated by the Exchange Agreement will allow our stockholders to realize the value of Sigma’s
current assets as well. |
| Q: |
Who
will be the directors of the Company following the Acquisition? |
| |
|
| A: |
As
of the closing of the Acquisition, Donald P. Monaco, a member of the Board of Managers of the NextTrip Parent, will be appointed
as a director of NextTrip, Inc. We currently anticipate that four of the five current directors of Sigma, including Jacob Brunsberg, will continue to
serve as directors of NextTrip, Inc. Under the Exchange Agreement, the NextTrip Representative will be entitled to appoint one additional
director of NextTrip, Inc. to replace a then-existing director (other than individuals previously appointed by the NextTrip Representative)
upon NextTrip’s achievement of each of the milestones specified in the Exchange Agreement. |
| Q: |
Who
will be the executive officers of the Company immediately following the Acquisition? |
| |
|
| A: |
Immediately
following the Acquisition, the executive management team of NextTrip, Inc. is expected to be as follows: |
| Name |
|
Position |
| William
Kerby |
|
Chief
Executive Officer |
| Frank
Orzechowski |
|
Chief
Financial Officer |
| |
It
is anticipated that the current executive officers of NextTrip will continue to serve as
its executive officers following the Acquisition.
|
| Q: |
Will
the Company continue business and operations after the Acquisition? |
| |
|
| A: |
Yes,
the Company will continue the business and operations of NextTrip after the Acquisition.
NextTrip is an innovative technology company that is building next-generation solutions to
power the travel industry. NextTrip, together with its wholly owned subsidiaries, is a travel
company that connects people to new places and discoveries by utilizing digital media engagement,
seasoned planning expertise, and unique inventory to curate custom vacations across the globe.
By bridging technology, media and product offerings, NextTrip engages with the travelers
of today while also building relationships with the travelers of tomorrow. The Exchange
Agreement contemplates that the Asset Sale will take place promptly after the closing
of the Acquisition.
Pending
the Acquisition and the Asset Sale, the Company has reduced its employee headcount and suspended
product development activities to reduce our expenses. The Company is continuing to operate
and support its existing customers who have maintenance agreements and leases in place, supporting
new installations in the field, and actively seeking potential sales of the PrintRite3D systems
and software to customers who have lease agreements in place, systems on consignment, or
otherwise express interest in Sigma’s products available for sale. The Company completed
two such sales in the quarter ended September 30, 2023, and believes additional sales are
achievable going forward as we progress towards closing the Acquisition and the Asset Sale. |
| |
|
| Q: |
What
material factors did the Board consider in approving the Acquisition? |
| |
|
| A: |
In
approving the Acquisition, the Board considered a number of positive and negative factors
described in the “Sigma’s Reasons for the Acquisition” section beginning
on page 41 of this proxy statement, and overall believes that the positive factors
outweigh any negative factors.
Please
also read with particular care the detailed description of the risks described in the “Risk Factors” section beginning
on page 19 of this proxy statement. |
| |
|
| Q: |
Why
is Sigma proposing the Name Change? |
| |
|
| A: |
The Board is submitting the Name Change Proposal for our stockholders’
approval to better align our name to reflect the NextTrip business following the Acquisition. |
| |
|
| Q: |
Why
is Sigma proposing the Capital Increase? |
| |
|
| A:
|
On
September 22, 2023, we effected a 1-for-20 reverse split of our outstanding shares of common stock and authorized shares of common
stock to regain compliance with the minimum bid price requirement for continued listing or our common stock on Nasdaq. The Board
is submitting the Capital Increase Proposal for our stockholders’ approval to provide sufficient authorized shares of common
stock to issue the Exchange Shares in the Acquisition, to implement the Equity Incentive Plan and for future capital raising, incentivizing
directors, officers and employees, possible strategic acquisitions and other corporate transactions, whether or not the Acquisition
is completed. |
| |
|
| Q: |
Why
is Sigma proposing the Election of Directors? |
| |
|
A:
|
The
term of our Class III directors ends at the Annual Meeting. Our Nominating and Corporate
Governance Committee has recommended, and our Board of Directors has approved, the nominations
of Dennis Duitch and Kent Summers for re-election as Class III directors. If elected, Messrs.
Duitch and Summers will serve as directors until the 2026 annual meeting of stockholders
and until their respective successors are duly elected and qualified, subject to their earlier
death, resignation or removal.
|
| |
|
| Q: |
Why
is Sigma proposing the Say on Pay Proposal? |
| |
|
| A: |
The
Say on Pay Proposal is an advisory vote required by SEC regulations that is non-binding and affords an opportunity for our stockholders
to weigh in on executive compensation for Sigma executives as disclosed in this proxy statement, including compensation payable
in connection with the Acquisition. Although it is non-binding, our Board of Directors will give consideration to the outcome
of the vote in connection with its future executive compensation decisions. |
| |
|
Q:
|
Why
is Sigma proposing the Frequency of Say on Pay Proposal?
|
| |
|
| A: |
SEC
regulations require Sigma to conduct a non-binding advisory vote at least every six years on the frequency of future advisory
votes on executive compensation. Although it is non-binding, our Board of Directors will give consideration to the outcome
of the vote in connection with determining the frequency of future advisory votes on executive compensation. |
Q:
|
Why
is Sigma proposing the Equity Incentive Plan Proposal?
|
| |
|
A:
|
Our
Board of Directors has adopted the Equity Incentive Plan, subject to stockholder approval, to replace Sigma’s former 2013 Equity
Incentive Plan, which has expired. Our Board of Directors believes the Equity Incentive Plan is necessary to attract and retain the
types of employees, consultants and directors who will contribute to our long-range success, provide incentives to align their interests
with those of our stockholders and promote the success of our business following the Acquisition, or otherwise. |
| |
|
| Q: |
Why
is Sigma proposing the Ratification of Accountant? |
| |
|
| A:
|
The
Ratification of Accountant Proposal is to afford our stockholders an opportunity weigh in on of our appointment of Haynie & Company
as our independent registered public accounting firm in connection with the preparation of our audit financial statements for the
year ending December 31, 2023 and other financial disclosures. |
| |
|
| Q: |
What
common stock will current Sigma stockholders and the NextTrip Sellers hold in the Company after the Acquisition? |
| |
|
A:
|
Upon
the closing of the Acquisition, the NextTrip Sellers will be issued Exchange Shares equal
to 19.99% of our issued and outstanding shares of common stock immediately prior to the closing.
Under the Exchange Agreement, the NextTrip Sellers will be entitled to receive additional
Contingent Shares, subject to NextTrip’s achievement of future milestones specified
in the Exchange Agreement. The Contingent Shares together with the Exchange Shares issued
at the closing will not exceed 6,000,000 shares of our common stock, subject to adjustment
in the event of stock splits, reverse stock splits and similar events. If all the milestones
are achieved and assuming no other change in our outstanding shares as of September 30, 2023,
the NextTrip Sellers will receive Exchange Shares equal to approximately 88.5% of our issued
and outstanding shares of common stock immediately following the issuance of all the Exchange
Shares and Sigma stockholders immediately prior to the closing of the Acquisition will retain
the balance of approximately 11.5% of such outstanding shares.
The Exchange
Agreement provides that in the event our stockholders approve the Acquisition Proposal but
not the Capital Increase Proposal, to the extent that we do not have sufficient authorized
shares of common stock available for issuance of the Exchange Shares, in lieu thereof, we
will issue shares of a new series of convertible preferred stock in form and substance satisfactory
to the NextTrip Representative which, among other things, will provide for voting on an as-converted
basis and will be automatically converted (on a one-for-one basis) into shares of our common
stock once stockholder approval for an increase in our authorized shares of common stock
has been obtained. |
| |
|
| Q: |
Will
there be any controlling stockholder after the closing of the Acquisition? |
| |
|
| A: |
No.
The closing of the Acquisition will not constitute a change in control of the Company, and there will not be a controlling stockholder
immediately after closing of the Acquisition. However, depending upon the achievement of milestones under the Exchange Agreement
and other changes in the outstanding shares of our common stock, the issuance of the Contingent Shares might result in a change in
control of NextTrip, Inc. at that time and could result in the NextTrip Sellers as a group holding a controlling interest
in the Company. |
| |
|
| Q: |
What
conditions must be satisfied to complete the Acquisition? |
| |
|
| A: |
The
Exchange Agreement sets forth a number of conditions to the completion of the Acquisition, including the approval of the Acquisition
Proposal and the Amendment at the Annual Meeting, satisfaction of Nasdaq’s continued listing standards and other customary
closing conditions. For a summary of the conditions that must be satisfied or waived prior to completion of the Acquisition, see
the section entitled “The Exchange Agreement” beginning on page 32 of this proxy statement. |
| |
|
| Q: |
Will
the Exchange Shares be subject to any transfer restrictions? |
| |
|
| A: |
Yes.
The Exchange Shares will be issued without registration under the Securities Act, in reliance upon an exemption from registration
for transactions not involving a public offering and, as such, will constitute “restricted securities” within the meaning
of Rule 144 under the Securities Act. Under Rule 144, the Exchange Shares generally may not be offered or sold publicly unless the
Exchange Shares have been held for at least six months and subject to other conditions. |
| Q: |
When
is the Acquisition expected to be completed? |
| |
|
| A: |
If
approved at the Annual Meeting, it is currently anticipated that the Acquisition will be completed promptly following the Annual
Meeting, provided that the conditions to the completion of the Acquisition have been satisfied or waived. |
| |
|
| Q: |
What
will happen to Sigma if, for any reason, the Acquisition is not completed? |
| |
|
| A: |
If
the Acquisition Proposal is not approved at the Annual Meeting or the Acquisition is not completed for any reason, we intend to proceed
with the Asset Sale and may attempt to complete another strategic transaction, such as a reverse merger, if there is a viable option
to do so. Otherwise, our Board of Directors is likely to consider winding up and dissolving Sigma, which would require stockholder
approval under the NGCL. If the Acquisition in not completed and another strategic transaction were to materialize, there can be
no assurance that it would be on terms as attractive as those provided for in the Exchange Agreement. While the Exchange Agreement
is in effect, and subject to very narrowly defined exceptions, Sigma is prohibited from soliciting, initiating, encouraging or entering
into certain extraordinary transactions, such as a merger, sale of assets or other business combination except with NextTrip. Completion
of the Acquisition also is part of our plan submitted to Nasdaq to regain compliance with Nasdaq’s minimum stockholders’
equity requirement. If the Acquisition is not
completed, it is likely that our common stock would be delisted from Nasdaq, with all the attendant risks described in the “Risk
Factors Relating to the Acquisition” section of this proxy statement, |
| |
|
| Q: |
What
happens if I sell my shares after the Record Date, but before the Annual Meeting? |
| |
|
| A: |
If
you sell or transfer your shares of the Company after the Record Date but before the Annual Meeting, you will retain your right to
vote at the Annual Meeting but will transfer ownership of the shares and will not hold an interest in NextTrip, Inc. if the Acquisition
is completed. |
| |
|
| Q: |
Are
there risks associated with the Acquisition that I should consider in deciding how to vote? |
| |
|
| A: |
Yes.
There are a number of risks related to the Acquisition and other transactions contemplated by the Exchange Agreement that are discussed
in this proxy statement. Please read with particular care the detailed description of the risks described in “Risk Factors”
beginning on page 19 of this proxy statement. |
| |
|
| Q: |
How
does the Board recommend that I vote? |
| |
|
| A: |
Our
Board of Directors recommends that Sigma stockholders vote, or instruct their broker or other agent to vote: |
“FOR”
the Acquisition Proposal;
“FOR”
the Name Change Proposal;
“FOR”
the Capital Increase Proposal;
“FOR”
each of the individuals nominated for appointment as Class III directors pursuant to the Election of Directors Proposal;
“FOR”
the Say on Pay Proposal;
“EVERY
THREE YEARS” on the Frequency of Say on Pay Proposal;
“FOR”
the Equity Incentive Plan Proposal;
“FOR”
the Ratification of Accountant Proposal; and
“FOR”
the Adjournment Proposal, if presented.
You
should read the discussion in the “Background of the Acquisition” section beginning on page 42 and the
discussion of each of the proposals for a discussion of the factors that the Board considered in deciding to recommend the approval of
the Acquisition Proposal and related proposals.
| Q: |
How
do I vote? |
| |
|
| A:
|
After
you have carefully read this proxy statement and have decided how you wish to vote your shares of Sigma common stock, please vote
promptly. |
Stockholders
of Record and Voting
If
your shares of Sigma common stock are registered directly in your name with Sigma’s transfer agent, Issuer Direct Corporation,
you are the stockholder of record of those shares and these proxy materials have been mailed or e-mailed to you by the Company. You may
vote your shares by Internet, telephone or by mail as further described below. Your vote authorizes Jacob Brunsberg, the President and
Chief Executive Officer of the Company, as your proxy, with the power to appoint his substitute, to represent and vote your shares as
you direct.
| |
● |
To
vote online during the Annual Meeting, follow the provided instructions to join the meeting at http://www.viewproxy.com/Sigma/2023/htype.asp,
starting at 10:00 a.m. Mountain Time on December 28, 2023. The webcast will open 15 minutes before the start of the
Annual Meeting. |
| |
|
|
| |
● |
To
vote in advance of the Annual Meeting through the internet, go to www.FCRVote.com/SASI to complete
an electronic proxy card. You will be asked to provide the company number and control number from the Notice or the printed proxy
card. Your internet vote must be received by 11:59 p.m. Eastern Time on December 27, 2023 to be counted. |
| |
|
|
| |
● |
To
vote in advance of the Annual Meeting by telephone, dial 1-866-402-3905 and follow the recorded instructions. You
will be asked to provide the company number and control number from the Notice or the printed proxy card. Your telephone vote must
be received by 11:59 p.m. Eastern Time on December 27, 2023 to be counted. |
| |
|
|
| |
● |
To
vote using the enclosed proxy card, complete, sign and date the enclosed proxy card and return it promptly in the accompanying postage-paid
envelope. If you return your signed proxy card to us before the Annual Meeting, the proxy will vote your shares as you direct. If
no directions are given, the proxy will vote your shares in accordance with our Board’s recommendations. |
Beneficial
Owners
If
your shares of Sigma common stock are held in a stock brokerage account, by a bank, broker or other nominee, you are considered the beneficial
owner of shares held in street name and these proxy materials are being forwarded to you by your bank, broker or nominee that is considered
the holder of record of those shares. As the beneficial owner, you have the right to direct your bank, broker, trustee or nominee on
how to vote your shares via the Internet or by telephone if the bank, broker, trustee or nominee offers these options. You can also sign
and return a proxy card. Your bank, broker, trustee or nominee will send you instructions for voting your shares. Please note that you
may not vote shares held in street name by returning a proxy card directly to Sigma or by voting at the Annual Meeting unless you provide
a “legal proxy,” which you must obtain from your broker, bank or nominee. Furthermore, brokers, banks and nominees who hold
shares of Sigma common stock on your behalf may not give a proxy to Sigma to vote those shares without specific instructions from you.
For
a discussion of the rules regarding the voting of shares held by beneficial owners, please see the question below entitled “If
I am a beneficial owner of shares of Sigma common stock, what happens if I don’t provide voting instructions?” “What
is discretionary voting?” and “What is a broker non-vote?”
| Q: |
How
many shares must be present to hold the Annual Meeting? |
| |
|
| A: |
The
presence in person or by proxy of at least one-third of the outstanding shares of Sigma common stock entitled to vote at the Annual
Meeting is necessary to constitute a quorum at the Annual Meeting. The inspector of election will determine whether a quorum is present.
If you are a beneficial owner (as defined above) of shares of the Company’s common stock and you do not instruct your bank,
broker or other nominee how to vote your shares on any of the proposals, your shares will nonetheless be counted as present at the
Annual Meeting for purposes of determining whether a quorum exists. Stockholders of record who are present at the Annual Meeting
in person or by proxy will be counted as present at the Annual Meeting for purposes of determining whether a quorum exists even if
such stockholders abstain from voting. |
| |
|
| Q: |
How
many votes do I and others have? |
| |
|
| A: |
You
are entitled to one vote for each share of Sigma common stock that you held as of the Record Date. As of the close of business on
the Record Date, there were 780,423 shares of Sigma common stock outstanding. |
| Q: |
What
vote is required to approve each proposal? |
| |
|
| A:
|
The
Acquisition Proposal, as well as the Say on Pay Proposal
and the Frequency of Say on Pay Proposal, which are advisory votes, and the Equity Incentive Plan Proposal and the Ratification
of Accountant Proposal will each be approved if the number of votes cast in favor of each such Proposal exceeds the number of votes
cast against each such Proposal. The affirmative vote of the holders of a majority of the outstanding shares of our common stock
as of the Record Date is required to approve the Name Change Proposal and the Capital Increase Proposal. The two nominees for election
as Class III directors receiving the highest number of votes will be elected as Class III directors. If presented, the Adjournment
Proposal will be approved, whether or not a quorum is present at the Annual Meeting, if the number of votes cast for the Adjournment
Proposal exceeds the number of votes cast against the Proposal. |
| |
|
| Q: |
How
will our directors and executive officers vote on the Amendment, Acquisition Proposal and the Executive Compensation Proposal? |
| |
|
| A: |
As
of the Record Date, the directors and executive officers of Sigma as a group owned and were entitled to vote approximately
4,827 shares of our common stock, representing less than 1% of the outstanding shares. Sigma expects that each of its
directors and executive officers will vote their shares in accordance with the recommendations of our Board of Directors. |
| |
|
| Q: |
What
will happen if I fail to vote, or I abstain from voting? |
| |
|
| A: |
Your
failure to vote or your abstention from voting will have the same effect as a vote against the Name Change Proposal and the Capital Increase
Proposal. Abstentions will not have any effect on the outcome of the vote on the Acquisition Proposal, the Election of Directors Proposal,
the Say on Pay Proposal, the Frequency of Say on Pay Proposal, the Equity Incentive Plan Proposal, the Ratification of Accountant
Proposal or the Adjournment Proposal, if presented for a vote. |
| |
|
| Q: |
If
I am a beneficial owner of shares of Sigma common stock, what happens if I don’t provide voting instructions? What is discretionary
voting? What is a broker non-vote? |
| |
|
| A: |
If
you are a beneficial owner and you do not provide voting instructions to your broker, bank or other holder of record holding shares
for you, your shares will not be voted with respect to any proposal for which your broker does not have discretionary authority to
vote. Even though Sigma’s common stock is listed on Nasdaq, the rules of the New York Stock Exchange determine whether proposals
presented at stockholder meetings are “discretionary” or “non-discretionary.” If a proposal is determined
to be discretionary, your broker, bank or other holder of record is permitted under New York Stock Exchange rules to vote on the
proposal without receiving voting instructions from you. If a proposal is determined to be non-discretionary, your broker, bank or
other holder of record is not permitted under New York Stock Exchange rules to vote on the proposal without receiving voting instructions
from you. A “broker non-vote” occurs when a bank, broker or other holder of record holding shares for a beneficial owner
does not vote on a non-discretionary proposal because the holder of record has not received voting instructions from the beneficial
owner. |
We
are advised that the Name Change Proposal,
the Ratification of Accountant Proposal and the Adjournment Proposal are discretionary proposals; however, each of the other proposals
to be presented at the Annual Meeting is a non-discretionary proposal. Accordingly, if you are a beneficial owner and you do not provide
voting instructions to your broker, bank or other holder of record holding shares for you, your shares may not be voted with respect
to any of the proposals other than the Name Change Proposal, the Ratification of Accountant and the Adjournment Proposal, if
presented. A broker non-vote would have the same effect as a vote against the Name Change Proposal and the Capital Increase
Proposal. Broker non-votes will have no effect on the outcome of the vote on any of the other proposals.
| Q: |
What
will happen if I return my proxy card without indicating how to vote? |
| |
|
| A: |
If
you sign and return your proxy card without indicating how to vote on one or more of the proposals, the Sigma common stock represented
by your proxy will be voted in favor of each such proposal. Proxy cards that are returned without a signature will not be counted
as present at the Annual Meeting and cannot be voted. |
| Q: |
Can
I change my vote after I have returned a proxy or voting instruction card? |
| |
|
| A: |
Yes.
You can change your vote at any time before your proxy is voted at the Annual Meeting. You can do this in one of four ways: |
| |
● |
you
can grant a new, valid proxy bearing a later date; |
| |
|
|
| |
● |
you
can send a signed notice of revocation; |
| |
|
|
| |
● |
if
you are a holder of record, you can attend the Annual Meeting and vote at the Annual Meeting, which will automatically cancel any
proxy previously given, or you may revoke your proxy in person, but your attendance alone will not revoke any proxy that you have
previously given; or |
| |
|
|
| |
● |
if
your shares of Sigma common stock are held in an account with a broker, bank or other nominee, you must follow the instructions on
the voting instruction card you received in order to change or revoke your instructions. |
If you choose either of the first two methods, you
must submit your written notice of revocation or your new proxy to the Secretary of Sigma, as specified below under “What
is the deadline to propose actions for consideration at next year’s annual meeting of stockholders or to nominate individuals to
serve as directors?” no later than the beginning of the Annual Meeting. If your shares are held in street name by
your broker, bank or nominee, you should contact them to change your vote.
| Q: |
Do
I need identification to attend the Annual Meeting? |
| |
|
| A: |
Yes.
You will be asked to provide the company number and control number from the printed proxy card. |
| |
|
| Q: |
Are
Sigma stockholders entitled to dissenters’ or appraisal rights? |
| |
|
| A: |
No.
Sigma stockholders do not have dissenters’ or appraisal rights in connection with any of the proposals under the NGCL and will
not be afforded any such rights. |
| |
|
| Q: |
What
do I do if I receive more than one set of voting materials? |
| |
|
| A:
|
You
may receive more than one set of voting materials for the Annual Meeting, including multiple copies of this proxy statement, proxy
cards and/or voting instruction forms. This can occur if you hold your shares of common stock in more than one brokerage account,
if you hold shares directly as a record holder and also in street name, or otherwise through a nominee. Other circumstances may apply.
If you receive more than one set of voting materials, each should be voted and/or returned separately in order to ensure that all
of your shares of common stock are voted. |
| |
|
| Q: |
How
can I find out the results of the voting at the Annual Meeting? |
| |
|
A:
|
Preliminary
voting results will be announced at the Annual Meeting. In addition, final voting results will be published in a Current Report on
Form 8-K that we expect to file within four business days after the Annual Meeting. If final voting results are not available to
us in time to file a Current Report on Form 8-K within four business days after the Annual Meeting, we intend to file a Current Report
on Form 8-K to publish preliminary voting results and, within four business days after the final results are known to us, file an
additional Current Report on Form 8-K to publish the final results. |
| |
|
Q:
|
What
proxy materials are available on the internet?
|
| |
|
A:
|
This
proxy statement, and the documents incorporated by reference herein, are available at http://www.viewproxy.com/Sigma/2023. |
| |
|
| Q: |
Whom
may I call with questions about the Annual Meeting, the Acquisition, or the other Proposals? |
| |
|
| A: |
Sigma
stockholders should contact our Chief Financial Officer and Secretary, Frank Orzechowski, via email at frank.orzechowski@sigmaadditive.com
or by telephone at (203) 733-1356 with any questions regarding the Annual Meeting or any of the proposals to be presented at the
Annual Meeting. |
| Q: |
What
is the deadline to propose actions for consideration at next year’s annual meeting of stockholders or to nominate individuals
to serve as directors? |
|
| |
|
|
| A: |
Stockholders
may present proper proposals for inclusion in our proxy statement and for consideration at
the next annual meeting of stockholders by submitting their proposals in writing to our Corporate
Secretary in a timely manner. For a stockholder proposal to be considered for inclusion in
our proxy statement for our 2024 annual meeting of stockholders, our Corporate Secretary
must receive the written proposal at our principal executive offices not later than August
2, 2024, which is 120 days prior to the first anniversary of the mailing date of this
proxy statement. In addition, stockholder proposals must comply with the requirements of
Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials.
Stockholder proposals should be addressed to:
Sigma
Additive Solutions, Inc.
Attention:
Corporate Secretary
3900
Paseo del Sol
Santa
Fe, New Mexico 87507
As
for stockholders who wish to present a proposal or to nominate a director candidate at the 2024 annual meeting of stockholders, but
not to include the proposal or nomination in our proxy statement, our amended and restated bylaws state that the proposal or nomination
must be received by us no later than August 2, 2024, which is 120 days prior to the first anniversary of the mailing date
of this proxy statement. The proposal or nomination must also contain the information required by our amended and restated bylaws.
A proposal or nomination to be presented directly at the 2024 annual meeting should be addressed to us as set forth above. For the
2024 annual meeting, we will be required pursuant to Rule 14a-19 under the Exchange Act to include on our proxy card all nominees
for director for whom we have received notice under the rule, which must be received no later than 60 calendar days prior to the
anniversary of the Annual Meeting. For any such director nominee to be included on our proxy card for next year’s annual meeting,
notice must be received no later than October 28, 2024. |
RISK
FACTORS
Post-Acquisition,
NextTrip, Inc. will be faced with a market environment that cannot be predicted and that involves significant risks, many of which will
be beyond its control. In addition to the other information contained in this proxy statement, you should carefully consider the material
risks described below before deciding how to vote your shares of Sigma common stock. You should also read and consider the risks associated
with the business of Sigma because these risks may also affect NextTrip, Inc. after closing of the Acquisition. These risks can
be found in Sigma’s Annual Report on Form
10-K for the year ended December 31, 2022 and most recent Quarterly Reports on Form 10-Q, which are incorporated herein by reference.
If any of the following risks and uncertainties develops into actual events, these events could have a material adverse effect on Sigma
or the businesses, financial conditions or results of operations of NextTrip, or ownership of NextTrip, Inc. securities following the
Acquisition. You should also read and consider the other information in this proxy statement and the other documents incorporated by
reference into this proxy statement. Please see the sections titled “Other Matters” and “Where You Can
Find More Information” on pages 124 and 124 of this proxy statement. In addition, past financial performance may not be
a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.
Risks
Related to the Acquisition
Failure
to complete the Acquisition could negatively impact Sigma’s stock price and we may not be able to avoid dissolution.
If
the Acquisition Proposal is not approved at the Annual Meeting, or the Acquisition is not completed for any reason, we intend to proceed
with the Asset Sale and may undertake to windup and dissolve the Company unless another strategic transaction such as a reverse merger
transaction materializes. Completion of the Acquisition is part of our plan submitted to Nasdaq to regain compliance with Nasdaq’s
minimum stockholders’ equity requirement. If the Acquisition is not completed, it is likely that our common stock would be delisted
from Nasdaq, with all the attendant risks described below in his section. Furthermore, if the Acquisition is not completed, the price
of Sigma’s common stock may decline significantly. If that were to occur, it is uncertain when, if ever, the price of Sigma’s
common stock would reach the price implied in the Acquisition or at which it trades as of the date we announced the Exchange Agreement
or the date of this proxy statement. Accordingly, if the Acquisition is not completed, there can be no assurance as to the effect on
the future value of your shares of our common stock.
Subsequent
to the consummation of the Acquisition, we may be required to take write-downs or write-offs, restructuring and impairment or other charges
that could have a significant negative effect on our financial condition, results of operations and share price, which could cause you
to lose some or all of your investment.
Although
we have conducted due diligence on NextTrip, we cannot assure you that this diligence revealed all material issues that may be present
in NextTrip’s business, that it would be possible to uncover all material issues through a customary amount of due diligence, or
that factors outside of our and NextTrip’s control will not arise. As a result, we may be forced to later write down or write off
NextTrip’s assets or incur impairment or other charges that could result in losses after closing of the Acquisition. Even if our
due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner
not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on
our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about NextTrip, Inc. or
its securities. In addition, charges of this nature may cause NextTrip, Inc. to be unable to obtain future financing on favorable terms
or at all.
The
unaudited pro forma financial information included in this proxy statement may not be indicative of what our actual financial position
or operational results would have been.
The
unaudited pro forma financial information included in this proxy statement is presented for illustrative purposes only and is not necessarily
indicative of what our actual financial position or results of operations would have been had the Acquisition been completed on the dates
indicated. See the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” for more information.
We
will have limited protection in the event that any of the representations and warranties made by NextTrip Parent or NextTrip in the Exchange
Agreement ultimately proves to be inaccurate or incorrect.
Sigma
will have limited protection if any representation or warranty made by NextTrip or the NextTrip Parent in the Exchange Agreement proves
to be inaccurate or incorrect and such representations and warranties will not survive the closing. Accordingly, to the extent such representations
or warranties are incorrect, Sigma would have limited or no indemnification claims with respect thereto, may not recover any damages
it may have suffered and may not have sufficient cash on hand or other resources to seek to pursue an alternative strategic transaction
or avoid the dissolution and liquidation of Sigma in the event that the Acquisition does not close.
We
may waive one or more of the conditions to the Acquisition.
We
may agree to waive, in whole or in part, some of the conditions to our obligations to complete the Acquisition, to the extent permitted
by our Amended and Restated Articles of Incorporation and applicable laws. For example, it is a condition of our obligation to close
the Acquisition and that NextTrip’s representations and warranties are true and correct in all respects as of the closing date,
except for such inaccuracies that, individually or in the aggregate, would not result in a Material Adverse Effect (as defined in the
Exchange Agreement). However, if the Board determines that it is in the stockholders’ best interest to waive any such breach, then
the Board may elect to waive that condition and close the Acquisition.
Our
ability to successfully operate and grow NextTrip’s business will be largely dependent upon the efforts of William Kerby,
who will be appointed as the Company’s Chief Executive Officer upon the closing of the Acquisition, and other executive
officers of NextTrip, who are expected to continue to serve as executive officers of NextTrip following the Acquisition. The loss of
any of such key personnel could negatively impact the business and operations of NextTrip, Inc. and its ability to grow the business
of NextTrip.
Our
ability to successfully operate and grow NextTrip’s business following the Acquisition will be dependent upon the efforts of William
Kerby, the co-founder and Chief Executive Officer of NextTrip, who will become our Chief Executive Officer upon the
closing of the Acquisition and upon the efforts of the other executive officers of NextTrip, including Lindsey North, the President
of NextTrip. Although we expect all of such key personnel to remain with NextTrip, Inc. and NextTrip following the Acquisition, it is
possible that we will lose some key personnel, and the loss of their services could have a material, adverse effect on the business and
operations of NextTrip, Inc. and NextTrip or the ability to grow their business. In addition, NextTrip does not have key-man insurance
on the life of Mr. Kirby or other executive officers. Furthermore, our assessment of these individuals may not prove to be correct.
A
market for our common stock may not continue, which would adversely affect the liquidity and price of our common stock.
Following
the Acquisition and in light of our recent reverse stock split, the market price of our common stock may fluctuate significantly due
to the market’s reaction to the Acquisition and general market and economic conditions. An active trading market for our common
stock following the Acquisition may never develop or, if developed, it may not be sustained. In addition, the market price of our common
stock after the Acquisition can vary due to general economic conditions and forecasts, our general business condition and the release
of our financial reports. Additionally, if our common stock becomes delisted from Nasdaq for any reason and is relegated to the OTC Bulletin
Board (an inter-dealer automated quotation system for equity securities that is not a national securities exchange), the liquidity and
price of our common stock will be more limited than if we were quoted or listed on Nasdaq or another national securities exchange. You
may be unable to sell your shares of common stock unless a market for our common stock can be established or sustained.
Although
we expect that our common stock will remain listed on Nasdaq after the Acquisition, there can be no assurance that we will be able to
comply with the continued listing standards of the Nasdaq.
To
continue listing our common stock on Nasdaq subsequent to the closing of the Acquisition, we will be required to demonstrate compliance
with Nasdaq’s continued listing standards, including that our common stock trades at a minimum of $1.00 per common stock and we
maintain a minimum stockholders’ equity of $2.5 million unless we meet alternative requirements. We cannot assure you that we will
be able to meet Nasdaq’s continued listing standards. In addition, the issuance of the Contingent Shares upon NextTrip’s
achievement of the milestones set forth in the Exchange Agreement could result in a “change of control” under Nasdaq
rules. If a change of control occurs, NextTrip, Inc. will be required to re-qualify for initial listing under the Nasdaq initial listing
rules, and there can be no assurances provided that NextTrip, Inc. will be able to satisfy the initial listing requirements.
If,
after the Acquisition, the Nasdaq delists our common stock due to our failure to meet its continued listing standards, or for failure
to re-qualify under Nasdaq’s initial listing standards in the event of a change of control, we and our stockholders could face
significant material adverse consequences including:
| |
● |
a
limited availability of market quotations for our securities; |
| |
|
|
| |
● |
a
determination that our ordinary shares are a “penny stock,” which will require brokers trading in our ordinary shares
to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for
our ordinary shares; |
| |
|
|
| |
● |
a
limited amount of analyst coverage and more limited universe of potential investors in our securities; and |
| |
|
|
| |
● |
a
decreased ability to issue additional securities or obtain additional financing in the future. |
If
the Acquisition’s benefits do not meet the expectations of investors, stockholders or financial analysts, the market price of our
securities may decline.
If
the benefits of the Acquisition do not meet the expectations of investors or securities analysts, the market price of our common stock
prior to the completion of the Acquisition may decline. The market values of our securities at the time of the Acquisition may vary significantly
from their prices on the date the Exchange Agreement was executed, the date of this proxy statement, or the date on which our stockholders
vote on the Acquisition Proposal.
In
addition, following the Acquisition, fluctuations in the price of our common stock could contribute to the loss of all or part of your
investment. Prior to the Acquisition, there has been no public market for NextTrip’s securities. Accordingly, the valuation
ascribed to NextTrip and our common stock in the Acquisition may not be indicative of the price that will prevail in the trading market
following the Acquisition. If an active market for our common stock develops and continues, the trading price of our common stock following
the Acquisition could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control.
Any of the factors listed below could have a material adverse effect on your investment in our common stock and our common stock may
trade at prices significantly below the price you paid for them. In such circumstances, the trading price of our common stock may not
recover and may experience a further decline.
Broad
market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock
market in general, and Nasdaq in particular, have experienced price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities,
may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors
perceive to be similar to the Company could depress our stock price regardless of our business, prospects, financial conditions or results
of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities
and our ability to obtain additional financing in the future.
The
obligation to disclose information publicly may put NextTrip at a disadvantage to competitors that are private companies.
Upon
completion of this Acquisition, NextTrip, Inc. will be required to disclose occurrence of matters that are material to NextTrip,
Inc. and its stockholders that the Company would not be required to disclose if NextTrip, Inc. was a
private company. NextTrip’s competitors may have access to this information, which would otherwise be confidential. This may give
them advantages in competing with NextTrip. To the extent compliance with U.S. laws increases expenses or decreases NextTrip’s
competitiveness against such companies, the public listing could adversely affect NextTrip Inc.’s financial condition or results
of operations.
NextTrip
may not realize anticipated growth opportunities.
NextTrip
expects that it will realize growth opportunities and other financial and operating benefits as a result of the Acquisition. NextTrip
cannot predict with certainty if or when these growth opportunities and benefits will occur, or the extent to which they actually will
be achieved. For example, the benefits from the Acquisition may be offset by costs incurred in connection with the Acquisition, or as
a result of being part of a public company. See “Risks Related to NextTrip Holdings’ Business and Industry”
for a fuller discussion of the risks relating to NextTrip Holdings following the Acquisition.
The
Company and NextTrip will incur significant transaction-related costs in connection with the Acquisition.
The
Company and NextTrip expect to incur significant nonrecurring costs associated with the Acquisition before, at, and after closing the
Acquisition. The Company and NextTrip will also incur transaction fees and costs related to formulating and implementing post-Acquisition
plans, including increased employment-related costs.
The
Acquisition will trigger compensation to our executive officers.
Our
executive officers will be entitled to compensation if the Acquisition is completed as described in the “Proposal
5 – Say on Pay Proposal” section of this proxy statement, and, as such, have interests in the
Acquisition that differ from our stockholders generally.
The
Acquisition might entitle the holders of our outstanding warrants to elect to cause us to repurchase their warrants.
Under
the terms of our outstanding January 2020 and April 2020 warrants to purchase up to 185,156 shares of our common stock at a current
exercise price of $6.00 per share, the warrant holders, at their election, may cause us to purchase their warrants at purchase
price equal to the “Black Scholes Value” (as defined) of the warrants at any time within 90 days following the public disclosure
of the completion of a “Fundamental Transaction.” Depending on the achievement of milestones under the Exchange Agreement
and the issuance of the Contingent Shares and other changes in outstanding shares of our common stock, the Acquisition might constitute
a Fundamental Transaction. If so, any such election by the warrant holders to cause us to purchase their warrants would reduce the amount
of cash otherwise available to us for available for use in the business and operations of NextTrip, Inc. following the Acquisition.
Risks
Related to NextTrip’s Business and Industry
References
in this section to “NextTrip” and the “company” refer to NextTrip and its subsidiaries.
NextTrip’s
revenue is derived from the global travel industry, and a prolonged or substantial decrease in global travel, particularly air travel,
could adversely affect its operating results.
NextTrip’s
revenue is derived from the global travel industry and would be significantly impacted by declines in, or disruptions to, travel activity,
particularly air travel. Global factors over which NextTrip has no control, but which could impact its clients’ willingness to
travel and, depending on the scope and duration, cause a significant decline in travel volumes include, among other things:
● widespread health concerns, epidemics or pandemics, such as the COVID-19 pandemic, the Zika virus, H1N1 influenza, the Ebola virus, avian flu, SARS or any other serious contagious diseases;
●
global security concerns caused by terrorist attacks, the threat of terrorist attacks, or the precautions taken in anticipation of such
attacks, including elevated threat warnings or selective cancellation or redirection of travel;
●
cyber-terrorism, political unrest, the outbreak of hostilities or escalation or worsening of existing hostilities or war, such as Russia’s
invasion of Ukraine and the military conflict in Israel, resulting sanctions imposed by the U.S. and other countries and retaliatory
actions taken by sanctioned countries in response to such sanctions;
●
natural disasters or severe weather conditions, such as hurricanes, flooding and earthquakes;
●
climate change-related impact to travel destinations, such as extreme weather, natural disasters and disruptions, and actions taken by
governments, businesses and supplier partners to combat climate change;
●
the occurrence of travel-related accidents or the grounding of aircraft due to safety concerns;
●
the impact of macroeconomic conditions and labor shortages on the cost and availability of airline travel; and
●
adverse changes in visa and immigration policies or the imposition of travel restrictions or more restrictive security procedures.
Any
decrease in demand for consumer or business travel could materially and adversely affect NextTrip’s business, financial condition
and results of operations.
NextTrip
needs additional capital, which may not be available on commercially acceptable terms, if at all, which raises questions about its ability
to continue as a going concern.
As
of August 31, 2023, NextTrip had $5.6 million in total assets, $7.1 million in total liabilities, negative working capital of $4.2 million
and a total accumulated deficit of $18.8 million. It had net loss of $5.4 million and $2.2 million for the fiscal year ended February
28, 2023 and the six months ended August 31, 2023, respectively.
NextTrip
is subject to all the substantial risks inherent in the development of a new business enterprise within an extremely competitive industry.
Due to the absence of a long-standing operating history and the emerging nature of the markets in which it competes, NextTrip anticipates
operating losses until it can successfully implement its business strategy, which includes all associated revenue streams. Its revenue
model is new and evolving, and NextTrip cannot be certain that it will be successful. The potential profitability of this business model
is unproven. NextTrip may never achieve profitable operations or generate significant revenues. NextTrip’s future operating
results depend on many factors, including demand for its products, the level of competition, and the ability of its officers to manage
its business and growth. Additional development expenses may delay or negatively impact the
ability of NextTrip to generate profits. Accordingly, it cannot assure you that its business model will be successful or that it can
sustain revenue growth, achieve, or sustain profitability, or continue as a going concern.
NextTrip believes that in the aggregate, it could
require several millions of dollars to support and expand the marketing and development of its products, repay debt obligations, provide
capital expenditures for additional equipment and development costs, payment obligations, office space and systems for managing the business,
and cover other operating costs until its planned revenue streams from all products are fully implemented and begin to offset its operating
costs.
In
the event NextTrip is unable to raise adequate funding in the future for its operations and to pay its outstanding debt obligations,
NextTrip may be forced to scale back its business plan and/or liquidate some or all of its assets or may be forced to seek bankruptcy
protection.
NextTrip
has outstanding indebtedness, which could adversely affect its business and financial condition.
Risks
relating to its indebtedness include:
| |
● |
increasing
its vulnerability to general adverse economic and industry conditions; |
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|
|
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● |
requiring
it to dedicate a portion of its cash flow from operations to principal and interest payments on its indebtedness, thereby reducing
the availability of cash flow to fund working capital, capital expenditures, acquisitions and investments and other general corporate
purposes; |
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|
|
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● |
making
it more difficult for it to optimally capitalize and manage the cash flow for its businesses; |
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|
|
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● |
limiting
its flexibility in planning for, or reacting to, changes in its businesses and the markets in which it operates; |
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|
|
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● |
possibly
placing it at a competitive disadvantage compared to its competitors that have less debt; and |
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|
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● |
limiting
its ability to borrow additional funds or to borrow funds at rates or on other terms that it finds acceptable. |
If
distributors are unable to drive customers to their websites and/or NextTrip is unable to drive visitors to its websites, from search
engines or otherwise, this could negatively impact transactions on the websites of NextTrip’s distributor websites as well as its
own websites and consequently cause NextTrip’s travel revenue to decrease.
Many
visitors find the distributors and NextTrip’s websites by searching for vacation rental information through Internet search engines.
A critical factor in attracting visitors to NextTrip’s websites, and those of its distributors, is how prominently its distributors
and NextTrip are displayed in response to search queries. Accordingly, NextTrip utilizes search engine marketing, or SEM, as a means
to provide a significant portion of its visitor acquisition. SEM includes both paid visitor acquisition (on a cost-per-click basis) and
unpaid visitor acquisition, which is often referred to as organic search.
NextTrip
plans to employ search engine optimization, or SEO, to acquire visitors. SEO involves developing NextTrip’s websites in order to
rank highly in relevant search queries. In addition to SEM and SEO, NextTrip may also utilize other forms of marketing to drive visitors
to its websites, including branded search, display advertising and email marketing.
The
various search engine providers, such as Google and Bing, employ proprietary algorithms and other methods for determining which websites
are displayed for a given search query and how highly websites rank. Search engine providers may change these methods in a way that may
negatively affect the number of visitors to NextTrip’s distributors’ websites as well as its own websites and may do so without
public announcement or detailed explanation. Therefore, the success of NextTrip’s SEO and SEM strategy depends, in part, on its
ability to anticipate and respond to such changes in a timely and effective manner.
In
addition, websites must comply with search engine guidelines and policies. These guidelines and policies are complex and may change at
any time. If NextTrip or its distributors fail to follow such guidelines and policies properly, the search engine may cause NextTrip’s
content to rank lower in search results or could remove the content altogether. If NextTrip or its distributors fail to understand and
comply with these guidelines and policies and ensure their websites’ compliance, NextTrip’s SEO and SEM strategy may not
be successful.
Unfavorable
changes in, or interpretations of, government regulations or taxation of the evolving product offerings, Internet and e-commerce industries
could harm NextTrip’s travel division operating results.
NextTrip
has contracted for products in markets throughout the world, in jurisdictions which have various regulatory and taxation requirements
that can affect its travel division operations or regulate the rental activity of property owners and managers.
Compliance
with laws and regulations of different jurisdictions imposing different standards and requirements is very burdensome because each region
has different regulations with respect to licensing and other requirements. NextTrip’s online marketplaces is accessible by travelers
in many states and foreign jurisdictions. Compliance requirements that vary significantly from jurisdiction to jurisdiction impose added
costs and increased liabilities for compliance deficiencies. In addition, laws or regulations that may harm NextTrip’s business
could be adopted, or interpreted in a manner that affects its activities, including but not limited to the regulation of personal and
consumer information and real estate licensing requirements. Violations or new interpretations of these laws or regulations may result
in penalties, negatively impact NextTrip’s operations and damage its reputation and business.
In
addition, many of the fundamental statutes and regulations that impose taxes or other obligations on travel and lodging companies were
established before the growth of the Internet and e-commerce, which creates a risk of these laws being used, in ways not originally intended,
that could burden property owners and managers or otherwise harm NextTrip’s business. These and other similar new and newly interpreted
regulations could increase costs for, or otherwise discourage, owners and managers from listing their property with NextTrip, which could
harm its business and operating results.
Furthermore,
as NextTrip expands or changes the products and services that it offers or the methods by which it offers them, NextTrip
may become subject to additional legal regulations, tax requirements or other risks. Regulators may seek to impose regulations and requirements
on NextTrip even if it utilizes third parties to offer the products or services. These regulations and requirements may apply to payment
processing, insurance products or the various other products and services NextTrip may now or in the future offer or facilitate through
its marketplace. Whether NextTrip complies with or challenges these additional regulations, NextTrip’s costs may increase,
and its business may otherwise be harmed.
If
NextTrip is not able to maintain and enhance its NextTrip brand and the brands associated with each of its websites, its reputation
and business may suffer.
It
is important for NextTrip to maintain and enhance its brand identity in order to attract and retain property owners, managers, distributors
and travelers. The successful promotion of its brands will depend largely on its marketing and public relations efforts. NextTrip expects
that the promotion of its brands will require it to make substantial investments, and, as its market becomes more competitive, these
branding initiatives may become increasingly difficult and expensive. In addition, NextTrip may not be able to successfully build its
NextTrip brand identity without losing value associated with, or decreasing the effectiveness of, its other brand identities. If NextTrip
does not successfully maintain and enhance its brands, it could lose traveler traffic, which could, in turn, cause property owners and
managers to terminate or elect not to renew their listings with it. In addition, NextTrip’s brand promotion activities may not
be successful or may not yield revenue sufficient to offset their cost, which could adversely affect NextTrip’s reputation and
business.
NextTrip’s
long-term success depends, in part, on its ability to expand its property owner, manager and traveler bases outside of the United States
and, as a result, its business is susceptible to risks associated with international operations.
NextTrip
has limited operating and e-commerce experience in many foreign jurisdictions and is making significant investments to build its international
operations. NextTrip’s plans to continue its efforts to expand globally, including potentially acquiring international businesses
and conducting business in jurisdictions where it does not currently operate. Managing a global organization is difficult, time-consuming
and expensive and any international expansion efforts that NextTrip undertakes may not be profitable in the near or long term or
otherwise be successful. In addition, conducting international operations subjects NextTrip to risks that include:
| |
● |
the
cost and resources required to localize its services, which requires the translation of its websites and their adaptation for local
practices and legal and regulatory requirements; |
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|
|
| |
● |
adjusting
the products and services it provides in foreign jurisdictions, as needed, to better address the needs of local owners, managers,
distributors and travelers, and the threats of local competitors; |
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|
|
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● |
being
subject to foreign laws and regulations, including those laws governing Internet activities, email messaging, collection and use of
personal information, ownership of intellectual property, taxation and other activities important to its online business practices,
which may be less developed, less predictable, more restrictive, and less familiar, and which may adversely affect financial results
in certain regions;
|
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● |
competition
with companies that understand the local market better than NextTrip does or who have pre-existing relationships with property owners,
managers, distributors and travelers in those markets; |
| |
|
|
| |
● |
legal
uncertainty regarding its liability for the transactions and content on its websites, including online bookings, property listings
and other content provided by property owners and managers, including uncertainty resulting from unique local laws or a lack of clear
precedent of applicable law; |
| |
|
|
| |
● |
lack
of familiarity with and the burden of complying with a wide variety of other foreign laws, legal standards and foreign regulatory
requirements, including invoicing, data collection and storage, financial reporting and tax compliance requirements, which are subject
to unexpected changes; |
| |
|
|
| |
● |
laws
and business practices that favor local competitors or prohibit or limit foreign ownership of certain businesses; |
| |
|
|
| |
● |
challenges
associated with joint venture relationships and minority investments; |
| |
|
|
| |
● |
adapting
to variations in foreign payment forms; |
| |
|
|
| |
● |
difficulties
in managing and staffing international operations and establishing or maintaining operational efficiencies; |
| |
|
|
| |
● |
difficulties
in establishing and maintaining adequate internal controls and security over its data and systems; |
| |
|
|
| |
● |
currency
exchange restrictions and fluctuations in currency exchange rates; |
| |
|
|
| |
● |
potentially
adverse tax consequences, which may be difficult to predict, including the complexities of
foreign
value
added tax systems and restrictions on the repatriation of earnings; |
| |
|
|
| |
● |
political,
social and economic instability abroad, war, terrorist attacks and security concerns in general; |
| |
|
|
| |
● |
the
potential failure of financial institutions internationally; |
| |
|
|
| |
● |
reduced
or varied protection for intellectual property rights in some countries; and |
| |
|
|
| |
● |
higher
telecommunications and Internet service provider costs. |
Operating
in international markets also requires significant management attention and financial resources. NextTrip cannot guarantee that its international
expansion efforts in any or multiple territories will be successful. The investment and additional resources required to establish operations
and manage growth in other countries may not produce desired levels of revenue or profitability and could instead result in increased
costs.
The
market in which NextTrip participates is highly competitive, and it may be unable to compete successfully with its current or
future competitors.
The
market to provide listing, search and marketing services for the travel industry is very competitive and dominated by key players, such
as Expedia and Booking.com. In addition, the barriers to entry are low and new competitors may enter. All of the services that NextTrip’s
plans to provide to property owners, managers and travelers, including listing and search, are provided separately or in combination
by current or potential competitors. NextTrip’s competitors may adopt aspects of its business model, which could reduce its ability
to differentiate its services. Additionally, current or new competitors may introduce new business models or services that NextTrip may
need to adopt or otherwise adapt to in order to compete, which could reduce its ability to differentiate its business or services from
those of its competitors.
In
addition, most of NextTrip’s current or potential competitors are larger and have more resources than we do. Many of its current
and potential competitors enjoy substantial competitive advantages, such as greater name recognition in their markets, longer operating
histories and larger marketing budgets, as well as substantially greater financial, technical and other resources. In addition, NextTrip’s
current or potential competitors may have access to larger property owner, manager or traveler bases. As a result, its competitors may
be able to respond more quickly and effectively than it can to new or changing opportunities, technologies, standards or owner, manager
or traveler requirements. For all of these reasons, NextTrip may not be able to compete successfully against its current and future competitors.
If
NextTrip is unable to introduce new or upgraded products, services or features that distributors, travelers or property owners
and managers recognize as valuable, it may fail to (i) drive additional travelers to the websites of its distributors, (ii) drive additional
travelers to its websites, (iii) retain existing property owners and managers, (iv) attract new property owners and managers, (v) retain
existing distributors, and/or (vi) attract new distributors. NextTrip’s efforts to develop new and upgraded services and products
could require it to incur significant costs.
In
order to attract travelers to NextTrip’s distributors, as well as its own online marketplace while retaining, and attracting
new, distributors, property owners and managers, NextTrip will need to continue to invest in the development of new products, services
and features that both add value for travelers, distributors, property owners and managers and differentiate NextTrip from its competitors.
The success of new products, services and features depends on several factors, including the timely completion, introduction and market
acceptance of the product, service or feature. If travelers, distributors, property owners or managers do not recognize the value of
NextTrip’s new services or features, they may choose not to utilize its products or list on its online marketplace.
Attempting
to develop and deliver these new or upgraded products, services or features involves inherent hazards and difficulties, and is costly.
Efforts to enhance and improve the ease of use, responsiveness, functionality and features of NextTrip’s existing websites have
inherent risks, and it may not be able to manage these product developments and enhancements successfully. NextTrip may not succeed in
developing new or upgraded products, services or features or new or upgraded products, services or features may not work as intended
or provide value. In addition, some new or upgraded products, services or features may be difficult for NextTrip to market and may also
involve unfavorable pricing. Even if it succeeds, it cannot guarantee that its property owners and managers will respond favorably.
In
addition to developing its own improvements, NextTrip may choose to license or otherwise integrate applications, content and data from
third parties. The introduction of these improvements imposes costs on it and creates a risk that it may be unable to continue to access
these technologies and content on commercially reasonable terms, or at all. In the event NextTrip fails to develop new or upgraded products,
services or features, the demand for its services and ultimately its results of operations may be adversely affected.
NextTrip
is exposed to fluctuations in currency exchange rates.
Because
NextTrip plans to conduct a significant portion of its business outside the United States, but reports its results in U.S. dollars, NextTrip
faces exposure to adverse movements in currency exchange rates, which may cause its revenue and operating results to differ materially
from expectations. In addition, fluctuation in its mix of U.S. and foreign currency denominated transactions may contribute to this effect
as exchange rates vary. Moreover, as a result of these exchange rate fluctuations, revenue, cost of revenue, operating expenses and other
operating results may differ materially from expectations when translated from the local currency into U.S. dollars upon consolidation.
For example, if the U.S. dollar strengthens relative to foreign currencies NextTrip’s non-U.S. revenue would be adversely affected
when translated into U.S. dollars. Conversely, a decline in the U.S. dollar relative to foreign currencies would increase NextTrip’s
non-U.S. revenue when translated into U.S. dollars. NextTrip may enter into hedging arrangements in order to manage foreign currency
exposure, but such activity may not completely eliminate fluctuations in its operating results.
If
NextTrip fails to protect confidential information against security breaches, or if distributors, property owners, managers or travelers
are reluctant to use it online marketplace because of privacy or security concerns, NextTrip might face additional costs, and activity
on its websites could decline.
NextTrip
collects and uses personally identifiable information of distributors, property owners, managers and travelers in the operation of its
business. NextTrip’s systems may be vulnerable to computer viruses or physical or electronic break-ins that its security measures
may not detect. Anyone that is able to circumvent its security measures could misappropriate confidential or proprietary information,
cause an interruption in NextTrip’s operations, damage its computers or those of its users, or otherwise damage NextTrip’s
reputation and business. NextTrip may need to expend significant resources to protect against security breaches or to address problems
caused by breaches. Security breaches of its systems, or the systems of third parties it relies upon, such as credit card processors,
could damage its reputation and expose it to litigation and possible liability under various laws and regulations. Concern among distributors,
property owners, managers and travelers regarding NextTrip’s use of personal information collected on its websites could keep them
from using, or continuing to use, its online marketplace.
There
are risks of security breaches both on NextTrip’s systems and on third party systems which store NextTrip’s information as
it increases the types of technology that NextTrip uses to operate its marketplace, such as mobile applications. New and evolving technology
systems and platforms may involve security risks that are difficult to predict and adequately guard against. In addition, third parties
that process credit card transactions between NextTrip and property owners and managers maintain personal information collected from
them. Such information could be stolen or misappropriated, and NextTrip could be subject to liability as a result. NextTrip’s property owners, managers and travelers may be harmed by such breaches, and
NextTrip may in turn be subject to costly litigation or regulatory compliance costs, and harm to its reputation and brand. Moreover,
some property owners, managers and travelers may cease using its marketplace altogether.
The
laws of some states and countries require businesses that maintain personal information about their residents in electronic databases
to implement reasonable measures to keep that information secure. NextTrip’s practice is to encrypt all sensitive information,
but it does not know whether its current practice will be challenged under these laws. In addition, under certain of these laws, if there
is a breach of NextTrip’s computer systems and NextTrip knows or suspects that unencrypted personal data has been stolen, it is
required to inform any user whose data was stolen, which could harm its reputation and business. Complying with the applicable notice
requirements in the event of a security breach could result in significant costs. NextTrip may also be subject to contractual claims,
investigation and penalties by regulatory authorities, and claims by persons whose information was disclosed.
Compounding
these legal risks, many states and countries have enacted different and often contradictory requirements for protecting personal information
collected and maintained electronically. Compliance with these numerous and contradictory requirements is particularly difficult for
NextTrip because it collects personal information from users in multiple jurisdictions. While it intends to comply fully with these laws,
failure to comply could result in legal liability, cause NextTrip to suffer adverse publicity and lose business, traffic and revenue.
If it were required to pay any significant amount of money in satisfaction of claims under these or similar laws, or if it were forced
to cease its business operations for any length of time as a result of its inability to comply fully, NextTrip’s business, operating
results and financial condition could be adversely affected.
Cyber-attacks
and system vulnerabilities could lead
to sustained service outages, data loss, reduced revenue, increased costs, liability claims, or harm to NextTrip’s competitive
position.
In
the past, NextTrip has experienced targeted and
organized malware, phishing, and account takeover attacks, and may in the future experience these and other forms of attack such as ransomware,
SQL injection (where a third party attempts to insert malicious code into its software through data entry fields in its websites in order
to gain control of the system) and attempts to use its websites as a platform to launch a denial-of-service attack on another
party. NextTrip’s existing security measures may not be successful in preventing attacks on its systems. For instance, from time
to time, it has experienced denial-of-service type attacks on its systems that have made portions of its websites slow or unavailable
for periods of time. NextTrip’s existing IT business continuity and disaster recovery practices are less effective against certain
types of attacks such as ransomware, which could result in its services being unavailable for an extended period of time, nullify its
data, expose its payment card and personal data, or expose it to an extortion attempt.
Reductions
in the availability and response time of its online services could cause loss of substantial business volumes during the occurrence of
a cyber-attack on its systems and measures NextTrip may take to divert suspect traffic in the event of such an attack could
result in the diversion of bona fide customers. These issues are more difficult to manage during any expansion of the number of places
where NextTrip operates and the variety of services it offers, and as the tools and techniques used in such attacks become more advanced.
NextTrip uses sophisticated technology to identify cybersecurity threats; however, a cyberattack may go undetected for a period of time
resulting in harm to its computer systems and the loss of data. This could result in financial penalties being imposed by the regulators
and reputational harm. NextTrip’s insurance policies have coverage limits and may not be adequate to reimburse it for all losses
caused by security breaches. Successful attacks could result in significant interruptions in its operations, severe damage to its information
technology infrastructure, negative publicity, damage its reputation, and prevent consumers from using its services during the attack,
any of which could cause consumers to use the services of NextTrip’s competitors, which would have a negative effect on the value
of its brands, its market share, business, and results of operations.
If
NextTrip’s systems cannot cope with the level of demand required to service its consumers and accommodations, it could experience
unanticipated disruptions in service, slower response times, decreased customer service and customer satisfaction, and delays in the
introduction of new services.
As
an online business, NextTrip is dependent on the Internet and maintaining connectivity between itself and consumers, sources of Internet
traffic, such as Google, and its travel service providers and restaurants. As consumers increasingly turn to mobile and other smart devices,
NextTrip also depends on consumers’ access to the Internet through mobile carriers and their systems. Disruptions in internet access,
especially if widespread or prolonged, could materially adversely affect its business and results of operations. While NextTrip maintains
redundant systems and hosting services, it is possible that it could experience an interruption in its business, and it does not carry
business interruption insurance sufficient to compensate NextTrip for all losses that may occur. NextTrip has computer hardware for operating
its services located in hosting facilities around the world. It does not have a comprehensive disaster recovery plan in every geographic
region in which it conducts business, and these systems and operations are vulnerable to damage or interruption from human error, misconduct,
or catastrophic events. In the event of any disruption of service at such facilities or the failure by such facilities to provide its
required data communications capacity, NextTrip may not be able to switch to back-up systems immediately and it could result in lengthy
interruptions or delays in its services. NextTrip has taken and continues to take steps to increase the reliability and redundancy of
its systems. These steps are expensive, may reduce its margins, and may not be successful in reducing the frequency or duration of unscheduled
downtime.
Loss
or material modification of NextTrip’s credit card acceptance privileges could have a material adverse effect on its business and
operating results.
The
loss of NextTrip’s credit card acceptance privileges could significantly limit the availability and desirability of its products
and services. Moreover, if it fails to fully perform its contractual obligations, NextTrip could be obligated to reimburse credit card
companies for refunded payments that have been contested by the cardholders. In addition, even when it is in compliance with these obligations,
NextTrip bears other expenses including those related to the acceptance of fraudulent credit cards. As a result of all of these risks,
credit card companies may require NextTrip to set aside additional cash reserves, may increase the transaction fees they charge it, or
may even refuse to renew its acceptance privileges.
In
addition, credit card networks, such as Visa, MasterCard and American Express, have adopted rules and regulations that apply to all merchants
who process and accept credit cards and include the Payment Card Industry Data Security Standards, or the PCI DSS. Under these rules,
NextTrip is required to adopt and implement internal controls over the use, storage and security of card data. It assesses its
compliance with the PCI DSS rules on a periodic basis and makes necessary improvements to its internal controls. Failure to comply
may subject NextTrip to fines, penalties, damages and civil liability and could prevent it from processing or accepting credit cards.
However, NextTrip cannot guarantee that compliance with these rules will prevent illegal or improper use of its payment systems or the
theft, loss or misuse of the credit card data.
The
loss of, or the significant modification of, the terms under which NextTrip obtains credit card acceptance privileges could have a material
adverse effect on its business, revenue and operating results.
NextTrip
currently relies on a small number of third-party service providers to host and deliver a significant portion of its services, and any
interruptions or delays in services from these third parties could impair the delivery of its services and harm its business.
NextTrip
relies on third-party service providers for numerous products and services, including payment processing services, data center services,
web hosting services, insurance products for customers and travelers and some customer service functions. It relies on these companies
to provide uninterrupted services and to provide their services in accordance with all applicable laws, rules and regulations.
NextTrip
uses a combination of third-party data centers to host its websites and core services. It does not control the operation of any of the
third-party data center facilities it uses. These facilities may be subject to break-ins, computer viruses, denial-of-service attacks,
sabotage, acts of vandalism and other misconduct. They are also vulnerable to damage or interruption from power loss, telecommunications
failures, fires, floods, earthquakes, hurricanes, tornadoes and similar events. NextTrip currently does not have a comprehensive disaster
recovery plan in place nor does its systems provide complete redundancy of data storage or processing. As a result, the occurrence of
any of these events, a decision by NextTrip’s third-party service providers to close their data center facilities without adequate
notice or other unanticipated problems could result in loss of data as well as a significant interruption in its services and harm to
its reputation and brand.
If
NextTrip’s third party service providers experience difficulties and are not able to provide services
in a reliable and secure manner, if they do not operate in compliance with applicable laws, rules and regulations and, with respect to
payment and card processing companies, if they are unable to effectively combat the use of fraudulent payments on NextTrip’s websites,
its results of operations and financial positions could be materially and adversely affected. In addition, if such third-party service
providers were to cease operations or face other business disruption either temporarily or permanently, or otherwise face serious performance
problems, NextTrip could suffer increased costs and delays until it finds or develops an equivalent replacement, any of which could have
an adverse impact on its business and financial performance.
If
NextTrip does not adequately protect its intellectual property, its ability to compete could be impaired.
NextTrip’s
intellectual property includes the content of its websites, registered domain names, as well as registered and unregistered trademarks.
NextTrip believes that its intellectual property is an essential asset of its business and that its domain names and its technology infrastructure
currently give it a competitive advantage in the online market for ALR and other listings. If it does not adequately protect its intellectual
property, its brand, reputation and perceived content value could be harmed, resulting in an impaired ability to compete effectively.
To
protect its intellectual property, NextTrip relies on a combination of copyright, trademark, patent and trade secret laws, contractual
provisions and its user policy and restrictions on disclosure. Upon discovery of potential infringement of its intellectual property,
NextTrip promptly takes action it deems appropriate to protect its rights. It also enters into confidentiality agreements with its employees
and consultants and seeks to control access to and distribution of its proprietary information in a commercially prudent manner. The
efforts it has taken to protect its intellectual property may not be sufficient or effective, and, despite these precautions, it may
be possible for other parties to copy or otherwise obtain and use the content of its websites without authorization. NextTrip may be
unable to prevent competitors from acquiring domain names or trademarks that are similar to, infringe upon or diminish the value of its
domain names, service marks and its other proprietary rights. Even if it does detect violations and decides to enforce its intellectual
property rights, litigation may be necessary to enforce its rights, and any enforcement efforts it undertakes could be time-consuming,
expensive, distracting and result in unfavorable outcomes. A failure to protect its intellectual property in a cost-effective and meaningful
manner could have a material adverse effect on NextTrip’s ability to compete.
Effective
trademark, copyright and trade secret protection may not be available in every country in which NextTrip’s offerings are available
over the Internet. In addition, the legal standards relating to the validity, enforceability and scope of protection of intellectual
property rights are uncertain and still evolving.
NextTrip
may be subject to claims that it violated intellectual property rights of others, which are extremely costly to defend and could require
NextTrip to pay significant damages and limit its ability to operate.
Companies
in the Internet and technology industries, and other patent and trademark holders seeking to profit from royalties in connection with
grants of licenses, own large numbers of patents, copyrights, trademarks and trade secrets and frequently enter into litigation based
on allegations of infringement or other violations of intellectual property rights. There may be intellectual property rights held by
others, including issued or pending patents and trademarks, that cover significant aspects of NextTrip’s technologies, content,
branding or business methods. Any intellectual property claims against NextTrip, regardless of merit, could be time-consuming and expensive
to settle or litigate and could divert its management’s attention and other resources. These claims also could subject it to significant
liability for damages and could result in NextTrip having to stop using technology, content, branding or business methods found to be
in violation of another party’s rights. It might be required or may opt to seek a license for rights to intellectual property held
by others, which may not be available on commercially reasonable terms, or at all. If NextTrip cannot license or develop technology,
content, branding or business methods for any allegedly infringing aspect of its business, it may be unable to compete effectively. Even
if a license is available, it could be required to pay significant royalties, which could increase its operating expenses. NextTrip may
also be required to develop alternative non-infringing technology, content, branding or business methods, which could require significant
effort and expense and be inferior. Any of these results could harm its operating results.
THE
ACQUISITION
Overview
On
October 12, 2023, we entered into the Exchange Agreement with NextTrip, the NextTrip Parent and the NextTrip Representative, pursuant
to which, among other things and subject to the terms and conditions contained therein, we will acquire all of the outstanding capital
stock of NextTrip from the NextTrip Parent in exchange for the issuance to the NextTrip Sellers of the Exchange Shares. Upon the closing
of the Acquisition, the NextTrip Sellers will be issued a number of Exchange Shares (the Closing Shares) equal to 19.99% or our issued
and outstanding shares of common stock immediately prior to the closing. Under the Exchange Agreement, the NextTrip Sellers may be entitled
to receive additional Contingent Shares, subject to NextTrip’s achievement of future milestones specified in the Exchange Agreement.
The Contingent Shares together with the Closing Shares will not exceed 6,000,000 shares of common stock. Assuming all the business milestones
are achieved and no change in our outstanding shares as of September 30, 2023, the NextTrip Sellers will receive Exchange Shares equal
to approximately 88.5% of the outstanding shares of our common stock immediately following the issuance of the Exchange Shares and Sigma
stockholders immediately prior to closing of the Acquisition will retain the balance of approximately 11.5% of such outstanding
shares. The Exchange Shares will be issued the NextTrip Sellers on a pro rata basis based on each NextTrip Seller’s ownership of
NextTrip Parent prior to the completion of the Acquisition.
Upon
completion of the Acquisition, NextTrip will become a wholly owned subsidiary of NextTrip, Inc. and the assets, liabilities, business
and operations of NextTrip, Inc. will be primarily those of NextTrip and its wholly owned subsidiaries. See below for more detailed discussion
of the terms of the Exchange Agreement.
The
Acquisition Structure
Upon
the closing of the Acquisition, the NextTrip Sellers will be issued a number of Exchange Shares equal to 19.99% or our issued and outstanding
shares of common stock immediately prior to the closing. Under the Exchange Agreement, the NextTrip Sellers may be entitled to receive
additional Contingent Shares, subject to NextTrip’s achievement of future business milestones as follows:
| Milestone |
|
Date
Earned |
|
Contingent
Shares |
| Launch
of NextTrip’s leisure travel booking platform by either (i) achieving $1,000,000 in cumulative sales under its historical “phase
1” business, or (ii) commencement of its marketing program under its enhanced “phase 2” business. |
|
As
of a date six months after the closing date |
|
1,450,000
Contingent Shares |
| |
|
|
|
|
| Launch
of NextTrip’s group travel booking platform and signing of at least five (5) entities to use the groups travel booking platform. |
|
As
of a date nine months from the closing date (or earlier date six months after the closing date) |
|
1,450,000
Contingent Shares |
| |
|
|
|
|
| Launch
of NextTrip’s travel agent platform and signing up of at least 100 travel agents to the platform (which calculation includes
individual agents of an agency that signs up on behalf of multiple agents). |
|
As
of a date 12 months from the closing date (or earlier date six months after the closing date) |
|
1,450,000
Contingent Shares |
| |
|
|
|
|
| Commercial
launch of PayDelay technology in the NXT2.0 system. |
|
As
of a date 15 months after the closing date (or earlier date six months after the closing date) |
|
1,650,000
Contingent Shares, less the Exchange Shares issued at the closing of the Acquisition |
Alternatively,
independent of achievement of the foregoing milestones, for each month during the 15-month period following the closing date in
which $1,000,000 or more in gross travel bookings are generated by NextTrip, Inc., to the extent not previously issued, the Contingent
Shares will be issuable in the order described above up to the maximum Exchange Shares issuable under the Share Exchange Agreement.
The Exchange Shares will be issued without
registration under the Securities Act, in reliance upon an exemption from registration for transactions not involving a public
offering and, as such, will constitute “restricted securities” within the meaning of Rule 144 under the Securities Act.
Under Rule 144, the Exchange Shares generally may not be offered or sold publicly unless the
Exchange Shares have been held for at least six months and subject to other conditions.
The
Exchange Agreement provides that in the event our stockholders approve the Acquisition Proposal but not the Capital Increase Proposal,
to the extent that we do not have sufficient authorized shares of common stock available for issuance of the Exchange Shares, in lieu
thereof, we will issue shares of a new series of convertible preferred stock in form and substance satisfactory to the NextTrip Representative
which, among other things, will provide for voting on an as-converted basis and will be automatically converted (on a one-for-one basis)
into shares of our common stock once stockholder approval for an increase in our authorized shares of common stock has been obtained.
Separation
of Certain Assets
The
Exchange Agreement contemplates that Sigma will complete the Asset Sale with Divergent and, in its discretion, sell, transfer and assign
some or all of the business and assets of Sigma that exist prior to the closing date of the Acquisition, subject to maintaining our listing
on Nasdaq Sigma will keep NextTrip apprised of all actions by Sigma in these regards. Sigma has agreed in the Exchange Agreement that,
if the Asset Sale has not occurred within 30 days following the closing date, Sigma will form a wholly owned subsidiary and assign
the remaining assets to such entity.
Financial
Accommodations
NextTrip
agrees in the Exchange Agreement to provide a line of credit to Sigma in the amount up to $400,000, payable in tranches over the
period ending four months following the date of the Exchange Agreement, or February 12, 2024, or the earlier termination of the Exchange
Agreement; provided, however, that any additional capital raised by us following the date of the Exchange Agreement, including but not
limited to via our At-the-Market Issuance Sales Agreement with Lake Street Capital Markets, LLC, shall proportionally reduce the maximum
amount available under the line of credit on a dollar-for-dollar basis. The funding under the line of credit may be used by Sigma to
support its operations, pay legal and accounting fees and other expenses incurred in connection with negotiation of, and transactions
contemplated by, this Agreement and related agreements, and pay debts of Sigma.
Nasdaq
Stock Market Listing
Our
common stock is currently listed on Nasdaq under the symbol “SASI.” We have agreed to use commercially reasonable efforts
to obtain approval for listing on Nasdaq of the Exchange Shares. Unless NextTrip and the NextTrip Parent both agree to waive such
condition in writing, it is a condition to closing that the common stock be listed on Nasdaq and no reason shall exist as to why such
listing shall not continue immediately following the closing.
Executive
Officers and Directors of the Company Following the Closing of the Acquisition
The
following table lists the names, ages and positions of the individuals who are expected to serve as
executive officers and directors of the Company upon completion of the Acquisition:
| Name |
|
Age |
|
Position |
| Executive
Officers |
|
|
|
|
| William
Kerby |
|
66 |
|
Chief
Executive Officer and Director |
| Frank
Orzechowski |
|
63 |
|
Chief
Financial Officer |
| |
|
|
|
|
| Non-Employee
Directors |
|
|
|
|
| Salvatore
Battinelli* |
|
81 |
|
Director |
| Jacob
Brunsberg |
|
37 |
|
Director |
| Dennis
Duitch* |
|
78 |
|
Director |
| Kent
Summers* |
|
64 |
|
Director |
| Donald P. Monaco |
|
71 |
|
Director |
In
the above table, the “*” denotes that our Board of Directors has determined that the director meets the independence requirements
of the SEC and Nasdaq.
We
currently anticipate that Mark Ruport, who serves as Chairman of our Board of Directors, will resign as a director in connection with
closing of the Acquisition, and that Donald P. Monaco will be appointed as a director to fill the vacancy created by Mr. Ruport’s
resignation.
Biographical
information for each of the current executive officers and members of the Board of Directors of the Company are included below under
“Election of Directors.” Set forth below is biographical information for Mr. Kirby and Mr. Monaco.
William
Kerby is the co-founder and Chief Executive Officer of NextTrip. Mr. Kerby has over two decades of experience in the travel and media
industries, and approximately a decade of experience in the financial industry. He acted as the architect of the NextTrip model, overseeing
the development and operations of the Travel, Real Estate and Television Media divisions of the company. Mr. Kerby served as Chief Executive
Officer of Verus International, Inc., formerly Realbiz Media Group, Inc., from October 2012 until August 2015 and on the board of directors
until April of 2016. From April 2002 to July 2008, Mr. Kerby served as the Chief Executive Officer of various media and travel entities
that ultimately became part of Extraordinary Vacations Group. Operations included Cruise & Vacation Shoppes, Maupintour Extraordinary
Vacations, Attaché Travel and the Travel Magazine - a TV series of 160 travel shows. From February 1999 to April 2002, Mr. Kerby
founded and managed Travelbyus, a publicly- traded company on the TSX and Nasdaq Small Cap Market. The launch included an intellectually
patented travel model that utilized technology-based marketing to promote its travel services and products. Mr. Kerby negotiated the
acquisition and financing of 21 companies encompassing multiple tour operators, 2,100 travel agencies, media that included print, television,
outdoor billboard and wireless applications and leading-edge technology in order to build and complete the Travelbyus model. The company
had over 500 employees, gross revenues exceeding $3 billion and a market cap of over $900 million. From June 1989 to January
1999, Mr. Kerby founded and grew Leisure Canada – a company that included the Master Franchise for Thrifty Car Rental British Columbia,
TravelPlus (a nationwide Travel Agency), Bluebird Holidays (an international tour company with operations in the U.S., Canada, Great
Britain, France, South Africa and the South Pacific) and Canadian Traveler (a travel magazine). Leisure Canada was acquired in
May 1998 by Wilton Properties, a Canadian company developing hotel and resort properties in Cuba. From October 1980 through June 1989,
Mr. Kerby worked in the financial industry as an investment advisor. Mr. Kerby graduated from York University with a Specialized Honors
Economics degree.
Mr.
Monaco is a member of the Board of Managers of the NextTrip Parent. Mr. Monaco has approximately three decades of experience as an international
information technology and business management consultant. Mr. Monaco is the founder and owner of
Monaco Air Duluth, LLC, a full service, fixed-base operator aviation services business at Duluth International Airport in Duluth, Minnesota,
serving airline, military, and general aviation customers since November 2005. Since January 2009, he has been appointed and reappointed
by Minnesota Governors to serve as a Commissioner of the Metropolitan Airports Commission in Minneapolis-St. Paul, Minnesota, and currently
serves as Chairman of the Operations, Finance and Administration Committee. Mr. Monaco is also the President and Chairman of the Monaco
Air Foundation, Treasurer of Honor Flight Northland, Treasurer of the Duluth Aviation Institute, and a member of the Duluth Chamber of
Commerce Military Affairs Committee. Mr. Monaco previously worked as an international information technology and business management
consultant with Accenture in Chicago, Illinois for 28 years, and as a partner and senior executive for 18 of such years. From August
2011 to January 2023, Mr. Monaco served as a member of the board of directors of NextPlay (known as Monaker prior to June 2020), where
he served as chairman of the board of directors from August 2018 to June 2021 and as co-chairman of the board from June 2021 to December
2021. He previously served as a director at Republic Bank in Duluth, Minnesota from May 2015 until October 2019. He also served on the
Verus International, Inc., formerly RealBiz Media Group, Inc., board of directors from October 2012 until April 2016, serving as chairman
of the board from August 2015 to April 2016. Mr. Monaco holds Bachelor’s and Master’s degrees in Computer Science Engineering
from Northwestern University.
Effect
of the Acquisition
Pursuant
to the Exchange Agreement, among other things and subject to the terms and conditions contained therein, we will acquire all of the outstanding
capital stock and other equity interests of NextTrip from the NextTrip Parent in exchange for the issuance to the NextTrip Sellers of
the Exchange Shares. The Exchange Shares will be allocated among the NextTrip Sellers pro-rata based on each NextTrip Seller’s
ownership of NextTrip Parent prior to the completion of the Acquisition. Upon completion of the Acquisition, the Sigma stockholders immediately
prior to the Acquisition will retain ownership of their shares of our common stock.
Effect
if the Acquisition is Not Completed
If
the Acquisition Proposal is not approved at the Annual Meeting, or the Acquisition is not completed for any reason, we intend to
proceed with the Asset Sale and may undertake to windup and dissolve the Company unless another strategic transaction such as a
reverse merger transaction materializes. Completion of the Acquisition is part of our plan submitted to Nasdaq to regain compliance
with Nasdaq’s minimum stockholders’ equity requirement. If the Acquisition is not completed, it is likely that our
common stock would be delisted from Nasdaq, with all the attendant risks described in the “Risk Factors Relating to the
Acquisition” section of this proxy statement. Furthermore, if the Acquisition is not completed, the price of Sigma’s
common stock may decline significantly. If that were to occur, it is uncertain when, if ever, the price of Sigma’s common
stock would reach the price implied in the Acquisition or at which it trades as of the date we announced the Exchange Agreement or
the date of this proxy statement. Accordingly, if the Acquisition is not completed, there can be no assurance as to the
effect on the future value of your shares of our common stock.
Reasons
for the Acquisition
In
evaluating the Acquisition and recommending that Sigma’s stockholders vote in favor of approval of the Acquisition Proposal, the
Board, in consultation with Sigma’s senior management, outside legal counsel and financial advisors, considered numerous positive
factors relating to the Exchange Agreement, the Acquisition and the other transactions contemplated thereby including the following material
factors:
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Sigma’s
inability to generate sufficient revenues or raise needed capital to sustain its current business and operations and the prospects
for NextTrip to do so; |
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the
experience of NextTrip’s executive management and prospects for growth in NextTrip’s business through acquisitions
or otherwise; |
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The
extensive processes conducted by Sigma and its financial advisers over approximately the last year prior to entering into the Exchange
Agreement involving a broad group of potential strategic and financial investors and acquirers, which led to no proposal that our
Board considered as favorable to Sigma stockholders as the Acquisition and other transactions contemplated by the Exchange Agreement,
including the Asset Sale; and |
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The
terms and conditions of the Exchange Agreement and related transaction documents, including: |
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The
fact that the Sigma stockholders will retain their ownership of Sigma shares following the Acquisition, which would constitute approximately
11.5% of Sigma shares assuming the issuance of all the Contingent Shares and no other change in our outstanding shares as
of September 30, 2023; |
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the
requirement that the Acquisition Proposal be approved by the stockholders of Sigma;
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the
fact that the Exchange Agreement provides in the event our stockholders approve the Acquisition Proposal but not the Capital Increase
Proposal, to the extent that we do not have sufficient authorized shares of common stock available for issuance of the Exchange Shares,
in lieu thereof, we will issue shares of a new series of convertible preferred stock in form and substance satisfactory to the NextTrip
Representative which, among other things, will provide for voting on an as-converted basis and will be automatically converted (on
a one-for-one basis) into shares of our common stock once stockholder approval for an increase in our authorized shares of common
stock has been obtained; |
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the
fact that the Exchange Shares will be issued in a transaction exempt from registration under
the Securities Act and will constitute “restricted securities” within the meaning
of Rule 144 under the Securities Act;
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the
fact that the future issuance of the Contingent Shares and appointment of additional directors
designated by the NextTrip Representative will be subject to NextTrip’s achievement
of significant business and operational milestones;
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the
fact that NextTrip agrees in the Exchange Agreement to provide Sigma up to $400,000
of bridge financing to facilitate the Acquisition, subject to certain limitations;
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the
fact that the closing of the Acquisition does not involve a change in control of the Company for Nasdaq and other
corporate purposes (although it may result in a future change in control as a result of the issuance of the Contingent Shares, if
any); |
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the
fact that William Kerby will become the Chief Executive Officer and Donald P. Monaco will become a director of NextTrip, Inc. in
connection with the Acquisition and that the other current executive officers of NextTrip will continue to serve as its officers
following the Acquisition; and |
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The
fact that the Board received and considered the fairness opinion of Lake Street. |
In
the course of reaching the determinations and decisions and making the recommendation described above, the Board, in consultation with
Sigma’s senior management, outside legal counsel and financial advisors, considered the risks and potentially negative factors
relating to the Exchange Agreement, the Acquisition and the other transactions contemplated thereby, including the following material
factors:
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The
possibility that the completion of the Acquisition may be delayed or not occur at all, and the likelihood that the dissolution and
liquidation of the Company may be its only viable alternative and the adverse impact such events would have on the
value of Sigma common stock to our stockholders. |
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Our
Board’s belief that the potential benefits of the Acquisition and the other transactions contemplated by the Exchange Agreement,
including the Asset Sale, outweighed the risks and uncertainties of the Acquisition. |
The
foregoing discussion of factors considered by the Board is not intended to be exhaustive but is a summary only of the material factors
considered by the Board. In light of the variety of factors considered in connection with its evaluation of the Acquisition, the Board
did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching
its determinations and recommendations. Moreover, each member of the Board applied his or her own personal business judgment to the process
and may have given different weight to different factors. The Board did not undertake to make any specific determination as to whether
any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. The Board based its recommendation
on the totality of the information presented.
Background
of the Acquisition
At
the beginning of 2022, management recognized that with deteriorating capital markets, the Company’s ability to raise funds to
continue its software-only product development path had become and would continue to be increasingly difficult. To address these
external market conditions, the Company’s management and Board of Directors commenced an assessment of our business, financial
condition, results of operations and prospects. We began to accelerate the software-only product completion, identified
opportunities to operate in a leaner, more cost-efficient manner, and reviewed other opportunities including inorganic
options.
On
November 11, 2022, we filed with the SEC our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, in which we
reported a perceived trend toward consolidation in the additive manufacturing, or AM, industry as companies aligned for
profitability and that a connection with a strategic partner might augment our ability to scale, support the greater AM marketplace
needs, and create shareholder value. We also reported that alignment with a strategic partner might allow for common growth, vision,
and funding of the company to achieve its mission, and provide an opportunity for other strategic relationships, including potential
acquisitions. From our assessment, it was determined that the primary path to accelerate growth was to align with a strategic
investor in the industry that was also interested in potential market consolidation through follow-on mergers and acquisitions, or
M&A. We also stated that we were engaged in identifying sources of financing either in the form of equity or debt, or a
combination thereof, but that no assurance could be given as to the availability of such financing, or, if available, that such
financing would be on terms acceptable to us.
Management
subsequently identified approximately 20 candidates for a potential strategic investment in Sigma. After initial talks, management
engaged in further discussions with three candidates that expressed the greatest interest in the opportunity and corresponding strategy.
We received a verbal commitment for an investment from a candidate, but after a decline in Sigma’s market capitalization the candidate
indicated that it could not provide the cash that it believed would be necessary to accomplish the parties’ strategic objectives.
Given the decline in Sigma’s market capitalization, management was unable to secure another strategic investor, and the decision was made to pivot to a strategic alternatives process with the
Lake Street’s assistance, which included a possible sale of the company and other M&A opportunities. This process yielded a
number of options; however, we were unable to find a buyer for the entire business. As such, we determined that our best opportunity to
maximize shareholder value would be to target a reverse merger, acquisition, or similar transaction in connection with an asset sale.
We employed Armanino, LLP as advisors in the asset sale process in parallel with Lake Street’s M&A work.
After
a thorough process in which over 120 companies were contacted, including for both M&A and an asset sale, management and our Board
of Directors, in consultation with our advisors, determined that the combination of the Acquisition and the Asset Sale was the best
possible strategy for our shareholders and the Company. Following are further details on this process.
The
following chronology summarizes key meetings and events that led to the signing of the Exchange Agreement. This chronology does not purport
to catalogue every conversation of, by, with or among members of the Board of Directors, the Company’s management, the Company’s
financial advisors, legal advisors or other representatives or any other person.
Historically,
the Company’s focus has been on solving the complex and challenging problem of how to best assure the high quality of metal parts
manufactured in laser powder bed additive manufacturing, or 3D, printing, machines. 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 believed would 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.
Beginning
in April 2022, at the direction of our executive team and Board of Directors, we commenced an assessment of our business, financial
condition, results of operation and prospects, including the acceleration of our development of a software-only product, pursuit of a
software partner with a simpler solution to quality control in additive manufacturing, or AM, based on camera technology to bundle with
our product, reducing operating expenses to conserve cash and assessment of a potential strategic investment in the Company to raise
working capital which we estimated would be needed to support our business and operations through the end of the year and into 2023.
In
August 2022, management began considering ways to further reduce operating expenses, including a reduction in workforce and severance
plan, and potential strategies to raise funds to augment our working capital, including a possible equity line of credit, restructuring
of our outstanding warrants in exchange for the warrant holders’ exercise of the warrants and rights offering to our stockholders.
In
September 2022, we determined to seek to engage an investment bank to assist in a possible bridge financing to a strategic investment
in the Company by potential AM industry partners which had expressed interest in the Company with a view to entering into a letter of
intent by the end of November and completing an investment in the range of $3 million to $4 million in exchange for approximately 20%
of the common stock of the Company by the end of the year, if possible. We also continued to consider possible joint product development
opportunities, mergers, acquisitions, and the potential sale of the Company.
On
November 11, 2022, we filed with the SEC our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, in which we reported
a perceived trend toward consolidation in the additive manufacturing, or AM, industry as companies align for profitability and that a
connection with a strategic partner might augment our ability to scale, support the greater AM marketplace needs, and create stockholder
value. We also reported that alignment with a strategic partner might allow for common growth, vision, and funding of the company to
achieve its mission, and provide an opportunity for other strategic relationships, including potential acquisitions. In the same Quarterly
Report, we stated our updated estimate that our existing cash on hand, together with expected revenue,
would be sufficient to fund our anticipated operating costs and capital expenditure requirements through at least the first quarter of
2023. We also stated that we were engaged in identifying sources of financing either in the form of equity or debt, or a combination
thereof, but that no assurance could be given as to the availability of such financing, or, if available, that such financing would be
on terms acceptable to us.
Management
subsequently identified a list of approximately 20 candidates for a potential strategic investment in Sigma. After initial talks, management
engaged in further discussions with three candidates that expressed the greatest interest in the opportunity and corresponding strategy.
We received a verbal commitment for an investment from one candidate, but after a decline in Sigma’s market capitalization the
candidate indicated that it could not provide the cash that it believed would be necessary to accomplish the parties’ strategic
objectives. None of the leading candidates submitted a proposal to invest in the company. During
the same period, we separately pursued a possible stand-alone financing with several potential investors, including certain existing
security holders of the company, prospective underwriters and institutional investors, as a bridge to a potential strategic transaction.
Management was advised by the prospective underwriters, however, that it would be necessary to restructure our outstanding shares
of convertible preferred stock and certain outstanding warrants in order to facilitate a possible financing.
Our
Board of Directors continued meeting at least monthly through December 2022 to assess our financial condition, cash burn rate and
prospects for completing a financing to raise needed working capital and the possible alternatives for preserving and possible
increasing stockholder value. At a meeting of our Board of Directors on December 6, 2022, our Board of Directors approved the
engagement of an investment bank to serve as underwriter or placement agent in connection with a possible public offering or
private placement.
At
a meeting of our Board of Directors on December 20, 2022, management reported that our bankers had advised management that it
would be necessary to restructure our outstanding shares of convertible preferred stock and certain outstanding warrants to purchase
common stock to modify or eliminate certain anti-dilution provisions in order to facilitate a possible financing and that management
and representatives of the investment bank had reached out to the lead holder of the convertible preferred stock and warrants
to discuss the terms on which it and the other holders might be willing to restructure their preferred shares and warrants to facilitate
a possible financing, as well as the lead holder’s interest in participating in a possible financing.
At
a meeting of our Board of Directors on January 3, 2023, management reported on the status of ongoing talks with potential strategic investors,
including one potential investor that indicated it would insist on a right of first refusal to acquire the Company as part of any investment
and that the leading potential strategic investor had scheduled a meeting of its board of directors on January 25, 2023 to decide whether
to pursue an investment in the Company. Management also reported on its talks with prospective investment banks regarding a possible
sale of the Company and recommended that our Board of Directors decide by the end of the month whether to pursue a sale of the Company
if no commitment were forthcoming from one or more potential strategic investors. At the same meeting, management discussed the economic terms of a proposal by the lead holder of the Company’s outstanding warrant to restructure the warrants to facilitate
a possible financing, which terms were unaffordable by the Company and therefore unacceptable to our Board of Directors.
At
the next meeting of our Board of Directors on January 10, 2023, management reported that one of the two or three leading potential strategic
investors had declined to pursue an investment in the Company, that the venture capital arm of another leading potential strategic investor
had expressed interest in a possible investment, and that management was responding to follow-up questions from another leading potential
strategic investor.
At
meetings of our Board of Directors on January 17 and January 24, 2023, among other things: management reported that (1) a technical product
review by one of the leading potential strategic investors was scheduled this month, a meeting regarding possible deal structure was
scheduled this month with another leading potential strategic investor, and two potential strategic investors were scheduled to meet
regarding a possible co-investment in the Company, (2) management expected to hear by January 27, 2023 from the leading potential strategic
investor regarding the outcome of the January 25, 2023 meeting of its board of directors, and (3) management was in talks with the holder
of the outstanding shares of Series D Convertible Preferred Stock of the Company regarding the conversion of the shares.
On
January 27, 2023, we reported in a Current Report on Form 8-K our agreement to issue to the holder
of the remaining outstanding shares of our Series D Preferred Stock a warrant to purchase common stock in consideration of the holder’s
agreement to convert, in full, its shares of Series D Preferred Stock. After several rounds of discussions, however, we were unable to
reach an agreement with the holders of our outstanding warrants to restructure the warrants in order to facilitate a possible financing
in terms that would be acceptable to the business. In light of this development, rising interest rates and deteriorating capital
market conditions, management was advised by our prospective underwriter that it was unlikely that we would be able to raise capital
in the public or private market in the near term. Also on January 27, 2023, we reiterated our previous advice that alignment with a strategic
partner may allow for common growth, vision, and funding of the company, as well as an opportunity for other strategic relationships,
including potential acquisitions, and that we had recently furloughed several of our workforce to conserve existing cash while we continued
to pursue possible strategic or financing transactions.
Our
Board of Directors continued to meet weekly or twice weekly through February 2023 during which time: (1) the venture capital arm of the
second leading potential strategic investor declined to invest in the Company purportedly because the investment would be inconsistent
the its investment strategy, which may have affected the leading potential strategic investor’s decision to also decline to invest
or to pursue an acquisition of the Company; (2) a multi-party investment by other potential strategic investors proved too complicated;
(3) our Board of Directors determined that a sale of the Company appeared to be the best option reasonably available to preserve or enhance
stockholder value; (4) the Company’s launch of its software-only product was still on schedule for the end of the second quarter,
but it would take time for any resulting revenues to materialize; (5) our Board of Directors authorized management to undertake to sell
the Company along with exploration of other strategic alternatives, approved Lake Street’s engagement as financial advisor
in connection with a possible sale and reviewed and considered a list of approximately 65 potential acquirers identified by Lake Street
and management, with an emphasis on those that have previously expressed a possible interest in a possible acquisition of the Company
and goal of securing a commitment for the acquisition of the Company by the end of April; and (6) management continued to consult with
the prior engaged investment bank about a possible capital raise if circumstances permitted.
On
March 1, 2023, we issued a press release and reported in a Current Report on Form 8-K that we had retained Lake Street Capital Markets,
or Lake Street, as our financial advisor in connection with the consideration of a range of strategic alternatives designed to enhance
stockholder value, including a possible strategic investment, acquisition, merger, business combination or similar transaction.
At
meetings of our Board of Director held on March 7, 2023 and March 14, 2023, among other things, management reported that (1) all or substantially
all of approximately 68 potential acquirers had been contacted by management and representatives of Lake Street, follow up meetings
or calls were conducted with approximately 10% to 15% of those contacted, and at least one contact indicated an interest in
a possible acquisition strictly on an earn-out basis but no contact had submitted an acquisition proposal, (2) the Company retained
bankruptcy counsel to consider possible options should that become necessary, (3) management reported that the Company’s
annualized “burn rate” had been reduced to approximately $6.6 million from approximately $9 million in 2022 and that the
Company’s cash might be sufficient to last through May 31, 2023, (4) and management reported that it was exploring a possible
loan financing secured by the Company’s intellectual property, or IP.
At
a meeting of our Board of Directors held on March 28, 2023, management reported that it and Lake Street were in talks with a few of the
most promising potential acquirers who expressed interest in a possible acquisition based on a strategy developed by management involving
a reduced workforce of a small core group of employees and substantially reduced burn rate. Management also reported that the talks suggested
a lack of interest in acquiring the Company due to: (1) the AM industry continues to be largely unprofitable; (2) most potential strategic
acquirers are unprofitable, so there is no value to them of the Company’s accumulated net operating losses, or NOLs; (3) the Company
is not large enough to have a significant financial and market impact for potential acquirers in short term; and
(4) potential financial buyers such as private equity, or PE, firms have experienced substantial declines in the value of their portfolio
companies and have little or no appetite for new acquisitions unless already EBITDA positive.
On
April 6, 2023, we retained Armanino LLC, or Armanino, as our advisor in connection with the possible dissolution and winding up
of the Company, and at a meeting of our Board of Directors on April 11, 2023 representatives of Armanino gave a presentation regarding
the process for dissolving and liquidating a distressed company and the principal elements of the dissolution and winding up process
and their related services. At the same meeting, management reported that Lake Street had sent bid process letters to prospective acquirers
setting forth an April 28, 2023 deadline for submitting letters of intent or other indications of interest in acquiring the Company.
On
April 13, 2023, we reported in a Current Report on Form 8-K that on April 13, 2023 Nasdaq notified us that the Nasdaq Staff has granted
us an additional 180 calendar day period, or until October 9, 2023, to regain compliance with Nasdaq’s minimum bid price continued
listing standard based on our meeting the continued listing requirement for market value of publicly held shares and all other applicable
requirements for initial listing on The Nasdaq Capital Market with the exception of the bid price requirement, and our written notice
of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. We also
reported that, according to Nasdaq’s notice, if we choose to implement a reverse stock split, it must be completed no later than
ten business days prior to October 9, 2023 to timely regain compliance.
At
a meeting of our Board of Directors on April 18, 2023, management reported on receipt of an informal offer from one of the leading prospective
strategic acquirers to purchase the Company for $100,000 in cash and an unspecified earn-out amount. Management did not consider this
a viable offer, because the Company’s cash on hand and the $100,000 upfront payment would not be sufficient to cover the Company’s
current liabilities and anticipated costs and expenses pending the possible acquisition. Management also reported that Lake Street advised
management that it may not be possible to obtain a fairness opinion regarding such an acquisition because of uncertainties regarding
the earn-out. Management also indicated that the list of possible acquirers had been reduced to approximately 20, including three “leading”
potential strategic acquirers and a possible “reverse merger” candidate, and discussed the status of the Company’s
ongoing software-only product development efforts.
At
a meeting of our Board on May 12, 2023, management and representatives of Lake Street reported that the strategic review process had
resulted in four letters of intent, or LOIs, to acquire the Company, with each offer involving different terms, structures, values, and
timeframes. Management noted that the Company had enough cash to continue operations through mid-July and possibly longer assuming certain
remaining employees were furloughed. Lake Street representatives noted that Lake Street had undertaken an exhaustive process to identify
approximately 86 potential acquirers, of which 32 elected to receive a bid process letter, which resulted in the four LOIs, which were
summarized as follows: (1) acquirer A offered $100,000 cash upfront plus an earnout based upon achieving certain pre-defined milestones;
due to the uncertainty of the earn-out amounts, if any, Lake Street would likely be unable to opine on the fairness opinion of
the transaction; (2) acquire B proposed to offer Sigma shareholders the option to receive cash or equity consideration at a 20% premium
to the current market capitalization of the Company as part of a larger rollup strategy that would require acquirer B to raise $70 million
to $90 million and its diligence of the Company would not begin until at least late June; (3) acquirer C proposed a reverse merger
in which the Company would acquire 100% of the outstanding equity of acquirer C in exchange for shares of common stock of the Company
constituting approximately 97% of the Company, with Sigma shareholders and other equity holders retaining approximately 3% of the Company;
the transaction would be contingent upon acquirer C and Sigma raising at least $10 million in a private investment in public equity,
or PIPE, immediately prior to or concurrent with the closing of the transaction; and (4) acquirer D, a publicly traded company, proposed
an all-stock transaction in which it would issue shares of its common stock at a slight premium to Sigma’s market capitalization
in exchange for the outstanding equity interests of Sigma; the proposal involved no bridge financing to the Company or cash payment
to Sigma shareholders. It was noted that the proposals from acquirer B and C could potentially provide a return to Sigma shareholders
in excess of the current value of their investment in Sigma, but that the potential return would have to be weighed against the probability
of completing each transaction. Management and its advisers considered the proposal from acquirer A, given its low upfront cash offer
of $100,000, was in the nature of a wind-down option, and that if the Company were to proceed on this path, there were several original
equipment manufacturers, or OEMs, that had expressed interest in licensing the Company’s intellectual property. Management also
noted that three other potential bidders had not committed to submitting a LOI.
Our
Board met on June 16, 2023, along with representatives of Lake Street, Armanino, the Company’s outside counsel and special bankruptcy
counsel. At the meeting, management reported that acquirer C had decided not to move forward with their proposed reverse merger transaction,
citing as the primary reason the inability and uncertainty to securing $10 million in committed funding concurrent with
the closing of the transaction. Acquirer C’s management suggested, however, that they would reconsider moving forward if the $10
million commitment could be secured by the Company. At the same meeting, management reported that they had met with management of acquirer
D to discuss their unwillingness to include any cash as part of their proposal made it difficult for the Company to entertain, because
at least a portion of the acquirer D shares to be issued in the proposed transaction would have to be converted to cash by the
Company in order to settle liabilities at closing.
At
a meeting of our Board on June 28, 2023, management reported that acquirer D was interested in purchasing Sigma’s IP and source
code only, and reduced by two-thirds the number of shares of acquirer D common stock it would be willing to issue to acquire the
Company’s assets. After discussion, the directors concluded that the new proposal was significantly
below the market capitalization of the Company and should be rejected. Management also noted that they were still in talks with OEMs
and other interested parties regarding a possible purchase of the Company’s IP and would be reaching out to other prospective purchasers
with Armanino’s assistance.
Our
Board met on July 13, 2023 together with representatives of Lake Street, Armanino, the Company’s outside counsel and special bankruptcy
counsel. Management noted that due to the substantially reduced proposal from acquirer D, management Company had pivoted to explore a
sale of assets in order to seek the most value reasonably available for creditors and stockholders of the Company and that Armanino was
leading the process and had begun to reach out to parties that had expressed interest in the previous rounds of discussions. It was reported
that a new process letter had been sent to potentially interested parties with a deadline to respond of July 28th. At the
same meeting, management reported that two new companies had expressed an interest in an M&A transaction with the Company
and any remaining post-sale assets; an agricultural technology, or AgTech, company whose shares are listed on the OTCQB tier of the OTC
Market; and a privately held biotech diagnostics company. Management indicated that it and the Company’s advisers would
pursue talks with the two companies in parallel with the asset sale process and would explore these and any other options
in connection with asset sale exploration.
On
July 20, 2023, we reported in a Current Report on Form 8-K that our management and Lake
Street had undertaken to solicit indications of interest in a possible strategic transaction from approximately 90 potential strategic
and financial acquirers, including many companies in the AM industry in the U.S. and Europe. Approximately a third of the potential acquirers
who responded subsequently entered into confidentiality agreements, or CDAs, to facilitate
discussions with our management and advisers and diligence regarding a possible strategic transaction, including the possible merger
or acquisition of the company, the sale of all or part of the company’s business and assets, and a possible bridge financing to
allow the company to retain its key employees and preserve its customers and other business pending a possible transaction.
A
meeting of our Board was held on August 2, 2023 with representatives of Armanino and Lake Street and the Company’s outside
counsel for purposes of (1) reviewing the status of the asset sale process, (2) reviewing proposed LOIs for a possible M&A
transaction, (3) hearing management’s recommendations regarding the possible transaction and (4) considering the
implementation of an “at-the-market,” or ATM, facility. The Armanino representatives reported they had contacted over 120
companies with some indicated interest in additive manufacturing regarding their interest in a possible purchase of Sigma assets. Of
those contacted, 40 companies entered into non-disclosure agreements, or NDAs, and 14 of such companies were provided access to the Company’s
virtual data room. Subsequently Armino received four LOIs to purchase assets consisting primarily of the Company’s IP portfolio,
trademarks, source code and documentation and one verbal indication of interest in a potential licensing agreement in India. The companies
submitting LOIs included acquirers A and D and an OEM referred to herein as acquirer E with which management and its advisors had been
in previous talks regarding a potential strategic transaction, and Divergent Technologies, Inc., or Divergent, a privately held
AM industry company, which was a relative newcomer to the process.
At
the August 2, 2023 meeting, Lake Street representatives reviewed with the directors the status of LOIs regarding a potential acquisition
transaction from the AgTech company whose shares are quoted on the OTCQB tier of the OTC Market and the privately held biotech
diagnostics company with which Lake Street has been in previous discussions, and NextTrip, an online travel company. It was noted that
the AgTech company’s proposal contemplated that Sigma shareholders and other equity holders would retain ownership of approximately
8.25% of the post-transaction Company, which would imply a value of Sigma of approximately $2.6 million. The Lake Street representatives
indicated that in their experience AgTech companies are currently difficult to finance, because of their capital-intensive nature and
low operating margins, and that Nasdaq had increased its scrutiny of recent OTC-uplist transactions. As for the biotech diagnostics
company’s proposal, the Lake Street representatives noted that the post-merger value of the transaction would be approximately
$37 million, with $5 million ascribed to Sigma shareholders and other equity holders, and $32 million to the biotech diagnostics
company’s equity holders. Although the LOI referred to the availability of bridge financing to Sigma, no amount was specified.
The Lake Street representatives noted the BioTech industry was viewed by professional investors as very speculative and was also difficult
to finance at present, with deals typically being highly structured.
The
Lake Street representatives also reviewed with the directors the terms of the LOI from NextTrip, which valued Sigma at approximately
$4.2 million, or $8.00 (post-reverse stock split) per outstanding share of common stock, in a transaction in which Sigma would acquire
NextTrip in exchange for the issuance of shares of Sigma common stock. Sigma shareholders would retain approximately 8.25% of the combined
Company post-transaction. The LOI contemplated that NextTrip would provide Sigma with a $200,000 line of credit under which up to $50,000
would be advanced per month pending the closing of the transaction. The Lake Street representatives noted the travel industry is currently
in favor with investors as travel has increased substantially since the COVID-19 epidemic and may be easier to finance than the other
industries discussed at the meeting. They noted further that NextTrip has a seasoned management team with public company experience who
have been known to Lake Street for some time, and that in Lake Street’s view the proposed transaction has attractive upside potential
to Sigma stockholders. Management and the Company’s advisers also noted with favor that NextTrip’s LOI would allow for the
possible sale of assets being considered by the Company. In concluding its presentation, the Lake Street representatives reported
that a current warrant holder of the Company had contacted Lake Street indicating an interest in submitting a last-minute LOI regarding
an unspecified transaction, but that the warrant holder typically deals in highly structured transactions involving antidilution features.
The directors proceeded to discuss the multiple LOIs and whether, among other things, NextTrip
was familiar with the Company’s equity holders and the nature of the Company’s outstanding warrants, which management
and the Lake Street representative confirmed. The directors also discussed whether the combined post-acquisition company was likely
to meet applicable Nasdaq listing requirements. Management and the Lake Street representatives indicated that these requirements had
not yet been fully analyzed, but the parties understood that compliance with applicable Nasdaq would be a condition to the
transaction. Management thereupon recommended to the directors that the Company pursue NextTrip’s proposal, which management
believed to have the best potential to optimize shareholder value, aligned well with the Company’s timing, provided for bridge
financing to the Company, and featured a seasoned management team with public company experience. As a contingency plan, should the
dealings with NextTrip fail, management and the Company’s advisers would seek to re-engage with the AgTech company, the cancer
diagnostics company and other potential acquirers.
On August 3, 2023, we received a summary,
non-binding LOI from an investment bank on behalf of a biotech company regarding a $2 million to $3 million investment in convertible preferred stock of the Company priced at market for 51% of the
Company on as as-converted basis and the right to designate four of five directors of the Company.
In
our Quarterly Report on Form 10-Q filed with the SEC on August 14, 2023, we reported that since the filing of the Current Report on July
20, 2023, we received additional written, non-binding proposals as well as revised previous proposals to purchase certain assets of the
Company or acquire
the Company in a merger or reverse merger transaction. We also reported we were continuing to work towards definitive agreements with
interested parties.
On
August 22, 2022, we reported in a Current Report on Form 8-K that on August 17, 2023 we received notice from Nasdaq that because our
stockholders’ equity as of June 30, 2023 was $2,391,289, we no longer complied with Nasdaq Listing Rule 5550(b)(1), which requires
listed companies to maintain a minimum stockholders’ equity of $2,500,000 and did not meet the alternatives of market value of
listed securities or net income from continuing operations. The notice stated that under Nasdaq Rules, we would have 45 calendar days
to submit a plan to regain compliance and that if our plan is accepted, Nasdaq can grant us an extension of up to 180 calendar days from
the date of the notice to evidence compliance.
In
our Current Report on Form 8-K filed on August 22, 2023, we also reiterated that, as disclosed in our Form 10-Q filed with the SEC on
August 14, 2023, we had received several written, non-binding proposals to purchase certain assets of the Company or acquire the Company
in a merger or reverse merger transaction and were continuing to work towards such definitive agreements with interested parties. We
also reported management’s belief that successful completion of these transactions would enable the Company to regain compliance
with Nasdaq’s minimum stockholders’ equity requirement and that we would submit our plan to Nasdaq to regain compliance.
Management
and our advisors subsequently conducted diligence regarding NextTrip and negotiated non-binding letters of intent, or LOIs, with Divergent
and NextTrip which were approved by our Board of Directors at meetings held on August 25, 2023 and September 1, 2023, respectively.
On
September 7, 2023, we issued and joint press release with NextTrip announcing the signing of a non-binding LOI to acquire all the capital
stock of NextTrip in exchange for the Exchange Shares. We also announced the signing of a non-binding LOI to sell IP assets related to
our additive quality assurance product to a strategic buyer.
Management
and our advisors subsequently engaged in negotiations with Divergent and NextTrip and their advisors regarding a definitive Asset Purchase
Agreement and definitive Exchange Agreement.
On
September 22, 2023, we reported in a Current Report on Form 8-K that on September 22, 2023, we effected a 1-for-20 reverse stock split,
which we refer to in this proxy statement as the Reverse Split, of the issued and outstanding shares of our common stock and a corresponding
decrease in the authorized shares of our common stock.
On
October 6, 2023, our Board of Directors unanimously
approved the Asset Purchase Agreement with Divergent and received management’s update on the status of negotiation of the proposed
Exchange Agreement with NextTrip.
On
October 12, 2023, our Board of Directors met with management and representatives of Lake Street and of our outside counsel to consider
the approval of the proposed Exchange Agreement. At the meeting, the Lake Street representatives summarized the terms of the proposed
Acquisition and rendered its oral opinion regarding the fairness of the Acquisition from a financial point of view to the stockholders
of the Company based on its fairness evaluation and discussed the assumptions underlying its evaluation. At the meeting, our Board of
Directors requested that Lake Street deliver its written fairness opinion and unanimously approved the Exchange Agreement and authorized
management to sign and deliver the Exchange Agreement.
On
October 12, 2023, Lake Street delivered its written fairness opinion to our Board of Directors, and we signed and delivered the Exchange
Agreement.
On
October 13, 2023, we issued a press release and filed a Current Report on Form 8-K to report that we had entered into the Exchange Agreement
with respect to the Acquisition.
Also
on October 13, 2023, we reported in a separate Current Report on Form 8-K that we had entered into the Asset Purchase Agreement with
Divergent. We also reported that the closing of the Asset Sale was expected to occur subsequent to the closing or termination of the
Acquisition, subject to satisfaction or waiver of customary conditions specified in the Asset Purchase Agreement.
Opinion
of Lake Street Capital Markets, LLC
On
October 12, 2023, Lake Street rendered its oral opinion to the Board (which was subsequently confirmed in writing)
to the effect that, as of such date and subject to and based on the procedures followed, assumptions made, qualifications, conditions
and limitations on the review undertaken and other matters considered by Lake Street as set forth in its written opinion, the Exchange
Shares to be issued to the NextTrip Sellers in connection with the Acquisition is fair, from a financial point of view, to Sigma.
Lake
Street’s opinion was directed to the Board (in its capacity as such) and only addressed the fairness, from a financial point of
view, to Sigma of the Exchange Shares to be received by NextTrip Sellers in connection with the Acquisition, and did not in any manner
address the relative merits of the Acquisition in comparison to any alternatives to the Acquisition, Sigma’s underlying decision
to proceed with the Acquisition, or any other aspect of the Acquisition, or alternatives to the Acquisition available to Sigma. The summary
of Lake Street’s opinion below is qualified in its entirety by reference to the full text of its written opinion, which is attached
as Annex C to this proxy statement, and which describes the procedures followed, assumptions made, qualifications, conditions
and limitations on the review undertaken and other matters considered by Lake Street in connection with the preparation of its opinion.
Neither Lake Street’s opinion nor the summary of its opinion and the related analyses set forth in this proxy statement are intended
to be, and do not constitute, advice or a recommendation to the Board, the Company or any security holder as to how to act or vote on
any matter relating to the Acquisition or otherwise.
In
connection with rendering its opinion, Lake Street, among other things:
| 1. | Reviewed
a copy of the proposed definitive Exchange Agreement dated as of October 12, 2023; |
| 2. | Reviewed
current financial projections of NextTrip (“NextTrip” refers collectively to
NextTrip and the NextTrip Parent) for the fiscal years ended December 31, 2024 through
December 31, 2028 prepared and furnished to us by management of NextTrip (the “NextTrip
Projections”); |
| 3. | Analyzed
public information with respect to certain other companies in lines of business that we believe
to be comparable to NextTrip, in whole or in part, which included an examination of current
public market prices and resulting valuation statistics; |
| 4. | Reviewed
the financial terms, to the extent publicly available, of certain other acquisitions involving
the acquisition of companies we believe, in our sole discretion, to be comparable to NextTrip,
in whole or in part; |
| 5. | Performed
a discounted cash flow analysis of NextTrip based on the NextTrip Projections, as applicable;
and |
| 6. | Performed
other research and analysis and considered such other factors as we deemed appropriate. |
In
performing its analyses and rendering its opinion with respect to the Acquisition, Lake Street, with the Company’s consent:
| ● | Relied
upon and assumed, without independent verification, the accuracy and completeness of all
information that was publicly available or was furnished, or otherwise made available, to
Lake Street by Sigma and/or NextTrip; |
| ● | Assumed
that the financial information provided was prepared on a reasonable basis in accordance
with industry and past management practice, and that management of neither Sigma nor NextTrip
was aware of any information or facts that would make any information provided to us incomplete
or misleading; |
| ● | Assumed
that with respect to financial forecasts, estimates and other forward-looking information
reviewed by Lake Street, that such information was reasonably prepared based on assumptions
reflecting the best currently available estimates and judgments of the management of NextTrip
as to the expected future results of operations and financial condition of NextTrip and did
not evaluate or otherwise test such financial forecasts, estimates and other forward-looking
information or the underlying assumptions; |
| ● | Assumed
and relied upon, without independent verification, the accuracy and completeness of all of
the financial, legal, regulatory, tax, accounting and other information provided to, discussed
with or reviewed by Lake Street; |
| ● | Assumed
that the executed Exchange Agreement was in all material respects identical to the last draft
of the Exchange Agreement reviewed by Lake Street; |
| ● | Relied
upon and assumed, without independent verification, that (i) the representations and warranties
of all parties set forth in the Agreement and all related documents and instruments that
were referred to therein were true and correct, (ii) each party to the Agreement was fully
and timely perform all of the covenants and agreements required to be performed by such party
thereunder, (iii) the Acquisition would be consummated pursuant to the terms of the Exchange
Agreement without amendment of any term or condition thereof the effect of which would be
in any way meaningful to Lake Street’s analysis, and (iv) all conditions to the consummation
of the Acquisition would be satisfied without waiver by any party of any conditions or obligations
thereunder the effect of which would be in any way meaningful to Lake Street’s analysis;
and |
| ● | Assumed
that all the necessary regulatory approvals and consents required for the Acquisition would
be obtained in a manner that would not adversely affect Sigma or the contemplated benefits
of the Acquisition to Sigma. |
Lake
Street’s opinion was necessarily based upon the information available to them and facts and circumstances as they existed and were
subject to evaluation as of the date thereof. Although subsequent developments may affect Lake Street’s opinion, Lake Street does
not have any obligation to update, revise or reaffirm its opinion.
In
connection with its opinion, Lake Street did not perform any appraisals or valuations of any specific assets or liabilities (fixed, contingent,
or other) of Sigma or NextTrip, and were not furnished or provided with any such appraisals or valuations, nor did Lake Street evaluate
the solvency of Sigma or NextTrip under any state or federal law relating to bankruptcy, insolvency, or similar matters. The analysis
performed by Lake Street in connection with its opinion was a going concern analysis. Lake Street did not undertake any independent
analysis of any pending or threatened litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which
Sigma, NextTrip, or any of their respective affiliates was a party or may be subject, and at the direction of Sigma and with its consent,
Lake Street’s opinion made no assumption concerning, and therefore did not consider, the possible assertion of claims, outcomes
or damages arising out of any such matters.
Lake
Street did not express any opinion as to any change in the price at which shares of Sigma’s common stock may trade following announcement
of the Acquisition or at any future time after the date thereof. Lake Street did not undertake to reaffirm or revise its opinion or otherwise
comment upon any events occurring after the date of the opinion and did not have any obligation to update, revise or reaffirm the opinion.
Lake
Street’s opinion did not constitute a recommendation that Sigma should complete the Acquisition. Lake Street was not requested
to opine as to, and its opinion did not in any manner address the relative merits of the Acquisition in comparison to any alternatives
to the Acquisition, Sigma’s underlying decision to proceed with the Acquisition, or any other aspect of the Acquisition, or alternatives
to the Acquisition available to Sigma.
Set
forth below is a summary of the material financial analyses reviewed by Lake Street with the Board on October 12, 2023 in connection
with rendering Lake Street’s opinion. The following summary, however, does not purport to be a complete description of the financial
analyses performed by Lake Street. The order of the financial analyses described, and the results of these analyses, do not represent
the relative importance or weight given to these analyses by Lake Street. Except as otherwise noted, the following quantitative
information, to the extent that it is based on market data, is based on market data that existed on or before October 12, 2023 and is
not necessarily indicative of then-current market conditions.
The
following summary of Lake Street’s financial analyses includes information presented in tabular format. Several financial analyses
were employed and no one method of analysis should be regarded as critical to the overall conclusion reached. Each analytical technique
has inherent strengths and weaknesses, and the nature of the available information may further affect the value of particular techniques.
Each of the analyses conducted was carried out to provide a particular perspective of the Acquisition. In order to fully understand the
analyses, the tables must be read together with the full text of each summary. The tables are not intended to stand alone and alone do
not constitute complete analyses. Considering the tables below without considering the full narrative description of Lake Street’s
financial analyses, including the methodologies and assumptions underlying such analyses, could create a misleading or incomplete view
of such analyses.
While
this summary describes certain of the analyses and factors that Lake Street deemed material in its presentation to the Board, it is not
a comprehensive description of all analyses and factors considered by Lake Street. The preparation of a fairness opinion is a complex
process that involves various determinations as to appropriate and relevant methods of financial analysis and the application of these
methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description.
Lake
Street did not form a conclusion as to whether any individual analysis, when considered in isolation, supported or failed to support
its opinion as to the fairness of the Exchange Shares. Accordingly, Lake Street believes that its analyses must be considered as a whole
and that selecting portions of its analyses and of the factors considered by it in rendering its opinion without considering all analyses
and factors could create a misleading or incomplete view of the evaluation process underlying the opinion. Lake Street did not place
any specific reliance on any individual analysis, but instead concluded that its analyses, taken as a whole, supported its opinion.
Summary
of Lake Street’s Financial Analysis
Discounted
Cash Flow Analysis
Lake
Street performed a discounted cash flow analysis of NextTrip. A discounted cash flow analysis is a valuation methodology used to derive
an intrinsic valuation of a company by calculating the present value of its estimated future cash flows. Lake Street performed a discounted
cash flow analysis of the projected unlevered free cash flows of NextTrip for the fiscal years 2024 through 2028. Free cash flow was
based on the forecasted unlevered after-tax net operating profits adjusted for non-cash charges and working capital investments. The
tax rate utilized in the discounted cash flow analysis was 26.5%, derived from summing the federal corporate tax rate of 21.0% with the
Florida corporate state tax rate of 5.5%. Lake Street calculated the net present value of the projected unlevered free cash flows utilizing
an estimate of NextTrip’s weighted average cost of capital for the discount rate. For purposes of its discounted cash flow
analysis, Lake Street utilized and relied upon the NextTrip Projections, which provided a financial forecast for the fiscal years 2024
through 2028, and other financial information provided by Company management. For further information regarding the NextTrip Projections,
see “Information Regarding Financial Projections Used for Fairness Opinion Analysis” below.
In
calculating the net present value of the unlevered free cash flows in the discounted cash flow analysis, Lake Street utilized a weighted
average cost of capital range of 18.5 % to 22.5%. The discount rate range was selected giving consideration to market-based and company-specific
risks and was based on Lake Street’s professional judgment and experience. Lake Street calculated NextTrip’s terminal value
by applying exit multiple ranges for Revenue of 0.8x to 1.6x and EBITDA of 8.7x to 15.1x to NextTrip’s terminal year revenue and
EBITDA. Lake Street discounted the indicated terminal value to present value using the selected range of discount rates and added
the present value of the unlevered free cash flows. Based on these assumptions, Lake Street’s discounted cash flow analysis indicated
an estimated enterprise value range for NextTrip of $87.0 million to $178.0 million based on terminal revenue multiples, and $143.0 million
to $264.0 million based on terminal EBITDA multiples, after rounding. In comparison, NextTrip’s enterprise value based on the maximum
number of the Exchange Shares of 6,000,000 and Sigma’s share price of $2.42 at the time of the opinion, plus net-debt, after rounding,
equaled approximately $18 million.
Selected
Public Companies Analysis
Lake
Street performed a selected public companies analysis for NextTrip. Although none of the selected public companies is directly comparable
to NextTrip, Lake Street selected the public companies for its analysis based on their degree of similarity to NextTrip, primarily in
terms of operations, geographic footprint, size, and historical and projected financial performance as compared to NextTrip. Lake Street
analyzed the selected public companies listed below:
| ● | trivago
N.V. |
| ● | Travelzoo |
| ● | Despegar.com,
Corp. |
| ● | Tripadvisor,
Inc. |
| ● | Global
Business Travel Group, Inc. |
| ● | MakeMyTrip
Limited |
| ● | Expedia
Group, Inc. |
| ● | Trip.com
Group Limited |
| ● | Airbnb,
Inc. |
| ● | Booking
Holdings Inc. |
The
table below summarizes observed historical and projected multiples of enterprise value to estimated calendar year 2024 revenue (“2024P
Revenue”), estimated calendar year 2024 earnings before interest, taxes, depreciation and amortization (“2024P EBITDA”),
estimated calendar year 2025 revenue (“2025P Revenue”), and estimated calendar year 2025 EBITDA (“2025P EBITDA”)
for the selected public companies, in each case as of October 12, 2023. The EBITDA estimates for calendar years 2024 and 2025 for the
selected public companies were derived based on equity research analyst estimates for the selected public companies.
The
results of this analysis were as follows:
Selected
Public Companies Analysis
| |
|
Enterprise
Value as a Multiple of |
| Company
Name |
|
2024P
Revenue |
|
2025P
Revenue |
|
2024P
EBITDA |
|
2025P
EBITDA |
| trivago
N.V. |
|
0.1x |
|
0.1x |
|
0.5x |
|
0.5x |
| Travelzoo |
|
0.6x |
|
0.6x |
|
3.1x |
|
NA |
| Despegar.com,
Corp. |
|
0.3x |
|
0.3x |
|
2.2x |
|
1.7x |
| Tripadvisor,
Inc. |
|
1.0x |
|
0.9x |
|
5.0x |
|
4.3x |
| Global
Business Travel Group, Inc. |
|
1.4x |
|
1.3x |
|
6.8x |
|
6.1x |
| MakeMyTrip
Limited |
|
4.6x |
|
3.9x |
|
29.7x |
|
21.1x |
| Expedia
Group, Inc. |
|
1.0x |
|
1.0x |
|
4.8x |
|
4.4x |
| Trip.com
Group Limited |
|
3.0x |
|
2.6x |
|
11.3x |
|
9.8x |
| Airbnb,
Inc. |
|
6.5x |
|
5.7x |
|
18.0x |
|
15.4x |
| Booking
Holdings Inc. |
|
4.6x |
|
4.2x |
|
13.2x |
|
11.8x |
Note:
2025P EBITDA figures were not available for Travelzoo.
None
of the selected public companies was identical to NextTrip. As a result, a complete valuation analysis cannot be limited to a quantitative
review of the selected public companies, but also requires complex consideration and judgments concerning differences in financial and
operating characteristics of such companies, as well as other factors that could affect their value relative to that of NextTrip.
Selected
M&A Transactions Analysis
Lake
Street reviewed publicly available information related to selected mergers and acquisitions transactions listed in the table below. The
selection of these transactions was based on, among other things, the target company’s industry and operational similarity, the
relative size of the transaction, and the availability of public information related to the selected transaction.
Selected
M&A Transactions Analysis
| |
|
|
|
|
|
Enterprise
Value as a Multiple of |
| Closed
Date |
|
Target |
|
Acquiror |
|
LTM
Revenue |
|
LTM
EBITDA |
| February,
2023 |
|
Scott
Dunn Ltd. |
|
Flight
Centre Travel Group Limited |
|
4.1x |
|
9.6x |
| November,
2022 |
|
SosTravel.com
S.P.A. |
|
Digital
Destination Company |
|
0.6x |
|
- |
| May,
2022 |
|
eSky.pl
S.A |
|
MCI
Capital Alternatywna Spólka Inwestycyjna S.A. |
|
0.2x |
|
4.1x |
| March,
2022 |
|
E-Domizil
Gmbh |
|
HomeToGo
SE |
|
2.0x |
|
- |
| February,
2022 |
|
Comtravo
GmbH |
|
TripActions,
Inc. |
|
2.2x |
|
- |
| July,
2021 |
|
Click
Travel Limited |
|
TravelPerk
S.L.U |
|
0.8x |
|
28.2x |
| October,
2020 |
|
Travel
and Transport, Inc. |
|
Corporate
Travel Management Limited |
|
1.0x |
|
- |
| December,
2019 |
|
Yapta,
Inc. |
|
Coupa
Software Incorporated |
|
8.6x |
|
- |
| July,
2019 |
|
Viajes
Falabella Ltda. |
|
Despegar.com,
Corp. |
|
0.5x |
|
7.7x |
| July,
2019 |
|
Liberty
Expedia Holdings, Inc. |
|
Expedia
Group, Inc. |
|
1.6x |
|
10.6x |
| June,
2019 |
|
Kiwi.com
s.r.o. |
|
General
Atlantic Service Company, L.P. |
|
0.2x |
|
- |
| May,
2019 |
|
VEGAS.com,
LLC |
|
MGG
Investment Group LP |
|
0.7x |
|
5.3x |
| October,
2018 |
|
Stewart
Travel Limited |
|
Zachary
Asset Holdings |
|
1.0x |
|
- |
| September,
2018 |
|
trivago
N.V. |
|
Par
Capital Management, Inc.; PAR Investment Partners L.P. |
|
1.3x |
|
NM |
| September,
2018 |
|
Musement
S.p.A. |
|
TUI
AG |
|
1.8x |
|
- |
| September,
2018 |
|
ILG,
Inc. |
|
Marriott
Vacations Worldwide Corporation |
|
3.8x |
|
19.2x |
| August,
2018 |
|
Classic
Collection Holidays Limited |
|
On
The Beach Travel Limited |
|
0.4x |
|
7.6x |
| August,
2018 |
|
Neilson
Active Holidays Limited |
|
LDC
(Managers) Limited |
|
1.0x |
|
20.6x |
| July,
2018 |
|
TAG |
|
Apiary
Capital Partners; Apiary Capital Partners I LP |
|
0.7x |
|
8.8x |
| July,
2018 |
|
Hogg
Robinson Group plc |
|
GBT
III B.V. |
|
1.3x |
|
9.8x |
| May,
2018 |
|
Travel
Counsellors Limited |
|
Vitruvian
Partners LLP |
|
0.5x |
|
- |
| May,
2018 |
|
Hillgate
Travel Ltd |
|
Reed
& Mackay Travel Limited |
|
3.3x |
|
20.4x |
| April,
2018 |
|
FareHarbor
Holdings, Inc. |
|
Booking
Holdings Inc. |
|
5.0x |
|
- |
| April,
2018 |
|
Ticketea,
S.L. |
|
Eventbrite,
Inc. |
|
0.7x |
|
- |
Note:
LTM EBITDA figures were not available for the transactions involving SosTravel.com S.P.A., E-Domizil Gmbh, Comtravo GmbH, Travel and
Transport, Inc., Yapta, Inc., Kiwi.com s.r.o., Stewart Travel Limited, Musement S.p.A., Travel Counsellors Limited, FareHarbor Holdings,
Inc., Ticketea, S.L.; LTM EBITDA figures were not meaningful for the transaction involving trivago N.V.
The
LTM revenue and LTM EBITDA multiples for the selected target companies were calculated based on certain publicly available historical
financial data for the selected M&A transactions. No company or transaction utilized in the selected M&A transactions analysis
was identical or directly comparable to NextTrip or the Acquisition.
Summary
of Selected Public Companies / Selected M&A Transactions Analyses
Selected
Public Companies Analysis: To determine a range of implied enterprise values for NextTrip, Lake Street multiplied its selected range
of enterprise value to 2024P Revenue and 2025P Revenue multiples of 0.6x to 4.6x and 0.5x to 4.0x, respectively, by NextTrip’s
2024P Revenue and 2025P Revenue, and Lake Street multiplied its selected range of enterprise value to 2024P EBITDA and 2025P EBITDA multiples
of 2.8x to 14.4x and 3.0x to 13.6x, respectively, by NextTrip’s 2024P EBITDA and 2025P EBITDA, based on the NextTrip Projections.
This analysis resulted in a range of implied enterprise values for NextTrip of approximately $21.0 million to $173.0 million based on
2024P Revenue, $35.0 million to $277.0 million based on 2025P Revenue, $11.0 million to $57.0 million based on 2024P EBITDA, and $26.0
million to $117.0 million based on 2025P EBITDA, after rounding. In comparison, NextTrip’s enterprise value based on the maximum
shares issuable of 6,000,000 and Sigma’s share price of $2.42 at the time of the opinion, plus net-debt, after rounding, equaled
approximately $18 million.
Selected
M&A Transactions Analysis: To determine a range of implied enterprise values for NextTrip, Lake Street multiplied its selected
range of enterprise value to 2024P Revenue and 2025P Revenue multiples of 0.6x to 2.2x and 0.6x to 2.2x, respectively, by NextTrip’s
2024P Revenue and 2025P Revenue, and Lake Street multiplied its selected range of enterprise value to 2024P EBITDA and 2025P EBITDA multiples
of 7.6 to 20.4x and 7.6x to 20.4x, respectively, by NextTrip’s 2024P EBITDA and 2025P EBITDA, based on the NextTrip Projections.
Additionally, Lake Street discounted its precedent transaction enterprise value ranges to present value utilizing an estimate of NextTrip’s
weighted average cost of capital for the discount rate. The discount rate range was selected giving consideration to market-based and
company-specific risks and was based on Lake Street’s professional judgment and experience. This analysis resulted in a range of
implied enterprise values for NextTrip of approximately $19.0 million to $68.0 million based on 2024P Revenue, $29.0 million to $103.0
million based on 2025P Revenue, $25.0 million to $66.0 million based on 2024P EBITDA, and $45.0 million to $121.0 million based on 2025P
EBITDA, after rounding. In comparison, NextTrip’s enterprise value based on the maximum shares issuable of 6,000,000 and Sigma’s
share price of $2.42 at the time of the opinion, plus net-debt, after rounding, equaled approximately $18 million.
Valuation
multiples were selected, in part, by taking into consideration historical and projected financial performance metrics of NextTrip relative
to such metrics of the selected public companies and selected M&A transactions target companies, including, but not limited to, the
size of NextTrip on a revenue and EBITDA basis, historical, estimated and projected EBITDA margins compared to the selected public companies,
and historical, estimated and projected revenue and EBITDA growth compared to the selected public companies.
Summary
of Analysis
The
range of indicated enterprise values for NextTrip that Lake Street derived from its Discounted Cash Flow Analysis, Selected Public Companies
Analysis, and its Selected M&A Transactions Analysis were as follows;
Discounted
Cash Flow Analysis: $87.0 million to $178.0 million based on terminal revenue multiples, and $143.0 million to $264.0 million based
on terminal EBITDA multiples, after rounding.
Selected
Public Companies Analysis: $21.0 million to $173.0 million based on 2024P Revenue, $35.0 million to $277.0 million based on 2025P
Revenue, $11.0 million to $57.0 million based on 2024P EBITDA, and $26.0 million to $117.0 million based on 2025P EBITDA, after rounding.
Selected
M&A Transactions Analysis: $19.0 million to $68.0 million based on 2024P Revenue, $29.0 million to $103.0 million based on 2025P
Revenue, $25.0 million to $66.0 million based on 2024P EBITDA, and $45.0 million to $121.0 million based on 2025P EBITDA, after rounding.
Lake
Street derived an estimated enterprise value for NextTrip by finding the median value of each valuation range presented above, and then
took the median of those median values, which resulted in an estimated enterprise value of $50.0M for NextTrip, after rounding. In comparison,
NextTrip’s enterprise value based on the maximum shares issuable of 6,000,000 and Sigma’s share price of $2.42 at the time
of the opinion, plus net-debt, after rounding, equaled approximately $18 million.
Information
Regarding Financial Projections Used for Fairness Opinion Analysis
In
its analysis, Lake Street relied, in part, upon the NextTrip Projections. A summary of the key NextTrip Projections are set forth in
the table below:
| | |
Fiscal
Year Ended December 31, | |
| ($
in millions) | |
2024 | | |
2025 | | |
2026 | | |
2027 | | |
2028 | |
| Revenue | |
$ | 37.9 | | |
$ | 69.9 | | |
$ | 120.4 | | |
$ | 186.3 | | |
$ | 266.6 | |
| Gross
Profit | |
| 7.2 | | |
| 13.6 | | |
| 23.0 | | |
| 35.4 | | |
| 53.7 | |
| EBIT | |
| 2.9 | | |
| 7.5 | | |
| 15.6 | | |
| 24.9 | | |
| 40.3 | |
| Income
Taxes @ 26.5% | |
| (0.8 | ) | |
| (2.0 | ) | |
| (4.1 | ) | |
| (6.6 | ) | |
| (10.7 | ) |
| Net
Operating Profit After Taxes | |
$ | 2.1 | | |
$ | 5.5 | | |
$ | 11.5 | | |
$ | 18.3 | | |
$ | 29.6 | |
| Depreciation
& Amortization | |
| 1.0 | | |
| 1.1 | | |
| 1.1 | | |
| 1.2 | | |
| 1.4 | |
| (Increase)
/ Decrease in Working Capital | |
| 0.0 | | |
| (3.8 | ) | |
| (10.1 | ) | |
| (19.5 | ) | |
| (31.1 | ) |
| Free
Cash Flow | |
$ | 3.2 | | |
$ | 2.8 | | |
$ | 2.5 | | |
$ | 0.1 | | |
$ | (0.1 | ) |
| Adjusted
EBITDA | |
$ | 3.9 | | |
$ | 8.6 | | |
$ | 16.7 | | |
$ | 26.2 | | |
$ | 41.7 | |
Neither
Sigma nor NextTrip, as a matter of course, publicly discloses forecasts, internal projections as to future performance, revenues, earnings
or other results of operations due to the inherent unpredictability and subjectivity of underlying assumptions and projections. As a
result of these risks and uncertainties, including the risks and uncertainties described in the section entitled “Risk Related
to NextTrip’s Business and Industry.” NextTrip’s future financial results are likely to differ, perhaps materially,
from the NextTrip Projections. The inclusion of the NextTrip Projections in this proxy statement should not be regarded as an indication
that Sigma, NextTrip or any other recipient of this information considered, or now considers, this information to be predictive of actual
future results. The NextTrip Projections, therefore, should not be relied upon as public guidance or for any other purpose.
The
NextTrip Projections were not prepared with a view toward public disclosure, or in compliance with published guidelines of the SEC or
the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective
financial information, or generally accepted accounting principles. Neither Sigma nor NextTrip, Haynie & Company or TPS
Thayer, has examined, compiled or performed any procedures with respect to the NextTrip Projections. Neither Haynie & Company
nor TPS Thayer express an opinion or any other form of assurance with respect thereto. The Haynie & Company and TPS Thayer reports
incorporated by reference or included in this proxy statement relate solely to historical financial information.
Stockholders
are urged to review the section entitled “Risk Factors” beginning on page 19 of this proxy statement for a
description of risk factors relating to the Acquisition and to NextTrip’s business and industry, and Sigma’s most recent
SEC filings for a description of risk factors with respect to Sigma. Stockholders of Sigma should also read the section entitled “Forward-Looking
Statements” beginning on page 7 of this proxy statement for additional information regarding the risks inherent in
forward-looking information such as the NextTrip Projections.
The
NextTrip Projections were utilized by Lake Street in preparing its analysis and are not intended to influence the decision whether to
vote in favor of the proposal to issue shares of Sigma common stock or in favor of any other proposal contained in this proxy statement.
In light of the foregoing factors and the uncertainties inherent in the NextTrip Projections, stockholders are cautioned not to place
undue, if any, reliance on the NextTrip Projections. The NextTrip Projections were prepared as of August 15, 2023 and neither Sigma
nor NextTrip or Lake Street undertakes to update the NextTrip Projections for events occurring after they were prepared.
Miscellaneous
Lake
Street, as a customary part of its investment banking business, engages in the valuation of businesses and their securities in connection
with mergers and acquisitions, underwriting and secondary distributions of securities, private placements and other valuations for estate,
corporate, and other purposes. Lake Street will receive a $250,000 fee from Sigma for providing its opinion. This opinion fee was not
contingent upon the consummation of the Acquisition. Further, Sigma has agreed to reimburse Lake Street for its expenses and to indemnify
Lake Street against certain liabilities that may arise in relation to its engagement. In the ordinary course of Lake Street’s business,
Lake Street and its affiliates may actively trade securities of Sigma for Lake Street’s own account or the account of its customers
and, accordingly, may at any time hold a long or short position in such securities. Other than currently serving as sales manager for
Sigma’s ATM program, Lake Street has not performed material financial advisory or investment banking services for Sigma in the
past. In the future, Lake Street may provide other financial advisory and investment banking services to Sigma for which Lake Street
would expect to receive compensation. Lake Street has not performed material financial advisory or investment banking services for NextTrip
or their respective affiliates.
Closing
and Effective Time of the Acquisition
We
are working to complete the Acquisition as quickly as possible, and we expect to complete the Acquisition promptly after the Annual Meeting
if the Acquisition Proposal is approved. However, Sigma cannot assure you when or if the Acquisition will occur. The Acquisition
is subject to other conditions, and it is possible that factors outside the control of both Sigma and NextTrip could result in the Acquisition
being completed at a later time, or not at all.
Dissenters’
and Appraisal Rights
Sigma
stockholders do not have dissenters’ or appraisal rights under the NGCL in connection with the Acquisition and will not be afforded
such rights.
Accounting
Treatment
Both
Sigma and NextTrip prepare their financial statements in accordance with accounting principles generally accepted in the United States
of America (“GAAP”). NextTrip is considered the accounting acquirer in the Acquisition, which will be accounted for as a reverse acquisition
of Sigma by NextTrip. See “Unaudited Combined Condensed Pro Forma Financial Information.”
Board
of Directors and Management Following the Acquisition
Immediately
following the completion of the Acquisition, the Board will continue to consist of five directors, one of whom, Donald P. Monaco, shall
be designated by NextTrip. Jacob Brunsberg, our current President and Chief Executive Officer, will resign upon the closing of
the Acquisition and William Kerby, the co-founder and Chief Executive Officer of NextTrip, shall become the Chief Executive Officer
of NextTrip, Inc. Frank Orzechowski, our current Chief Financial Officer, will continue to serve as the Chief Financial Officer of NextTrip,
Inc., and the current executive officers of NextTrip will continue to serve as executive officers of NextTrip. See the “Directors
and Executive Officers” section of this proxy statement.
Interests
of Sigma’s Directors and Officers in the Acquisition
As
of the Record Date, the directors and executive officers of Sigma as a group owned and were entitled to vote approximately 4,827
shares of our common stock, representing less than 1% of the outstanding shares. Sigma expects that its directors and executive
officers will vote their shares in favor of each of the proposals to be presented at the Annual Meeting.
See
the “Say on Pay Proposal” section of this proxy statement for information regarding compensation payable
to our executive officers in connection with the Acquisition.
Except
as referred to above, the directors and executive officers of the Company do not have interests in the Acquisition different than the
stockholders of Sigma.
Regulatory
Approvals Required for the Acquisition
Under
Nasdaq Listing Rule 5635(a)(1), a company listed on Nasdaq is required to obtain stockholder approval prior to the issuance of common
stock, among other things, in connection with the acquisition of another company’s stock, if the number of shares of common stock
to be issued is in excess of 20% of the number of shares of common stock then outstanding. Although the Closing Shares will only constitute
19.99% of our issued and outstanding shares of common stock immediately prior to Closing, if the relevant milestones are achieved by
NextTrip post-closing and any of the Contingent Shares are issued, it will result in the issuance of more than 20% of our issued and
outstanding shares of common stock immediately prior to closing in connection with the Acquisition.
Under
Nasdaq Listing Rule 5635(b), a listed company is required to obtain stockholder approval prior to the issuance of common stock that will
result in a “change of control” of the company (which may be deemed to occur if, as a result of the issuance, an investor
or affiliated investor group acquires, or has the right to acquire, at least 20% of the outstanding shares of common stock (or securities
convertible into or exercisable for common stock) or voting power of an issuer and such ownership or voting power would be the largest
ownership position of the issuer). You should note that a “change of control” as described under Nasdaq Listing Rule 5635(b)
applies only with respect to the application of such rule.
Accordingly,
in order to ensure compliance with Nasdaq Listing Rule 5635(a)(1) and Rule 5635(b), we must obtain the approval of our stockholders for
the issuance of the Contingent Shares in connection with the Acquisition. Furthermore, under the Exchange Agreement, stockholder approval
of the issuance of the Exchange Shares is a condition to closing the Acquisition.
Except
as set forth above, the Acquisition and the transactions contemplated by the Exchange Agreement are not subject to any additional federal
or state regulatory requirement or approval, except for the Nasdaq’s approval of listing of the Exchange Shares and the filings
with the Nevada Secretary of State necessary to effectuate the Name Change Proposal and the Capital Increase Proposal if they are
approved at the Annual Meeting.
THE
EXCHANGE AGREEMENT
General
On
October 12, 2023, we entered into the Exchange Agreement with NextTrip, NextTrip Parent and the Next Trip Representative, pursuant to
which, among other things and subject to the terms and conditions contained therein, we will acquire all of the outstanding capital stock
of NextTrip from Next Trip Parent in exchange for the issuance to the NextTrip Sellers of the Exchange Shares.
Representations
and Warranties
The
Exchange Agreement contains customary representations and warranties made by Sigma. Specifically, the representations and warranties
in the Exchange Agreement (many of which are qualified by concepts of knowledge, materiality and/or dollar thresholds and are further
modified and limited by confidential disclosure schedules delivered by Sigma, as may or may not be specifically indicated in the text
of the Exchange Agreement) relate to the following subject matters, among other things:
| |
● |
our
due incorporation, valid existence, good standing, and qualification to do business; |
| |
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● |
our
corporate power and authority to enter into the Exchange Agreement, and to consummate the
transactions under the Exchange Agreement, which are duly authorized and binding obligations
of Sigma;
|
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● |
that
the Exchange Agreement and each of the related transaction documents is duly authorized and is a binding obligation; |
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● |
the
absence of certain specified violations of, or conflicts with, our and our subsidiaries’
governing documents, applicable law, and certain agreements as a result of entering into
the Exchange Agreement;
|
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● |
our
corporate structure; |
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● |
our
articles of incorporation and bylaws; |
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● |
our
capitalization, including the number of shares of our common stock and derivative securities outstanding; |
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● |
compliance
of our business and operations with applicable laws and orders; |
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● |
the
absence of certain liabilities, undisclosed legal proceedings and governmental orders against us; |
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● |
disclosure
of all brokers or finder fees or commissions; |
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● |
disclosure
of all our material contracts; |
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● |
filing
of documents required by the SEC and compliance with the requirements of securities laws and regulations; |
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● |
maintenance
of internal accounting controls; |
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compliance
with listing and maintenance requirements of The Nasdaq Capital Markets; |
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● |
maintenance
of DTC eligibility; |
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● |
action
has been taken to render inapplicable anti-takeover provisions; |
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status
and filing of tax returns and tax investigations; |
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● |
labor
matters; |
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● |
employee
benefits; |
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● |
title
to assets; |
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● |
intellectual
property; |
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affiliate
transactions; |
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liabilities; |
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investment
company attestations; |
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money
laundering and Foreign Corrupt Practices Act; |
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absence
of certain changes and undisclosed events; |
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insurance;
and |
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verification
of accuracy of disclosures. |
The
Exchange Agreement also contains customary representations and warranties made by NextTrip to Sigma. Specifically, the representations
and warranties of NextTrip and the NextTrip Parent in the Exchange Agreement (some of which are qualified by concepts of knowledge and/or
materiality) relate to the following subject matters, among other things related to the NextTrip and NextTrip Parent in regards to the
Exchange Agreement and related transactions: duly organized and qualified requisite authority and power; binding obligations; subsidiaries;
organizational documents; capitalization; brokers and finders; compliance with laws; legal and other proceedings; contracts; financial
statements; taxes; adjustments or changes; disputes; U.S. Real Property Holding Corporation; tax allocation; internal accounting controls;
labor matters; employee benefits; title to assets; intellectual property and data privacy; environmental laws; affiliate and employee
transactions; liabilities; money laundering; foreign corrupt practices; absence of certain changes; disclosures; insurance; Investment
Company Act of 1940; proxy statement information and financial disclosures; validity of representation and warranties.
Many
of the representations and warranties contained in the Exchange Agreement are qualified by a materiality standard, including in some
cases a “Company Material Adverse Effect” or “Buyer Material Adverse Effect” (as defined in the Exchange Agreement).
Moreover, the representations and warranties contained in the Exchange Agreement are complicated and are not easily summarized. You are
urged to carefully read the sections of the Exchange Agreement, which is attached hereto as Annex A, titled “Representations
and Warranties of the Sigma” and “Representations and Warranties of NextTrip.”
The
representations and warranties contained in the Exchange Agreement (as well as the covenants described herein and set forth in the Exchange
Agreement) were made solely for purposes of the Exchange Agreement and solely for the benefit of the parties to the Exchange Agreement,
may be subject to limitations agreed upon by the contracting parties, including being qualified by references to the Company’s
filings with the SEC and confidential disclosures, made for the purposes of allocating contractual risk among the parties to the agreements
instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties
that differ from those applicable to stockholders. Moreover, information concerning the subject matter of the representations and warranties
may change after the date of the Exchange Agreement, which subsequent information may or may not be fully reflected in the Company’s
public disclosures. The Company will provide additional disclosure in its public reports to the extent that it is aware of the existence
of any material facts that are required to be disclosed under federal securities laws that might otherwise contradict the terms and information
contained in the Exchange Agreement and will update such disclosures as required by federal securities laws. The representations and
warranties will not survive the closing of the Acquisition.
Covenants
and Agreements
Sigma
has agreed to carry on its business in the ordinary course and in substantially in the manner as currently conducted, but for
the Asset Sale and the sale of up to $1,500,000 of equity pursuant to its At-The-Market Sales Issuance Agreement with Lake Street Capital
Markets, LLC as contemplated by the Exchange Agreement, and has further agreed to not do any of the following, except in the ordinary
course of business:
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● |
waive
any stock repurchase rights or take any action or make a change regarding any options or restricted stock; |
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enter
into any partnership agreements, joint development agreements or strategic alliances;
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increase
the compensation or fringe benefits of, or pay any bonuses or special awards to, any present or former director, officer, stockholder
or employee of Sigma or NextTrip; |
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● |
except
as contemplated by this Agreement, approved by the NextTrip Parent (as it relates to Sigma)
or Sigma (as it relates to NextTrip), or pursuant to agreements in place at the time this
Agreement is entered into, issue, deliver, sell, authorize, pledge or otherwise encumber,
or propose any of the foregoing with respect to, any shares of capital stock or any securities
convertible into, or exercisable or exchangeable for, shares of capital stock of Sigma or
NextTrip, or subscriptions, rights, warrants or options to acquire any shares of capital
stock or any securities convertible into, or exercisable or exchangeable for, shares of capital
stock of Sigma or NextTrip, or enter into other Contracts or commitments of any character
obligating it to issue any such shares of capital stock of Sigma or NextTrip or securities
convertible into, or exercisable or exchangeable for, shares of capital stock of Sigma or
NextTrip;
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cause,
permit or propose any amendments to any Sigma or NextTrip Organizational Documents; |
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● |
acquire
or agree to acquire by merging or consolidating with, or by purchasing any equity interest in or a portion of the assets of, or by
any other manner, any business or any corporation, limited liability company, general or limited partnership, joint venture, association,
business trust or other business enterprise or entity, or otherwise acquire or agree to acquire any assets other than in the Ordinary
Course of Business; |
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● |
adopt
a plan of merger, complete or partial liquidation, dissolution, consolidation, restructuring, recapitalization or other reorganization; |
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adopt
or amend any employee incentive plan, or enter into any employment contract or collective bargaining agreement, pay any special bonus
or special remuneration, or increase the salaries or wage rates or fringe benefits (including rights to severance or indemnification)
of its officers; |
| |
● |
modify,
amend or terminate any contract, or waive, delay the exercise of, release or assign any rights or claims thereunder; |
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sell,
lease, license, mortgage or otherwise encumber or subject to any lien or otherwise dispose of any properties or assets; |
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incur
or guarantee indebtedness, issue or sell any debt securities or warrants or other rights
to acquire any debt securities, guarantee any debt securities, enter into any “keep
well” or other agreement to maintain any financial statement condition of another person
or enter into any arrangement having the economic effect of any of the foregoing, or make
any loans, advances or capital contributions to, or investment in, any person other than
to Sigma or NextTrip;
|
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pay,
discharge or satisfy any claims, liabilities or obligations, except in accordance with their terms as in effect, or waive, release,
grant, or transfer any rights of material value or modify or change in any material respect any existing document; |
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change
any financial reporting or accounting principle, methods or practices used by it unless otherwise
required by applicable law or GAAP;
|
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settle
or compromise any litigation; |
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declare,
set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock; (ii) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock; or (iii) purchase, redeem or otherwise acquire any shares of capital stock of Sigma or NextTrip
or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities; |
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enter
into any transaction with any of its directors, officers, stockholders, or affiliates; |
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(i)
grant any license or sublicense of any rights regarding any intellectual property; (ii) dispose of or let lapse any intellectual
property, or any application for the foregoing, or any license, permit or authorization to use any intellectual property; or (iii)
amend, terminate any other agreement to which Sigma or NextTrip is a party; or |
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commit
to or otherwise to take any of the actions described in Section 6.2 of the Exchange Agreement. |
Post-Closing
Covenants
The
Parties each agree that they will take any further action (including the execution and delivery of such further instruments and documents)
as any other party reasonably may request in the event necessary to carry out the purposes of the Exchange Agreement.
Post-Closing
Financial Statements
NextTrip
and its officers and employees will use commercially reasonable efforts to assist Sigma and our accountants and auditors in preparing
audited and unaudited financial statements as required by SEC’s rules and requirements for inclusion in this proxy statement and
any other filings with the SEC that such financial statements are required to be included in, and will provide Sigma all information,
reports, documentation and financial information reasonably requested in connection with such reports. NextTrip is responsible for the
costs of all audits and the preparation of all financial information required.
Directors’
and Officers’ Indemnification and Insurance
We
have entered into indemnification agreements with each of our directors and executive officers. These agreements, among
other things, require us to indemnify each director and executive officer to the fullest extent permitted by Nevada law, including indemnification
of expenses such as attorneys’ fees, judgments, fines and settlement amounts incurred by the director or executive officer in any
action or proceeding, including any action or proceeding by or in the right of us, arising out of the person’s services as a director
or executive officer, including in connection with the Acquisition. The Exchange Agreement provides that the Company will purchase a
paid-up, six-year “tail” policy of directors’ and officers’ liability insurance on the same terms as our existing
directors’ and officers’ liability insurance under certain circumstances.
Public
Announcements
Sigma
filed a Current Report on Form 8-K on November 13, 2023, describing the material terms of the Exchange Agreement and the transactions
contemplated thereby. Prior to the closing, Sigma, NextTrip and the NextTrip Parent shall consult with each other in issuing any press
releases or otherwise making public statements or filings and other communications with the SEC or any regulatory agency or Nasdaq with
respect to the transactions contemplated by the Acquisition and the Exchange Agreement. The parties shall all receive the prior written
consent of the other before issuing a press release or otherwise making a public statement, filings or other communications. The disclosing
party shall use commercially reasonable efforts to provide the other parties with at least three days prior notice of such disclosure
and shall incorporate in the disclosure the reasonable comments of the other parties.
Efforts
to Obtain Nasdaq Approval, and Continued Listing
We
are also required to use our commercially reasonable best efforts to cause the Exchange Shares to be issued and to be approved for listing
on Nasdaq and to continue to trade on Nasdaq following the closing of the Acquisition. Failure to continue listing will result in our
common stock being illiquid.
Closing
The Exchange Agreement requires the closing of
the Acquisition to take place not later than three business days following the satisfaction or waiver by the party entitled to the benefit
thereof of the conditions set forth in Article IX of the Exchange Agreement (other than conditions that by their nature are to be satisfied
at the closing, but subject to the satisfaction or waiver of such conditions), at the offices of the legal counsel of Sigma or NextTrip,
as may be mutually agreed by Sigma and the NextTrip Parent prior to closing.
Conditions
to Closing of the Acquisition
The
obligations of the parties to complete the Acquisition are subject to the fulfillment or written waiver of certain closing
conditions, including without limitation:
| |
● |
the
approval of the Acquisition Proposal at the Annual Meeting; |
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|
|
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● |
absence
of pending action before any governmental authority, or law or order that would prevent the closing; |
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|
|
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● |
a
five-member Board of Directors in place as set forth in the Exchange Agreement, of which three shall be independent in accordance
with the rules of Nasdaq; |
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|
|
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● |
effectiveness
of the name change of the Company to “NextTrip, Inc.” in connection with the closing of the Acquisition; and |
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|
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● |
all
parties making a good faith effort to ensure our common stock will be listed on Nasdaq.
|
Further,
the obligations of NextTrip and NextTrip Parent to close are subject to the satisfaction on or before the closing date of the
following conditions:
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● |
that
the representations and warranties by Sigma be true in all material respects; |
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Sigma
shall have performed all covenants in all material respects; |
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absence
of a pending action that would enjoin or otherwise restrict the consummation of the closing or affect NextTrip’s right to own
the common stock of Sigma; |
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● |
absence
of a Material Adverse Effect (as defined in the Exchange Agreement”); |
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all
material consents will have been obtained, and all required filings will have been made; |
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we
will have filed all documents required to be filed by under the U.S. federal securities laws; |
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our
common stock shall be listed on Nasdaq and continue to be listed immediately following the closing and not have been suspended; |
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the
Exchange Shares shall have cleared and settled through DTC and DTC eligibility remains through the closing; |
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delivery
of a closing certificate executed by an officer of Sigma, certifying the satisfaction of the conditions specified in the Exchange
Agreement and delivery of a certificate of secretary of the Company certifying the authorizing resolutions for the Acquisition; |
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● |
receipt
of the written resignations of the resigning director and the current president and chief executive officer of Sigma, effective as
of the closing; |
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Sigma
shall have delivered proof of the appointment as a director and of William Kerby as chief executive officer of Sigma and shall have
executed an executive employment agreement; and |
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NextTrip
and the NextTrip Parent shall find all actions to be taken by Sigma in connection with consummation of the Acquisition and all documents
required to be reasonably satisfactory. |
The
obligations of Sigma to close are subject to the following conditions being met:
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● |
all
outstanding indebtedness of NextTrip shall have been converted into shares of NextTrip’s common stock prior to closing; |
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that
the representations and warranties by NextTrip and NextTrip Parent be true in all material respects; |
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NextTrip
and NextTrip Parent shall have performed all covenants in all material respects; |
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absence
of a pending action that would enjoin or otherwise restrict the consummation of the closing or affect the NextTrip Parent’s
right to hold the Exchange Shares or the right of NextTrip to own its assets or operate its business; |
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absence
of a Material Adverse Effect (as defined in the Exchange Agreement); |
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all
material consents will have been obtained, and all required filings will have been made; |
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delivery
of a closing certificate by each of an officer of NextTrip and the NextTrip Parent, certifying the satisfaction of the conditions
specified in the Exchange Agreement, and delivery by the Parent of a certificate certifying the authorizing resolutions for the Acquisition;
and |
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|
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● |
Sigma
shall find all actions to be taken by NextTrip and the NextTrip Parent in connection with consummation of the Acquisition and all
documents required to be reasonably satisfactory. |
We
cannot provide assurance as to when or if all of the closing conditions will be satisfied or waived by the appropriate party. As of the
date of this proxy statement, we have no reason to believe that any of the conditions will not be satisfied.
Closing
Deliverables
At
the closing of the Acquisition, the Company shall deliver to NextTrip and the NextTrip Parent or the NextTrip Sellers, as the case
may be, the following:
(a)
a certificate by an officer of Sigma, certifying the satisfaction of the conditions specified in Sections 9.1 and 9.2 of the Exchange
Agreement, as such sections relate to Sigma;
(b)
a certificate duly executed by the secretary of Sigma as to the resolutions adopted by Sigma’s board of directors, in a form reasonably
acceptable to NextTrip, approving the Exchange Agreement and related documents;
(c)
proof of the appointment of Mr. Kerby as a director and as chief executive officer of Sigma and an executed copy of the employment agreement
between the Company and Mr. Kerby;
(d)
written resignations as of the closing of one current director and the current President and Chief Executive Officer of
Sigma;
(e)
the Exchange Shares; and
(f)
all other documents, instruments and writings required to affect the transactions contemplated by the Exchange Agreement.
Termination
The
Exchange Agreement may be terminated prior to the closing by:
| |
● |
by
the mutual written agreement of Next Trip, NextTrip Parent and us; |
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|
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●
|
written
notice by any party if the closing has not occurred by December 31, 2023, (as long as such failure to close is attributable
to the terminating party failing to perform a material obligation); |
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|
|
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● |
written
notice by either us or NextTrip if any governmental authority of competent jurisdiction has issued a final and non-appealable order
or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by the Exchange Agreement
(as long as such notice was not caused by a breach of the Exchange Agreement due to the failure of such terminating party); |
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written
notice by any party if any event makes it impossible to satisfy a condition precedent to the terminating party’s obligations
to perform under the Exchange Agreement, unless such occurrence is due to the failure of the terminating party to perform or comply
at or prior to closing; |
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if
any event occurs that makes it impossible to satisfy a condition precedent to the terminating party’s obligations to perform
its obligations hereunder, unless such occurrence is due to the failure of the terminating party to perform or comply at or prior
to closing; |
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|
|
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written
notice by NextTrip or NextTrip Parent if there is a Material Adverse Effect on Sigma, or there shall have occurred any event or circumstance
that could reasonably be expected to have, a Material Adverse Effect with respect to Sigma; and |
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|
|
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● |
Written
notice by Sigma to NextTrip if, (i) there shall have occurred a Material Adverse Effect on NextTrip, or there shall have occurred
any event or circumstance that, in combination with any other events or circumstances, could reasonably be expected to have, a Material
Adverse Effect with respect to NextTrip; or (ii) in disclosure schedules delivered subsequently disclose anything which (A) has,
or could reasonably be expected to have, a Material Adverse Effect with respect to NextTrip, (B) results in any representation, warranty
or covenant made herein by NextTrip or NextTrip Parent being materially incorrect or misleading at the time it was made, (C) departs
materially, from any disclosures relating to NextTrip or NextTrip Parent (or its financial statements, liabilities, agreements, litigation,
assets, operations or prospects) that has been provided prior to the date of this Agreement, or (D) materially affects the ability
of NextTrip or NextTrip Parent to complete the transactions contemplated by the Exchange Agreement and such has not been cured within
the applicable cure period. |
If
the Exchange Agreement is terminated, all further obligations of the parties under the Exchange Agreement will terminate and will be
of no further force and effect and no party will have any further liability thereunder to any other party, except that certain obligations
related to public announcements, confidential information, fees and expenses, and general provisions will continue in effect and no party
shall be relieved of liability for any fraud claims or breach of the Exchange Agreement prior to such termination.
Fees
and Expenses
Except
as described above under “Financial Accommodations,” each party will bear its own expenses in connection
with the Exchange Agreement and the transactions contemplated thereby.
Third-Party
Beneficiaries
Except
as set forth in Article I of the Exchange Agreement, nothing expressed or referred to in the Exchange Agreement will be construed to
give any person other than the parties to the Exchange Agreement any legal or equitable right, remedy, or claim under or with respect
to the Exchange Agreement or any provision of the Exchange Agreement.
Governing
Law
All
matters arising out of or relating to the Exchange Agreement (including its interpretation, construction, performance and enforcement)
shall be governed by and construed in accordance with the Law of the State of Delaware without giving effect to any choice or conflict
of law provision or rule that would cause the application of Laws of any jurisdictions other than those of the State of Delaware.
FINANCIAL
INFORMATION RELATED TO THE ACQUISITION
Financial
Statements of the Company
The
audited financial statements of the Company for the years ended December 31, 2022 and December 31, 2021 are contained in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2022, and are hereby incorporated by reference into this proxy statement.
The unaudited financial statements of the Company for the nine months ended September 30, 2023 and 2022 are contained in the Company’s
Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, and are hereby incorporated by reference into this proxy
statement. See “Where You Can Find More Information; Incorporation of Information by Reference” and “Index
to Financial Statements” below in this proxy statement.
A
representative of Haynie & Company is not expected to be present at the Annual Meeting or to be available to make a comment or respond
to questions.
Management’s
Discussion and Analysis of Financial Condition and Results of Operations of the Company
The
audited and unaudited financial statements of the Company incorporated herein by reference should be read in conjunction with the respective
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s
Annual Report on Form 10-K for the year ended December31, 2022 and Quarterly Report on Form 10-Q for the quarter ended September 30,
2023, which sections are hereby incorporated herein by reference.
Financial
Statements of NextTrip
The
audited historical financial statements of NextTrip and its subsidiaries for fiscal years ended February 28, 2023 and February 28, 2022
and the unaudited historical financial statements of NextTrip and its subsidiaries for the six months ended August 31, 2023 and 2022
are included in the “Index to Financial Statements” section of this proxy statement.
Management’s
Discussion and Analysis of Financial Condition and Results of Operations of NextTrip
Forward-looking
statements
You
should read the following discussion and analysis of NextTrip’s financial condition and results of operations together with its
financial statements and the related notes appearing elsewhere in this proxy statement. Among other things, those historical financial
statements include more detailed information regarding the basis of presentation for the financial data than is included in the following
discussion. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks,
uncertainties and assumptions. NextTrip’s actual results may differ materially from those discussed below.
Business
Overview
NextTrip
is an innovative technology company that is building next generation solutions to power the travel industry. NextTrip Parent, through
its subsidiaries, provides travel technology solutions with sales originating in the United States, with a primary emphasis on ALR properties,
hotel, air, cruise, and all-inclusive travel packages. Its proprietary booking engine, branded as NXT2.0, provides travel distributors
access to a sizeable inventory. NextTrip’s NXT2.0 booking technology was built upon a platform acquired in June 2022, which previously
powered the Bookit.com business, a well-established online leisure travel agent generating over $450 million in annual sales as recently
as 2019 (pre-pandemic).
Since
2022, NextTrip has been focused on the holistic integration of the NXT2.0 technology platform, which will serve as a base for current
and future technology projects as well as proprietary system enhancements. Through this strategic offering, NextTrip will focus on key
areas of opportunity in the travel sector and drive enhanced booking conversion rates. NextTrip’s proprietary technology, when
combined with media, product offerings and customer service, provides a unique lane to serve mid- to luxury travelers.
The
spread of the COVID-19 virus globally beginning in January 2020, severely impacted NextTrip Parent’s business. Beginning in March
2020, many U.S. states and foreign countries began issuing “stay-at-home” orders and closed their borders to interstate and
international travel. Such restrictions on travel, together with other measures implemented by governments around the world, severely
restricted the level of economic activity around the world and had an unprecedented effect on the global travel industry. The public’s
ability to travel was severely curtailed through border closures, mandated travel restrictions and limited operations of hotels, airlines,
and additional voluntary or mandated closures of travel-related businesses from December 2019 through the beginning of 2022 (and beyond
in some jurisdictions). Measures implemented during the COVID-19 pandemic led to unprecedented levels of temporary and permanent business
closures, cancellations and limited new travel bookings, having a severe negatively impacted on NextTrip Parent’s business, financial
condition and results of operations.
Due
to the significant decrease in demand for the travel related services provided by NextTrip Parent during the peak of the COVID-19 pandemic,
NextTrip Parent shifted its focus to developing and enhancing its program offerings. For example, it enhanced the functionality of its
booking engines, including developing a booking engine platform that allows customers to book packaged vacations and cruises along with
a platform to arrange and manage business travel.
NextTrip
Parent is the parent company of NextTrip and its subsidiaries, which together previously formed the travel assets of NextPlay Technologies,
Inc. (“NextPlay”), a public company. All of the business operations of NextTrip Parent are done through its subsidiaries.
On January 25, 2023, NextPlay and NextTrip Parent entered into an Amended and Restated Separation Agreement, an Amended and Restated
Operating Agreement, and Exchange Agreement (“Exchange Agreement”), pursuant to which NextPlay transferred their interest
in the travel business to NextTrip. As per the Exchange Agreement, NextPlay exchanged 1,000,000 Membership Units of NextTrip for 400,000
Preferred Units in NextTrip. The Preferred Units have a value of $10.00 per Unit, NextTrip had a payable amount to NextPlay of $17,295,873.
This was partial payment that was exchanged for the 400,000 Preferred Units in NextTrip as per the Exchange Agreement. Any intercompany
amount owed after the separation date is to be considered a promissory note bearing 5% interest per annum. NextPlay has a balance owing
to NextTrip of $1,942,630 as of August 31, 2023. As per ASC 505-10-45-2 the reporting of the paid in capital is considered equity.
NextTrip
Parent has accounted for the business transfer on a retroactive basis. All assets, liabilities and results of operations assumed in the
transaction are the basis of the financial information discussed in this Management’s Discussion and Analysis of Financial Conditions
and Results of Operations, as well as the financial statements of NextTrip Parent included elsewhere in this proxy statement.
Critical
Accounting Policies and Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”)
requires management to make estimates and assumptions that affect the reported assets, liabilities, sales and expenses in the accompanying
financial statements. Critical accounting policies are those that require the most subjective and complex judgments, often employing
the use of estimates about the effect of matters that are inherently uncertain. By their nature, changes in these assumptions and estimates
could significantly affect our financial position or results of operations. Significant accounting estimates that may materially change
in the near future are revenue recognition, impairment of long-lived assets, and allowance for bad debts. Such critical accounting policies,
including the assumptions and judgments underlying them, are disclosed in Note 1 of the Notes to Financial Statements of NextTrip Parent
for the fiscal years ended February 28, 2022 and 2023 and the six months ended August 31, 2023, included elsewhere in this proxy statement.
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.
The
critical accounting policies and estimates addressed below reflect our most significant judgements and estimates used in the preparation
of our financial statements.
Summary
of Significant Accounting Policies of NextTrip Parent
Basis
of Presentation and Principles of Consolidation
NextTrip
Parent’s financial statements and related disclosures are prepared pursuant to the rules and regulations of the SEC for annual
and interim financial statements, as applicable. The Financial Statements have been prepared using the accrual basis of accounting in
accordance with GAAP of the United States.
The
financial statements of NextTrip Parent have been prepared on a consolidated basis with those of its wholly owned subsidiaries. All intercompany
transactions and balances have been eliminated in consolidation.
Limited
Liability of Managers and Members
The
liability of the managers and members of NextTrip Parent shall be limited to the extent, now or hereafter set forth in NextTrip Parent’s
Operating Agreement and as provided under the Florida Act.
No
Personal Liability, except as otherwise provided in the Florida Act or by applicable law, no members, manager or officer of NextTrip
Parent will be obligated personally for any debt, obligation or liability of the NextTrip Parent or of any of its subsidiaries, whether
arising in contract, tort or otherwise, solely by reason of being a member, manager and/or officer of NextTrip Parent.
Use
of Estimates
The
preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated
financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from
those estimates. These differences could have a material effect on NextTrip Parent’s future results of operations and financial
position. Significant items subject to estimates and assumptions include the carrying amounts of intangible assets, depreciation and
amortization.
Information
about key assumptions and estimation uncertainty that has a significant risk of resulting in a material adjustment to the carrying amounts
of NextTrip Parent’s assets and liabilities within the next financial year are referenced in the notes to the financial statements
as follows:
| ● | The
assessment of NextTrip Parent’s ability to continue as a going concern; |
| ● | The
measurement and useful life of intangible assets and property and equipment; and |
| ● | Recoverability
of long-lived assets |
Cash
Cash
consists of amounts denominated in U.S. dollars.
Prepaids
NextTrip
Parent records cash paid in advance for goods and/or services to be received in the future as prepaid expenses. Prepaid expenses are
expensed over time according to the terms of the purchase. Other current assets are recognized when it is probable that the future economic
benefits will flow to NextTrip Parent and the asset has a cost or value that can be measured reliably. It is then charged to expense
over the expected number of periods during which economic benefits will be realized.
Receivables
Receivables
are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is NextTrip Parent’s best estimate
of the amount of probable credit losses in its existing receivables.
NextTrip
Parent considers receivables to be fully collectible; accordingly, no allowance for doubtful accounts is required. If amounts become
uncollectible, they will be charged to operations when that determination is made. The August 31, 2023, receivables balance includes
a receivable from TGS Esports Inc. for $50,000, which is expected to be collected by December 31, 2023.
Receivables
balances as of August 31, 2023, and February 28, 2023, were $5,000 and $0, respectively. Receivables from a related party as of such
dates were $1,992,630 and $1,933,908, respectively. Management has determined that no allowance for credit losses is necessary as of
August 31, 2023, or February 28, 2023.
Property
and Equipment
Recognition
and measurement
Items
of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. When parts of an item
of property and equipment have different estimated useful lives, they are accounted for as separate items within property and equipment.
The costs of the ongoing regular repairs and maintenance of property and equipment are recognized in the period in which they are incurred.
Depreciation
Depreciation
is recognized in profit or loss over the estimated useful lives of each part of an item of property and equipment in a manner that most
closely reflects management’s estimated future consumption of the future economic benefits embodied in the asset. The estimated
useful lives for NextTrip Parent’s property and equipment are as follows:
| Category |
|
Method |
|
Estimated
useful life |
| Furniture
& Fixtures |
|
Straight
line |
|
5
years |
| Computer
& Equipment |
|
Straight
line |
|
3
years |
Intangible
assets
NextTrip
Parent measures separately acquired intangible assets at cost less accumulated amortization and impairment losses. NextTrip Parent recognizes
internally developed intangible assets when it has determined that the completion of such is technically feasible, and it has sufficient
resources to complete the development. Subsequent expenditures are capitalized when they increase the future economic benefits of the
associated asset. All other expenditures are recorded in profit or loss as incurred.
NextTrip
Parent assesses whether the life of intangible assets is finite or indefinite. NextTrip Parent reviews the amortization method
and period of use of its intangible assets at least annually. Changes in the expected useful life or period of consumption of future
economic benefits associated with the asset are accounted for prospectively by changing the amortization method or period as a change
in accounting estimates in profit or loss. NextTrip Parent has assessed the useful life of its trademarks as indefinite.
The
estimated useful lives for NextTrip Parent’s finite life intangible assets are as follows:
| Category |
|
Method |
|
Estimated
useful life |
| Software
|
|
Straight
line |
|
3
years |
| Software
licenses |
|
Straight
line |
|
0.5
- 4 years |
Software
Development Costs
NextTrip
Parent capitalizes internal software development costs subsequent to establishing technological feasibility of a software application
in accordance with guidelines established by “ASC 985-20-25” Accounting for the Costs of Software to Be Sold, Leased, or
Otherwise Marketed, requiring certain software development costs to be capitalized upon the establishment of technological feasibility.
The establishment of technological feasibility and the ongoing assessment of the recoverability of these costs require considerable judgment
by management with respect to certain external factors such as anticipated future revenue, estimated economic life, and changes in software
and hardware technologies. Amortization of the capitalized software development costs begins when the product is available for general
release to customers. Capitalized costs are amortized based on the straight-line method over the remaining estimated economic life of
the product.
Impairment
of Intangible Assets
In
accordance with ASC 350-30-65 “Goodwill and Other Intangible Assets”, NextTrip Parent assesses the impairment of identifiable
intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors it considers
important, which could trigger an impairment review include the following:
1.
Significant underperformance compared to historical or projected future operating results;
2.
Significant changes in the manner or use of the acquired assets or the strategy for the overall business; and
3.
Significant negative industry or economic trends.
When
NextTrip Parent determines that the carrying value of an intangible asset may not be recoverable based upon the existence of one or more
of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows,
NextTrip Parent records an impairment charge. NextTrip Parent measures any impairment based on a projected discounted cash flow method
using a discount rate determined by management to be commensurate with the risk inherent to the current business model. Significant management
judgment is required in determining whether an indicator of impairment exists and in projecting cash flows. Intangible assets that have
finite useful lives are amortized over their useful lives.
Leases
NextTrip
Parent adopted ASU 2016-02 (Topic ASC 842) Leases, which requires a lessee to recognize a lease asset and a leases liability for operating
leases arrangements greater than twelve months.
We
determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”)
assets, operating lease liabilities - current, and operating lease liabilities - noncurrent on the balance sheets. Finance leases are
included in property and equipment, other current liabilities, and other long-term liabilities in our balance sheets.
ROU
assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease
payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present
value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we generally use our incremental
borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement
date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include
options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments
is recognized on a straight-line basis over the lease term.
Concentration
of Credit Risk
Financial
instruments that potentially subject to concentrations of credit risk consist primarily of cash. All of NextTrip Parent’s cash
is held at high credit quality financial institutions. No credit risk in accounts receivable as deemed collectable.
Fair
Value of Financial Instruments
NextTrip
Parent follows accounting guidelines on fair value measurements for financial instruments measured on a recurring basis, as well as for
certain assets and liabilities that are initially recorded at their estimated fair values. Fair Value is defined as the exit price, or
the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants
as the measurement date. NextTrip Parent uses the following six-level hierarchy that maximizes the use of observable inputs and minimizes
the use of unobservable inputs to value its financial instruments:
| |
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Level
1: Observable inputs such as unadjusted quoted prices in active markets for identical instruments. |
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Level
2: Quoted prices for similar instruments that are directly or indirectly observable in the marketplace. |
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● |
Level
3: Significant unobservable inputs which are supported by little or no market activity and that are financial instruments whose values
are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which
the determination of fair value requires a significant judgment or estimation. |
Financial
instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair
value measurement. NextTrip Parent’s assessment of the significance of a particular input to the fair value measurement in its
entirety requires it to make judgments and consider factors specific to the asset or liability. The use of different assumptions and/or
estimation methodologies may have a material effect on estimated fair values. Accordingly, the fair value estimates disclosed, or initial
amounts recorded may not be indicative of the amount that NextTrip Parent or holders of the instruments could realize in a current market
exchange.
The
carrying amounts of NextTrip Parent’s financial instruments including cash, accounts receivable, accounts payable, accrued expenses,
convertible notes and notes payable are of approximately fair value due to the short-term maturities of these instruments.
Revenue
Recognition
NextTrip
Parent recognizes revenue in accordance with ASC 606 which involves identifying the contracts with customers, identifying performance
obligations in the contracts, determining transactions price, allocating transaction price to the performance obligation, and recognizing
revenue when the performance obligation is satisfied.
NextTrip
Parent recognizes revenue when the customer has purchased the product, the occurrence of the earlier of date of travel or the date of
cancellation has expired, as satisfaction of the performance obligation, the sales price is fixed or determinable and collectability
is reasonably assured. Revenue for customer travel packages purchased directly from NextTrip Parent are recorded gross (the amount paid
to NextTrip Parent by the customer is shown as revenue and the cost of providing the respective travel package is recorded to cost of
revenues).
NextTrip
Parent generates revenues from sales directly to customers as well as through other distribution channels of tours and activities at
destinations throughout the world.
NextTrip
Parent controls the specified travel product before it is transferred to the customer and is therefore a principal, including but
not limited to, the following:
| ● | NextTrip
Parent is primarily responsible for fulling the promise to provide such travel product. |
| ● | NextTrip
Parent has inventory risk before the specified travel product has been transferred to a customer
or after transfer of control to a customer. |
| ● | NextTrip
Parent has discretion in establishing the price for the specified travel product. |
Payments
for tours or activities received in advance of services being rendered are recorded as deferred revenue and recognized as revenue at
the earlier of the date of travel or the last date of cancellation (i.e., the customer’s refund privileges lapse).
From
time to time, payments are made to suppliers in advance of customer bookings as required by hotels. These payments are recognized as
costs of goods at the earlier of the date of travel or the last date of cancellation.
Loss
Per Member Interests/Common Units
Basic
loss per member interests/common units is computed by dividing net loss by the weighted average number of member interest/common units
outstanding during the period. Diluted loss per member interests/common units is computed considering the dilutive effect of preferred
units and convertible debt. However, no diluted loss per member interests/common units can be computed for the period as (i) the conversion
price and units for preferred units is undeterminable due to the unpredictability of future events, and (ii) convertible debt is not
expected to be converted as the conversion price is substantially higher than the current value of the member interests/common units.
Sales
and Marketing
Selling
and administration expenses consist primarily of marketing and promotional expenses, expenses related to our participation in industry
conferences, and public relations expenses.
Income
Taxes
Income
taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation
allowance on deferred tax assets is established when management considers it is more likely than not that some portion or all of the
deferred tax assets will not be realized.
Tax
benefits from an uncertain tax position are only recognized if it is more likely than not that the tax position will be sustained on
examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated
financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood
of being realized upon ultimate resolution. Interest and penalties related to unrecognized tax benefits are recorded as incurred as a
component of income tax expense. NextTrip Parent has not recognized any tax benefits from uncertain tax positions for any of the reporting
periods presented.
No
provision for federal income taxes is necessary in the financial statements of the subsidiaries as they have elected to be treated
as partnerships for tax purposes and therefore they are not subject to federal income tax and the tax effect of their activities
accrues to the members.
In
certain circumstances, partnerships may be held to be associations taxable as corporations. The IRS has issued regulations specifying
circumstances under current law when such a finding may be made, and based on those regulations management determined that the
subsidiaries are not associations taxable as corporations. A finding that the partnership is an association taxable
as a corporation could have a material adverse effect on the financial position and results of operations of the partnership.
Recently
adopted accounting pronouncements
In
August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—
Contracts in Entity’s Own Equity (Subtopic 815-40). The FASB issued this ASU to address issues identified as a result of the complexity
associated with GAAP for certain financial instruments with characteristics of liabilities and equity. Complexity associated with the
accounting is a significant contributing factor to numerous financial statement restatements and results in complexity for users attempting
to understand the results of applying the current guidance. In addressing the complexity, the FASB focused on amending the guidance on
convertible instruments and the guidance on the derivatives scope exception for contracts in an entity’s own equity. For convertible
instruments, the FASB decided to reduce the number of accounting models for convertible debt instruments and convertible preferred stock.
Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared
with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features
that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for
a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums
are recorded as paid-in capital. The FASB concluded that eliminating certain accounting models simplifies the accounting for convertible
instruments, reduces complexity for preparers and practitioners, and improves the decision usefulness and relevance of the information
provided to financial statement users. In addition to eliminating certain accounting models, the FASB also decided to enhance information
transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share (“EPS”)
guidance on the basis of feedback from financial statement users. The FASB decided to amend the guidance for the derivatives scope exception
for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. The FASB observed that the
application of the derivatives scope exception guidance results in accounting for some contracts as derivatives while accounting for
economically similar contracts as equity. The FASB also decided to improve and amend the related EPS guidance. The amendments in this
ASU are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption
is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.
The FASB specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The FASB decided to allow
entities to adopt the guidance through either a modified retrospective method of transition or a fully retrospective method of transition.
NextTrip Parent adopted ASU 2020-06 on April 1, 2022, on a prospective basis. The adoption of this standard did not have an impact on
the NextTrip Parent’s consolidated financial statements.
In
May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50),
Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. ASU
2021-04 requires accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants)
that remain equity classified after the modification or exchange based on the economic substance of the modification or exchange. The
recognition of the modification depends on the nature of the transaction in which the equity-classified written call option is modified.
If there is more than one element in a transaction (for example, if the modification involves both a debt modification and an equity
issuance), then the guidance requires allocating the effect of the option modification to each element. ASU 2021-04 is effective for
the Company beginning in the first quarter of 2022. ASU 2021-04 should be applied prospectively to modifications or exchanges occurring
on or after the effective date of the amendments. NextTrip Parent adopted ASU 2021-04 on April 1, 2022, on a prospective basis. The adoption
of this standard did not have an impact on NextTrip Parent’s consolidated financial statements.
In
March 2022, the FASB issued ASU 2022-02, ASC Subtopic 326 “Credit Losses”: Troubled Debt Restructurings and Vintage Disclosures.
Since the issuance of Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments, the Board has provided resources to monitor and assist stakeholders with the implementation of
Topic 326. Post-Implementation Review (PIR) activities have included forming a Credit Losses Transition Resource Group, conducting outreach
with stakeholders of all types, developing educational materials and staff question-and-answer guidance, conducting educational workshops,
and performing an archival review of financial reports. ASU No. 2022-02 is effective for annual and interim periods beginning after December
15, 2022. The adoption of this standard did not have a significant impact on NextTrip Parent’s unaudited condensed consolidated
financial statements.
NextTrip
Parent has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will
have a material impact on its consolidated financial statements.
Results
of Operations
Three
Months Ended August 31, 2023 and August 31, 2022
Revenue
During
the three months ended August 31, 2023, we recognized revenue of $27,663, as compared to $140,638 in the same period in 2022, a decrease
of $112,975, or 80%. The decrease was due to the development and introduction of an enhanced booking platform during the 2023 period,
resulting in a delay in revenue generated.
Cost
of Revenue
Our
cost of revenue for the three months ended August 31, 2023, was $22,118, as compared to $116,159 for the same period in 2022, a decrease
of $94,041, or 81%. The decrease was attributable to the reduction in revenue in the three months ended August 31, 2023, as compared
to the same period in of 2022.
Operating
Expenses
Our
total operating expenses for the three months ended August 31, 2023, were $1,092,546, as compared to $1,074,814 for the same period in
2022, an increase of $17,732, or 1.6%.
Depreciation
and Amortization Expense
Depreciation
and amortization expense for the three months ended August 31, 2023, was $331,549 as compared to $10,044 for the same period in 2022,
an increase of $321,505, or 32%. The increase was primarily the result of amortization of software in the current period that was in
development in prior periods.
Sales
and Marketing Expenses
Sales
and marketing expenses were $49,758 for the three months ended August 31, 2023, as compared to $263,254 for the same period in
2022. The $213,496 decrease was primarily related to deferment of marketing costs during the booking engine enhancement upgrade
process.
General
and Administrative Expenses
General
and administrative expenses were $711,239 for the three months ended August 31, 2023, as compared to $801,516 for the same period in
2022. The $90,277 decrease was primarily related to a reduction in staff.
Net
Loss
In
the three months ended August 31, 2023, we realized net loss of $1,160,763, as compared to net loss of $1,021,024 in the same period
in 2022. The increase in loss of $139,739 was primarily due to expense changes as noted above.
Six
Months Ended August 31, 2023 and August 31, 2022
Revenue
During
the six months ended August 31, 2023, NextTrip Parent recognized revenue of $47,225, as compared to $312,388 in the same period in 2022,
a decrease of $265,163 or 84%. The decrease was due to the development and introduction of an enhanced booking platform during the 2023
period, resulting in a delay in revenue generated.
Cost
of Revenue
Cost
of revenue for the six months ended August 31, 2023, was $39,836, as compared to $252,200 for the same period in 2022, a decrease of
$212,364, or 84%. The decrease was attributable to the reduction in revenue in the six months ended August 31, 2023, as compared to the
same period in of 2022.
Operating
Expenses
Total
operating expenses for the six months ended August 31, 2023, were $2,051,039, as compared to $2,476,755 for the same period in 2022,
a decrease of $425,716, or 17%, primarily due to a reduction in staff.
Depreciation
and Amortization Expense
Depreciation
and amortization expense for the six months ended August 31, 2023, was $594,555 as compared to $213,356 for the same period in 2022,
an increase of $381,199, or 179%. The increase was primarily the result of amortization of software in the current period that was in
development in prior periods.
Sales
and Marketing Expenses
Sales
and marketing expenses were $90,539 for the six months ended August 31, 2023, as compared to $506,208 for the same period in 2022. The
$415,669 decrease was primarily related to deferment of marketing costs during the booking engine enhancement upgrade.
General
and Administrative Expenses
General
and administrative expenses were $1,365,945 for the six months ended August 31, 2023, as compared to $1,757,190 for the same period in
2022. The $391,245 decrease was primarily related to a reduction in staff.
Net
Loss
In
the six months ended August 31, 2023, NextTrip Parent realized a net loss of $2,182,801, as compared to net loss of $2,420,100 in the
same period in 2022. The decrease in loss of $237,299 was primarily due to expense changes as noted above.
Year
Ended February 28, 2023 and February 28, 2022
Revenue
During
the year ended February 28, 2023, NextTrip Parent recognized revenue of $383,832 as compared to $175,998 in the same period in 2022,
an increase of $207,834 or 118%. The increase was a result of the removal of travel restrictions under COVID.
Cost
of Revenue
Cost
of revenue for the year ended February 28, 2023, was $354,921, as compared to $155,191 for the same period in 2022, an increase of $199,730,
or 128%. The increase was attributable to the increase in revenue in the year ended February 28, 2023, as compared to the same period
in 2022.
Operating
Expenses
Total
operating expenses for the year ended February 28, 2023, were $5,089,181, as compared to $5,372,302 for the same period in 2022, a decrease
of $283,121, or 5.3% primarily due to a reduction in marketing costs.
Depreciation
and Amortization Expense
Depreciation
and amortization expense for the year ended February 28, 2023, was $806,883 as compared to $1,060,587 for the same period in 2022, a
decrease of $253,704, or 23.9%. The decrease was primarily the result of a reduction in amortization for software that became fully amortized
and as the result of capitalizing new software developments and enhancements in the current period.
Sales
and Marketing Expenses
Sales
and marketing expenses were $708,047 for the year ended February 28, 2023, as compared to $1,370,889 for the same period in 2022. The
$662,842 decrease was primarily related to deferment of marketing costs during the booking engine enhancement upgrade.
General
and Administrative Expenses
General
and administrative expenses were $3,574,251 for the year ended February 28, 2023, as compared to $2,940,826 for the same period in 2022.
The $633,425 increase was the result of costs incurred to build the infrastructure for the company.
Net
Loss
In
the year ended February 28, 2023, we realized net loss of $5,133,141, as compared to net loss of $5,437,764 in the same period in 2022.
The decrease in loss of $304,623 was primarily due to expense changes as noted above.
Liquidity
and Capital Resources
Going
Concern
As
of August 31, 2023, NextTrip Parent had $105,902 in cash, an accumulated deficit of $18,833,664 and a working capital deficit of $4,190,225,
compared to $103,634 in cash, an accumulated deficit of $14,061,990 and a working capital deficit of $17,184,470 as of August 31, 2022.
As of February 28, 2023, NextTrip Parent had $282,475 in cash, an accumulated deficit of $16,650,863 and a working capital deficit of
$2,310,654 compared to $231,050 in cash, an accumulated deficit of $11,517,722 and a working capital deficit of $12,767,379 as of February
28, 2022.
NextTrip
Parent has incurred losses since inception. The aforementioned factors raise substantial doubt about NextTrip Parent’s ability
to continue as a going concern within one year from the issuance date of the NextTrip Parent financial statements included elsewhere
in this proxy statement. To date, NextTrip Parent has financed its operations primarily through revenue generated from operations, the
issuance of convertible debt and private placements of its securities.
NextTrip
Parent will need to raise additional funds through equity or debt financings or other means to support the on-going operations, increase
market penetration of its products, expand the marketing and development of its travel and technology driven products, provide capital
expenditures for additional equipment and development costs, payment obligations, and systems for managing the business including covering
other operating costs until the planned revenue streams are fully implemented and begin to offset its operating costs. Failure to obtain
additional capital to finance NextTrip Parent’s working capital needs on acceptable terms, or at all, would negatively impact the
NextTrip Parent’s financial condition and liquidity.
Since
August 31, 2023, NextTrip Parent has raised $1,275,130 in net proceeds by selling convertible notes and common shares in NextTrip, which
notes will be converted into common shares at closing of the Acquisition and exchanged for the Exchange Shares pursuant
to the Exchange Agreement. With these additional proceeds, NextTrip Parent estimates that it has sufficient cash and working capital
to fund its operations as described elsewhere in this proxy statement through the completion of the Acquisition. There is no assurance,
however, that the Acquisition will close in a timely manner, or ever.
Net
Cash Used in Operating Activities
Net
cash used in operating activities during the six months ended August 31, 2023, was $1,384,397, as compared to $1,705,545 during the same
period in 2022, a decrease of $321,148, or 18.8%.
Net
cash used in operating activities during the year ended February 28, 2023, was $2,772,157, as compared to $3,107,383 during the same
period in 2022, a decrease of $335,236, or 10.7%.
During
the six months ended August 31, 2023, the net cash used in operating activities was the result of a net loss of $2,182,801, partially
offset by changes in working capital of $203,849 and non-cash expenses of $594,555 related to depreciation and amortization. Changes
in working capital were driven by an increase in accounts receivable of $5,000, a decrease in prepaid expenses of $18,896, an
increase in accounts payable and accrued expenses of $95,741, an increase in deferred revenue of $57,156 and an increase in right of
use asset in the amount of $74,848. The increase in accounts payable and accrued expenses was due to extending payment times to vendors
to conserve cash in advance of obtaining additional financing.
During
the six months ended August 31, 2022, the net cash used in operating activities was the result of a net loss of $2,420,100 partially
offset by changes in working capital of $501,199, and non-cash expenses of $213,356 related to depreciation and amortization. Changes
in working capital were driven by an increase in accounts receivables of $292,277, an increase in prepaid expenses of $300,261, an increase
in deferred revenue of $245,752, an increase in accounts payable and accrued expenses of $811,832, and an increase in right of use asset
in the amount of $36,153. The increase in accounts payable and accrued expenses was due to extending payment times to vendors to conserve
cash in advance of obtaining additional financing.
During
the year ended February 28, 2023, the net cash used in operating activities was the result of a net loss of $5,133,141, partially offset
by changes in working capital of $1,554,101 and non-cash expenses of $806,883 related to depreciation and amortization. Changes in working
capital were driven by a decrease in accounts receivable of $5,503, a decrease in prepaid expenses of $48,796, an increase in accounts
payable and accrued expenses of $533,193, a decrease in deferred revenue of $46,855 and an increase in right of use asset in the amount
of $1,013,914. The increase in accounts payable and accrued expenses was due to extending payment times to vendors to conserve cash in
advance of obtaining additional financing.
During
the year ended February 28, 2022, the net cash used in operating activities was the result of a net loss of $5,437,764 partially offset
by changes in working capital of $54,180, and non-cash expenses of $1,060,455 related to depreciation and amortization and non-cash impairment
in intangible assets of $1,215,746. Changes in working capital were driven by an increase in prepaid expenses of $45,170, an increase
in deferred revenue of $13,171, and a decrease in accounts payable and accrued expenses of $14,791. Management routinely perform an assessment
of intangible assets and as a result of this assessment by management the intangibles as at February 28, 2022 were written down by $1,215,746.
Net
Cash Used in Investing Activities
Net
cash used in investing activities during the six months ended August 31, 2023, was $345,806, which compares to $2,153,506 of cash used
in investing activities during the same period of 2022, a decrease of $1,807,700, or 83.4%. The decrease resulted from a decrease in
the purchase of intangibles in the amount of $1,684,616 in 2023 compared to 2022 and a decrease in the purchase of equipment in the amount
of $123,084 in 2023 compared to 2022.
Net
cash used in investing activities during the year ended February 28, 2023, was $3,377,465, which compares to $1,743,859 of cash used
in investing activities during the same period of 2022, an increase of $1,633,606, or 93.7%. The increase resulted from a right of use
asset in the amount of $1,020,443 and an increase in the purchase of intangible assets in the amount of $637,007 in 2023 compared to
2022.
Net
Cash Provided by Financing Activities
NextTrip
Parent raised $1,269,852 in net proceeds from the issuance of convertible notes and $283,778 in advances from a related party in the six months ended August 31,
2023, compared to $3,731,635 advanced to the company by a related party in the comparable period in 2022.
Net
advances from a related party generated $6,201,047 in net proceeds in the year ended February 28, 2023 compared to $4,905,697 in the
year ended February 28, 2022.
Inflation,
changing prices and rising interest rates have had no material effect on NextTrip Parent’s continuing operations over our two most
recent fiscal years.
UNAUDITED
CONDENSED COMBINED PRO FORMA FINANCIAL INFORMATION
We
are providing the following unaudited pro forma condensed combined financial information to aid you in your analysis of the financial
aspects of the Acquisition. The following unaudited pro forma condensed combined financial information presents the combination of the
financial information of Sigma and NextTrip adjusted to give effect to the Acquisition, as well as the Asset Sale. The following unaudited
pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X, as amended by the
final rule, Release No. 33-10786 “Amendments to Financial Disclosure about Acquired and Disposed Businesses.”
The
unaudited pro forma combined condensed financial information was derived from and should be read in conjunction with the following historical
financial statements and accompanying notes, which are included or incorporated by reference in this proxy statement and incorporated
herein by reference in this section:
| ● | The
audited financial statements of Sigma as of and for the fiscal years ended December 31, 2022
and 2021; |
| ● | The
unaudited financial statements of Sigma as of and for the three and nine months ended September
30, 2023 and 2022; |
| ● | The
audited financial statements of NextTrip as of and for the fiscal years ended on February
28, 2023 and 2022; and |
| ● | The
historical interim financial statements of NextTrip as of and for the three and six months
ended August 31, 2023 and 2022. |
The
unaudited pro forma combined condensed financial information should be read together with the historical financial statements of Sigma
and NextTrip incorporated by reference or included in this proxy statement along with the information in Sigma’s “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” incorporated by reference in this proxy statement and
“NextTrip’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other
financial information included in this Proxy Statement and incorporated herein by reference.
On
October 12, 2023, Sigma, NextTrip, and Parent, entered into a Share Exchange Agreement (the “Exchange Agreement”). Under
the terms of the Exchange Agreement, the parties agreed that the Parent will sell and transfer to Sigma all of the NextTrip Shares in
exchange for the Restricted Sigma Shares to be issued to the Parent Members Pro Rata under the terms of the Exchange Agreement, subject
to certain closing conditions (the “Merger”). Upon the closing of the Merger NextTrip will become a wholly owned subsidiary
of Sigma.
The
Contingent Shares, together with the Closing Shares issued at the closing, will not exceed 6,000,000 shares of Sigma common stock,
or approximately 88.5% of our issued and outstanding shares of common stock immediately following the issuance of the Exchange
Shares assuming no other change in our outstanding shares as of September 30, 2023. Assuming the issuance of all the Exchange Shares,
including the Contingent Shares, the Acquisition would result in an eventual change of control of Sigma, with the NextTrip
Sellers as a group receiving an aggregate number of shares that exceeds the number of shares that will be held by the legacy stockholders
of Sigma. As a result, the Acquisition will be accounted for as a reverse acquisition of Sigma by NextTrip. Sigma is expected
to change its corporate name to “NextTrip, Inc.” following the Acquisition.
On
October 6, 2023, Sigma entered into an Asset Purchase Agreement with Divergent, pursuant to which Sigma has agreed to sell to Divergent
certain assets consisting primarily of patents, software code and other intellectual property for a purchase price of $1,626,242, including
a $37,000 earnest-money deposit previously paid to us by Divergent. The closing under the Asset Purchase Agreement is expected to occur
subsequent to the closing of the reverse acquisition with NextTrip. The parties’ respective obligations to close are subject to
the accuracy of the parties’ respective representations and warranties and performance of their respective covenants and satisfaction
or waiver of other customary conditions specified in the Asset Purchase Agreement. In the interim, between the signing date and closing
date or termination of the Asset Purchase Agreement, Sigma has granted Divergent a non-exclusive, nontransferable, non-sublicensable
(except to Divergent customers and affiliates), limited, irrevocable (except in connection with the termination of the Asset Purchase
Agreement), worldwide, royalty-free license to the “Licensed IP” (as defined) for testing, evaluation, and commercialization
purposes.
Sigma
and NextTrip have fiscal years ending on December 31 and February 28, respectively. The unaudited pro forma condensed combined balance
sheet as of September 30, 2023 combines the historical unaudited balance sheet of Sigma as of September 30, 2023 and the historical unaudited
balance sheet of NextTrip as of August 31, 2023, and is adjusted for the pro forma effects of the Acquisition and Asset Sale.
The
unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2023 combines the historical unaudited
statement of operations of Sigma for the nine months ended September 30, 2023 and the historical unaudited statement of operations of
NextTrip for the nine months ended August 31, 2023, and is adjusted on a pro forma basis as if the Acquisition had occurred on January
1, 2022 including the issuance of all contingent shares as of that date and for the pro forma effects of the Asset Sale .
The
unaudited pro forma condensed combined statement of operations for the year ended December 31, 2022 combines the historical unaudited
statement of operations of Sigma for the year ended December 31, 2022 and the historical unaudited statement of operations of NextTrip
for the year ended February 28, 2023, and is adjusted on a pro forma basis as if the Acquisition occurred on January 1, 2022 including
the issuance of all contingent shares as of that date and for the pro forma effects of the Asset Sale.
On
September 22, 2023, Sigma effected the Reverse Split of the issued and outstanding shares of our common stock and the number of
shares of common stock that we are authorized to issue. The Reverse Split combined each 20 shares of the issued and outstanding common
stock into one share of common stock. No fractional shares were issued in connection with the Reverse Split, and any fractional shares
resulting from the Reverse Split were rounded up to the nearest whole share. All stock options, warrants, shares issuable upon conversion
of the Company’s preferred stock and stock awards of the Company outstanding immediately prior to the Reverse Split were adjusted
in accordance with their terms. All share and earnings per share information in the unaudited pro forma condensed combined financial
information has been adjusted for the Reverse Split.
The
unaudited pro forma condensed combined financial information is for informational purposes only. It does not purport to indicate the
results that would have been obtained had the Acquisition and the Asset Sale actually been completed on the assumed date or for the periods
presented, or which may be realized in the future. The pro forma adjustments are based on the information currently available and the
assumptions and estimates underlying the pro forma adjustments described in the accompanying notes. Actual results may differ materially
from the assumptions within the accompanying unaudited pro forma condensed combined financial information.
Sigma
Additive Solutions, Inc.
Unaudited
Pro forma Condensed Combined Balance Sheet
September
30, 2023
(in
thousands)
| | |
NextTrip
Group | | |
Sigma
Additive Solutions | | |
Adjustments | | |
| | |
Pro
forma Combined Company | |
| ASSETS | |
| | |
| | |
| | |
| | |
| |
| Current
assets | |
| | | |
| | | |
| | | |
| | |
| | |
| Cash | |
| 106 | | |
| 556 | | |
| 1,589 | | |
(H) | | |
| 2,251 | |
| Accounts
Receivable, net | |
| 5 | | |
| 59 | | |
| - | | |
| | |
| 64 | |
| Receivables
- related party, net | |
| 1,993 | | |
| - | | |
| - | | |
| | |
| 1,993 | |
| Inventory | |
| - | | |
| 775 | | |
| (325 | ) | |
(H) | | |
| 450 | |
| Prepaid
expenses and other current assets | |
| 42 | | |
| 38 | | |
| - | | |
| | |
| 80 | |
| Total
current assets | |
| 2,146 | | |
| 1,428 | | |
| 1,264 | | |
| | |
| 4,838 | |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| Property
and equipment | |
| 6 | | |
| 162 | | |
| (57 | ) | |
(H) | | |
| 111 | |
| Intangible
assets | |
| 2,480 | | |
| 1,248 | | |
| (1,248 | ) | |
(H) | | |
| 2,480 | |
| Goodwill | |
| - | | |
| - | | |
| 1,657 | | |
(C),(H) | | |
| 1,657 | |
| Security
Deposit | |
| 15 | | |
| - | | |
| - | | |
| | |
| 15 | |
| Right
of use asset | |
| 946 | | |
| - | | |
| - | | |
| | |
| 946 | |
| Total
assets | |
| 5,593 | | |
| 2,838 | | |
| 1,616 | | |
| | |
| 10,047 | |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| LIABILITIES
AND STOCKHOLDERS’ EQUITY | |
| | | |
| | | |
| | | |
| | |
| | |
| Current
liabilities | |
| | | |
| | | |
| | | |
| | |
| | |
| Accounts
payable | |
| 582 | | |
| 607 | | |
| - | | |
| | |
| 1,189 | |
| Accrued
expenses | |
| 378 | | |
| 146 | | |
| 1,308 | | |
(G),(H) | | |
| 1,832 | |
| Convertible
notes | |
| 4,303 | | |
| - | | |
| (4,303 | ) | |
(D) | | |
| - | |
| Convertible
notes - related parties | |
| 200 | | |
| - | | |
| (200 | ) | |
(D) | | |
| - | |
| Deferred
revenue | |
| 80 | | |
| 111 | | |
| (111 | ) | |
(H) | | |
| 80 | |
| Notes
payable - related parties | |
| 574 | | |
| - | | |
| - | | |
| | |
| 574 | |
| Operating
lease liability - current | |
| 220 | | |
| - | | |
| - | | |
| | |
| 220 | |
| Total
current liabilities | |
| 6,337 | | |
| 864 | | |
| (3,306 | ) | |
| | |
| 3,895 | |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| Long-term
liabilities | |
| | | |
| | | |
| | | |
| | |
| | |
| Operating
lease liability - non-current | |
| 794 | | |
| - | | |
| - | | |
| | |
| 794 | |
| Total
Long-term liabilities | |
| 794 | | |
| - | | |
| - | | |
| | |
| 794 | |
| Total
liabilities | |
| 7,131 | | |
| 864 | | |
| (3,306 | ) | |
| | |
| 4,689 | |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| Stockholders’
equity | |
| | | |
| | | |
| | | |
| | |
| | |
| Preferred
units / Preferred stock | |
| 4,000 | | |
| - | | |
| (4,000 | ) | |
(E) | | |
| - | |
| Common
units / Common stock | |
| - | | |
| 1 | | |
| 7 | | |
(A),(B),(D),(E),(F) | | |
| 8 | |
| Additional
paid-in-capital | |
| 13,296 | | |
| 55,380 | | |
| (10,635 | ) | |
(A),(B),(D),(E),(F) | | |
| 58,041 | |
| Accumulated
deficit | |
| (18,834 | ) | |
| (53,407 | ) | |
| 19,550 | | |
(A),(F),(G) | | |
| (52,691 | ) |
| Total
Stockholders’ equity | |
| (1,538 | ) | |
| 1,974 | | |
| 4,922 | | |
| | |
| 5,358 | |
| Total
Liabilities and Stockholders’ equity | |
| 5,593 | | |
| 2,838 | | |
| 1,616 | | |
| | |
| 10,047 | |
Sigma
Additive Solutions, Inc.
Unaudited
Pro forma Condensed Combined Statement of Operations
For
the Nine Months Ended September 30, 2023
(in
thousands)
| | |
NextTrip
Group | | |
Sigma
Additive Solutions | | |
Adjustments | | |
| | |
Pro
forma Combined Company | |
| | |
| | |
| | |
| | |
| | |
| |
| Revenue | |
| 47 | | |
| 369 | | |
| (369 | ) | |
(I)
| | |
| 47 | |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| Cost
of revenue | |
| 40 | | |
| 276 | | |
| (276 | ) | |
(I)
| | |
| 40 | |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| Gross
Profit | |
| 7 | | |
| 93 | | |
| (93 | ) | |
| | |
| 7 | |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| Operating
expenses | |
| | | |
| | | |
| | | |
| | |
| | |
| General
and administrative | |
| 2,299 | | |
| - | | |
| - | | |
| | |
| 2,299 | |
| Sales
and marketing | |
| 186 | | |
| - | | |
| - | | |
| | |
| 186 | |
| Salaries
& Benefits | |
| - | | |
| 1,775 | | |
| (1,775 | ) | |
(I)
| | |
| - | |
| Stock-Based Compensation | |
| - | | |
| 447 | | |
| (447 | ) | |
(I) | | |
| - | |
| Operations
and R&D Costs | |
| - | | |
| 232 | | |
| (232 | ) | |
(I)
| | |
| - | |
| Investor,
Public Relations and Marketing | |
| - | | |
| 129 | | |
| (129 | ) | |
(I)
| | |
| - | |
| Organizational
Costs | |
| - | | |
| 137 | | |
| (137 | ) | |
(I)
| | |
| - | |
| Legal
& Professional Service Fees | |
| - | | |
| 587 | | |
| (587 | ) | |
(I)
| | |
| - | |
| Office
Expenses | |
| - | | |
| 310 | | |
| (310 | ) | |
(I)
| | |
| - | |
| Depreciation
and amortization | |
| 1,192 | | |
| 74 | | |
| (74 | ) | |
(I)
| | |
| 1,192 | |
| Other
Operating Expenses | |
| - | | |
| 388 | | |
| (388 | ) | |
(I)
| | |
| - | |
| Total
Operating expenses | |
| 3,677 | | |
| 4,079 | | |
| (4,079 | ) | |
| | |
| 3,677 | |
| Income
(loss) from operations | |
| (3,670 | ) | |
| (3,986 | ) | |
| 3,986 | | |
| | |
| (3,670 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| Other
(income) expense | |
| | | |
| | | |
| | | |
| | |
| | |
| Interest
(income) expense, net | |
| 215 | | |
| 10 | | |
| (225 | ) | |
(I),
(J) | | |
| - | |
| State
Incentives | |
| - | | |
| - | | |
| - | | |
| | |
| - | |
| Exchange
Rate Loss | |
| - | | |
| 3 | | |
| (3 | ) | |
(I) | | |
| - | |
| Other
(income) | |
| - | | |
| (68 | ) | |
| 68 | | |
(I)
| | |
| - | |
| Total
other (income) expense | |
| 215 | | |
| (55 | ) | |
| (160 | ) | |
| | |
| - | |
| Income
(loss) before income taxes | |
| (3,885 | ) | |
| (3,931 | ) | |
| 4,146 | | |
| | |
| (3,670 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| Income
tax expense | |
| - | | |
| - | | |
| - | | |
| | |
| - | |
| Net
Income (loss) | |
| (3,885 | ) | |
| (3,931 | ) | |
| 4,146 | | |
| | |
| (3,670 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| Preferred
Dividends | |
| - | | |
| 33 | | |
| (33 | ) | |
(I)
| | |
| - | |
| Net
Income (loss) applicable to Common Stockholders | |
| (3,885 | ) | |
| (3,964 | ) | |
| 4,179 | | |
| | |
| (3,670 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| Net
income (loss) per common share - basic and diluted | |
| (4.25 | ) | |
| (7.28 | ) | |
| | | |
| | |
| (0.58 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| Weighted
average shares outstanding - basic and diluted | |
| 915,000 | | |
| 544,587 | | |
| | | |
| | |
| 6,368,672 | |
Sigma
Additive Solutions, Inc.
Unaudited
Pro forma Condensed Combined Statement of Operations
For
the Year Ended December 31, 2022
(in
thousands)
| | |
NextTrip
Group | | |
Sigma
Additive Solutions | | |
Adjustments | | |
| | |
Pro
forma Combined Company | |
| | |
| | |
| | |
| | |
| | |
| |
| Revenue | |
| 383 | | |
| 630 | | |
| (630 | ) | |
(I) | | |
| 383 | |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| Cost
of revenue | |
| 355 | | |
| 350 | | |
| (350 | ) | |
(I) | | |
| 355 | |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| Gross
Profit | |
| 28 | | |
| 280 | | |
| (280 | ) | |
| | |
| 28 | |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| Operating
expenses | |
| | | |
| | | |
| | | |
| | |
| | |
| General
and administrative | |
| 3,574 | | |
| - | | |
| - | | |
| | |
| 3,574 | |
| Sales
and marketing | |
| 708 | | |
| - | | |
| - | | |
| | |
| 708 | |
| Salaries
& Benefits | |
| - | | |
| 4,740 | | |
| (4,740 | ) | |
(I) | | |
| - | |
| Stock-Based Compensation | |
| - | | |
| 793 | | |
| (793 | ) | |
(I) | | |
| - | |
| Operations
and R&D Costs | |
| - | | |
| 653 | | |
| (653 | ) | |
(I) | | |
| - | |
| Investor,
Public Relations and Marketing | |
| - | | |
| 423 | | |
| (423 | ) | |
(I) | | |
| - | |
| Organizational
Costs | |
| - | | |
| 312 | | |
| (312 | ) | |
(I) | | |
| - | |
| Legal
& Professional Service Fees | |
| - | | |
| 725 | | |
| (725 | ) | |
(I) | | |
| - | |
| Office
Expenses | |
| - | | |
| 915 | | |
| (915 | ) | |
(I) | | |
| - | |
| Depreciation
and amortization | |
| 807 | | |
| 116 | | |
| (116 | ) | |
(I) | | |
| 807 | |
| Other
Operating Expenses | |
| - | | |
| 352 | | |
| (352 | ) | |
(I) | | |
| - | |
| Total
Operating expenses | |
| 5,089 | | |
| 9,029 | | |
| (9,029 | ) | |
| | |
| 5,089 | |
| Income
(loss) from operations | |
| (5,061 | ) | |
| (8,749 | ) | |
| 8,749 | | |
| | |
| (5,061 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| Other
(income) expense | |
| | | |
| | | |
| | | |
| | |
| | |
| Interest
(income) expense, net | |
| 72 | | |
| 4 | | |
| (76 | ) | |
(I),
(J) | | |
| - | |
| State
Incentives | |
| - | | |
| (77 | ) | |
| 77 | | |
(I) | | |
| - | |
| Exchange
Rate Loss | |
| - | | |
| 16 | | |
| (16 | ) | |
(I) | | |
| - | |
| Other
(income) | |
| - | | |
| - | | |
| - | | |
| | |
| - | |
| Total
other (income) expense | |
| 72 | | |
| (57 | ) | |
| (15 | ) | |
| | |
| - | |
| Income
(loss) before income taxes | |
| (5,133 | ) | |
| (8,692 | ) | |
| 8,764 | | |
| | |
| (5,061 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| Income
tax expense | |
| - | | |
| - | | |
| - | | |
| | |
| - | |
| Net
Income (loss) | |
| (5,133 | ) | |
| (8,692 | ) | |
| 8,764 | | |
| | |
| (5,061 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| Preferred
Dividends | |
| - | | |
| 57 | | |
| (57 | ) | |
(I) | | |
| - | |
| Net
Income (loss) applicable to Common Stockholders | |
| (5,133 | ) | |
| (8,749 | ) | |
| 8,821 | | |
| | |
| (5,061 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| Net
income (loss) per common share - basic and diluted | |
| (0.88 | ) | |
| (16.56 | ) | |
| | | |
| | |
| (0.80 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| Weighted
average shares outstanding - basic and diluted | |
| 5,824,085 | | |
| 524,940 | | |
| | | |
| | |
| 6,349,025 | |
See
accompanying notes to unaudited condensed combined pro forma financial information.
NOTES
TO THE UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL INFORMATION
(1)
Basis of Presentation
The
unaudited pro forma condensed combined balance sheet as of September 30, 2023 and the unaudited pro forma condensed combined statement
of operations for the nine months ended September 30, 2023 and for the year ended December 31, 2022 are presented on a pro forma basis
as if the Acquisition had occurred on January 1, 2022 and gives pro forma effect to the Asset Sale. These periods are presented on the
basis of NextTrip as the accounting acquirer.
The
pro forma adjustments are based on certain currently available information and certain assumptions and methodologies that we believe
are reasonable under the circumstances. The unaudited pro forma adjustments may be revised as additional information becomes available
and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments, and it is possible
the difference may be material. We believe that our assumptions and methodologies provide a reasonable basis for presenting all of the
significant effects of the Acquisition and the Asset Sale based on information available to management and that the pro forma adjustments
give appropriate effect to those assumptions and are properly applied in the unaudited proforma condensed combined financial information.
The
unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies,
tax savings, or cost savings that may be associated with the Acquisition.
The
unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and
financial position would have been had the Acquisition and the Asset Sale taken place on the dates indicated, nor are they indicative
of the future consolidated results of operations or financial position of NextTrip, Inc., as the post-Acquisition company. This information
should be read in conjunction with the historical financial statements and notes thereto of Sigma and NextTrip.
The
unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended
by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release
No. 33-10786 replaces the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction
(“Transaction Accounting Adjustments”), operations and financial position of the registrant as an autonomous entity (“Autonomous
Entity Adjustments”) and an option to present the reasonably estimable synergies and dis-synergies and other transaction effects
that have occurred or are reasonably expected to occur (“Management’s Adjustments”). We have elected not to present
any Management’s Adjustments in the unaudited pro forma condensed combined financial information.
(2)
Accounting Policies
Management
is performing a comprehensive review of the accounting policies of Sigma and NextTrip. As a result of the review, management may identify
differences between the accounting policies of the entities which, when confirmed, could have a material impact on the financial statements
of the post-Acquisition company. Based on its initial analysis, management has not identified any differences that would have an impact
on the unaudited pro forma condensed combined financial information and has not recorded any adjustments.
The
pro forma combined provision for income taxes does not necessarily reflect the amounts that would have resulted had the post-Acquisition
company filed consolidated income tax returns during the periods presented.
The
pro forma basic and diluted earnings per share amounts presented in the unaudited pro forma condensed combined statements of operations
for the nine months ended September 30, 2023 and for the year ended December 31, 2022 are based upon the number of the post-Acquisition
company’s shares outstanding, assuming the Acquisition occurred on January 1, 2022 and the issuance of all the Exchange Shares,
including the Contingent Shares, on that date.
(3)
Purchase Consideration and Purchase Price Allocation
The
Acquisition will be accounted for as a reverse acquisition, with NextTrip as the accounting acquirer, using the acquisition method in
accordance with ASC 805, Business Combinations. Under this method of accounting, the purchase price is allocated to the assets acquired
and liabilities assumed based upon their estimated fair values at the date of consummation of the transaction. In the Asset Sale, the
assets sold are derecognized at their carrying value at the disposition date.
The
following table presents the preliminary allocation of the $3.7 million consideration for the Acquisition and summarizes the estimated
fair values of the Sigma (the accounting acquiree) assets acquired and liabilities assumed for NextTrip (the accounting acquirer). The
estimated consideration of approximately $3.7 million is based on Sigma’s weighted average closing share price as reported on Nasdaq
for the period from October 6, 2023 through November 3, 2023 multiplied by the 651,536 shares outstanding as of September 30, 2023 and
the assumed conversion of Series E Preferred Stock into 3,069 common shares. The value of the purchase price consideration will change
based on fluctuations in the share price of Sigma’s common stock and the number of common shares of Sigma outstanding on the closing
date of the Acquisition. As described above, fair values assigned to certain assets acquired and liabilities assumed are provisional
and thus subject to change:
Sigma
Additive Solutions, Inc.
Provisional
Table of Assets Acquired and Liabilities Assumed
as
of the Reverse Acquisition Date
(in
thousands)
| | |
Value | |
| Fair
Value of Net Assets Acquired: | |
| |
| | |
| |
| Cash | |
| 556 | |
| Accounts
Receivable, net | |
| 59 | |
| Inventory | |
| 775 | |
| Prepaid
expenses and other current assets | |
| 38 | |
| Property
and equipment | |
| 162 | |
| Intangible
assets | |
| 1,248 | |
| Accounts
payable | |
| (607 | ) |
| Accrued
expenses | |
| (146 | ) |
| Deferred
revenue | |
| (111 | ) |
| Total
identifiable net assets acquired | |
| 1,974 | |
| | |
| | |
| Goodwill | |
| 1,764 | |
| Total
Fair Value of Net Assets Acquired | |
| 3,738 | |
Other
considerations in the preliminary allocation of the estimated acquisition purchase consideration include the following:
| 1) | Our
preliminary valuation used to allocate the purchase price uses a third-party market participant
view and assumes there are no synergies unique to the Acquisition. If there were synergies
unique to the Acquisition, a higher portion of the purchase consideration would be allocatable
to goodwill. |
| 2) | Accounts
receivable and other current assets and liabilities carrying values approximate fair value. |
| 3) | We
have estimated the acquired intangibles based including goodwill on preliminary valuation
analysis subject to finalization; |
| 4) | The
Exchange Shares include the Contingent Shares to be potentially issued to the NextTrip Sellers.
Contingent equity to be issued to the shareholders of the accounting acquirer in a reverse
acquisition are accounted for in a manner similar to a stock dividend which capitalizes the
fair value of the shares from retained earnings (accumulated deficit) as of the issuance
of the shares. Consequently, we have estimated that approximately $32.5 million will be transferred
from accumulated deficit to additional paid-in-capital as a result of the assumed issuance
of the Contingent Shares. |
| 5) | The
post-Acquisition company will consist of two reporting units, Sigma and NextTrip. We allocated
$1,626,000 of the purchase consideration to the fair value of Sigma reporting unit based
on the sale price of the assets in the Asset Sale and $2,112,000 to the fair value of the
net assets assigned to the NextTrip reporting unit in the reverse acquisition. As the fair
value attributable to the Sigma reporting unit was determined by the Asset Sale price, no
gain or loss was recognized in the disposition transaction. |
(4)
Adjustments to Unaudited Pro Forma Condensed Combined Financial Information
The
unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Acquisition and Asset
Sale and has been prepared for informational purposes only.
Adjustments
to Unaudited Pro Forma Condensed Combined Balance Sheet
The
pro forma adjustments included in the unaudited pro forma condensed combined balance sheet as of September 30, 2023:
| A. | Eliminate
the historical equity of Sigma. The equity of Sigma is revalued to the reverse acquisition
purchase consideration in Adjustment B. |
| B. | Record
the reverse acquisition purchase consideration measured by the estimated fair value of the
Sigma stock as of the acquisition date. |
| C. | Reflect
the estimated residual goodwill in the reverse acquisition. The residual goodwill of $1,764,000
was allocated to the Sigma and NextTrip reporting units at $107,000 and $1,657,000, respectively. |
| D. | Reflect
the conversion of the NextTrip convertible debt to equity of NextTrip. |
| E. | Reflect
the conversion of 400,000 NextTrip preferred units to equity of NextTrip. |
| F. | Reflect
the issuance of the Exchange Shares, including the Contingent Shares in the Acquisition accounted
for as a reverse acquisition. As discussed above, the issuance of the Contingent Shares is
accounted for as a stock dividend in a business combination accounted for as a reverse acquisition. |
| G. | Reflect
the accrual of transaction costs for Sigma and NextTrip that were not included in the historical
financial statements for the periods presented. The Company included an accrual of $1,345,000
for unrecorded transaction costs in the pro forma balance sheet as of September 30, 2023.
The Company had included $35,000 in the historical statements of operations. Total estimated
transaction costs of $1,380,000 include $500,000 for investment banking fees payable on closing
of the Acquisition and $170,000 in estimated legal and transaction costs for NextTrip. |
| H. | Reflect
the derecognition of the assets sold and the purchase price received in the Asset Sale. |
Adjustments
to Unaudited Pro Forma Condensed Combined Statements of Operations
The
pro forma adjustments included in the unaudited pro forma condensed combined statements of operations for the nine months ended September
30, 2023 and for the year ended December 31, 2022:
| I. | Reflect
the derecognition of the Sigma operating results due to the Asset Sale to conform to the
pro forma presentation which assumes that the Asset Sale took place on January 1, 2022. |
| J. | Remove
the interest expense on the NextTrip convertible debt to conform to the pro forma assumption
that the NextTrip convertible debt was converted to NextTrip equity on January 1, 2022. |
(5)
Income (Loss) Per Share
Represents
the net income (loss) per share calculated using the historical weighted average shares outstanding and assuming the Exchange Shares,
including the Contingent Shares, were issued and outstanding since January 1, 2022.
The
unaudited pro forma condensed combined financial information has been prepared based on the following weighted average shares outstanding:
| | |
Weighted
Average Shares | |
| Share
Issuance Component | |
September
30, 2023 | | |
December
31, 2022 | |
| | |
| | |
| |
| Sigma
Additive Weighted Average Shares | |
| 544,587 | | |
| 524,940 | |
| Closing
Shares | |
| 130,242 | | |
| 130,242 | |
| Tranche
1 Contingent Shares (A) | |
| 1,305,000 | | |
| 1,305,000 | |
| Tranche
2 Contingent Shares (A) | |
| 1,305,000 | | |
| 1,305,000 | |
| Tranche
3 Contingent Shares (A) | |
| 1,305,000 | | |
| 1,305,000 | |
| Tranche
4 Contingent Shares (A) | |
| 1,367,782 | | |
| 1,367,782 | |
| Alternative
Calculation Contingency (A) | |
| 411,061 | | |
| 411,061 | |
| Total
weighted average shares | |
| 6,368,672 | | |
| 6,349,025 | |
(A)
Contingent Shares issuance is calculated on a 90% probability of the shares being issued.
As
a result of the pro forma net loss for the nine-months ended September 30, 2023 and the year ended December 31, 2022, the earnings per
share amounts exclude the anti-dilutive impact from the following common stock equivalents:
| | |
September
30, 2023 | | |
December
31, 2022 | |
| | |
Potential
Shares | | |
Potential
Shares | |
| | |
| | |
| |
| Warrants | |
| 222,043 | | |
| 191,164 | |
| Stock
Options | |
| - | | |
| - | |
| Preferred
Stock | |
| - | | |
| - | |
| | |
| | | |
| | |
| Total
anti-dilutive securities | |
| 222,043 | | |
| 191,164 | |
The
number of potentially dilutive shares is based on the maximum number of shares issuable on exercise or conversion of the related securities
as of the period end. Such amounts have not been adjusted for the treasury stock method or weighted average outstanding calculations
as required if the securities were dilutive. The Preferred Stock is reflected at zero as the Series E Preferred Stock is expected to
be converted into 3,069 shares of common stock in connection with the Acquisition. The Stock Options have been reflected at zero due
to the likely cancellation or expiration of the outstanding stock options at the closing of the Exchange Agreement transaction due to
the change of control transaction.
DESCRIPTION
OF NEXTTRIP BUSINESS
NextTrip
For
purposes of this section only, “NextTrip,” “we,” “us,” “our” or “the Company”
refer to the NextTrip Parent and NextTrip together with its subsidiaries, unless the context otherwise requires.
Organizational
History
NextTrip
Parent was formed on January 7, 2021 in Florida, pursuant to the Florida Business Corporation Act, c. 607. NextTrip Parent is a holding
company, and does business through NextTrip, its wholly owned subsidiary, and its related travel companies. NextTrip Parent and its subsidiaries
previously formed the travel assets of NextPlay Technologies, Inc. (“NextPlay”), a publicly company, and were spun
out of NextPlay on January 27, 2023.
NextTrip
Holdings, Inc. was formed under the laws of the State of Florida on October 22, 2015. The subsidiaries of NextTrip Holdings, Inc. include
Extraordinary Vacations USA Inc., a wholly-owned subsidiary incorporated on June 24, 2002 in the state of Delaware corporation; and Next
Innovations LLC, which was formed under the laws of the State of Florida on April 27, 2021, and is a joint venture that is 50% owned
by NextTrip.
NextTrip’s
principal executive offices are located at 1560 Sawgrass Corporate Parkway, Suite 400, Sunrise, Florida 33323 and its telephone number
is (954) 888-9779. Additional information about the company is available on its website at www.nexttrip.com. The information included
on its website is not incorporated herein by reference.
NextTrip
Business Overview
NextTrip
is an innovative technology company that is building next generation solutions to power the travel industry. NextTrip Parent, through
its subsidiaries, provides travel technology solutions with sales originating in the United States, leisure travel , business travel,
groups travel, media and tech. It connects people to new places and discoveries by utilizing digital media engagement, seasoned planning
expertise, and unique inventory to curate custom vacations across the globe. Its proprietary booking engine, branded as NXT2.0, provides
travel distributors access to a sizeable inventory.
NextTrip’s
travel business was the principal business of NextPlay (then, Monaker Group, Inc. (“Monaker”)) until June 30, 2020,
when Monaker entered into a share exchange transaction with HotPlay Enterprise Limited (“HotPlay”), resulting in HotPlay
becoming a wholly owned subsidiary of Monaker and HotPlay’s business becoming the principal business of Monaker. Prior to this
share exchange, the primary focus of NextPlay had been its travel business, which included the sale of vacation rentals, and in particular,
ALRs, to consumers through its proprietary booking engine. To support its travel offerings, NextPlay introduced travelmagazine.com, featuring
travel and lifestyle content to appeal to travelers researching destinations and planning future vacations.
The
spread of the COVID-19 virus globally beginning in January 2020 severely impacted NextTrip’s business. Beginning in March 2020,
many U.S. states and foreign countries began issuing “stay-at-home” orders and closed their borders to interstate and international
travel. Such restrictions on travel, together with other measures implemented by governments around the world, severely restricted the
level of economic activity around the world and had an unprecedented effect on the global travel industry. The public’s ability
to travel was severely curtailed through border closures, mandated travel restrictions and limited operations of hotels, airlines, and
additional voluntary or mandated closures of travel-related businesses from December 2019 through the beginning of 2022 (and beyond in
some jurisdictions). Measures implemented during the COVID-19 pandemic led to unprecedented levels of temporary and permanent business
closures, cancellations and limited new travel bookings, having a severe negative impact on NextTrip’s business, financial condition
and results of operations.
Due
to the significant decrease in demand for the travel related services provided by NextTrip during the peak of the COVID-19 pandemic,
NextTrip shifted its focus to developing and enhancing its program offerings. For example, NextTrip enhanced the functionality of its
booking engines, including developing a booking engine platform that allows customers to book packaged vacations and cruises along with
a platform to arrange and manage business travel.
NextTrip’s
current booking engine is powered by its proprietary NXT2.0 booking technology, built upon a platform acquired in June 2022. Previously,
this technology powered the Bookit.com business, a well-established online leisure travel agent generating over $450 million in annual
sales as recently as 2019 (pre-pandemic). As part of the acquisition of the assets of Bookit.com, NextTrip was not only able to acquire
a proven technology platform that could be integrated with its core travel sectors, but was also able to secure the Bookit.com database
with millions of past travelers and opt-in consumers.
Since
2022, NextTrip has been focused on the holistic integration of the NXT2.0 technology platform, which will serve as a base for current
and future technology projects as well as proprietary system enhancements. Through this strategic offering, NextTrip will focus on
key areas of opportunity in the travel sector and drive enhanced booking conversion rates. NextTrip’s proprietary technology, when
combined with media, product offerings and customer service, provides a unique lane to serve mid- to luxury travelers.
NextTrip’s
Direct to Consumer Websites
NextTrip
has established a direct-to-consumer presence though a number of websites, powered by the NXT2.0 booking platform. Today, the primary
leisure platform is hosted on nexttrip.com. The business platform is hosted on nexttripbusiness.com.
NextTrip
sells travel services to leisure and corporate customers across these websites. Its primary focus is its current offerings of scheduling,
pricing and availability information for booking reservations for airlines, hotels, rental cars, as well as other travel products such
as transfers, sightseeing tours, shows and event tickets. NextTrip sells these travel services both individually and as components of
dynamically assembled packaged travel vacations and trips. In addition, it provides content that presents travelers with information
about travel destinations, maps and other travel details.
NextTrip’s
online travel publication, travelmagazine.com, provides travelers around the world with inspiration for future vacation destinations
and trips. The publication offers written articles, videos, and podcasts. The website is expected to be supported by advertising and
allow for research and booking of vacation products.
Travel
Products and Services
NextTrip
has established an ecosystem with technology and product offerings that include leisure travel, wellness travel, business travel, alternative
lodging, technology and media solutions. NextTrip engages with consumers and distributors throughout the travel planning journey from
planning through post-travel. Its online products also offer efficient management and booking solutions for distributors, suppliers,
and property managers. Through direct relationships, NextTrip has established robust product offerings and preferred rates across the
top destinations world-wide. NextTrip’s primary product offerings are as follows:
| ● | NextTrip
Leisure brings travel solutions and a proprietary booking engine that allows customers to
book customized travel, including vacation packages, airline tickets, hotel
reservations, tours and activities, curated journeys, cruises, wellness and group travel. |
| ● | NextTrip
Business offers corporate travel management solutions for small to medium-sized businesses.
This system allows companies to easily manage travel from anywhere, including bookings,
expense reports, travel concierge, and 24/7 support services. |
| ● | NextTrip
Solutions offers technology solutions for product and inventory management as well as white
label offerings including: NextTrip products under their brand, technology solutions, vacation
rental homes, and property management systems. |
| ● | NextTrip
Media includes Travel Magazine and the WorldOne Metaverse experience, which is currently
in development. These digital solutions engage consumers at the initial phases of travel
planning, offering relevant content, destination information and immersive online experiences
as well as solutions for travel suppliers. The metaverse platform, once fully developed,
is expected to feature 52 virtual customized vacation journey opportunities that customers
can explore prior to booking the actual vacation. |
Products
and Services for Travelers
Search
Tools and Ability to Compare. NextTrip’s online marketplace nexttrip.com provides travelers with the tools to search for and
filter several travel products including air, car, accommodations (including ALRs) and activities based on various criteria, such as
destination, travel dates, type of property, number of bedrooms, amenities, price, or keywords.
Traveler
Login. Travelers are able to create accounts on our website(s) that give them access to their booking activity through the website.
Travel
Blog. Travel guides, videos and pictures as well as travel articles can be accessed through travelmagazine.com.
Security.
NextTrip uses a combination of technology and human review to evaluate the content of listings and to screen for inaccuracies or
fraud with the goal of providing only accurate and trustworthy information to travelers. NextTrip is Payment Card Industry (“PCI”)
compliant to ensure the safety and security of its customer credit card data.
Communication.
Travelers who create an account on NextTrip’s website will receive regular communications, including notices about places of
interest, special offers, new listings, and an email newsletter. The newsletter will be available to any traveler who agrees to receive
it and offers introductions to new destinations and vacation rentals, as well as tips and useful information when staying in vacation
rentals.
Since
the Covid-19 pandemic arose, NextTrip has primarily focused on developing its booking engine and establishing relationships with suppliers
to increase the size of its instantly bookable inventory. The booking engine has produced little revenue to date because of, among other
reasons, the efforts that have been taken to integrate the NextTrip travel platforms with the Bookit.com technology since its acquisition
in the summer of 2022. The new platform was launched in beta in May 2023 with a limited number of hotel properties in Mexico and the
Caribbean. We have expanded our distribution since launch to include over one million hotel properties worldwide and have completed a
full launch of the leisure travel website.
Technology
and Infrastructure
NextTrip’s
websites are hosted using cloud services distributed globally across multiple regions. Its systems architecture has been designed to
manage increases in traffic through additional computing power without making software changes. Its cloud services provide our online
marketplace with scalable and redundant Internet connectivity and redundant power and cooling to its hosting environments. NextTrip uses
security methods to ensure the integrity of its networks and protection of confidential data collected and stored on its servers, and
it has developed and uses internal policies and procedures to protect the personal information of its property owners, managers and travelers
using its websites that it collects and uses as part of its normal operations. Access to NextTrip’s networks, and the servers and
databases, on which confidential data is stored, is protected by industry standard firewall and encryption technology. Physical access
to its servers and related equipment is secured by limiting access to the data center to operations personnel only.
Competition
The
U.S. travel market is highly competitive and rapidly evolving. The markets are dominated by a few key distributors, which has caused
suppliers to look for viable alternatives that would diversify their business mix.
NextTrip’s
competition, which is strong and increasing, includes online and offline travel companies that target leisure and corporate travelers,
including travel agencies, tour operators, travel supplier direct websites and their call centers, consolidators and wholesalers of travel
products and services, large online portals and search websites, certain travel metasearch websites, mobile travel applications, social
media websites, as well as traditional consumer eCommerce and group buying websites. In some cases, competitors are offering more favorable
terms and improved interfaces to suppliers and travelers, which make competition increasingly difficult. NextTrip also faces competition
for customer traffic on internet search engines and metasearch websites, which impacts its customer acquisition and marketing costs.
Seasonality
NextTrip
experiences seasonal fluctuations in the demand for its travel products and services. For example, traditional leisure travel bookings
are generally the highest in the first three quarters as travelers plan and book their spring, summer and winter holiday travel. The
number of bookings typically decreases in the fourth quarter. Because revenue for most of NextTrip’s travel products is recognized
when the travel takes place rather than when it is booked, revenue typically lags bookings by several weeks to several months. As a result,
although travel bookings through NextTrip’s platforms tend to be highest from the period from January to June, moderate from July
through September and low from October through December, the majority of revenue is recognized in the summer months (June, July, and
August), and during the winter holidays (November and December).
Intellectual
Property
NextTrip’s
intellectual property includes the content of its websites, registered domain names, registered and unregistered trademarks, business
plan, business strategies and trade secrets, proprietary and acquired software platforms and related assets, licensed software platforms,
and customer and third party supplier lists. NextTrip believes that its intellectual property is an essential asset of its business and
that its registered domain names and its technology infrastructure will give it a competitive advantage in the online market and arrangements
with attractions and tour operators. NextTrip relies on a combination of trademark, copyright and trade secret laws in the United States,
as well as contractual provisions, to protect its proprietary technology and our brands. It also relies on copyright laws to protect
the appearance and design of its sites and applications. NextTrip has registered numerous Internet domain names related to its business
in order to protect our proprietary interests.
Employees
As
of August 31, 2023, NextTrip employed twelve full-time employees. Additionally, it uses independent contractors and temporary personnel
to supplement its workforce, particularly in the software development and technology tasks. Its employees are not represented by a labor
union, and it considers its employee relations to be very good. Competition for qualified personnel in its industry has historically
been intense, particularly for software engineers, developers, and other technical staff.
PROPOSAL
1: APPROVAL OF THE ACQUISITION
The
Company is asking you to approve the issuance of the Exchange Shares in exchange for all the capital stock of NextTrip and the other
terms and conditions of the Exchange Agreement and the transactions contemplated thereby.
The
terms of and reasons for and other aspects of the Exchange Agreement, the Acquisition and the issuance of the Exchange Shares in connection
with the Acquisition are described in detail in the other sections in this proxy statement.
A
copy of the Exchange Agreement is attached as Annex A to this proxy statement.
Upon
completion of the Acquisition, NextTrip will become a wholly owned subsidiary of NextTrip, Inc. and the assets, liabilities, business
and operations of NextTrip, Inc. will be primarily those of NextTrip and its wholly owned subsidiaries.
Consequences
if the Acquisition Proposal is not Approved
If
the Acquisition Proposal is not approved at the Annual Meeting, or the Acquisition is not completed for any reason, we intend to proceed
with the Asset Sale and may undertake to windup and dissolve the Company unless another strategic transaction such as a reverse merger
transaction materializes. Completion of the Acquisition is part of our plan submitted to Nasdaq to regain compliance with Nasdaq’s
minimum stockholders’ equity requirement. If the Acquisition is not completed, it is likely that our common stock would be delisted
from Nasdaq, with all the attendant risks described in the “Risk Factors Relating to the Acquisition” section of this
proxy statement. Furthermore, if the Acquisition is not completed, the price of Sigma’s common stock may decline significantly.
Accordingly, if the Acquisition is not completed, there can be no assurance as to the effect of these risks and opportunities on the
future value, if any, of your shares of Sigma’s common stock.
Required
Vote
The
Acquisition Proposal will be approved if the number of votes cast for the Acquisition Proposal exceeds the number of votes cast against
the Proposal. Broker non-votes and abstentions will have no effect on the outcome of the vote on the Acquisition Proposal.
SIGMA’S
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SIGMA’S STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE ACQUISITION PROPOSAL.
PROPOSAL
2: APPROVAL OF THE NAME CHANGE
The
Board has adopted resolutions approving, declaring advisable and recommending that, in connection with and contingent upon closing of
the Acquisition, our stockholders approve a change in our corporate name (the “Name Change”) to “NextTrip, Inc.”
and directing that a proposal to approve the Name Change (the “Name Change Proposal”) be submitted for approval at
the Annual Meeting. If approved by our stockholders, the Name Change will be effected by the filing of the Amendment, a copy of which
is attached as Annex B to this proxy statement, with the Nevada Secretary of State following the closing the Acquisition.
Purpose
and Effects of the Amendment
The
Name Change is intended to better align the name of the Company with the NextTrip business if the Acquisition is completed. If the Acquisition
does not occur, the Amendment will not be filed with the Nevada Secretary of State even if approved at the Annual Meeting, and our corporate
name will not change.
Following
implementation of the Name Change, stockholders should continue to hold their existing stock certificates. Stockholders will not be required
to tender their stock certificates in exchange for new certificates with the new name. Stockholders should not destroy any stock certificates
and should not deliver any stock certificates to the Company’s transfer agent.
Required
Vote
Approval
of the Name Change Proposal will require the affirmative vote of a majority of the outstanding shares of our common stock as of
the Record Date. The Name Change Proposal is considered a routine matter on which brokers can vote in their discretion, so we do not
expect broker non-votes on the Proposal. Any broker non-votes, however, and abstentions will have the same effect as a vote against
the Name Change Proposal.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE NAME CHANGE PROPOSAL.
PROPOSAL
3: APPROVAL OF THE CAPITAL INCREASE
The
Board has adopted resolutions approving, declaring advisable and recommending that our stockholders approve the Amendment to increase
the authorized number of shares of our common stock (the “Capital Increase”) from 1,200,000 shares to 100,000,000
shares and directing that a proposal to approve the Capital Increase (the “Capital Increase Proposal”) be submitted
for approval at the Annual Meeting. If approved by our stockholders, the Capital Increase will be effected by the filing of the Amendment,
a copy of which is attached as Annex B to this proxy statement, with the Nevada Secretary of State following
the Annual Meeting.
The
Capital Increase is intended to facilitate the Acquisition and to implement the Equity Incentive Plan and for other corporate purposes,
whether or not the Acquisition is completed.
Purpose
and Effects of the Capital Increase
On
September 22, 2023, we effected a 1-for-20 reverse stock split of our outstanding shares of common stock and authorized but unissued
shares of common stock in order to seek to regain compliance with the minimum bid price requirement for continued listing of our common
stock on Nasdaq. As a result of the reverse stock split, the number of shares of common stock that we are authorized to issue was decreased
to 1,200,000 shares. As of October 31, 2023, there were 780,423 shares of our common stock issued and outstanding, 685,052
shares reserved for issuance upon exercise or conversation of outstanding securities, and only 95,371 shares of common stock
available for issuance, which is not sufficient to enable us to issue the Exchange Shares issuable upon the closing of the Acquisition
or any of the Contingent Shares or to implement the Equity Incentive Plan if approved at the Annual Meeting.
The Exchange Agreement provides that in the
event our stockholders approve the Acquisition Proposal but not the Capital Increase Proposal, to the extent that we do not have sufficient
authorized shares of common stock available for issuance of the Exchange Shares, in lieu thereof, we will issue shares of a new series
of convertible preferred stock in form and substance satisfactory to the NextTrip Representative which, among other things, will provide
for voting on an as-converted basis and will be automatically converted (on a one-for-one basis) into shares of our common stock once
stockholder approval for an increase in our authorized shares of common stock has been obtained.
Without
the Capital Increase, our Board believes that our current authorized but unissued shares of common stock are inadequate for a publicly
traded company such as ours and that the Capital Increase necessary in order to give us or NextTrip, Inc. sufficient authorized shares
of common stock for future capital raising activity, the issuance awards of stock options or other equity compensation to directors,
officers and employees under the Equity Incentive Plan and possible strategic acquisitions and other corporate transactions. Following
the Acquisition, NextTrip intends to seek to expand its existing platform and product offerings, which will require additional capital.
NextTrip, Inc. may elect to raise such additional capital through the sale of shares of our common stock or other equity securities exercisable
for or convertible into shares of our common stock. Such expansion may also be accomplished through acquisitions in which NextTrip, Inc.
may choose to issue shares of our common stock or common stock equivalents in payment for all or a portion of the acquisition price,
although NextTrip has no present plan or arrangement for such acquisitions. In addition, NextTrip, Inc. may seek to raise additional
capital for general business purposes following the Acquisition through future issuances of share of common stock or securities exercisable
for or convertible into shares of common stock.
The
additional shares of common stock resulting from the Capital Increase will have the same rights and privileges as the currently authorized
common stock. Once authorized, the additional shares of common stock resulting from the Capital Increase generally may be issued with
approval of the Board but without further approval of the stockholders. Accordingly, unless stockholder approval is required by applicable
law, rule or regulation, stockholders will not have approval rights in connection with the issuance of such additional shares.
The
Capital Increase itself would not have any immediate dilutive effect on the proportionate voting power or other rights of our existing
stockholders. However, any subsequent issuance, or the possibility of such issuance, of shares of our common stock (including the issuance
of the Exchange Shares, exercise of stock options and warrants, or conversion of convertible securities) would reduce each stockholder’s
proportionate interest in the Company and may depress the market price of our common stock. Other than with respect to the issuance of
the Exchange Shares and possible future awards under the Equity Incentive Plan, if approved at the Annual Meeting, we have no
present plan or arrangement to issue any of the additional shares if the Capital Increase is approved.
Anti-takeover
Effects
SEC
rules and regulations require disclosure of the possible anti-takeover effects of an increase in authorized capital stock and other charter
and bylaw provisions that could have an anti-takeover effect. Although our Board of Directors has not proposed the Capital Increase with
the intent of using the additional shares to prevent or discourage any actual or threatened takeover of the Company, under certain circumstances,
such shares could have an anti-takeover effect. The additional shares of authorized common stock could be issued to dilute the stock
ownership or voting rights of persons seeking to obtain control of the Company or could be issued to persons allied with the Board or
management and, thereby, have the effect of making it more difficult to remove directors or members of management by diluting the stock
ownership or voting rights of persons seeking to effect a change in control of the Company. Accordingly, if the proposed Capital Increase
is approved, the additional shares of authorized common stock may render more difficult or discourage a merger, tender offer or proxy
contest, the assumption of control by a holder of a large block of common stock, or the replacement or removal of the Board or management.
The
Capital Increase Proposal is being presented to stockholders as a condition of the parties’ obligations under the Exchange Agreement,
and is not prompted by any takeover threat perceived by our Board of Directors or management.
Required
Vote
The
Capital Increase Proposal will require the affirmative vote of a majority of the outstanding shares of our common stock as of the Record
Date. Broker non-votes and abstentions will have the same effect as a vote against the Capital Increase Proposal.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE CAPITAL INCREASE PROPOSAL.
PROPOSAL
4 - ELECTION OF DIRECTORS
Our
Board of Directors is currently composed of five members. In accordance with our amended and restated bylaws, our Board of Directors
is divided into three staggered classes of directors, with each class having a three-year term. Vacancies on the Board of Directors and
newly created directorships may be filled only by the affirmative vote of a majority of the remaining directors then in office, although
less than a quorum, or by a sole remaining director. A director elected by the Board of Directors to fill a vacancy (including a vacancy
created by an increase in the number of directors) shall serve for the remainder of the full term of the class of directors in which
the vacancy occurred and until the director’s successor is elected and has duly qualified, or until such director’s earlier
death, resignation or removal. Any increase or decrease in the number of directors will be distributed among the three classes so that,
as nearly as possible, each class will consist of one-third of our directors.
Nominees
Our
Nominating and Corporate Governance Committee has recommended, and our Board of Directors has approved, the nominations of Dennis Duitch
and Kent Summers for election as Class III directors at the Annual Meeting. If elected, Messrs. Duitch and Summers will serve as directors
until the 2026 annual meeting of stockholders and until their respective successors are duly elected and qualified. For information concerning
the nominees, please see the section titled “Board of Directors and Corporate Governance.”
If
you are a stockholder of record and you sign your proxy card or vote by telephone or over the Internet but do not give instructions with
respect to the voting of directors, your shares will be voted “FOR” the re-election of each of Messrs. Duitch and Summers.
Messrs. Duitch and Summers have agreed to serve as directors if elected; however, in the event that either director nominee is unable
or declines to serve as a director at the time of the Annual Meeting, your proxy will be voted for any nominee who shall be designated
by our Board of Directors to fill such vacancy. If you are a street name stockholder and you do not give voting instructions to your
broker or nominee, your broker will leave your shares unvoted on this matter.
Vote
Required
The
two nominees receiving the highest number of votes will be elected as Class III directors. Broker non-votes and abstentions will have
no effect on the outcome of the election.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF
THE
NOMINEES NAMED ABOVE.
BOARD
OF DIRECTORS AND CORPORATE GOVERNANCE
The
following table sets forth information about Messrs. Duitch and Summers and each of the other current members of our Board of Directors:
| Directors |
|
Class |
|
Age |
|
Position |
|
Director
Since |
|
Current
Term Expires |
|
Expiration
of Term
For
Which Nominated |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Mark
K. Ruport |
|
I |
|
70 |
|
Chairman
of the Board of Directors |
|
2019 |
|
2024 |
|
|
| Salvatore
Battinelli(1)(2)(3) |
|
II |
|
81 |
|
Director |
|
2017 |
|
2025 |
|
|
| Jacob
Brunsberg |
|
II |
|
37 |
|
President,
Chief Executive Officer and Director |
|
2022 |
|
2025 |
|
|
| Dennis
Duitch(1)(2)(3) |
|
III |
|
78 |
|
Director |
|
2017 |
|
2023 |
|
2026 |
| Kent
Summers(1)(2)(3) |
|
III |
|
64 |
|
Director |
|
2018 |
|
2023 |
|
2026 |
(1)
Member of our Audit Committee
(2)
Member of our Compensation Committee
(3)
Member of our Nominating and Corporate Governance Committee
Nominees
for Class III Director
Dennis
Duitch was appointed to our Board of Directors on August 8, 2017. Mr. Duitch has served as Managing Director of Duitch Consulting
Group, a private consulting company, since 2003. Prior to that time, he practiced public accounting, business management, mediation and
consultancy nationally, with expertise in strategic and operations management, finance, accounting, strategic planning and business operations
for a wide spectrum of companies, including technology, manufacturing and distribution, marketing, real estate, entertainment, and professional
practices. He has served in executive officer roles and as a director of public and private companies, not-for-profit organizations,
including as Vice-Chairman for Accountants Global Network, and as a top-level advisor for public companies, closely held businesses,
families and high-wealth individuals for over thirty years.
Mr.
Duitch began his career with the international CPA firm Grant Thornton in its Chicago, San Francisco and Beverly Hills offices before
founding Duitch & Franklin LLP, which evolved to become one of Southern California’s largest independent CPA/Business Management/Consultancy
practices, and which was acquired by a public company in 1998. He subsequently served as President for a consumer products company with
direct responsibility for marketing, retail, and fulfillment operations, until forming Duitch Consulting Group in 2003 to serve clients
in advisory, C-level, and board of director roles.
Mr.
Duitch is a Certified Family Business and Estate Advisor, and mediator for matters including partner/stockholder agreements and disputes,
business and marital property dissolution, and dysfunctional executive teams and boards of directors. He has lectured extensively in
management, financial and accounting areas for the California CPA Foundation, business and professional groups, has instructed at several
colleges and universities, and has authored technical articles in management and taxation for regional and national publications.
Mr.
Duitch earned a B.B.A degree in Accounting from the University of Iowa and a Master of Business Administration in Finance from Northwestern
University.
Our
Board of Directors believes that Mr. Duitch is qualified to serve as a member of the board because of his extensive public accounting
experience, which will assist the Board and the Audit Committee in addressing the numerous accounting-related issues, regulations and
SEC reporting requirements to which we are subject, as well as his expertise in business management, finance and strategic planning.
Kent
Summers was appointed to our Board of Directors on January 18, 2018. Mr. Summers was also appointed to serve as a member of the Company’s
Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee.
Mr.
Summers currently divides his time among a number of independent activities which focus on early-stage technology company formation and
development strategies, and sales planning and execution needs for emerging- and mid-market technology companies located primarily in
the Boston metropolitan area, including: management consultant to private and family-owned businesses; volunteer Mentor and Instructor
with the Massachusetts Institute of Technology Venture Mentoring Services program; regular lectures on enterprise, business-to-business
sales to company founders and students enrolled at the Massachusetts Institute of Technology Sloan School of Management, the Harvard
MBA Program, the Wharton School at the University of Pennsylvania, and a number of domestic and international entrepreneurship support
organizations; and consultant to Fellows enrolled in the Harvard Advanced Leadership Initiative. Mr. Summers has served in those roles
at various times from 2003 to the present. From 2009 to the present, Mr. Summers has served as the non-executive Chairman of CADNexus,
Inc., and from 2017 to the present, as a director and Chairman of the Compensation Committee with iQ3 Connect, Inc. Mr. Summers also
currently serves as Chairman, Board of Managers, Massachusetts Materials Technologies LLC.
From
2005 to 2017, Mr. Summers served as Managing Partner at Practical Computer Applications, Inc., a Boston-based database consulting and
engineering services firm, where he was responsible for sales planning and execution activities. Prior to Practical Computer Applications,
from 2001 to 2005, Mr. Summers provided independent merger & acquisition advisory services to support the sale of privately-owned
companies. Over a prior 14-year period, Mr. Summers served in leadership roles at several software and internet start-ups, including:
Chairman and CEO of Collego Corporation (acquired by MRO Software), founder and CEO of MyHelpDesk, Inc. (acquired by Support.com), founder
of PCMovingVan.com (acquired by a PE firm), and Vice President of Marketing at Electronic Book Technologies, Inc. (acquired by INSO Corporation,
formerly listed on Nasdaq).
Prior
to the software industry, Mr. Summers served as Technology Analyst at Electronic Joint Venture Partners LLC and Associate Program Trader
on the Options Trading Desk at Bear Stearns & Co. In 1986, Mr. Summers received a BA in English from the University of Houston.
Our
Board of Directors believes that Mr. Summers is qualified to serve as a member of our Board on the basis of his deep understanding of
early-stage business growth strategies, enterprise sales, business acquisitions, as well as his background and extensive company management
and leadership experience.
Continuing
Directors
Mark
K. Ruport was appointed as Executive Chairman and as a director on December 3, 2019. Effective April 30, 2020, Mr. Ruport became
our President and Chief Executive Officer and, as of February 16, 2022 and April 1, 2022, respectively, no longer serves as President
and Chief Executive Officer. Mr. Ruport was appointed as Chairman of our Board effective April 1, 2022. We currently anticipate that
Mr. Ruport will resign from as a director in connection with closing of the Acquisition, and that Mr. Kerby will be appointed as a director
to fill the vacancy created by Mr. Ruport’s resignation.
Mr.
Ruport brings more than 30 years of public and private company experience in the software sector to his position at Sigma Labs. Mr. Ruport
received his Bachelor of Science degree and MBA from Bowling Green State University. Mr. Ruport received a Bachelor of Science in Business
and an MBA from Bowling Green State University.
Our
Board of Directors believes that Mr. Ruport is qualified to serve as a member of the board because of his extensive experience in management
and leadership in the technology industry. Mr. Ruport has indicated his willingness to resign as a director in conjunction with the completion
of the Acquisition in order to facilitate the appointment of Donald P. Monaco as a director. See “The Exchange Agreement
– Executive Officers and Directors Following the Closing of the Acquisition” for Mr. Monaco’s biographical
information.
Jacob
Brunsberg was appointed to our Board of Directors on April 1, 2022. He was appointed Senior Vice-President of Product Management
and Strategic Relationships on September 20, 2021, on February 16, 2022, he was named President and Chief Operating Officer, and on April
1, 2022, he was named President and Chief Executive Officer. Prior to joining the Company, Mr. Brunsberg was a P&L leader for General
Electric’s Binder Jet Technology unit, with management responsibility for strategy, development, commercialization, and overall
business performance. Mr. Brunsberg holds a Bachelor of Science degree in Material Science and Engineering from the University of Wisconsin-Madison.
Our
Board of Directors believes that Mr. Brunsberg is qualified to serve as a member of the board because of his extensive executive experience.
Salvatore
Battinelli was appointed to our Board of Directors on August 16, 2017. Mr. Battinelli is currently the President and Chief Executive
Officer of Bello e Preciso Co., a manufacturer and wholesaler of Italian-made fashion watches and has served in those roles since early
2017.
Mr.
Battinelli is a Certified Public Accountant and received a BS in accounting and an MBA with an emphasis in international economics and
accounting, both from Babson College.
Our
board of directors believes that Mr. Battinelli is qualified to serve as a member of the board on the basis of his deep understanding
of business acquisitions and sales, as well as his background and extensive company management and integration experience.
Director
Independence
Our
Board currently consists of five members. As a result of his previous service as our Chief Executive Officer, Mr. Ruport is not considered
an independent director. As Chief Executive Officer, Mr. Brunsberg is also not considered an independent director. Our Board of Directors
has determined that our other directors, Salvatore Battinelli, Dennis Duitch and Kent Summers, constituting a majority of our directors,
are “independent” as that term is defined under Rule 5605(a)(2) of the Nasdaq marketplace rules. Pursuant to Nasdaq rules,
our board must consist of a majority of independent directors.
The
Nasdaq independence definition includes a series of objective tests, including that the director is not, and has not been for at least
three years, one of our employees and that neither the director nor any of his family members has engaged in various types of business
dealings with us. In addition, as required by Nasdaq rules, our Board of Directors has made a subjective determination as to Messrs.
Battinelli, Duitch and Summers, our independent directors, that no relationships exist, which, in the opinion of our Board of Directors,
would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations,
our Board of Directors reviewed and discussed information provided by the directors and us with regard to each director’s business
and personal activities and relationships as they may relate to us and our management. There are no family relationships among any of
our directors or executive officers.
Classified
Board of Directors
In
accordance with our amended and restated bylaws, our Board of Directors is divided into three classes with staggered, three-year terms.
At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of
election and qualification until the third annual meeting following election. Our directors are classified as follows:
| |
● |
the
Class I director is Mark Ruport, with a term expiring at our 2024 annual meeting of stockholders; |
| |
|
|
| |
● |
the
Class II directors are Salvatore Battinelli and Jacob Brunsberg, with terms expiring at our 2025 annual meeting of stockholders;
and |
| |
|
|
| |
● |
the
Class III directors are Dennis Duitch and Kent Summers, with terms expiring at the Annual Meeting. |
Our
amended and restated bylaws provide that the authorized number of directors may be changed by resolution of the Board of Directors. Any
additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as
nearly as possible, each class will consist of one-third of the directors. The division of our Board of Directors into three classes
with staggered three-year terms may delay or prevent a change of our management or a change in control of our Company.
Leadership
Structure of the Board
Any
director or our Board of Directors as a whole may be removed with or without cause at any meeting of stockholders by the affirmative
vote of the holders of at least two-thirds of our outstanding voting stock entitled to vote in the election of directors. Our amended
and restated bylaws provide our Board of Directors with flexibility in its discretion to combine or separate the positions of Chairman
of the Board and Chief Executive Officer. Our Board of Directors believes it is important to select the Company’s Chairman and
Chief Executive Officer in the manner it considers in the best interests of the Company at any given time. Our Board of Directors believes
that the Chairman and Chief Executive Officer positions may be filled by one individual or by two different individuals, as determined
by our Board of Directors based on circumstances then in existence.
The
Chairman of the Board presides at all meetings of our Board of Directors and exercises and performs such other powers and duties as may
be assigned to him from time to time by the Board or prescribed by our amended and restated bylaws. The Chairman of the Board is appointed
by our Board of Directors on an annual basis.
Our
Board of Directors has no established policy on whether it should be led by a Chairman who is also the Chief Executive Officer, and in
the past has combined the roles of Chairman and Chief Executive Officer. Our Board currently is committed to the separation of the offices
of Chairman and Chief Executive Officer. However, our Board of Directors continually evaluates our leadership structure and could, in
the future, decide to combine the Chairman and Chief Executive Officer positions if it believes that doing so would serve the best interests
of our Company and our stockholders.
Board
Meetings and Committees
During
our fiscal year ended December 31, 2022, the Board of Directors held fourteen meetings, and each director attended at least 75% of the
aggregate of (i) the total number of meetings of our Board of Directors held during the period he was a director and (ii) the total number
of meetings held by all committees of our Board of Directors on which he served during the periods that he served.
Although
we do not have a formal policy regarding attendance by members of our Board of Directors at annual meetings of stockholders, we encourage,
but do not require, our directors to attend. Each of our then current directors attended our 2022 Annual Meeting of Stockholders.
Our
Board of Directors has established three standing committees-audit, compensation, and nominating and corporate governance, each of which
operates under a written charter that has been approved by our Board of Directors. Each committee charter has been posted on the Investors
section of our website at www.sigmaadditive.com. The reference to our website address does not constitute incorporation by reference
of the information contained at or available through our website, and you should not consider it to be a part of this Annual Report.
Audit
Committee
The
Audit Committee’s responsibilities include:
| |
● |
appointing,
approving the compensation of, and assessing the independence of our registered public accounting firm; |
| |
|
|
| |
● |
overseeing
the work of our registered public accounting firm, including through the receipt and consideration of reports from such firm; |
| |
|
|
| |
● |
reviewing
and discussing with management and the registered public accounting firm our annual and quarterly financial statements and related
disclosures; |
| |
|
|
| |
● |
monitoring
our internal control over financial reporting, disclosure controls and procedures; |
| |
|
|
| |
● |
establishing
procedures for the receipt, retention and treatment of accounting related complaints and concerns; |
| |
● |
meeting
independently with our registered public accounting firm and management; |
| |
|
|
| |
● |
reviewing
and approving or ratifying any related person transactions; and |
| |
|
|
| |
● |
preparing
the Audit Committee report required by SEC rules. |
The
members of our Audit Committee are Messrs. Duitch, Battinelli and Summers, and Mr. Duitch serves as the chairperson of the committee.
Our Board of Directors has determined that each of Messrs. Duitch, Battinelli and Summers is an independent director under the applicable
Nasdaq rules and under SEC Rule 10A-3. All members of our Audit Committee meet the requirements for financial literacy under the applicable
rules and regulations of the SEC and Nasdaq. Our Board of Directors has determined that each member of our Audit Committee is an “audit
committee financial expert” as defined by applicable SEC rules and has the requisite financial sophistication as defined under
the applicable Nasdaq rules and regulations. The Audit Committee met four times during 2022.
Compensation
Committee
The
Compensation Committee’s responsibilities include:
| |
● |
annually
reviewing and approving corporate goals and objectives applicable to CEO compensation; |
| |
|
|
| |
● |
determining
our CEO’s compensation; |
| |
|
|
| |
● |
reviewing
and approving, or making recommendations to our Board of Directors with respect to the compensation of our other executive officers;
|
| |
|
|
| |
● |
overseeing
an evaluation of our senior executives; |
| |
|
|
| |
● |
overseeing
and administering our equity incentive plans; |
| |
|
|
| |
● |
reviewing
and making recommendations to our Board of Directors with respect to director compensation; and |
| |
|
|
| |
● |
reviewing
and discussing annually with management our “Compensation Discussion and Analysis” when it is required by SEC rules to
be included in our Proxy Statements. |
The
members of our Compensation Committee are Messrs. Duitch, Battinelli and Summers, and Mr. Battinelli serves as the chairperson of the
committee. Our Board of Directors has determined that each of Messrs. Duitch, Battinelli and Summers is independent under the applicable
Nasdaq rules and regulations and is a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act.
Nominating
and Corporate Governance Committee
The
Nominating and Corporate Governance Committee’s responsibilities include:
| |
● |
identifying
individuals qualified to become board members; |
| |
|
|
| |
● |
recommending
to our board the persons to be nominated for election as directors and to each of the board’s committees; and |
| |
|
|
| |
● |
overseeing
an annual evaluation of the board. |
The
members of our Nominating and Corporate Governance Committee are Messrs. Duitch, Battinelli and Summers, and Mr. Duitch serves as the
chairperson of the committee. Our Board of Directors has determined that each of Messrs. Duitch, Battinelli and Summers is independent
under the applicable Nasdaq rules and regulations.
Code
of Ethics and Business Conduct
The
Company has a code of ethics that applies to all employees, including the Company’s principal executive officer, principal financial
officer, and principal accounting officer, as well as to the members of the Board of Directors. The code is available on our website
at www.sigmaadditive.com. The Company intends to disclose any changes in, or waivers from, this code by posting such information on the
same website or by filing a Current Report on Form 8-K, in each case to the extent such disclosure is required by the rules of the SEC
or Nasdaq. The reference to our website address does not constitute incorporation by reference of the information contained at or available
through our website, and you should not consider it to be a part of this proxy statement.
Considerations
in Evaluating Director Nominees
Our
Nominating and Corporate Governance Committee uses a variety of methods for identifying and evaluating director nominees. In its evaluation
of director candidates, our Nominating and Corporate Governance Committee will consider the current size and composition of our Board
of Directors and the needs of our Board of Directors and the respective committees of our Board of Directors. Some of the qualifications
that our Nominating and Corporate Governance Committee considers include, without limitation, issues of character, integrity, judgment,
diversity of experience, independence, area of expertise, corporate experience, length of service, potential conflicts of interest and
other commitments. Nominees must also have the ability to offer advice and guidance to our Chief Executive Officer based on past experience
in positions with a high degree of responsibility and be leaders in the companies or institutions with which they are affiliated. Director
candidates must have sufficient time available in the judgment of our Nominating and Corporate Governance Committee to perform all board
of director and committee responsibilities. Members of our Board of Directors are expected to prepare for, attend, and participate in
all board of directors and applicable committee meetings. Other than the foregoing, there are no stated minimum criteria for director
nominees, although our Nominating and Corporate Governance Committee may also consider such other factors as it may deem, from time to
time, are in our and our stockholders’ best interests.
Although
our Board of Directors does not maintain a specific policy with respect to board diversity, our Board of Directors believes that our
Board of Directors should be a diverse body, and our Nominating and Corporate Governance Committee considers a broad range of backgrounds
and experiences. In making determinations regarding nominations of directors, our Nominating and Corporate Governance Committee may take
into account the benefits of diverse viewpoints. Our Nominating and Corporate Governance Committee also will consider these and other
factors as it oversees the annual Board of Director and committee evaluations. After completing its review and evaluation of director
candidates, our Nominating and Corporate Governance Committee recommends to our full Board of Directors the director nominees for selection.
The
Company currently does not meet the diversity objectives of Rule 5605(f)(2)(C). Our Nominating and Corporate Governance Committee is
committed to ensuring that our Board’s composition appropriately reflects the current and anticipated needs of our Board of Directors
and the Company and believes that our current directors are well-suited to serve as directors based on the expertise and experience.
Our Nominating and Corporate Governance Committee, however, has and will continue to consider diverse candidates for membership on our
Board of Directors.
| Board
Diversity Matrix (as of September 30, 2023) |
| | |
Female | | |
Male | |
| Total
Number of Directors | |
0 | | |
5 | |
| Part
I: Gender Identity | |
| | |
| |
| Directors | |
0 | | |
5 | |
| Part
II: Demographic Background | |
| | |
| |
| White | |
0 | | |
5 | |
| LGBTQ+ | |
0 | |
Stockholder
Recommendations for Nominations to the Board of Directors
Our
Nominating and Corporate Governance Committee will consider candidates for director recommended by stockholders so long as such recommending
stockholder was a stockholder of record both at the time of giving notice and at the time of the annual meeting, and such recommendations
comply with our amended and restated articles of incorporation and amended and restated bylaws and applicable laws, rules and regulations,
including those promulgated by the SEC. The Nominating and Corporate Governance Committee will evaluate such recommendations in accordance
with its charter, our amended and restated bylaws, our policies and procedures for director candidates, as well as the regular director
nominee criteria described above. This process is designed to ensure that our Board of Directors includes members with suitable backgrounds,
skills and experience, including appropriate financial and other expertise relevant to our business. Eligible stockholders wishing to
recommend a candidate for nomination should contact the Secretary in writing. Our Nominating and Corporate Governance Committee has the
discretion to decide which individuals to recommend for nomination as directors.
Any
nomination should be sent in writing to our Corporate Secretary at Sigma Additive Solutions, Inc., 3900 Paseo del Sol, Santa Fe, New
Mexico 87507. To be timely for our 2024 annual meeting of stockholders, our Corporate Secretary must receive the nomination by August
2, 2024, the date 120 days prior to the first anniversary of the mailing date of this proxy statement. For the 2024 annual meeting,
we will be required pursuant to Rule 14a-19 under the Exchange Act to include on our proxy card all nominees for director for whom we
have received notice under the rule, which must be received no later than 60 calendar days prior to the anniversary of the Annual Meeting.
For any such director nominee to be included on our proxy card for next year’s annual meeting, notice must be received no later
than October 28, 2024.
Role
of Board in Risk Oversight Process
Risk
assessment and oversight are an integral part of our governance and management processes. Our Board of Directors encourages management
to promote a culture that incorporates risk management into our corporate strategy and day-to-day business operations. Management discusses
strategic and operational risks at regular management meetings and conducts specific strategic planning and review sessions during the
year that include a focused discussion and analysis of the risks we face. Throughout the year, senior management reviews these risks
with the Board of Directors at regular board meetings as part of management presentations that focus on particular business functions,
operations or strategies, and presents the steps taken by management to mitigate or eliminate such risks. Our Board of Directors does
not have a standing risk management committee, but rather administers this oversight function directly through the Board of Directors
as a whole, as well as through standing committees of the Board of Directors that will address risks inherent in their respective areas
of oversight. In particular, our Audit Committee is responsible for overseeing our major financial risk exposures and the steps our management
has taken to monitor and control these exposures. The Audit Committee also monitors compliance with legal and regulatory requirements
and considers and approves or disapproves of any related-person transactions. Our Nominating and Governance Committee monitors the effectiveness
of our corporate governance guidelines that we may adopt or amend from time to time. Our Compensation Committee assesses and monitors
whether any of our compensation policies and programs has the potential to encourage excessive risk-taking by our management.
Delinquent
Section 16(a) Reports
Section
16(a) of the Exchange Act requires the Company’s executive officers and directors, and persons who own more than 10% of a registered
class of the Company’s equity securities, to file reports of ownership and changes in ownership with the SEC. Executive officers,
directors and greater than 10% stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
The
Company believes that during the fiscal year ended December 31, 2022, its executive officers, directors and greater than 10% stockholders
timely filed all reports under Section 16(a).
Current
Executive Officers
The
following table sets forth the name, age and position of each of our executive officers:
| Name |
|
Age |
|
Position |
| Jacob
Brunsberg |
|
37 |
|
President
and Chief Executive Officer |
| Frank
Orzechowski |
|
63 |
|
Chief
Financial Officer, Treasurer and Corporate Secretary |
For
Mr. Brunsberg’s biographical information, see the “Board of Directors and Corporate Governance” section of this
proxy statement.
Frank
Orzechowski has served as our Chief Financial Officer, Treasurer, principal accounting officer, principal financial officer, and
Corporate Secretary since July 1, 2019. Prior to joining the Company, Mr. Orzechowski served as the Chief Financial Officer of StormHarbour
Partners LP, an independent global markets and financial advisory firm since September 2013. From May 2013 to August 2013, Mr. Orzechowski
served as a contract CFO for Etouches Inc., a cloud-based event management software company, to assist with financial matters in connection
with that company’s planned equity financing. Prior to that, he served as President and Owner/Operator of Four-O Technologies Inc.
from August 2009 to December 2012, where he successfully launched and guided operations for two Cartridge World franchise units in Connecticut.
From February 2006 to July 2009, Mr. Orzechowski served as President and Chief Financial Officer of Nikko Americas Holding Company Inc.,
where he was responsible for managing all of the support and infrastructure for that company’s U.S. business, as well as investment
manager selection and due diligence functions for its World Series Platform. Mr. Orzechowski began his career at Coopers & Lybrand
in 1982, received his CPA certification in 1984 and received his Bachelor of Science in Business Administration with a major in Accounting
from Georgetown University in 1982.
EXECUTIVE
COMPENSATION
Unless
otherwise indicated, share and per share information in this section gives retroactive effect to the 1-for-20 reverse stock split effected
on September 22, 2023.
Processes
and Procedures for Compensation Decisions
Our
Compensation Committee is responsible for the executive compensation programs for our executive officers and reports to our Board of
Directors on its discussions, decisions and other actions. Typically, our Chief Executive Officer makes recommendations to our Compensation
Committee and is involved in the determination of compensation for the respective executive officers that report to him. Our Chief Executive
Officer does not determine his own compensation. Our Chief Executive Officer makes recommendations to our Compensation Committee regarding
short- and long-term compensation for all executive officers based on our results, an individual executive officer’s contribution
toward these results and performance toward individual goal achievement. Our Compensation Committee then reviews the recommendations
and other data and makes decisions (or makes recommendations to the Board) as to total compensation for each executive officer as well
as each individual compensation component.
The
following table sets forth compensation for services rendered in all capacities to the Company: (i) for each person who served as the
Company’s Chief Executive Officer at any time during the past fiscal year and (ii) for our two most highly compensated executive
officers, other than our Chief Executive Officer, who were employed with the Company on December 31, 2022 (the foregoing executives are
herein collectively referred to as the “named executive officers”).
Summary
Compensation Table
| Name
and Principal Position | |
Year | | |
Salary
($) (1) | | |
Bonus
($) (1) | | |
Stock
Awards ($) | | |
Option
Awards ($) (3) | | |
All
Other Compensation ($) | | |
Total
($) | |
| Jacob
Brunsberg – Chief Executive Officer and Director | |
| 2022 | | |
| 250,000 | | |
| - | | |
| - | | |
| 597,722 | (4) | |
| - | | |
| 847,722 | |
| | |
| 2021 | | |
| 56,818 | | |
| 19,876 | (2) | |
| - | | |
| 264,352 | (5) | |
| - | | |
| 341,046 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Mark
Ruport – Former Chief Executive Officer and Current Chairman | |
| 2022 | | |
| 122,917 | | |
| - | | |
| - | | |
| 46,771 | (6) | |
| - | | |
| 169,687 | |
| | |
| 2021 | | |
| 250,000 | | |
| 208,333 | (2) | |
| - | | |
| 368,660 | (7) | |
| - | | |
| 826,993 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Darren
Beckett – Former Chief Technology Officer | |
| 2022 | | |
| 200,000 | | |
| - | | |
| - | | |
| 178,896 | (8) | |
| - | | |
| 378,896 | |
| | |
| 2021 | | |
| 185,000 | | |
| 25,800 | (2) | |
| - | | |
| 361,812 | (9) | |
| - | | |
| 572,612 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Frank
Orzechowski - Chief Financial Officer | |
| 2022 | | |
| 200,000 | | |
| - | | |
| - | | |
| 228,097 | (10) | |
| - | | |
| 428,097 | |
| | |
| 2021 | | |
| 185,000 | | |
| 26,500 | (2) | |
| - | | |
| 276,424 | (11) | |
| - | | |
| 487,924 | |
| (1) |
Actual
amounts paid or accrued. |
| |
|
| (2) |
On
January 24, 2022, the Compensation Committee granted Messrs. Brunsberg, Ruport, Beckett, and Orzechowski performance bonuses of $19,876,
$208,333, $25,800, and $26,500 respectively, for the fiscal year ended December 31, 2021 in accordance with the provisions of their
incentive compensation plans. |
| |
|
| (3)
|
Includes
option awards and stock appreciation rights awards. Stock appreciation rights awards are only payable in cash. As such, no shares
of common stock were reserved in connection with the awards since no shares will be issued pursuant to exercise. The Fair Value of
option and SARs awards are calculated in accordance with FASB ASC Topic 718. The amount recognized for all awards is calculated using
the Black Scholes pricing model. |
| |
|
| (4)
|
On
February 16, 2022, we granted Mr. Brunsberg an option to purchase up to 3,500 shares of our common stock under our 2013 Equity Incentive
Plan in connection with his employment arrangement. The option has an exercise price of $50.00 and vests in equal monthly installments
over three years. As of December 31, 2022, 978 shares were vested and exercisable. The option had a grant date fair value of $117,719.
Also on February 16, 2022, we granted Mr. Brunsberg 1,500 SARs under our 2020 Stock Appreciation Rights Plan. The SARs have an exercise
price of $50.00 and vests in equal monthly installments over three years. As of December 31, 2022, 420 SARs were fully vested and
exercisable. The SARs had a grant date fair value of $50,451. On July 1, 2022, we granted Mr. Brunsberg an option to purchase up
to 2,490 shares of common stock. The option has an exercise price of $50.00, and vests as follows: 25%, on the date of the grant,
and the remaining 75% in equal monthly installments over the subsequent thirty-six months. As of December 31, 2022, 883 shares were
vested and exercisable. The option had a grant date fair value of $46,367. Also on July 1, 2022, we granted Mr. Brunsberg an option
to purchase up to 760 shares of common stock. The option has an exercise price of $50.00, and vests as follows: 25%, on the date
of the grant, and the remaining 75% in equal monthly installments over the subsequent thirty-six months. As of December 31, 2022,
270 shares were vested and exercisable. The option had a grant date fair value of $14,152. Additionally, on July 1, 2022 we granted
Mr. Brunsberg 9,747 SARs. The SARS have an exercise price of $50.00 and vests as follows: 25% on the date of the grant, and the remaining
75% in equal monthly installments over the subsequent thirty-six months. As of December 31, 2022, 3,453 SARs were vested and exercisable.
The SARs had a grant date fair value of $181,503. Last, on July 1, 2022, we granted Mr. Brunsberg 9,098 SARs in connection with his
employment retention agreement. The SARs have an exercise price of $26.00 and will vest and become exercisable on March 15, 2025
if Mr. Brunsberg remains an employee of the Company on that date. The SARs had a grant date fair value of $187,530. |
| (5)
|
On
September 20, 2021, we granted Mr. Brunsberg an option to purchase up to 5,000 shares of our common stock under our 2013 Equity Incentive
Plan in connection with his employment arrangement. The option has an exercise price of $63.60 and is fully vested and exercisable.
The option had a grant date fair value of $264,352. |
| (6) |
On
July 1, 2022, the Company granted Mr. Ruport an option to purchase up to 963 shares of our common stock under our 2013 Equity Incentive
Plan in connection with his employment arrangement. The option has an exercise price of $50.00 and vests as follows: 25%, on the
date of the grant, and the remaining 75% in equal monthly installments over the subsequent thirty-six months. As of December 31,
2022, 343 shares were vested and exercisable. The option had a grant date fair value of $17,916. Also on July 1, 2022, the Company
granted Mr. Ruport an option to purchase up to 294 shares of our common stock. The option has an exercise price of $50.00 and vests
as follows: 25%, on the date of the grant, and the remaining 75% in equal monthly installments over the subsequent thirty-six months.
As of December 31, 2022, 108 shares were fully vested and exercisable. The option had a grant date fair value of $5,469. Last, on
July 1, 2022 the Company granted Mr. Ruport 1,256 SARs. The SARs have an exercise price of $50.00 and vest as follows: 25% on the
date of the grant, and the remaining 75% in equal monthly installments over the subsequent thirty-six months. As of December 31,
2022, 449 SARs were fully vested and exercisable. The SARs had a grant date fair value of $23,386. |
| |
|
| (7) |
On
August 11, 2021, we granted Mr. Ruport an option to purchase 2,592 shares of our common stock under our 2013 Equity Incentive Plan
in connection with his employment arrangement. The option has an exercise price of $68.40 and vests as follows: 25%, or 648 shares
vested and became exercisable on August 11, 2021, and the remaining 1,944 shares will vest in equal monthly installments over the
next three years. As of December 31, 2022, 1,512 shares were vested and exercisable. The option had a grant date fair value of $147,464.
On August 11, 2021, pursuant to our 2020 Stock Appreciation Rights Plan, we granted Mr. Ruport 3,888 Stock Appreciation Rights (“SARs”).
The SARs have an exercise price of $68.40 and will vest and become exercisable in three equal installments on each of the first,
second, and third anniversaries of the grant date. As of December 31, 2022, 1,296 SARs were fully vested and exercisable. The SARs
had an aggregate grant date fair value of $221,196. |
| |
|
| (8) |
On
July 1, 2022, we granted Mr. Beckett an option to purchase up to 793 shares of our common stock under our 2013 Equity Incentive Plan
in connection with his employment arrangement. The option has an exercise price of $50.00 and vests as follows: 25% on the date of
the grant, and the remaining 75% in equal monthly installments over the subsequent thirty-six months. As of December 31, 2022, 281
shares were vested and exercisable. The option had a grant date fair value of $14,757. Also on July 1, 2022, we granted Mr. Beckett
an option to purchase up to 2,597 shares of our common stock with an exercise price of $50.00 and vests as follows: 25% on the date
of the grant, and the remaining 75% in equal monthly installments over the subsequent thirty-six months. As of December 31, 2022,
920 shares were fully vested and exercisable. The option had a grant date fair value of $48,348. Additionally, on July 1, 2022 we
granted Mr. Beckett 848 SARs with an exercise price of $50.00 and vests as follows: 25% on the date of the grant, and the remaining
75% in equal monthly installments over the subsequent thirty-six months. As of December 31, 2022, 300 SARs were fully vested and
exercisable. The SARs had a grant date fair value of $15,776. Last, on July 1, 2022, we granted Mr. Beckett 4,852 SARs in connection
with his employment retention agreement. The SARs have an exercise price of $26.00 and will vest and become exercisable on March
15, 2025 if Mr. Beckett remains an employee of the Company on that date. The SARs had a grant date fair value of $100,015. |
| |
|
| (9) |
On
August 11, 2021, we granted Mr. Beckett an option to purchase 2,544 shares of our common stock under our 2013 Equity Incentive Plan
in connection with his employment arrangement. The option has an exercise price of $68.40 and vests as follows: 25%, or 636 shares
vested and became exercisable on August 11, 2021, and the remaining 1,908 shares will vest in equal monthly installments over the
next three years. As of December 31, 2022, 1,484 shares were vested and exercisable. The option had a grant date fair value of $144,724.
On August 11, 2021, pursuant to our 2020 Stock Appreciation Rights Plan, we granted Mr. Beckett 3,816 SARs. The SARs have an exercise
price of $68.40 and will vest and become exercisable in three equal installments on each of the first, second, and third anniversaries
of the grant date. As of December 31, 2022, 1,272 SARs were vested and exercisable. The SARs had an aggregate grant date fair value
of $217,088. |
| (10) |
On July 1, 2022, we granted
Mr. Orzechowski an option to purchase up to 797 shares of our common stock under our 2013 Equity Incentive Plan in connection with
his employment arrangement. The option has an exercise price of $50.00 and vests as follows: 25% on the date of the grant, and the
remaining 75% in equal monthly installments over the subsequent thirty-six months. As of December 31, 2022, 283 shares were vested
and exercisable. The option had a grant date fair value of $14,826. Also on July 1, 2022, we granted Mr. Orzechowski an option to
purchase up to 2,609 shares of our common stock with an exercise price of $50.00 and vests as follows: 25% on the date of the grant,
and the remaining 75% in equal monthly installments over the subsequent thirty-six months. As of December 31, 2022, 928 shares were
fully vested and exercisable. The option had a grant date fair value of $48,574. Additionally, on July 1, 2022 we granted Mr. Orzechowski
3,474 SARs with an exercise price of $50.00 and vests as follows: 25% on the date of the grant, and the remaining 75% in equal monthly
installments over the subsequent thirty-six months. As of December 31, 2022, 1,234 SARs were fully vested and exercisable. The SARs
had a grant date fair value of $64,682. Last, on July 1, 2022, we granted Mr. Orzechowski 4,852 SARs in connection with his employment
retention agreement. The SARs have an exercise price of $26.00 and will vest and become exercisable on March 15, 2025 if Mr. Orzechowski
remains an employee of the Company on that date. The SARs had a grant date fair value of $100,015. |
| |
|
| (11) |
On August 11, 2021, we
granted Mr. Orzechowski an option to purchase 2,429 shares of our common stock under our 2013 Equity Incentive Plan in connection
with his employment arrangement. The option has an exercise price of $68.40 and vests as follows: 25%, or 608 shares vested and became
exercisable on August 11, 2021, and the remaining 1,821 shares will vest in equal monthly installments over the next three years.
As of December 31, 2022, 1,424 shares were vested and exercisable. The option had a grant date fair value of $138,212. On August
11, 2021, pursuant to our 2020 Stock Appreciation Rights Plan, we granted Mr. Orzechowski 2,429 SARs. The SARs have an exercise price
of $68.40 and will vest and become exercisable in three equal installments on each of the first, second, and third anniversaries
of the grant date. As of December 31, 2022, 810 SARs were vested and exercisable. The SARs had an aggregate grant date fair value
of $138,212. |
Named
Executive Officer Employment Agreements
Jacob
Brunsberg
On
September 7, 2021, we entered into an “at-will’ employment letter agreement with Jacob Brunsberg, effective as of September
20, 2021 (the “effective date”), pursuant to which Mr. Brunsberg agreed to serve as Senior Vice-President, Product Management
and Strategic Relationships on an “at-will” basis. As of February 16, 2022, Mr. Brunsberg was appointed President and Chief
Operating Officer, and as of April 1, 2022, Mr. Brunsberg was appointed President, Chief Executive Officer, and Principal Executive Officer
of the Company. Additionally, Mr. Brunsberg was appointed to serve as a member of our Board of Directors, effective as of April 1, 2022,
with a term expiring at the 2025 annual meeting of stockholders.
Under
the employment letter agreement. Mr. Brunsberg is entitled to (i) an annual base salary of $200,000, which was increased to $250,000
effective February 16, 2022, and (ii) all benefits that we elect in our sole discretion to provide from time to time to our other executive
officers,, and received a grant of a five-year stock option to purchase up to 5,000 shares of common stock of the Company, which has
an exercise price equal to the closing price of the Company’s common stock on the effective date, and vested and became exercisable
in full on the effective date. The option is on such other terms and provisions as are contained in the Company’s standard form
nonqualified stock option agreement.
Additionally,
during the term of his employment, Mr. Brunsberg is eligible to receive one or more bonuses relating to each fiscal year in recognition
of his achievement of individual and Company goals established by the Board of Directors from time to time. However, the decision to
provide any such bonuses and the amount and terms of any such bonuses is in the sole discretion of the Board of Directors. On January
24, 2022, Mr. Brunsberg was awarded a performance bonus of $19,876 for 2021.
Mark
K. Ruport
On
December 3, 2019, we entered into an “at-will’ employment letter agreement with Mark Ruport, effective as of December 3,
2019 (the “effective date”), pursuant to which Mr. Ruport agreed to serve as our Executive Chairman on an “at-will”
basis. Additionally, Mr. Ruport was appointed to serve as a member of our Board of Directors, effective as of December 3, 2019, with
a term expiring at the 2021 annual meeting of stockholders. As of April 30, 2020, Mr. Ruport was appointed as President, Chief Executive
Officer, and principal executive officer of the Company, and no longer serves as Executive Chairman. On February 16, 2022, Mr. Ruport
resigned as President, and effective April 1, 2022, Mr. Ruport resigned as Chief Executive Officer. Mr. Ruport remained an employee of
the Company until September 30, 2022. Mr. Ruport remains a member of our Board of Directors and was appointed Chairman of our Board effective
April 1, 2022.
Darren
P. Beckett
Mr.
Beckett served as an employee of the Company from September 25, 2017, until March 1, 2023 pursuant to an “at will” employment
agreement with the Company, under which he was engaged to serve as our Engineering Manager. On October 18, 2018, his title was changed
from Vice President of Engineering to Chief Technology Officer of the Company. On October 18, 2018, the Company also increased the annual
base salary of Mr. Beckett from $135,000 to $180,000, effective retroactive to September 16, 2018, and granted Mr. Beckett an option
to purchase 100 shares of common stock under the 2013 Plan at an exercise price of $242.00 per share. The option has a
term of five years and vests in equal annual installments over four years from the date of grant subject, in each case, to Mr. Beckett
being in the continuous employ of the Company on the applicable vesting date. Under the agreement, Mr. Beckett is eligible to receive
medical and dental benefits, life insurance, short and long-term disability coverage, and to participate in the Company’s Section
125 cafeteria plan, vision plan and 401K plan.
Frank. Orzechowski
On
July 1, 2019, we entered into an “at will” employment agreement, with Frank Orzechowski under which he was engaged to serve
as our Chief Financial Officer, Treasurer, Principal Accounting Officer and Corporate Secretary of the Company. Under Mr. Orzechowski’s
employment agreement, he was entitled to receive an annual base salary of $135,000, which was increased to $155,000 effective March 1,
2020, which was increased to $180,000 on January 1, 2021, and which was increased to $200,000 on October 1, 2021. Pursuant to the employment
agreement, Mr. Orzechowski was granted (1) a stock option to purchase up to 13 shares of common stock of the Company, at an exercise
price equal to $280.00 per share, which was the closing market price of the Company’s common stock on July 1, 2019 (i.e., the Effective
Date), and (2) to purchase up to 300 shares of common stock of the Company, with an exercise price of $280.00, and will vest and become
exercisable as follows: 20 shares vested and became exercisable on the one-year anniversary of the Effective Date, 45 shares vested and
became exercisable on the second-year anniversary of the Effective Date, 71 shares will vest and become exercisable on the third-year
anniversary of the Effective Date, and 164 shares will vest and become exercisable on the fourth-year anniversary of the Effective Date,
provided, in each case, that Mr. Orzechowski remains an employee of the Company through such vesting dates. Further, Mr. Orzechowski
is eligible to participate in the Company’s 2013 Equity Incentive Plan, and is eligible to receive medical and dental benefits,
life insurance, short and long-term disability coverage, and to participate in the Company’s Section 125 cafeteria plan, vision
plan and 401K plan.
Outstanding
Equity Awards at 2022 Fiscal Year-End
The
following table sets forth outstanding stock options granted under or outside of our 2013 Equity Incentive Plan and SARs under our 2020
Stock Appreciation Rights Plan that are held by our named executive officers as of December 31, 2022:
| | |
Option Awards(1) | | |
|
| Name | |
Number of securities underlying unexercised options (#) exercisable | | |
Number of securities underlying unexercised options (#) unexercisable | | |
Option exercise price ($) | | |
Option expiration date |
| Jacob Brunsberg(2) | |
| 5,000 | | |
| - | | |
$ | 63.60 | | |
9/20/2026 |
| | |
| 978 | | |
| 2,522 | | |
$ | 50.00 | | |
2/16/2027 |
| | |
| 420 | | |
| 1,080 | | |
$ | 50.00 | | |
2/16/2027 |
| | |
| 270 | | |
| 490 | | |
$ | 50.00 | | |
7/1/2027 |
| | |
| 883 | | |
| 1,607 | | |
$ | 50.00 | | |
7/1/2027 |
| | |
| 3,453 | | |
| 6,294 | | |
$ | 50.00 | | |
7/1/2027 |
| | |
| - | | |
| 9,098 | | |
$ | 26.00 | | |
7/1/2027 |
| | |
| | | |
| | | |
| | | |
|
| Mark K. Ruport(3) | |
| 500 | | |
| - | | |
$ | 224.00 | | |
12/3/2024 |
| | |
| 2,000 | | |
| - | | |
$ | 224.00 | | |
12/3/2024 |
| | |
| 5,106 | | |
| 727 | | |
$ | 50.00 | | |
6/14/2025 |
| | |
| 2,004 | | |
| 1,001 | | |
$ | 52.60 | | |
6/22/2025 |
| | |
| 3,997 | | |
| 1,749 | | |
$ | 51.00 | | |
11/24/2025 |
| | |
| 1,512 | | |
| 1,080 | | |
$ | 68.40 | | |
8/11/2026 |
| | |
| 1,296 | | |
| 2,592 | | |
$ | 68.40 | | |
8/11/2026 |
| | |
| 108 | | |
| 186 | | |
$ | 50.00 | | |
7/1/2027 |
| | |
| 343 | | |
| 620 | | |
$ | 50.00 | | |
7/1/2027 |
| | |
| 449 | | |
| 807 | | |
$ | 50.00 | | |
7/1/2027 |
| | |
| | | |
| | | |
| | | |
|
| Darren Beckett(4) | |
| 100 | | |
| - | | |
$ | 242.00 | | |
10/18/2023 |
| | |
| 14 | | |
| 5 | | |
$ | 300.00 | | |
1/1/2024 |
| | |
| 19 | | |
| 7 | | |
$ | 248.00 | | |
7/18/2024 |
| | |
| 250 | | |
| - | | |
$ | 134.00 | | |
10/11/2024 |
| | |
| 2,042 | | |
| 292 | | |
$ | 50.00 | | |
6/14/2025 |
| | |
| 802 | | |
| 401 | | |
$ | 52.60 | | |
6/22/2025 |
| | |
| 1,484 | | |
| 1,060 | | |
$ | 68.40 | | |
8/11/2026 |
| | |
| 1.272 | | |
| 2,544 | | |
$ | 68.40 | | |
8/11/2026 |
| | |
| 281 | | |
| 512 | | |
$ | 50.00 | | |
7/1/2027 |
| | |
| 300 | | |
| 548 | | |
$ | 50.00 | | |
7/1/2027 |
| | |
| 920 | | |
| 1,677 | | |
$ | 50.00 | | |
7/1/2027 |
| | |
| - | | |
| 4,852 | | |
$ | 26.00 | | |
7/1/2027 |
| | |
| 75 | | |
| - | | |
$ | 312.00 | | |
2/26/2028 |
| | |
| | | |
| | | |
| | | |
|
| Frank Orzechowski(5) | |
| 13 | | |
| - | | |
$ | 280.00 | | |
7/1/2024 |
| | |
| 135 | | |
| 165 | | |
$ | 280.00 | | |
7/1/2024 |
| | |
| 1,533 | | |
| 217 | | |
$ | 50.00 | | |
6/14/2025 |
| | |
| 601 | | |
| 301 | | |
$ | 52.60 | | |
6/22/2025 |
| | |
| 810 | | |
| 1,619 | | |
$ | 68.40 | | |
8/11/2026 |
| | |
| 1,424 | | |
| 1,005 | | |
$ | 68.40 | | |
8/11/2026 |
| | |
| 283 | | |
| 514 | | |
$ | 50.00 | | |
7/1/2027 |
| | |
| 928 | | |
| 1,681 | | |
$ | 50.00 | | |
7/1/2027 |
| | |
| 1,234 | | |
| 2,240 | | |
$ | 50.00 | | |
7/1/2027 |
| | |
| - | | |
| 4,852 | | |
$ | 26.00 | | |
7/1/2027 |
(1)
On June 23, 2020, we adopted the 2020 Stock Appreciation Rights Plan. The Plan provides for incentive awards in the form of SARs payable
in cash. No shares of common stock were reserved in connection with the adoption of the Plan since no shares will be issued pursuant
to the Plan. Awards issued under the Plan are included in the table.
(2)
On September 20, 2021, in conjunction with the hiring of Jacob Brunsberg, the Company’s current President and Chief Executive Officer,
the Company granted to Mr. Brunsberg an option to purchase 5,000 shares of our common stock with an exercise price of $63.60, which was
fully vested and exercisable on the date of the grant. On February 16, 2022, the Company granted an option to Mr. Brunsberg to purchase
up to 3,500 shares of common stock with an exercise price of $50.00, which will vest in equal monthly installments over three years.
As of December 31, 2022, 978 shares were fully vested and exercisable. Also on February 16, 2022, the Company granted 1,500 SARs to Mr.
Brunsberg, with an exercise price of $50.00, which will vest in equal monthly installments over three years. As of December 31, 2022,
420 SARs were fully vested and exercisable. On July 1, 2022, we granted Mr. Brunsberg an option to purchase up to 760 shares of our common
stock with an exercise price of $50.00. 205 shares were fully vested and exercisable on the date of the grant, and the remaining 555
shares will vest in equal monthly installments over the next three years. As of December 31, 2022, 270 shares were fully vested and exercisable.
Also on July 1, 2022, we granted Mr. Brunsberg an option to purchase up to 2,490 shares of our common stock with an exercise price of
$50.00. 623 shares were fully vested and exercisable on the date of the grant, and the remaining 1,867 shares will vest in equal monthly
installments over the next three years. As of December 31, 2022, 883 shares were fully vested and exercisable. Additionally, on July
1, 2022 we granted Mr. Brunsberg 9,747 SARs with an exercise price of $50.00. 2,437 SARs were fully vested and exercisable on the date
of the grant, and the remaining 7,310 SARs will vest in equal monthly installments over the next three years. As of December 31, 2022,
3,453 SARs were fully vested and exercisable. Last, on July 1, 2022, we granted Mr. Brunsberg 9,098 SARs in connection with his employment
retention agreement. The SARs have an exercise price of $26.00 and will vest and become exercisable on March 15, 2025 if Mr. Brunsberg
remains an employee of the Company on that date.
(3)
On December 3, 2019, in conjunction with the hiring of Mark K. Ruport, the Company’s former President and Chief Executive Officer,
the Company granted to Mr. Ruport (i) an option to purchase 500 shares of our common stock with an exercise price of $224.00, which fully
vested and became exercisable on January 3, 2020; and (ii) an option to purchase up to 2,000 shares of our common stock, with an exercise
price of $224.00, which became fully vested and exercisable as of December 31, 2022. On May 28, 2020, we granted Mr. Ruport an option
to purchase 5,833 shares of our common stock under our 2013 Equity Incentive Plan in connection with his employment arrangement. The
option has an exercise price of $50.00 and as of December 31, 2022 5,106 shares were fully vested and exercisable, and the remaining
727 shares will vest in equal monthly installments over the next six months. On November 24, 2020, we granted Mr. Ruport an option to
purchase up to 5,746 shares of our common stock. The option has an exercise price of $51.00 and vests over three years in equal monthly
installments beginning one month from the grant date. As of December 31, 2022, 3,997 shares were vested and exercisable. On June 23,
2020, pursuant to our 2020 Stock Appreciation Rights Plan, we granted Mr. Ruport 3,005 SARs. The SARs have an exercise price of $52.60
and will vest and become exercisable in three equal installments on each of the first, second, and third anniversaries of the grant date.
As of December 31, 2022, 2,004 SARs were vested and exercisable. On August 11, 2021, we granted Mr. Ruport an option to purchase 2,592
shares of our common stock under our 2013 Equity Incentive Plan in connection with his employment arrangement. The option has an exercise
price of $68.40 and as of December 31, 2022, 1,512 shares were fully vested and exercisable, and the remaining 1,080 shares will vest
in equal monthly installments over the next twenty months. On August 11, 2021, pursuant to our 2020 Stock Appreciation Rights Plan, we
granted Mr. Ruport 3,888 SARs. The SARs have an exercise price of $68.40 and will vest and become exercisable in three equal installments
on each of the first, second, and third anniversaries of the grant date. As of December 31, 2022, 1,296 SARs were fully vested and exercisable.
On July 1, 2022, the Company granted Mr. Ruport an option to purchase up to 294 shares of our common stock with an exercise price of
$50.00. 79 shares were fully vested and exercisable on the date of the grant, and the remaining 215 shares will vest in equal monthly
installments over the next three years. As of December 31, 2022, 108 shares were fully vested and exercisable. Also on July 1, 2022,
the Company granted Mr. Ruport an option to purchase up to 963 shares of our common stock with an exercise price of $50.00. 241 shares
were fully vested and exercisable on the date of the grant, and the remaining 722 shares will vest in equal monthly installments over
the next three years. As of December 31, 2022, 343 shares were fully vested and exercisable. Additionally, on July 1, 2022 the Company
granted Mr. Ruport 1,256 SARs. The SARs have an exercise price of $50.00. 314 SARs were fully vested and exercisable on the date of the
grant, and the remaining 942 SARs will vest in equal monthly installments over the next three years. As of December 31, 2022, 449 SARs
were fully vested and exercisable.
(4)
On February 26, 2018 we granted Mr. Beckett an option to purchase up to 75 shares of our common stock under our 2013 Equity Incentive
Plan in connection with his employment arrangement. The option has an exercise price per share equal to $312.00 and is fully vested and
exercisable. On October 18, 2018, we granted Mr. Beckett an option to purchase up to 100 shares of our common stock. The option has an
exercise price per share equal to $242.00 and is fully vested and exercisable. On January 1, 2019, we granted Mr. Beckett an option to
purchase up to 19 shares of our common stock under our 2013 Equity Incentive Plan in connection with his employment arrangement. The
option has an exercise price per share equal to $300.00, and vests in equal installments on the first through the fourth anniversaries
of the grant. As of December 31, 2022, 14 shares are vested and exercisable. On July 18, 2019, we granted Mr. Beckett an option to purchase
up to 26 shares of our common stock under our 2013 Equity Incentive Plan in connection with his employment arrangement. The option has
an exercise price per share equal to $248.00. The option vests and will become exercisable in equal installments on the first through
the fourth anniversaries of the date of grant. As of December 31, 2022, the option was vested as to 19 shares. On October 11, 2019, we
granted Mr. Beckett an option to purchase up to 250 shares of our common stock under our 2013 Equity Incentive Plan in connection with
his employment arrangement. The option has an exercise price per share equal to $134.00 and is fully vested and exercisable. On May 28,
2020, we granted Mr. Beckett an option to purchase 2,334 shares of our common stock. The option has an exercise price per share equal
to $50.00 and as of December 31, 2022, 2,042 shares were fully vested and exercisable. The remaining 292 shares will vest in equal monthly
installments over the next six months. On June 23, 2020, pursuant to our 2020 Stock Appreciation Rights Plan, we granted Mr. Beckett
1,203 SARs. The SARs have an exercise price of $52.60 and will vest and become exercisable in three equal installments on each of the
first, second, and third anniversaries of the grant date. As of December 31, 2022, 802 SARs were vested and exercisable. On August 11,
2021, we granted Mr. Beckett an option to purchase 2,544 shares of our common stock under our 2013 Equity Incentive Plan in connection
with his employment arrangement. The option has an exercise price of $68.40 and as of December 31, 2022, 1,484 shares were fully vested
and exercisable, and the remaining 1,060 shares will vest in equal monthly installments over the next twenty months. On August 11, 2021,
pursuant to our 2020 Stock Appreciation Rights Plan, we granted Mr. Beckett 3,816 SARs. The SARs have an exercise price of $68.40 and
will vest and become exercisable in three equal installments on each of the first, second, and third anniversaries of the grant date.
As of December 31, 2022, 1,272 shares were fully vested and exercisable. On July 1, 2022, we granted Mr. Beckett an option to purchase
up to 793 shares of our common stock with an exercise price of $50.00. 214 shares were fully vested and exercisable on the date of the
grant, and the remaining 579 shares will vest in equal monthly installments over the next three years. As of December 31, 2022, 281 shares
were fully vested and exercisable. Also on July 1, 2022, we granted Mr. Beckett an option to purchase up to 2,597 shares of our common
stock with an exercise price of $50.00. 650 shares were fully vested and exercisable on the date of the grant, and the remaining 1,947
shares will vest in equal monthly installments over the next three years. As of December 31, 2022, 920 shares were fully vested and exercisable.
Additionally, on July 1, 2022 we granted Mr. Beckett 848 SARs with an exercise price of $50.00. 212 SARs were fully vested and exercisable
on the date of the grant, and the remaining 636 SARs will vest in equal monthly installments over the next three years. As of December
31, 2022, 300 SARs were fully vested and exercisable. Last, on July 1, 2022, we granted Mr. Beckett 4,852 SARs in connection with his
employment retention agreement. The SARs have an exercise price of $26.00 and will vest and become exercisable on March 15, 2025 if Mr.
Beckett remains an employee of the Company on that date.
(5)
On July 1, 2019, in conjunction with the hiring of Frank Orzechowski, the Financial Officer, the Company granted to Mr. Orzechowski (i)
an option to purchase 13 shares of our common stock with an exercise price of $280.00, which fully vested and became exercisable on July
1, 2019; and (ii) an option to purchase up to 300 shares of our common stock, with an exercise price of $280.00. As of December 31, 2022,
135 shares were fully vested and exercisable, and the remaining 165 shares will vest and become exercisable on July 1, 2023. On May
28, 2020, we granted Mr. Orzechowski an option to purchase 1,750 shares of our common stock under our 2013 Equity Incentive Plan in connection
with his employment arrangement. The option has an exercise price of $50.00. As of December 31, 2022, 1,533 shares were fully vested
and exercisable, and the remaining 217 shares will vest in equal monthly installments over the next six months. On June 23, 2020, pursuant
to our 2020 Stock Appreciation Rights Plan, we granted Mr. Orzechowski 902 SARs. The SARs have an exercise price of $52.60 and will vest
and become exercisable in three equal installments on each of the first, second, and third anniversaries of the grant date. As of December
31, 2022, 601 SARs were vested and exercisable. On August 11, 2021, we granted Mr. Orzechowski an option to purchase 2,429 shares of
our common stock under our 2013 Equity Incentive Plan in connection with his employment arrangement. The option has an exercise price
of $68.40 and as of December 31, 2022, 1,424 shares were fully vested and exercisable, and the remaining 1,005 shares will vest in equal
monthly installments over the next twenty months. On August 11, 2021, pursuant to our 2020 Stock Appreciation Rights Plan, we granted
Mr. Orzechowski 2,429 SARs. The SARs have an exercise price of $68.40 and will vest and become exercisable in three equal installments
on each of the first, second, and third anniversaries of the grant date. As of December 31, 2022, 810 SARs were fully vested and exercisable.
.. On July 1, 2022, we granted Mr. Orzechowski an option to purchase up to 797 shares of our common stock with an exercise price of $50.00.
215 shares were fully vested and exercisable on the date of the grant, and the remaining 582 shares will vest in equal monthly installments
over the next three years. As of December 31, 2022, 283 shares were fully vested and exercisable. Also on July 1, 2022, we granted Mr.
Orzechowski an option to purchase up to 2,609 shares of our common stock with an exercise price of $50.00. 652 shares were fully vested
and exercisable on the date of the grant, and the remaining 1,957 shares will vest in equal monthly installments over the next three
years. As of December 31, 2022, 928 shares were fully vested and exercisable. Additionally, on July 1, 2022 we granted Mr. Orzechowski
3,474 SARs with an exercise price of $50.00. 869 SARs were fully vested and exercisable on the date of the grant, and the remaining 2,605
SARs will vest in equal monthly installments over the next three years. As of December 31, 2022, 1,234 SARs were fully vested and exercisable.
Last, on July 1, 2022, we granted Mr. Orzechowski 4,852 SARs in connection with his employment retention agreement. The SARs have an
exercise price of $26.00 and will vest and become exercisable on March 15, 2025 if Mr. Orzechowski remains an employee of the Company
on that date.
Potential
Payments Upon Termination or Change-in-Control
Section 14A of the Securities Exchange Act
of 1934, as amended, which was enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, requires that Sigma provide
stockholders with the opportunity to vote to approve, on a non-binding advisory vote basis, the payment of compensation payable by
Sigma to its named executive officers upon termination or change-in-control.
The following table sets forth information
regarding the compensation payable to our named executive officers under our separation plan described below:
Golden
Parachute Compensation
| Name | |
Cash
($) | | |
Equity
($) | | |
Pension/ NQDC
($) | | |
Perquisites/ benefits
($) | | |
Tax
reimbursement ($) | | |
Other
($) | | |
Total
($) | |
| Jacob Brunsberg – President and Chief Executive Officer | |
| 267,011 | (1) | |
| - | | |
| - | | |
| - | | |
| - | | |
| 121,400 | (2) | |
| 388,411 | |
| Frank Orzechowski – Chief Financial Officer | |
| 309,073 | (3) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 309,073 | |
| |
(1) |
Consists
of the retention bonus of $204,511 under our former retention bonus plan, calculated as 1.5 times annual base salary and prorated
for the period July 1, 2022 through December 31, 2023, plus a severance payment of $62,500 equating to three months’ base salary,
payable upon Mr. Brunsberg’s voluntary resignation from the Company effective as of the closing date of the
Acquisition. |
| |
(2) |
Consists
of a grant of 31,250 shares of restricted common stock at a price of $3.88, which was the average closing market price of the Company’s
common stock over the first five business days following September 7, 2023, the date of our first public announcement of
the proposed Acquisition. Such grant will be awarded to Mr. Brunsberg in connection with his voluntary resignation from the Company effective
as of the closing date of the Acquisition. |
| |
(3) |
Consists
of the retention bonus of $109,073 under our former retention bonus plan, calculated as one times annual base salary and prorated
for the period July 1, 2022 through December 31, 2023. In addition, should Mr. Orzechowski be terminated without “cause” or resign for
“good reason” within 18 months of the closing date of the Acquisition, he will be entitled to a severance payment of $200,000,
which is equal to one year’s current base salary. |
Separation
Plan
The separation plan consists of retention bonuses
payable to Mr. Brunsberg and Mr. Orzechowski consistent with their respective Retention Bonus and Change in Control Agreements entered
into in January 2023 described below and separation payments as an incentive to facilitate the Acquisition as provided in the Exchange
Agreement. The Exchange Agreement contemplates that Mr. Brunsberg will resign as our President and Chief Executive Officer in conjunction
with the closing of the Acquisition and that William Kerby, the co-founder and Chief Executive Officer of NextTrip, will be appointed
as our Chief Executive Officer, and that Mr. Orzechowski will continue to serve as our Chief Financial Officer following the Acquisition.
Under the separation plan, Mr. Brunsberg
will resign effective at the close of business on the closing date of the Acquisition and receive the retention bonus under his
Retention Bonus and Change in Control Agreement, prorated through an assumed closing date of the Acquisition of December 31, 2023,
of $204,511 and a cash separation payment equal to three months’ base salary, or $62,500. Mr. Brunsberg also will be awarded under the Sigma
Additive Solutions, Inc. 2023 Equity Incentive Plan, assuming it is approved at the Annual Meeting, of 31,250 shares of restricted
stock, or restricted stock units, or stock options to purchase up to 31,250 shares of common stock as determined by the Administrator
of the 2023 Plan.
Under the separation plan, Mr. Orzechowski
will be entitled to receive the retention bonus under his Retention Bonus and Change in Control Agreement, prorated through an
assumed closing date of the Acquisition of December 31, 2023, of $109,073 upon the closing of the Acquisition. Mr. Orzechowski also
will be entitled to severance equal to his current base annual salary if his employment is terminated by the Company without
“cause” or he resigns for “good reason” within 18 months following the Acquisition.
In the event the Acquisition in not completed for any reason, the retention bonuses to Mr. Brunsberg and Mr. Orzechowski will be payable upon the closing of the Asset Sale.
Except as otherwise indicated, the Retention
Bonus and Change in Control Agreements between Sigma and Messrs. Brunsberg and Orzechowski described below have been terminated, and
Messrs. Brunsberg and Orzechowski will forgo any rights and benefits thereunder in connection with the Acquisition, the Asset Sale, or
otherwise.
Former
Retention Bonus Plan
On
July 1, 2022, as reported in the Annual Report, our Board of Directors, upon the recommendation of the Compensation Committee,
adopted retention bonus and change in control plans for certain of our named executive officers as described below.
The
retention bonus plan consisted of the award of retention bonuses to Mr.
Brunsberg, and Mr. Orzechowski as an incentive to remain in our employ through the end of the retention period. The retention bonus amount
for Mr. Brunsberg was $375,000, which was equal to 150% of his base salary in effect on July 1, 2022, and the retention bonus amount for
Mr. Orzechowski was $200,000, which was equal to 100% of his base salary in effect on July 1, 2022. The retention bonuses were to be payable
50% in cash and 50% in SARs for each executive.
The
SARs have an exercise price of $26.00 (i.e., the closing price of our common stock on the grant date) and are subject to vesting,
in full, on March 15, 2025, subject to the executive remaining in our continuous employ through such date. The SARs will remain outstanding and not be affected by the termination of the Retention Bonus and Change in Control
Agreements with Mr. Brunsberg and Mr. Orzechowski.
The
cash component of the retention bonuses was to be paid upon the end of the retention period coinciding with the filing of the Company’s
2024 Annual Report on Form 10-K, subject to the executive’s continuous employment by the Company through the filing date. In the
event of a “change in control” of the Company prior to such filing, the executives would be entitled to payment in cash of
a pro rata portion of their total respective bonuses. The balance of the retention bonuses would terminate. Assuming a change
in control had occurred on December 31, 2022, the amount of retention bonuses payable to Mr. Brunsberg and Mr. Orzechowski would have
been $67,164 and $35,821, respectively.
Former
Change in Control Plan
The
change in control plan adopted on July 1, 2022, as modified by our Board of Directors on January 24, 2023, provided that following a
“Change in Control” of the Company, Messrs. Brunsberg and Orzechowski each would be entitled to a cash payment equal to two
times his base annual salary in effect on July 1, 2022 (i.e., $500,000 for Mr. Brunsberg and $400,000 for Mr. Orzechowski), less
any base salary payments received between the date of the “change in control” and the termination date, if his employment
is terminated by the Company without “Cause” or the executive resigned for “Good Reason” within two years following
the “Change in Control.” For purposes of the plan, “Change in Control” meant: (i) a liquidation or dissolution
of the Company; (ii) a merger or consolidation of the Company with or into another corporation or entity (other than a merger with a
wholly owned subsidiary); (iii) a sale of all or substantially all of the assets of the Company; or (iv) a purchase or other acquisition
of more than 50% of the outstanding stock of the Company by one person or by more than one person acting in concert.
Equity
Awards
We
offer stock options, stock appreciation rights, and stock awards to certain of our employees, including our executive officers, as the
long-term incentive component of our compensation program. We generally grant equity awards to new hires upon their commencing employment
with us. Our stock options allow employees to purchase shares of our common stock at a price per share equal to the fair market value
of our common stock on the date of grant and may or may not be intended to qualify as “incentive stock options” for U.S.
federal income tax purposes. Our stock appreciation rights allow employees to receive a cash payment for the difference between the market
price of our common stock on the date of exercise and the strike price. We sometimes also offer stock options, stock appreciation rights
and stock awards to our consultants in lieu of cash. Our stock options allow consultants to purchase shares of our common stock at a
price per share equal to the fair market value of our common stock on the date of grant and are not intended to qualify as “incentive
stock options” for U.S. federal income tax purposes. Our stock appreciation rights allow consultants to receive a cash payment
for the difference between the market price of our common stock on the date of exercise and the strike price. Stock options, stock appreciation
rights, and stock awards granted to our executive officers may be subject to accelerated vesting in certain circumstances.
Retirement
Plans
We
maintain a qualified 401(k) plan, in which all eligible employees may participate. We make safe harbor contributions to match 100% of
each participant’s contribution up to 3% of salary, and 50% of the next 2% of salary contributed. Safe harbor contributions are
100% vested. We may also elect, on an annual basis, to make a discretionary contribution to the plan, but have not done so to date. Our
elective matches and elective contributions vest to participant accounts as follows: 20% after two years of service, and 20% per year
thereafter until the participant reaches 6 years of service, at which time, employer contributions vest 100%. As a tax-qualified retirement
plan, contributions to the 401(k) plan and earnings on those contributions are not taxable to the employees until distributed from the
401(k) plan.
No
Tax Gross-Ups
We
do not make gross-up payments to cover our executive officers’ personal income taxes that may pertain to any of the compensation
paid or provided by our Company.
2013
Equity Incentive Plan
Plan
Purpose
Our
Board of Directors adopted the 2013 Plan, which terminated on March 15, 2023, to (1) encourage selected employees, officers, directors,
consultants and advisers to improve our operations and increase our profitability, (2) encourage selected employees, officers, directors,
consultants and advisers to accept or continue employment or association with us, and (3) increase the interest of selected employees,
officers, directors, consultants and advisers in our welfare through participation in the growth in value of our common stock. All of
our current employees, officers, directors and consultants were eligible to participate in the 2013 Plan.
Administration
The
2013 Plan is administered by the Board or by a committee to which administration of the Plan, or of part of thereof, is delegated by
the Board. The 2013 Plan is currently administered by our Compensation Committee, which we refer to below as the “Administrator.”
The Administrator is responsible for selecting the officers, employees, directors, consultants and advisers who will receive Options,
Stock Appreciation Rights and Stock Awards. Subject to the requirements imposed by the 2013 Plan, the Administrator is also responsible
for determining the terms and conditions of each Option and Stock Appreciation Right award, including the number of shares subject to
the Option, the exercise price, expiration date and vesting period of the Option and whether the option is an Incentive Option or a Non-Qualified
Option. Subject to the requirements imposed by the 2013 Plan, the Administrator is also responsible for determining the terms and conditions
of each Stock Award, including the number of shares granted, the purchase price (if any), and the vesting, transfer and other restrictions
imposed on the stock. The Administrator has the power, authority and discretion to make all other determinations deemed necessary or
advisable for the administration of the 2013 Plan or of any award under the 2013 Plan.
The
2013 Plan is not subject to the Employee Retirement Income Security Act of 1974 and is not a qualified pension, profit sharing or bonus
plan under Section 401(a) of the Internal Revenue Code.
Stock
Subject to the 2013 Plan
As
of September 30, 2023, there were 95,749 shares previously issued or subject to outstanding awards under the 2013 Plan. The
plan expired on March 15, 2023 and therefore there are no shares available for future issuance under the 2013 Plan.
Vesting
Each
Option, Stock Appreciation Right or Stock Award will become exercisable or non-forfeitable (that is, “vest”) under conditions
specified by the Administrator at the time of grant. Vesting typically is based upon continued service as a director or employee but
may be based upon any performance criteria and other contingencies that are determined by the Administrator. Shares subject to Stock
Awards may be subject to specified restrictions concerning transferability, repurchase by the Company and forfeiture of the shares issued,
together with such other restrictions as may be determined by the Administrator.
Expiration
Date
Each
Option or Stock Appreciation Right must be exercised by a date specified in the award agreement, which may not be more than ten years
after the grant date. Except as otherwise provided in the relevant agreement, an Option or Stock Appreciation Right ceases to be exercisable
ninety days after the termination of the holder’s service with us.
Transfers
of Options
Unless
otherwise determined by the Administrator, Options are not transferable except by will or the laws of descent and distribution.
Purchase
Price Payment
Unless
otherwise determined by the Administrator, the purchase price of common stock acquired under the 2013 Plan is payable by cash or check
at the time of an Option exercise or acquisition of a Stock Award. The Company does not charge participants any fees or commissions in
connection with their acquisition of common stock under the 2013 Plan. The Administrator also has discretion to accept the following
types of payment from participants:
| |
● |
A secured or unsecured
promissory note, provided that this method of payment is not available to a participant who is a director or an executive officer; |
| |
|
|
| |
● |
Shares of our Common Stock
already owned by the Option or Stock Award holder as long as the surrendered shares have a fair market value that is equal to the
acquired stock and have been owned by the participant for at least six months; |
| |
|
|
| |
● |
The surrender of shares
of Common Stock then issuable upon exercise of an Option; and |
| |
|
|
| |
● |
A “cashless”
option exercise in accordance with applicable regulations of the SEC and the Federal Reserve Board. |
Withholding
Taxes
At
the time of his or her exercise of an Option or Stock Appreciation Right, an employee is responsible for paying all applicable federal
and state withholding taxes. A holder of Stock Awards is responsible for paying all applicable federal and state withholding taxes once
the shares covered by the award cease to be forfeitable or at any other time required by applicable law.
Securities
Law Compliance
Shares
of common stock will not be issued pursuant to the exercise of an Option or the receipt of a Stock Award unless the Administrator determines
that the exercise of the Option or receipt of the Stock Award and the issuance and delivery of such shares will comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933 (the “Securities Act”), applicable state and
foreign securities laws and the requirements of any stock exchange on which our common stock is traded.
Effects
of Certain Corporate Transactions
Except
as otherwise determined by the Administrator, in the event of a “corporate transaction,” all previously unexercised Options
and Stock Appreciation Rights will terminate immediately prior to the consummation of the corporate transaction and all unvested Restricted
Stock awards will be forfeited immediately prior to the consummation of the corporate transaction. The Administrator, in its discretion,
may permit exercise of any Options or Stock Appreciation Rights prior to their termination, even if those awards would not otherwise
have been exercisable, or provide that outstanding awards will be assumed or an equivalent Option or Stock Appreciation Right substituted
by a successor corporation. The Administrator, in its discretion, may remove any restrictions as to any Restricted Stock awards or provide
that all outstanding Restricted Stock awards will participate in the corporate transaction with an equivalent stock substituted by the
successor corporation subject to the restrictions. In general, a “corporate transaction” means:
| |
● |
Our liquidation or dissolution;
|
| |
|
|
| |
● |
Our merger or consolidation
with or into another corporation as a result of which we are not the surviving corporation; |
| |
|
|
| |
● |
A sale of all or substantially
all of our assets; or |
| |
|
|
| |
● |
A purchase or other acquisition
of more than 50% of our outstanding stock by one person, or by more than one person acting in concert. |
Other
Adjustment Provisions
If
the stock of the Company is changed by reason of a stock split, reverse stock split, stock dividend, recapitalization, combination or
reclassification, appropriate adjustments shall be made by the Administrator, in its discretion, in (1) the number and class of shares
of stock subject to the 2013 Plan and each Option and grant of Stock Awards outstanding under the 2013 Plan, and (2) the purchase price
of each outstanding Option and (if applicable) Stock Award.
Termination
of the Plan
The
2013 Plan terminated by its terms on March 15, 2023.
2020
Stock Appreciation Rights Plan
On
June 23, 2020, our Board of Directors adopted the Sigma Labs, Inc. 2020 Stock Appreciation Rights Plan (the “Plan”).
The purposes of the Plan are to: (i) enable the Company to attract and retain the types of employees, consultants, and directors (collectively,
“Service Providers”) who will contribute to the Company’s long-range success; (ii) provide incentives that align
the interests of Service Providers with those of the stockholders of the Company; and (iii) promote the success of the Company’s
business. The Plan only provides for incentive awards that are only made in the form of stock appreciation rights payable in cash (“SARs”).
No shares of common stock were reserved in connection with the adoption of the Plan since no shares will be issued pursuant to the Plan.
Administration
The
Plan will be administered by the Compensation Committee of the Board or, in the Board’s sole discretion, by the Board. The Compensation
Committee will have the authority to, among other things, (i) construe and interpret the Plan and apply its provisions; (ii) promulgate,
amend, and rescind rules and regulations relating to the administration of the Plan; (iii) delegate its authority to one or more persons
who is an officer of the Company within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and the rules and regulations promulgated thereunder with respect to SARs that do not involve “insiders”
within the meaning of Section 16 of the Exchange Act; (iv) determine when SARs are to be granted under the Plan and the applicable grant
date; (v) prescribe the terms and conditions of each SAR, including, without limitation, the exercise price and medium of payment and
vesting provisions, and to specify the provisions of the SAR Agreement relating to such grant; (vi) amend any outstanding SARs, subject,
in certain cases, to the participant’s consent; and (vii) make all other determinations which may be necessary or advisable for
the administration of the Plan.
Eligible
Participants
SARs may be granted only to persons who are
Service Providers, and those persons whom the Committee determines are reasonably expected to become Service Providers following the
grant date. The Committee may from time to time designate those Service Providers, if any, to be granted SARs under the Plan, the
number of SARs which will be granted to each such person, and any other terms or conditions relating to SARs as it may deem
appropriate to the extent consistent with the provisions of the Plan. A participant who has been granted a SAR may, if otherwise
eligible, be granted additional incentive awards at any time.
Grant.
The Committee may grant SARs to any Service Provider. An SAR is the right to receive an amount equal to the Spread with respect
to a share of the Company’s common stock upon the exercise of the SAR. The “Spread” is the difference between the exercise
price per share specified in a SAR agreement on the date of grant and the fair market value per share on the date of exercise of the
SAR.
General
Provisions. The terms and conditions of each SAR will be evidenced by a SAR agreement. The exercise price per share will not be less
than 100% of the fair market value of a Share on the date of grant of the SAR. The term of the SAR will be determined by the Committee
but may not be greater than ten years from the date of grant.
Exercise.
SARs are exercisable subject to such terms and conditions as the Committee may specify in the SAR agreement for the SAR. A SAR may be
exercised by the delivery of a signed written notice of exercise to the Company, which must be received and accepted by the Company as
of a date set by the Company in advance of the effective date of the proposed exercise. The notice must set forth the number of SARs
being exercised, together with any additional documents the Company may require.
Settlement.
Upon exercise of a SAR, the Grantee will receive an amount equal to the Spread. The Spread, less applicable withholdings, will be payable
only in cash. In no event may any SAR be settled in any manner other than by delivery of a cash payment from the Company.
Form
of SAR Agreement
Each
participant to whom a SAR is granted will be required to enter into a SAR agreement with the Company, in such a form as is provided by
the Committee. The SAR agreement will contain specific terms as determined by the Committee, in its discretion, with respect to the participant’s
particular SAR. Such terms need not be uniform among all participants or any similarly situated participants. The SAR agreement may include,
without limitation, vesting, forfeiture and other provisions particular to the particular participant’s SAR, as well as, for example,
provisions to the effect that the participant must abide by all the terms and conditions of the Plan and such other terms and conditions
as may be imposed by the Committee. A SAR will include such terms and conditions as are determined by the Committee, in its discretion,
to be appropriate with respect to any participant.
The
Committee may specify in a SAR agreement that the participant’s rights, payments, and benefits with respect to a SAR will be subject
to forfeiture upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions
of the incentive award. Such events may include, but are not limited to, termination with cause or other conduct by the participant that
is detrimental to the business or reputation of the Company.
Termination
of Employment
Unless
otherwise expressly provided in the participant’s SAR agreement, if the participant’s employment is terminated for any reason
other than due to cause, death or disability, any non-vested portion of any outstanding SAR at the time of such termination will automatically
expire and terminate and no further vesting will occur after the termination date. In such event, except as otherwise expressly provided
in the SAR agreement, the participant will be entitled to exercise such participant’s rights only with respect to the portion of
the SAR that was vested as of the termination date for a period that will end on the earlier of (i) the expiration date set forth in
the SAR agreement or (ii) ninety days after the date of termination.
Termination
for Cause
Unless
otherwise expressly provided in the participant’s SAR agreement, in the event of the termination of a participant’s employment
for cause, all vested and non-vested SARs granted to such participant will immediately expire and will not be exercisable to any extent.
Disability
or Death
Unless
otherwise expressly provided in the participant’s SAR agreement, upon termination of employment as a result of the participant’s
disability or death, (i) any non-vested portion of any outstanding SAR will immediately terminate upon termination and no further vesting
will occur, and (ii) any vested SAR will expire on the earlier of either (A) the expiration date set forth in the SAR agreement or (B)
12 months following the participant’s termination of employment.
Continuation
Subject
to the conditions and limitations of the Plan and applicable law, in the event that a participant ceases to be an employee, outside director
or consultant, as applicable, for whatever reason, the Committee and participant may mutually agree with respect to any outstanding SAR
then held by the participant (i) for an acceleration or other adjustment in any vesting schedule applicable to the SAR award; (ii) for
a continuation of the exercise period following termination for a longer period than is otherwise provided under such SAR; or (iii) to
any other change in the terms and conditions of the SAR. In the event of any such change to an outstanding SAR, a written amendment to
the participant’s SAR agreement will be required. No amendment to a participant’s SAR will be made to the extent compensation
payable pursuant thereto as a result of such amendment would be considered deferred compensation that is not excepted from taxation or
penalties under Code Section 409A, unless otherwise determined by the Committee.
SARs
granted under the Plan are not transferable other than to a designated beneficiary upon the Participant’s death or by will or the
laws of descent and distribution.
Change
in Control
Unless
otherwise provided in a SAR Agreement, notwithstanding any contrary provision in the Plan, in the event of a Change in Control (as defined
in the Plan), all outstanding SARs will become 100% vested and immediately exercisable. The closing of the Acquisition will not result
in an immediate Change in Control under the Plan. Depending on the achievement of future milestones under the Exchange Agreement and
other changes in the outstanding shares of our common stock, the issuance of the Contingent Shares might constitute a Change in Control
at that time.
Amendment
The
Board at any time, and from time to time, may amend or terminate the Plan. The Committee at any time, and from time to time, may amend
the terms of any one or more SAR agreements, except that the Committee may not affect any amendment which would otherwise constitute
an impairment of the rights under any SAR unless the participant consents in writing.
As
of September 30, 2023, there were 40,457 SARs outstanding under the 2020 Plan, giving effect the 1-for-20 reverse stock split
effected September 22, 2023.
Director
Compensation
We
believe that a combination of cash and equity compensation is appropriate to attract and retain the individuals we desire to serve on
our Board of Directors. Our cash compensation policies are designed to encourage frequent and active interaction between directors and
our executives both during and between formal meetings as well as compensate our directors for their time and effort. Further, we believe
it is important to align the long-term interests of our non-employee directors (i.e., directors who are not employed by us as officers
or employees) with those of the Company and its stockholders, and that awarding equity compensation to, and thereby increasing ownership
of our common stock by, our non-employee directors is an appropriate means to achieve this alignment. Directors who are also employees
of our company do not receive compensation for their service on our Board of Directors.
Under
our director compensation program for 2022, each non-employee director received annual compensation of $30,000, and an option to purchase
14,000 shares of our common stock, which is fully vested. All cash fees are paid quarterly. Also, each non-employee director may be reimbursed
for his reasonable expenses incurred in the performance of his duties as a director as our Board of Directors determines from time to
time. Our Compensation Committee intends to evaluate our director compensation program and determine whether any changes should be recommended
to the Board.
The
following table sets forth certain information concerning the compensation paid to non-employee directors in 2022 for their services
as directors of the Company. The compensation of Mr. Brunsberg, who serves as a director and our President and Chief Executive Officer,
is described in the Summary Compensation Table of Executive Officers. Our non-employee directors do not receive fringe or other benefits.
| Name | |
Fees Earned or Paid in Cash ($) | | |
Option Awards ($)(6) | | |
Total ($) | |
| Mark K. Ruport(1) | |
| 7,500 | | |
| 1,871 | | |
| 9,371 | |
| John Rice (2) | |
| 22,500 | | |
| 21,721 | | |
| 44,221 | |
| Salvatore Battinelli(3) | |
| 30,000 | | |
| 21,721 | | |
| 51,721 | |
| Dennis Duitch(4) | |
| 30,000 | | |
| 21,721 | | |
| 51,721 | |
| Kent Summers(5) | |
| 30,000 | | |
| 21,721 | | |
| 51,721 | |
| (1) |
The
fees shown were paid to Mr. Ruport for services as a non-employee director from October 1, 2022 through December 31, 2022. On October
1, 2022, the Company granted Mr. Ruport an option to purchase up to 175 shares of the Company’s common stock in connection
with his service as a director. The exercise price of the option is equal to $50.00 per share, is fully vested, and had a
grant date fair value of $1,871. The compensation of Mr. Ruport for the period January 1, 2022 through September 30, 2022, during
which time he served as President and Chief Executive Officer from January 1, 2022 through March 31, 2022, in addition to his service
as a director, is described in the Summary Compensation Table of Executive Officers |
| (2) |
The fees shown were paid
to Mr. Rice for services as a director. On March 31, 2022, the Company granted Mr. Rice an option to purchase up to 700 shares
of the Company’s common stock in connection with his service as a director. The exercise price of the option is equal to $50.00
per share, is fully vested, and had a grant date fair value of $21,721. Mr. Rice resigned from the Board of Directors on September
16, 2022. |
| (3) |
The fees shown were paid
to Mr. Battinelli for services as a director. On March 31, 2022, the Company granted Mr. Battinelli an option to purchase up to 700
shares of the Company’s common stock in connection with his service as a director. The exercise price of the option is
equal to $50.00 per share, is fully vested, and had a grant date fair value of $21,721. |
| (4) |
The fees shown were paid
to Mr. Duitch for services as a director. On March 31, 2022, the Company granted Mr. Duitch an option to purchase up to 700
shares of the Company’s common stock in connection with his service as a director. The exercise price of the option is equal
to $50.00 per share, is fully vested, and had a grant date fair value of $21,721. |
| (5) |
The fees shown were paid
to Mr. Summers for services as a director. On March 31, 2022, the Company granted Mr. Summers an option to purchase up to 700
shares of the Company’s common stock in connection with his service as a director. The exercise price of the option is
equal to $50.00 per share, is fully vested, and had a grant date fair value of $21,721. |
| (6) |
These columns represent the aggregate grant date fair value of stock awards and stock options computed in accordance with FASB ASC Topic 718. These amounts do not correspond to the actual value that will be recognized by the named directors from these awards. |
PAY VERSUS PERFORMANCE
The following information is presented about the
relationship between executive compensation actually paid (“CAP”) and certain financial performance of the Company
as required by SEC rules. The Company’s executive compensation program is discussed above under “Summary of Named
Executive Officer Compensation.”
| Year | | |
Summary
Compensation Table Total for PEO A (1) | | |
Summary
Compensation Table Total for PEO B (1) | | |
Compensation
Actually Paid to PEO A (2) | | |
Compensation
Actually Paid to PEO B (2) | | |
Average
Summary Compensation Table Total for Non-PEO NEO’s (3) | | |
Average
Compensation Actually Paid to Non-PEO NEO’s (2) | | |
Value
of Initial Fixed $100 Investment Based on Total Shareholder Return (4) | | |
Net
Loss (5) | |
| 2022 | | |
$ | 169,687 | | |
$ | 847,722 | | |
$ | (86,976 | ) | |
$ | 430,005 | | |
$ | 403,497 | | |
$ | 132,020 | | |
$ | 11.84 | | |
$ | (8,749,304 | ) |
| 2021 | | |
$ | 826,993 | | |
$ | - | | |
$ | 575,416 | | |
$ | - | | |
$ | 467,194 | | |
$ | 352,524 | | |
$ | 54.44 | | |
$ | (7,488,172 | ) |
| |
(1) | The amounts presented reflect the total compensation
set forth in the Summary Compensation Table (“SCT”) for the Company’s
former Chief Executive Officer, Mark Ruport (PEO A), who was the Company’s PEO during
the four months ended April 30, 2022 and the year ended December 31, 2021, and Jacob Brunsberg,
the Company’s current President and Chief Executive Officer (PEO B), who was the Company’s
PEO for the period May 1, 2022 through December 31, 2022. |
| |
| |
| |
(2) | The following table reflects the adjustments prescribed by SEC rules to calculate the CAP
from those total amounts reflected in the SCT. The SCT amounts and the CAP amounts do not reflect the actual amount of compensation earned
by or paid to the Company’s executives during the applicable years, but rather are amounts determined in accordance with Item 402
of Regulation S-K under the Exchange Act. |
| | |
2022 | | |
2021 | |
| | |
PEO A | | |
PEO B | | |
Other NEO’s | | |
PEO | | |
Other NEO’s | |
| SCT Amounts | |
$ | 169,687 | | |
$ | 847,722 | | |
$ | 403,497 | | |
$ | 826,993 | | |
$ | 467,194 | |
| Adjustments Related to Defined Benefit and Actuarial Plans: | |
| | | |
| | | |
| | | |
| | | |
| | |
| None (6) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| Adjustments Related to Stock Based Compensation | |
| | | |
| | | |
| | | |
| | | |
| | |
| Values reported in Stock Awards and Options awards columns of the SCT | |
| (46,771 | ) | |
| (597,722 | ) | |
| (203,497 | ) | |
| (368,660 | ) | |
| (300,863 | ) |
| Year-End Fair Value of Awards Granted during the year that are outstanding and unvested as of the end of the covered fiscal year | |
| 6,413 | | |
| 83,425 | | |
| 35,955 | | |
| 143,222 | | |
| 81,274 | |
| Decrease in Fair Value of Awards granted in prior years that are outstanding and unvested at Year End | |
| (159,768 | ) | |
| - | | |
| (85,201 | ) | |
| (268,508 | ) | |
| (34,012 | ) |
| Fair Value on Vesting Date of Awards that are granted and vest in the same covered fiscal year | |
| 12,775 | | |
| 96,580 | | |
| 27,406 | | |
| 47,102 | | |
| 118,241 | |
| Increase (Decrease) in Fair Value of Awards granted in prior years that vest in the covered fiscal year | |
| (69,313 | ) | |
| - | | |
| (46,140 | ) | |
| 195,266 | | |
| 20,690 | |
| Increase (Decrease) in fair value of awards granted in prior years that failed to meet vesting conditions during the year | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| Dividends and other earnings paid on awards before the vesting date | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| CAP Amounts | |
$ | (86,976 | ) | |
$ | 430,005 | | |
$ | 132,020 | | |
$ | 575,416 | | |
$ | 352,524 | |
| (3) | The
amounts presented reflect the average compensation set forth in the SCT for the Company’s
Non-PEO NEOs, consisting of Frank Orzechowski and Darren Beckett in 2022 and Jacob Brunsberg,
Frank Orzechowski and Darren Beckett in 2021. |
| (4) | The
amounts presented reflect the value of a fixed investment of $100 on January 1st of the reporting
period (i.e., January 1, 2021) based upon the closing market price of the Company’s
common stock of $8.00, $36.80 and $67.60 at December 31, 2022, December 31, 2021 and December
31, 2020, respectively, as traded on The Nasdaq Capital Market. All amounts presented herein
have been retroactively adjusted to reflect the 1-for-20 reverse split of the Company’s
common stock effective September 22, 2023. |
| (5) | The
amounts presented reflect the net loss as reported in the Company’s audited financial
statements for the periods presented. |
| (6) | The
Company had no Defined Benefit or Actuarial Plans during the periods presented. |
Analysis
of Information Presented in the Pay Verses Performance Table
The
Company is providing the following descriptions of the relationships between information presented in the Pay Versus Performance table,
including CAP, as required by Item 402(v) of Regulation S-K under the Exchange Act.
The
Compensation Committee does not use TSR or net income (loss) in its compensation programs. However, the Compensation Committee does utilize
several other performance measures that it considers appropriate under the circumstances, including Company market capitalization, actual
performance vs. budget and quarterly forecasts, customer success and capital raising efforts, in order to align executive compensation
with the Company’s business and performance objectives.
Compensation
actually paid to the Company’s PEO A (Mr. Ruport) decreased by $662,392 in 2022 as compared to 2021 due to the resignation of PEO
A as of April 30, 2022 as well as a 78.3% decrease in the price of the Company’s common stock which resulted in decreases in the
fair value of awards granted in prior years that were outstanding and vested and unvested at December 31, 2022. For 2022, PEO A was paid
a salary of $122,917 in cash and was granted stock options to acquire 1,256 shares of common stock. In addition, PEO A was granted
1,256 SARs For 2022, PEO B (Mr. Brunsberg) was paid a salary of $250,000 in cash and
was granted stock options to acquire 6,750 shares of common stock. In addition, PEO B was granted 20,345 SARs. For 2021,
PEO A was paid a salary of $250,000 in cash and received a bonus of $208,333 in cash. In addition, PEO A was granted a stock option to
purchase 2,592 shares of common stock and 3,888 SARs.
Average
compensation actually paid to the Company’s non-PEO NEOs decreased by $220,504 in 2022 as compared to 2021 due to one less non-PEO
NEO in 2022 as well as a 78.3% decrease in the price of the Company’s common stock, which resulted in decreases in the fair value
of awards granted in prior years that were outstanding and vested and unvested at December 31, 2022. For 2022, the Company’s two
non-PEO NEO’s were paid salaries of $400,000 in cash and were granted stock options to acquire 6,794 shares of common stock
and 14,025 SARs. For 2021, the Company’s three non-PEO NEO’s were paid salaries and bonuses in cash of $426,818 and
$72,176, respectively, and received stock options to purchase 9,973 shares of common stock and 6,245 SARs.
TSR
represents a cumulative loss in value of 88.16% for the two years ended December 31, 2022, and a loss in value of 45.56% for the year
ended December 31, 2021. Net loss increased by $1,261,132 in 2022 as compared to 2021.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
following table sets forth certain information regarding beneficial ownership of our common stock as of the Record Date (a) by each person
known by us to own beneficially 5% or more of any class of our common stock, (b) by our named executive officers and each of our directors
(and director nominees) and (c) by all executive officers and directors of the Company as a group.
The
number of shares beneficially owned by each stockholder is determined in accordance with SEC rules. Under these rules, beneficial ownership
includes any shares as to which a person has sole or shared voting power or investment power. Percentage ownership is based on 780,423
shares of our common stock outstanding October 31, 2023. In computing the number of shares beneficially owned by a person and the percentage
ownership of that person, shares of common stock subject to stock options, warrants or other rights held by such person that are currently
convertible or exercisable or will become convertible or exercisable within 60 days of October 31, 2023 are considered outstanding, although
these shares are not considered outstanding for purposes of computing the percentage ownership of any other person.
We
believe, based on information provided to us, that each of the stockholders listed below has sole voting and investment power with respect
to the shares beneficially owned by the stockholder unless noted otherwise, subject to community property laws where applicable.
| Name of Beneficial Owner | |
Number of Shares Beneficially Owned | | |
Percentage of Shares Beneficially Owned(1) | |
| Named Executive Officers and Directors: | |
| | | |
| | |
| Jacob Brunsberg(2) | |
| 13,125 | | |
| 1.65 | % |
| Frank Orzechowski(3) | |
| 8,876 | | |
| 1.12 | % |
| Mark Ruport(4) | |
| 20,901 | | |
| 2.62 | % |
| Salvatore Battinelli(5) | |
| 5,892 | | |
| * | |
| Dennis Duitch(6) | |
| 5,604 | | |
| * | |
| Kent J. Summers(7) | |
| 5,567 | | |
| * | |
| All executive officers and
directors as a group (6 persons)(8) | |
| 59,966 | | |
| 7.18 | % |
*Less
than 1%.
| (1) |
Based on 780,423 shares
outstanding at October 31, 2023. |
| (2) |
Includes 13,030 shares
issuable upon the exercise of stock options. |
| (3) |
Includes 8,828 shares issuable
upon the exercise of stock options. |
| (4) |
Includes (a) 17,670 shares
issuable upon the exercise of stock options; (b) 325 shares issuable upon the conversion of the shares of the Company’s Series
E Preferred Stock; and (c) 243 shares issuable upon exercise of Class A Warrants. |
| (5) |
Includes (a) 4,942 shares
issuable upon the exercise of stock options, (b) 162 shares issuable upon the conversion of shares of the Company’s Series
E Preferred Stock, and (c) 121 shares issuable upon exercise of Class A Warrants. |
| (6) |
Includes 4,942 shares issuable
upon the exercise of stock options. |
| (7) |
Includes 4,942 shares issuable
upon the exercise of stock options. |
| (8) |
Includes
(a) 54,354 shares issuable upon the exercise of stock options, (b) 487 shares issuable upon the conversion of the shares of
the Company’s Series E Preferred Stock, and (c) 364 shares issuable upon exercise of Class A Warrants. |
Equity
Compensation Plan Information
The
following table provides certain information with respect to our equity compensation plans as of December 31, 2022.
| | |
(a) | | |
(b) | | |
(c) | |
| Plan Category | |
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | | |
Weighted- average Exercise Price of Outstanding Options, Warrants and Rights | | |
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) | |
| | |
| | |
| | |
| |
| 2013 Equity Incentive Plan(1) | |
| 87,453 | | |
$ | 71.00 | | |
| 21,826 | |
| Equity compensation plans not approved by security holders(2) | |
| - | | |
$ | 44.20 | | |
| - | |
| Chief Executive Officer Inducement Options(3) | |
| 2,500 | | |
$ | 224.00 | | |
| - | |
(1) On March 15, 2013, the Company’s Board
of Directors approved the Company’s 2013 Equity Incentive Plan. The Plan was approved by our stockholders on October 10, 2013.
On August 9, 2022, an amendment to the Plan was approved by our stockholders to increase the number of shares of our common stock
subject to the Plan to 113,250. The Plan expired by its terms on March 15.
(2)
On June 23, 2020, our Board of Directors adopted the Company’s 2020 Stock Appreciation Rights Plan. The Plan provides for
incentive awards in the form of SARs payable in cash only; no shares of common stock are issuable pursuant to the Plan.
As of December 31, 2022, the Company had awarded 57,889 SARs pursuant to the Plan.
(3)
On December 3, 2019, in conjunction with the hiring of Mark K. Ruport, the Company’s former President and Chief Executive Officer,
the Company granted to Mr. Ruport (i) an option to purchase 500 shares of our common stock with an exercise price of $224.00, which fully
vested and became exercisable on January 3, 2020; and (ii) an option to purchase up to 2,000 shares of our common stock, with an exercise
price of $224.00, which fully vested and became exercisable on December 3, 2022. In accordance with Nasdaq Listing Rule 5635(c)(4), such
options were granted to Mr. Ruport as an inducement award outside of the 2013 Equity Incentive Plan.
TRANSACTIONS WITH RELATED
PERSONS
Except
as described below in this section, since the beginning of our last fiscal year, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which we were a party other than equity and other compensation, termination, change
in control and other arrangements, which are described under “Executive Compensation” and “Director Compensation”
above:
| |
● |
in which
the amount involved exceeds the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed
fiscal years; and |
| |
● |
in which
any director, executive officer, or other stockholder of more than 5% of our common stock or any member of their immediate family
had or will have a direct or indirect material interest. |
Indemnification
Agreements
We
have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things,
require us to indemnify each director and executive officer to the fullest extent permitted by Nevada law, including indemnification
of expenses such as attorneys’ fees, judgments, fines and settlement amounts incurred by the director or executive officer in any
action or proceeding, including any action or proceeding by or in the right of us, arising out of the person’s services as a director
or executive officer, including in connection with the Acquisition and related matters.
Policies
and Procedures for Related Person Transactions
Our
Audit Committee is responsible for reviewing and approving, as appropriate, all transactions with related persons (other than compensation-related
matters, which should be reviewed by our Compensation Committee), in accordance with its Charter and the Nasdaq marketplace rules. In
reviewing and approving any such transactions, our Audit Committee is tasked to consider all relevant facts and circumstances, including,
but not limited to, whether the transaction is on terms comparable to those that could be obtained in an arm’s length transaction
and the extent of the related person’s interest in the transaction.
PROPOSAL
5 – SAY ON PAY PROPOSAL
The
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) entitles our stockholders
to vote to approve, on an advisory or non-binding basis, the compensation of our named executive officers as disclosed in this proxy
statement. We are asking for stockholder approval of the compensation of our named executive officers as disclosed in this proxy statement,
including compensation payable under our separation plan in connection with the Acquisition, in accordance with SEC rules, which
includes the compensation disclosed under “Executive Compensation” in the compensation tables and the related
narrative discussion following the compensation tables.
Accordingly,
we are asking for stockholder approval of the following resolution:
RESOLVED,
that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including
the compensation tables and narrative discussion and the compensation payable in connection with the Acquisition as disclosed pursuant
to Item 502(t) of Regulation S-K, is hereby APPROVED.
This
vote is advisory in nature and therefore not binding on us, our Compensation Committee or our Board of Directors. Our Board and our
Compensation Committee, however, value the opinions of our stockholders. To the extent there is any significant vote against the
named executive officer compensation as disclosed in this proxy statement, we will consider the stockholders’ concerns, and
our Compensation Committee will evaluate whether any actions are necessary to address those concerns. Further, the underlying
arrangements with our named executive offices are contractual in nature and not, by their terms, subject to stockholder approval.
Accordingly, regardless of the outcome of the advisory vote, if the Acquisition is completed, Sigma’s named executive officers
will be entitled to the retention bonuses under our separation plan in accordance with the terms and conditions of
the underlying arrangements between Sigma and the named executive officers.
Vote
Required
The
Say on Pay Proposal will be approved if the number of votes cast for the Say on Pay Proposal exceeds the number of votes cast against
the Proposal. Broker non-votes and abstentions will have no effect on the outcome of the vote on the Say on Pay Proposal.
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN
THIS PROXY STATEMENT.
PROPOSAL
6 – FREQUENCY OF SAY ON PAY PROPOSAL
The
Dodd-Frank Act also entitles our stockholders to vote on an advisory or non-binding basis on how frequently they would like to cast the
advisory vote on the compensation of our named executive officers. By voting on this proposal, stockholders may indicate whether they
would prefer that the advisory votes on named executive officer compensation take place once every year, every two years or every three
years, or they may abstain from voting.
After
considering these three alternatives, our Board believes that conducting the advisory vote on executive compensation every three years
is appropriate for us and our stockholders at this time.
Our Board will consider the outcome of the vote when
making future decisions regarding the frequency of the advisory vote on executive compensation. This vote is advisory in nature and not
binding, however, our Board may decide that it is in the best interests of us and our stockholders to hold an advisory vote more or less
frequently than the alternative that is approved by our stockholders.
Vote
Required
The
Frequency of Say on Pay Proposal will be approved if the number of votes cast for the Frequency of Say on Pay Proposal exceeds the number
of votes cast against the Proposal. Broker non-votes and abstentions will have no effect on the outcome of the vote on the Frequency
of Say on Pay Proposal.
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE “EVERY THREE YEARS” FOR THE CONDUCT OF AN ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED
EXECUTIVE OFFICERS.
PROPOSAL
7 - APPROVAL OF THE SIGMA ADDITIVE SOLUTIONS, INC. 2023 EQUITY INCENTIVE PLAN
On November 19, 2023, our Board
of Directors adopted the Sigma Additive Solutions, Inc. 2023 Equity Incentive Plan, which we refer to as the “2023 Plan,”
subject to approval by our stockholders. We are asking for your approval of the 2023 Plan, a copy of which is included as Annex
D to this Proxy Statement.
Our
Board of Directors believes that the grant of options and other stock awards is an important incentive for the Company’s employees,
officers and directors. Previously, we issued options and stock awards pursuant to our 2013
Equity Incentive Plan, which plan expired according to the terms thereof in March 2023.
A
summary of the 2023 Plan is set forth below.
Purpose
Our
Board of Directors adopted the 2023 Plan to (1) encourage selected employees, officers, directors, consultants and advisers to improve
our operations and increase our profitability, (2) encourage selected employees, officers, directors, consultants and advisers to accept
or continue employment or association with us, and (3) increase the interest of selected employees, officers, directors, consultants
and advisers in our welfare through participation in the growth in value of our common stock. All of our current employees, directors
and consultants are eligible to participate in the 2023 Plan.
Administration
The
2023 Plan is to be administered by the Board of Directors or by a committee to which administration of the 2023 Plan, or of part of thereof,
is delegated by the Board of Directors. The 2023 Plan is currently administered by our Compensation Committee, which we refer to below
as the “Administrator.” The Administrator is responsible for selecting the officers, employees, directors, consultants and
advisers who will receive Options, Stock Appreciation Rights and Stock Awards. Subject to the requirements imposed by the 2023 Plan,
the Administrator is also responsible for determining the terms and conditions of each Option and Stock Appreciation Right award, including
the number of shares subject to the Option, the exercise price, expiration date and vesting period of the Option and whether the option
is an Incentive Option or a Non-Qualified Option. Subject to the requirements imposed by the 2023 Plan, the Administrator is also responsible
for determining the terms and conditions of each Stock Award, including the number of shares granted, the purchase price (if any), and
the vesting, transfer and other restrictions imposed on the stock. The Administrator has the power, authority and discretion to make
all other determinations deemed necessary or advisable for the administration of the 2023 Plan or of any award under the 2023 Plan.
The
2023 Plan is not subject to the Employee Retirement Income Security Act of 1974 and is not a qualified pension, profit sharing or bonus
plan under Section 401(a) of the Internal Revenue Code
Stock
Subject to the 2023 Plan
If
the 2023 Plan is approved at the Annual Meeting, subject to approval of the Capital Increase the aggregate number of shares of
common stock set aside and reserved for issuance under the 2023 Plan will be fixed at 7,000,000 shares.
If
awards granted under the 2023 Plan expire or otherwise terminate or are cancelled without being exercised in full, the shares of common
stock not acquired pursuant to such awards will again become available for issuance under the 2023 Plan. If shares of common stock issued
pursuant to awards under the 2023 Plan are forfeited to or repurchased by us, the forfeited or repurchased stock will again become available
for issuance under the 2023 Plan.
If
shares of common stock subject to an award are not delivered to a participant because such shares are withheld for payment of taxes incurred
in connection with the exercise of an Option, or the issuance of shares under a Stock Award, or the award is exercised through a reduction
of shares subject to the award (“net exercised”), then the number of shares that are not delivered will not again be available
for issuance under the 2023 Plan. In addition, if the exercise price of any award is satisfied by the tender of shares of common stock
to us (whether by actual delivery or attestation), the shares tendered will not again be available for issuance under the 2023 Plan.
Eligibility
All
directors, employees, consultants and advisors of the Company and its subsidiaries are eligible to receive awards under the 2023 Plan.
Incentive Options may only be granted under the 2023 Plan to a person who is a full-time officer or employee of the Company or a subsidiary.
The Administrator will determine from time-to-time which directors, employees, consultants and advisers will be granted awards under
the 2023 Plan.
Terms
of Awards
Maximum
Grant
The
maximum number of shares of Common Stock subject to a Stock Award granted during a single Fiscal Year to any Non-Employee Director (together
with any cash fees paid to such Non-Employee Director during the Fiscal Year) is not permitted to exceed a total value of $500,000. The
value of the Stock Award is based on the fair value for financial reporting purposes on the grant date.
Written
Agreement
Each
award under the 2023 Plan will be evidenced by an agreement in a form approved by the Administrator.
Exercise
Price; Base Value
The
exercise price for a Non-Qualified Option or an Incentive Option may not be less than 100% of the fair market value of the Common Stock
on the date of the grant of the Non-Qualified Option or Incentive Option. With respect to an Option holder who owns stock possessing
more than 10% of the total voting power of all classes of our stock, the exercise price for an Incentive Option may not be less than
110% of the fair market value of the Common Stock on the date of the grant of the Incentive Option. The base value of a Stock Appreciation
Right shall also be no less than 100% of the Common Stock on the date of the grant of the Stock Appreciation Right. The 2023 Plan does
not specify a minimum exercise price for Stock Awards.
Vesting
Each
Option, Stock Appreciation Right or Stock Award will become exercisable or non-forfeitable (that is, “vest”) under conditions
specified by the Administrator at the time of grant. Vesting typically is based upon continued service as a director or employee but
may be based upon any performance criteria and other contingencies that are determined by the Administrator. Shares subject to Stock
Awards may be subject to specified restrictions concerning transferability, repurchase by the Company and forfeiture of the shares issued,
together with such other restrictions as may be determined by the Administrator.
Expiration
Date
Each
Option or Stock Appreciation Right must be exercised by a date specified in the award agreement, which may not be more than ten years
after the grant date. Except as otherwise provided in the relevant agreement, an Option or Stock Appreciation Right ceases to be exercisable
ninety days after the termination of the holder’s employment with us.
Transfers
of Options
Unless
otherwise determined by the Administrator, Options are not transferable except by will or the laws of descent and distribution.
Purchase
Price Payment
Unless
otherwise determined by the Administrator, the purchase price of Common Stock acquired under the 2023 Plan is payable by cash or check
at the time of an Option exercise or acquisition of a Stock Award. The Company does not charge participants any fees or commissions in
connection with their acquisition of Common Stock under the 2023 Plan. The Administrator also has the discretion to accept the following
types of payment from participants: shares of Common Stock, cash or a combination thereof.
Withholding
Taxes
At
the time of his or her exercise of an Option or Stock Appreciation Right, an employee is responsible for paying all applicable federal
and state withholding taxes. A holder of Stock Awards is responsible for paying all applicable federal and state withholding taxes once
the shares covered by the award cease to be forfeitable or at any other time required by applicable law.
Securities
Law Compliance
Shares
of Common Stock will not be issued pursuant to the exercise of an Option or the receipt of a Stock Award unless the Administrator determines
that the exercise of the Option or receipt of the Stock Award and the issuance and delivery of such shares will comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933 (the “Securities Act”), applicable state and
foreign securities laws and the requirements of any stock exchange on which our Common Stock is traded.
Effects
of Change of Control
Except
as otherwise provided in an Award Agreement, in the event of a Change in Control, all outstanding Options and Stock Appreciation Rights
shall become immediately exercisable with respect to 100% of the shares subject to such Options or Stock Appreciation Rights, and/or
the Restricted Period shall expire immediately with respect to 100% of the outstanding shares of Restricted Stock or Restricted Stock
Units.
With
respect to Performance Share Awards and Cash Awards, in the event of a Change in Control, all Performance Goals or other vesting
criteria will be deemed achieved at 100% of target levels and all other terms and conditions will be deemed met.
In
general, a “Change of Control” means:
| |
● |
A sale of all
or substantially all of our assets; |
| |
● |
Our liquidation or dissolution; |
| |
● |
A purchase or other acquisition
of 51% or more of our Common Stock |
| |
● |
Our merger or consolidation
with or into another corporation. |
Other
Adjustment Provisions
If
the stock of the Company is changed by reason of a stock split, reverse stock split, stock dividend, recapitalization, combination or
reclassification, appropriate adjustments shall be made by the Administrator, in its discretion, in (1) the number and class of shares
of stock subject to the 2023 Plan and each Option and grant of Stock Awards outstanding under the 2023 Plan, and (2) the purchase price
of each outstanding Option and (if applicable) Stock Award. For example, if an Option is for 1,000 shares for $20.00 per share and there
is a 2-for-1 stock split, the Option would be adjusted to be exercisable for 2,000 shares at $10.00 per share.
Amendment
or Termination of the Plan
The
Board of Directors may at any time amend, discontinue or terminate the 2023 Plan. With specified exceptions, no amendment, suspension
or termination of the Plan may adversely affect outstanding Options or Stock Appreciation Rights or the terms that are applicable to
outstanding Stock Awards. No amendment, suspension or termination of the Plan requires stockholder approval unless such approval is required
under applicable law or under the rules of any stock exchange on which our Common Stock is traded. Unless terminated earlier by the Board
of Directors, the 2023 Plan will terminate on the tenth anniversary of the date of the 2023 Plan’s adoption by the Board.
Federal
Income Tax Consequences
The
following discussion is a summary of the federal income tax provisions relating to the grant and exercise of awards under the 2023 Plan
and the subsequent sale of Common Stock acquired under the 2023 Plan. The tax effect of awards may vary depending upon the circumstances,
and the income tax laws and regulations change frequently. This summary is not intended to be exhaustive and does not constitute legal
or tax advice.
General.
A recipient of an award of Options or Stock Appreciation Rights under the 2023 Plan will realize no taxable income at the time of grant
if the exercise price is not less than the fair market value of our Common Stock on the date of the grant. The recipient generally will
realize no taxable income at the time of a grant of a Stock Award so long as the Stock Award is not vested (that is, remains subject
to forfeiture and is not transferable) and an election under Section 83(b) of the Internal Revenue Code is not made.
Non-Qualified
Options. The holder of a Non-Qualified Option will recognize ordinary income at the time of the Non-Qualified Option exercise
in an amount equal to the excess of the fair market value of the shares on the date of exercise over the exercise price. This taxable
income will be subject to payroll tax withholding if the holder is an employee.
When
a holder disposes of shares acquired upon the exercise of a Non-Qualified Option, any amount received in excess of the fair market value
of the shares on the date of exercise will be treated as long-term or short-term capital gain, depending upon the holding period of the
shares, and if the amount received is less than the fair market value of the shares on the date of exercise, the loss will be treated
as long-term or short-term capital loss, depending upon on the holding period of the shares.
Incentive
Options. The holder of an Incentive Option will not recognize taxable income upon exercise of the Incentive Option. In order
to retain this tax benefit, the holder must make no disposition of the shares so received for at least one year from the date of exercise
and for at least two years from the date of grant of the Incentive Option. The holder’s compliance with the holding period requirement
and other applicable tax provisions will result in the realization of long-term capital gain or loss when he or she disposes of the shares,
measured by the difference between the exercise price and the amount received for the shares at the time of disposition.
If
a holder disposes of shares acquired by exercise of an Incentive Option before the expiration of the required holding period, the gain,
if any, arising from such disqualifying disposition will be taxable as ordinary income in the year of disposition to the extent of the
lesser of (1) the excess of the fair market value of the shares over the exercise price on the date the Incentive Option was exercised
or (2) the excess of the amount realized over the exercise price upon such disposition. Any amount realized in excess of the fair market
value on the date of exercise is treated as long-term or short-term capital gain, depending upon the holding period of the shares. If
the amount realized upon such disposition is less than the exercise price, the loss will be treated as long-term or short-term capital
loss, depending upon the holding period of the shares.
For
purposes of the alternative minimum tax, the holder will recognize as an addition to his or her tax base, upon the exercise of an Incentive
Option, an amount equal to the excess of the fair market value of the shares at the time of exercise over the exercise price. If the
holder makes a disqualifying disposition in the year of exercise, the holder will recognize taxable income for purposes of the regular
income tax and the holder’s alternative minimum tax base will not be additionally increased.
Stock
Appreciation Rights. The holder of a Stock Appreciation Right will recognize ordinary income at the time that it is exercised
in an amount equal to the excess of the fair market value of the number of shares of Common Stock as to which it is exercised on the
date of exercise over their value at the date of grant. This taxable income will be subject to payroll tax withholding if the holder
is an employee.
Stock
Awards. The recipient of a Stock Award will recognize ordinary income when the stock vests in an amount equal to the excess
of the fair market value of the shares at the time of vesting over the purchase price for the shares, if any, subject to payroll tax
withholding if the holder is an employee. When the recipient sells a Stock Award that has vested, any amount received in excess of the
fair market value of the shares on the date of vesting will be treated as long-term or short-term capital gain, depending upon the holding
period of the shares (after vesting has occurred), and if the amount received is less than the fair market value on the date of vesting,
the loss will be treated as long-term or short-term capital loss, depending on the holding period of the shares. Dividends paid on Stock
Awards that have not vested and that have not been the subject of an election under Section 83(b) of the Internal Revenue Code are treated
as compensation income, subject to payroll tax withholding with respect to an employee.
Section
83(b) of the Internal Revenue Code permits the recipient to elect, not more than thirty days after the date of receipt of a Stock Award,
to include as ordinary income the difference between the fair market value of the Stock Award on the date of grant and its purchase price
(rather than being taxed as the shares vest). If such an election is made, the holding period for long-term capital gain or loss treatment
will commence on the day following the receipt of the Stock Award, dividends on the Stock Award will be treated as such and not as compensation,
and the tax basis of the shares will be their fair market value at the date of grant.
Deduction
for the Company. The Company will be entitled to a deduction for federal income tax purposes at the same time and in the same
amount as the recipient of an award is considered to have realized ordinary income as a result of the award, assuming that the limitation
under Section 162(m) of the Internal Revenue Code is not applicable. Assuming that the holder of shares received on exercise of an Incentive
Option disposes of the shares after compliance with the holding period requirement described above, the Company will not be entitled
to a federal income tax deduction since the holder will not have realized any ordinary income in the transaction.
Prior
to the Tax Cuts and Jobs Act of 2017 (“TCJA”), Section 162(m) of the Internal Revenue Code generally disallowed a tax deduction
to publicly held companies for compensation paid to certain executive officers in excess of $1 million per officer in any year that
did not qualify as performance-based. Under the TCJA, the performance-based exception has been repealed and the $1 million deduction
limit now applies to anyone serving as the chief executive officer or the chief financial officer at any time during the taxable year
and the top three other highest compensated executive officers serving at any fiscal year-end.
New
Plan Benefits
Other
than with respect to certain future awards that may be made to our directors as described in “Director
Compensation” and the award to Mr. Brunsberg described in “Executive Compensation – Potential Payments
Upon Termination or Change-in-Control,” the amount and timing of awards under the 2023 Plan to executive officers, other employees and
directors are not determinable at this time.
Equity
Compensation Plan Information
See
“Executive Compensation – Outstanding Equity Awards at 2022 Fiscal Year-End” for information with respect to
our equity compensation plans as of December 31, 2022.
Vote
Required
The
Equity Incentive Plan Proposal will be approved if the number of votes cast for the Equity Incentive Plan Proposal exceeds
the number of votes cast against the Proposal. Broker non-votes and abstentions will have no effect on the outcome of the vote on the
Equity Incentive Plan Proposal.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE SIGMA ADDITIVE SOLUTIONS, INC. 2023 EQUITY INCENTIVE
PLAN.
PROPOSAL
8 - RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Our
Audit Committee has appointed Haynie & Company (“H&C”) to continue as our independent registered public accounting
firm for the fiscal year ending December 31, 2023.
During
the Company’s two most recent fiscal years, neither we nor anyone acting on our behalf consulted with H&C regarding either
(i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that
might be rendered on our financial statements, and neither a written report nor oral advice was provided to the Company that H&C
concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting
issue, or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related
instructions to Item 304 of Regulation S-K) or a reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).
Notwithstanding
the appointment of H&C, and even if our stockholders ratify the appointment, our Audit Committee, in its discretion, may appoint
another independent registered public accounting firm at any time during our fiscal year if our Audit Committee believes that such a
change would be in the best interests of the Company and its stockholders. At the Annual Meeting, our stockholders are being asked to
ratify the appointment of H&C as our independent registered public accounting firm for our fiscal year ending December 31, 2022.
Our Audit Committee is submitting the appointment of H&C to our stockholders because we value our stockholders’ views on our
independent registered public accounting firm and as a matter of good corporate governance. Representatives of H&C are not expected
to be present at the Annual Meeting.
If
our stockholders do not ratify the appointment of H&C, our board of directors may reconsider the appointment.
Audit
Fees
The
following is a summary of the fees billed to the Company by H&C for professional services rendered with respect to the years ended
December 31, 2022 and 2021:
| | |
2022 | | |
2021 | |
| Audit Fees | |
$ | 89,000 | | |
$ | 76,500 | |
| Audit Related Fees | |
| 5,000 | | |
| 14,800 | |
| Tax Fees | |
| 2,200 | | |
| 4,000 | |
| | |
$ | 96,200 | | |
$ | 95,300 | |
In
the above table, in accordance with the SEC’s definitions and rules, “audit fees” are fees that we paid for professional
services for the audit of our financial statements included in our Form 10-K and review of the interim financial statements included
in quarterly reports, and for services that are normally provided by the registered public accounting firm in connection with statutory
and regulatory filings or engagements; “audit-related fees” are fees for assurance and related services that are reasonably
related to the performance of the audit or review of our financial statements; and “tax fees” are fees for tax compliance,
tax advice and tax planning.
The
Audit Committee’s pre-approval policies and procedures and other protocols are discussed in its written charter which can be found
at www.sigmaadditive.com under the tab “Investors.” Before our independent registered public accounting firm is engaged by
the Company to render audit or non-audit services, the Audit Committee must pre-approve the engagement. Audit Committee pre-approval
of audit and non-audit services are not required if the engagement for the services is entered into pursuant to pre-approval policies
and procedures established by the Audit Committee regarding the Company’s engagement of the independent registered public accounting
firm, provided the policies and procedures are detailed as to the particular service, the Audit Committee is informed of each service
provided and such policies and procedures do not include delegation of the Audit Committee’s responsibilities under the Exchange
Act to the Company’s management. The Audit Committee may delegate to one or more designated members of the Audit Committee the
authority to grant pre-approvals. If the Audit Committee elects to establish pre-approval policies and procedures regarding non-audit
services, the Audit Committee must be informed of each non-audit service provided by the independent registered public accounting firm.
Audit Committee pre-approval of non-audit services (other than review and attestation services) also will not be required if such services
fall within available exceptions established by the SEC. The Audit Committee may not engage the independent registered public accounting
firm to perform non-audit services prohibited by law or regulation. On an annual basis, our management reports to the Audit Committee
all audit services performed during the previous 12 months and all fees billed by our independent registered public accounting firm for
such services.
A
representative of H&C is not expected to be present at the Annual Meeting or to be available to make a comment or respond to questions.
Auditor
Independence
In
our fiscal year ended December 31, 2022, H&C provided no professional services other than those described above that would require
our Audit Committee to consider their compatibility with maintaining the independence of H&C.
Vote
Required
The
Ratification of Accountant Proposal be approved if the number of votes cast for the Ratification of Accountant Proposal exceeds the number
of votes cast against the Proposal. The Ratification of Accountant Proposal is considered a routine matter on which brokers can vote
in their discretion, so we do not expect broker non-votes on the Proposal. Any broker non-votes, however, and abstentions will have
no effect on the outcome of the vote on the Ratification of Accountant Proposal.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A
VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF
HAYNIE
& COMPANY
REPORT OF THE AUDIT COMMITTEE
The
Audit Committee provides assistance to our Board of Directors in fulfilling its oversight responsibility to the Company’s stockholders,
potential stockholders, the investment community, and others relating to our financial statements and the financial reporting process,
the systems of internal accounting and financial controls, the internal audit function, the annual independent audit of our financial
statements and the ethics programs when established by our management and our board of directors. The Audit Committee has the sole authority
(subject, if applicable, to stockholder ratification) to appoint or replace the outside auditors and is directly responsible for determining
the compensation of the independent auditors.
The
Audit Committee schedules its meetings with a view to ensuring that it devotes appropriate attention to all of its tasks. In discharging
its oversight role, the Audit Committee is empowered to investigate any matter brought to its attention, with full access to all of our
books, records, facilities and personnel, and to retain its own legal counsel and other advisers as it deems necessary or appropriate.
Haynie
& Company serves as our independent registered public accounting firm and audited our financial statements for the year ended December
31, 2022. Haynie & Company does not have and has not had any financial interest, direct or indirect, in our company, and does not
have and has not had any connection with our company except in its professional capacity as our independent auditors. The Audit Committee
also has selected Haynie & Company as our independent registered public accountants for 2023.
The
Audit Committee has reviewed the Company’s audited financial statements for the fiscal year ended December 31, 2022 and has discussed
those financial statements with management and Haynie & Company. The Audit Committee has also received from, and discussed with,
Haynie & Company various communications that such independent registered public accounting firm is required to provide to the Audit
Committee, including the matters required to be discussed by statement on Auditing Standards No. 1301, as adopted by the Public Company
Accounting Oversight Board (“PCAOB”). The Audit Committee also discussed with Haynie & Company matters relating
to its independence, including a review of audit and non-audit fees and the letter and written disclosures made by Hayne & Company
to the Audit Committee pursuant to PCAOB Rule 3526 (Communications with Audit Committees Concerning Independence).
Audit
and non-audit services to be provided by Hayne & Company are subject to the prior approval of the Audit Committee. In general, the
Audit Committee’s policy is to grant such approval where it determines that the non-audit services are not incompatible with maintaining
the independent registered public accounting firm’s independence and there are cost or other efficiencies in obtaining such services
from the independent registered public accounting firm as compared to other possible providers.
In
addition, the Audit Committee reviewed initiatives aimed at strengthening the effectiveness of our internal control structure. As part
of this process, the Audit Committee continued to monitor and review staffing levels and steps taken to implement recommended improvements
in internal procedures and controls.
Based
on these reviews and discussions, the Audit Committee recommended to our Board of Directors that our audited financial statements be
included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC.
Respectfully
submitted,
Audit
Committee:
Salvatore
Battinelli
Dennis
Duitch
Kent
Summers
PROPOSAL
9: THE ADJOURNMENT PROPOSAL
The
Adjournment Proposal allows the Chairman of the Annual Meeting to submit a proposal to adjourn the Annual Meeting to a later date or
dates, if necessary, to permit further solicitation of proxies in the event, based on the tabulated votes at the Annual Meeting there
are not sufficient votes to approve the Acquisition Proposal or the Amendment to effect the Name Change and the Capital Increase. In no event will the Chairman adjourn the Annual Meeting beyond the date by which it
may properly do so under the NGCL.
In
addition to an adjournment of the Annual Meeting upon approval of the Adjournment Proposal, our Board of Directors is empowered
under the NGCL law to postpone the meeting at any time prior to the meeting being called to order. In such event, Sigma will issue a
press release and take such other steps as it believes are necessary and practical in the circumstances to inform its stockholders of
the postponement.
Consequences
if the Adjournment Proposal is not Approved
If
an Adjournment Proposal is presented and not approved at the Annual Meeting, the Chairman of the Annual Meeting may not be able to adjourn
the Annual Meeting to a later date and the Acquisition would not be completed.
Required
Vote
The
Adjournment Proposal will be approved, whether or not a quorum is present, if the number of votes cast for the Adjournment Proposal exceeds
the number of votes cast against the Proposal. The Adjournment Proposal is considered a routine matter on which brokers can vote in
their discretion, so we do not expect broker non-votes on the Proposal. Any broker non-votes, however, and abstentions will have
no effect on the outcome of the vote on the Adjournment Proposal.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE ADJOURNMENT PROPOSAL.
OTHER MATTERS
Accompanying
this proxy statement is a copy of our Annual Report on Form 10-K, without exhibits, for the year ended December 31, 2022, as filed with
the SEC, which constitutes our annual report to stockholders. We will provide, without charge upon written request, a further copy of
our Annual Report on Form 10-K, including the financial statements and the financial statement schedules. Copies of the Form 10-K exhibits
also are available without charge. Stockholders who would like such copies should direct their requests in writing to: Corporate Secretary,
3900 Paseo del Sol, Santa Fe, New Mexico 87507.
As
of the date of this proxy statement, the Board knows of no matters that will be presented for consideration at the Annual Meeting other
than as described in this proxy statement. If any other matters properly come before the Annual Meeting or any adjournment or postponement
of the meeting and are voted upon, your proxy will confer discretionary authority on the individuals named as proxy holders to vote the
shares represented by the proxy as to any other matters.
EXPERTS
The
consolidated financial statements of Sigma for the years ended December 31, 2021 and December 31, 2022 incorporated by reference in this
proxy statement have been audited by Haynie & Company, independent registered public accounting firm, as set forth in their report
thereon, included therein, and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference
in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.
The
consolidated financial statements of NextTrip as of February 28, 2021 and 2022 included in this proxy statement have been audited by
TPS Thayer, LLC, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein,
and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
MISCELLANEOUS
The
Company will bear all costs incurred in the solicitation of proxies. In addition to solicitation by mail, our officers and employees
may solicit proxies by telephone, the Internet or personally, without additional compensation. We may also make arrangements with brokerage
houses and other custodians, nominees and fiduciaries for the forwarding of solicitation materials to the beneficial owners of shares
of our common stock held of record by such persons, and we may reimburse such brokerage houses and other custodians, nominees and fiduciaries
for their out-of-pocket expenses incurred in connection therewith.
We
have engaged Alliance Advisors, LLC, or Alliance, to assist in the solicitation of proxies. We have paid Alliance a fixed fee
of $7,000 and will reimburse Alliance for standard out-of-pocket expenses. If we utilize an incoming/outgoing call campaign, we will
pay Alliance a one-time modest set up and data processing fee and flat fees per attempted and completed proxy solicitation
call and per telephone vote.
The
SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements
with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders.
This process, which is commonly referred to as “householding,” potentially provides extra convenience for stockholders and
cost savings for companies. The Company and some brokers household proxy materials and may deliver a single proxy statement to multiple
stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received
notice from your broker or the Company that they or the Company will be householding materials to your address, householding will continue
until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding
and would prefer to receive a separate copy of our proxy materials, please notify your broker if your shares are held in a brokerage
account or the Company if you hold registered shares of common stock. We will also deliver a separate copy of this proxy statement to
any stockholder upon written request. Similarly, stockholders who have previously received multiple copies of disclosure documents may
write to the address or call the phone number listed below to request delivery of a single copy of these materials in the future. You
can notify the Company by sending a written request to Sigma Additive Solutions, Inc, 3900 Paseo del Sol, Santa Fe, New Mexico 87507,
Attn: Secretary, by registered, certified or express mail or by calling the Company at (203) 733-1356.
WHERE YOU CAN FIND MORE
INFORMATION
We
file annual, quarterly and current reports, proxy statements and other documents with the SEC under the Exchange Act. Stockholders may
obtain free copies of certain documents filed with the SEC by Sigma through the “SEC Filings” section of our website. You
also may obtain any of the documents we file with the SEC, including exhibits to the documents, without charge, by requesting them in
writing or by telephone at the following address or telephone number:
Sigma
Additive Solutions, Inc.
3900
Paseo del Sol
Santa
Fe, New Mexico 87507
(203)
733-1356
By
Order of the Board of Directors
/s/ Jacob Brunsberg
Jacob
Brunsberg
President
and Chief Executive Officer
INDEX TO FINANCIAL STATEMENTS
*Incorporated
by reference to pages F-2 – F-20 of Sigma’s Annual Report on Form 10-K filed with the SEC on March 30, 2023
**Incorporated
by reference to pages 3 – 17 of Sigma’s Quarterly Report on Form 10-Q filed with the SEC on November 13, 2023
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and
Members of NextTrip Group, LLC
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of NextTrip Group, LLC (the Company) as of February 28, 2023 and 2022, and
the related consolidated statements of operations, changes in members’ equity, and cash flows for each of the years in the two-year
period ended February 28, 2023, and the related notes (collectively referred to as the financial statements). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of February 28, 2023 and 2022, and the
results of its operations and its cash flows for each of the years in the two-year period ended February 28, 2023, in conformity with
accounting principles generally accepted in the United States of America.
Going
Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note
1 to the financial statements, the Company has suffered recurring losses from operations and has negative working capital and a stockholders’
deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters
are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits,
we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
TPS
Thayer, LLC
We
have served as the Company’s auditor since 2020. Sugar Land, TX
August
14, 2023
NEXTTRIP
GROUP, LLC
CONSOLIDATED BALANCE SHEETS
As
of February 28, 2023 and 2022
| | |
2023 | | |
2022 | |
| ASSETS | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 282,475 | | |
$ | 231,050 | |
| Accounts receivables, net | |
| - | | |
| 5,053 | |
| Receivables – related party, net | |
| 1,933,908 | | |
| - | |
| Prepaid expenses and other current assets | |
| 8,613 | | |
| 57,409 | |
| Total Current Assets | |
| 2,224,996 | | |
| 293,512 | |
| Non-Current assets | |
| | | |
| | |
| Property and equipment, net | |
| 16,536 | | |
| 43,994 | |
| Intangible assets, net | |
| 2,768,360 | | |
| 1,190,763 | |
| Security deposit | |
| 15,000 | | |
| 15,000 | |
| Right of Use Asset | |
| 1,020,443 | | |
| - | |
| Total Non-Current Assets | |
| 3,820,339 | | |
| 1,249,757 | |
| Total Assets | |
$ | 6,045,335 | | |
$ | 1,543,269 | |
| LIABILITIES | |
| | | |
| | |
| Current Liabilities | |
| | | |
| | |
| Accounts payable | |
$ | 519,136 | | |
$ | 302,059 | |
| Accrued expenses | |
| 329,922 | | |
| 13,806 | |
| Convertible Notes | |
| 3,233,503 | | |
| - | |
| Deferred revenue | |
| 22,750 | | |
| 69,605 | |
| Notes payable - related parties | |
| 281,000 | | |
| 12,675,421 | |
| Operating Lease Liability – Short Term | |
| 149,339 | | |
| - | |
| Total Current Liabilities | |
| 4,535,650 | | |
| 13,060,891 | |
| | |
| | | |
| | |
Non- Current Liabilities | |
| | | |
| | |
| Operating Lease Liability – Long Term | |
$ | 864,575 | | |
$ | - | |
| Total Non-Current Liabilities | |
| 864,575 | | |
| - | |
| Total Liabilities | |
| 5,400,225 | | |
| 13,060,891 | |
| Commitments and Contingencies | |
| - | | |
| - | |
| Equity | |
| | | |
| | |
| Preferred units: par value $10, 400,000 authorized, 400,000 and 0 issued and outstanding as of February
28, 2023 and 2022, respectively | |
| 4,000,000 | | |
| - | |
Members’ interest; par value $0.0001, 0 and 1,000,000 authorized, 0
and 1,000,000 issued and outstanding as of February 28, 2023 and 2022, respectively. | |
| - | | |
| 100 | |
| Common units, par value $0.0001, 1,000,000 and 0 authorized, 915,000 and 0 issued and outstanding as of
February 28, 2023 and 2022 respectively | |
| 100 | | |
| - | |
| Additional Paid in Capital | |
| 13,295,773 | | |
| - | |
| Accumulated deficit | |
| (16,650,863 | ) | |
| (11,517,722 | ) |
| Total Members’ Equity | |
| 645,110 | | |
| (11,517,622 | ) |
| Total Liabilities and Members’ Equity | |
$ | 6,045,335 | | |
$ | 1,543,269 | |
The
accompanying notes are an integral part of these consolidated financial statements.
NEXTTRIP
GROUP, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR
THE YEARS ENDED FEBRUARY 28, 2023 AND 2022
| | |
February
28, 2023 | | |
February
28, 2022 | |
| Revenue | |
$ | 382,832 | | |
$ | 175,998 | |
| Cost of revenue | |
| (354,921 | ) | |
| (155,191 | ) |
| Gross profit | |
| 27,911 | | |
| 20,807 | |
| Operating Expenses | |
| | | |
| | |
| General and administrative | |
| 3,574,251 | | |
| 2,940,826 | |
| Sales and marketing | |
| 708,047 | | |
| 1,370,889 | |
| Depreciation and amortization | |
| 806,883 | | |
| 1,060,587 | |
| Total Operating Expenses | |
| 5,089,181 | | |
| 5,372,302 | |
| Operating loss | |
| (5,061,270 | ) | |
| (5,351,495 | ) |
| Other (Income)/Expenses | |
| | | |
| | |
| Other expenses | |
| - | | |
| (1,129,468 | ) |
| Impairment of intangible assets | |
| - | | |
| 1,215,746 | |
| Interest (income) expense, net | |
| 71,871 | | |
| (8 | ) |
| Foreign exchange (gain) loss | |
| - | | |
| (1 | ) |
| Total other (income) expense | |
| 71,871 | | |
| 86,269 | |
| Net loss before taxes | |
| (5,133,141 | ) | |
| (5,437,764 | ) |
| Provision for income taxes | |
| - | | |
| - | |
| Net loss | |
$ | (5,133,141 | ) | |
$ | (5,437,764 | ) |
The
accompanying notes are an integral part of these consolidated financial statements
NEXTTRIP
GROUP, LLC.
CONSOLIDATED
STATEMENTS OF MEMBERS’ DEFICIT
FOR THE YEARS ENDED FEBRUARY 28, 2023 AND 2022
| | |
Preferred | | |
Common | | |
Members | | |
Additional
Paid in | | |
Accumulated
Equity | | |
Total
Members’ | |
| | |
Units | | |
Amount | | |
Units | | |
Amount | | |
Interest | | |
Amount | | |
Capital | | |
(Deficit) | | |
(Deficit) | |
| Balance, February 28, 2021 | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 1,000,000 | | |
$ | 100 | | |
$ | - | | |
$ | (6,079,958 | ) | |
$ | (6,079,858 | ) |
| Net Loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (5,437,764 | ) | |
| (5,437,764 | ) |
| Balance, February 28, 2022 | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,000,000 | | |
| 100 | | |
| - | | |
| (11,517,722 | ) | |
| (11,517,622 | ) |
| Conversion of member units | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,000,000 | ) | |
| (100 | ) | |
| - | | |
| - | | |
| (100 | ) |
| Issuance of preferred units | |
| 400,000 | | |
| 4,000,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 13,295,873 | | |
| - | | |
| 17,295,873 | |
| Issuance to of common units | |
| - | | |
| - | | |
| 915,000 | | |
| 100 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 100 | |
| Net Loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (5,133,141 | ) | |
| (5,133,141 | ) |
| Balance, February 28, 2023 | |
| 400,000 | | |
$ | 4,000,000 | | |
| 915,000 | | |
$ | 100 | | |
| - | | |
$ | - | | |
$ | 13,295,773 | | |
$ | (16,650,863 | ) | |
$ | 645,110 | |
The
accompanying notes are an integral part of these financial statements
NEXTTRIP
GROUP, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR
THE YEARS ENDED FEBRUARY 28, 2023 AND 2022
| | |
February 28,
2023 | | |
February 28,
2022 | |
| Cash Flows from Operating Activities: | |
| | | |
| | |
| Net Loss | |
$ | (5,133,141 | ) | |
$ | (5,437,764 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
| Depreciation and amortization | |
| 806,883 | | |
| 1,060,455 | |
| Impairment of intangible assets | |
| - | | |
| 1,215,746 | |
| Changes in operating assets and liabilities: | |
| | | |
| | |
| Receivables – related party | |
| - | | |
| (3,604 | ) |
| Accounts receivable | |
| 5,503 | | |
| - | |
| Prepaid expenses | |
| 48,796 | | |
| 45,170 | |
| Security deposit | |
| - | | |
| 14,234 | |
| Right of use asset | |
| 1,013,914 | | |
| - | |
| Accounts payable and accrued expenses | |
| 533,193 | | |
| (14,791 | ) |
| Deferred revenue | |
| (46,855 | ) | |
| 13,171 | |
| Net cash used in operating activities | |
| (2,772,157 | ) | |
| (3,107,383 | ) |
| Cash Flows from Investing activities: | |
| | | |
| | |
| Purchase of equipment | |
| (2,928 | ) | |
| (26,772 | ) |
| Lease liability | |
| (1,020,443 | ) | |
| - | |
| Purchase of intangible assets | |
| (2,354,094 | ) | |
| (1,717,087 | ) |
| Net cash used in investing activities | |
| (3,377,465 | ) | |
| (1,743,859 | ) |
| Cash Flows from Financing Activities: | |
| | | |
| | |
| Proceeds from notes payable - related party | |
| 281,000 | | |
| - | |
| Proceeds from issuance of convertible notes | |
| 3,233,503 | | |
| - | |
| Promissory note – related party | |
| (1,933,908 | ) | |
| - | |
| Advances from related party | |
| 13,295,973 | | |
| 6,993,461 | |
| Advances to related party | |
| (8,675,521 | ) | |
| (2,087,765 | ) |
| Net cash provided by financing activities | |
| 6,201,047 | | |
| 4,905,697 | |
| Increase in cash | |
| 51,425 | | |
| 54,455 | |
| Cash - beginning of the period | |
| 231,050 | | |
| 176,595 | |
| Cash - end of the period | |
$ | 282,475 | | |
$ | 231,050 | |
| Supplemental cash flow information | |
| | | |
| | |
| Cash paid for interest | |
$ | (1,769 | ) | |
$ | (8 | ) |
| Cash paid for taxes | |
$ | - | | |
$ | - | |
| Non-Cash Financing Transactions | |
| | | |
| | |
| Issuance of preferred units | |
$ | 4,000,000 | | |
$ | - | |
| Related party advances settlement | |
$ | (4,000,000 | ) | |
$ | - | |
The
accompanying notes are an integral part of these financial statements
NEXTTRIP
GROUP, LLC
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 2023 AND 2022
1.
Business Description and Going Concern
NextTrip
Group, LLC (“NextTrip” or the “Company”) was incorporated on January 7, 2021 organized under the laws of the
State of Florida. The operating agreement of NextTrip Group, LLC was entered into January 11, 2021 and made effective January 11, 2021.
The Company’s head office is located at 1560 Sawgrass Corporate Pkwy, 4th Floor, Sunrise, FL, 33323. The consolidated
financial statements include the accounts of the Company’s wholly owned subsidiaries, NextTrip Holdings Inc. incorporated October
22, 2015, and Extraordinary Vacations USA, Inc. incorporated June 24, 2002.
The
Company provides travel technology solutions with sales originating in the United States, with a primary emphasis on alternative lodging
rental (“ALR”) properties, hotel, air, cruise, and all-inclusive travel packages. Our proprietary booking engine, branded
as NextTrip 2.0, provides travel distributors access to a sizeable inventory.
On
January 25, 2023, NextPlay Technologies Inc. (“NextPlay”) and NextTrip Group, LLC (“NextTrip”) entered into an
Amended and Restated Separation Agreement (“Separation Agreement”), Amended and Restated Operating Agreement (“Operating
Agreement”), Exchange Agreement (“Exchange Agreement”), and together (“Agreements”) whereby NextPlay
transferred their interest in the travel business to NextTrip. As per the Exchange Agreement, NextPlay exchanged 1,000,000 Membership
Units of NextTrip for 400,000 Preferred Units in NextTrip. The Preferred Units have a value of $10.00 per Unit. NextTrip had a payable
amount to NextPlay of $17,295,873. This was partial payment that was exchanged for the 400,000 Preferred Units in NextTrip as per the
Exchange Agreement. Any intercompany amount owed after the separation date are to be considered a promissory note bearing 5% interest
per annum. As per ASC 505-10-45-2 the reporting of the paid in capital is considered equity.
The
Company has accounted for the business transfer on a retroactive basis. All assets, liabilities and results of operations assumed in
this transaction are the basis of these financial statements.
The
company owns 50% of Next Innovation LLC (Joint Venture) and this entity is in the process of a first structure plan. No activities nor
operations occurred in 2023 and NextTrip Group, LLC does not have control on the company and therefore no minority interest was recorded.
Going
Concern
As
of February 28, 2023, and 2022, the Company had an accumulated deficit of $16,650,863 and $11,517,722 respectively, and working capital
deficit of $1,112,788 and $12,721,563, respectively, and has incurred losses since incorporation. The Company will need to raise additional
funds through equity or debt financings to support the on-going operations, increase market penetration of our products, expand the marketing
and development of our travel and technology driven products, provide capital expenditures for additional equipment and development costs,
payment obligations, and systems for managing the business including covering other operating costs until the planned revenue streams
are fully implemented and begin to offset our operating costs. Failure to obtain additional capital to finance the Company’s working
capital needs on acceptable terms, or at all, would negatively impact the Company’s financial condition and liquidity.
The
Company has entered into a letter of intent, to vend into a public vehicle which if completed will provide the Company with sufficient
resources to continue operations into the future (see note 16).
Recent
Issues Surrounding the COVID-19 Pandemic
On
March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak and any related adverse
public health developments, has adversely affected workforces, economies, and financial markets globally, leading to an economic downturn.
The
duration and severity of the COVID-19 pandemic impeded global economic activity for an extended period of time, even as restrictions
have been lifted in many jurisdictions (including the United States) and vaccines are being made available, leading to decreased per
capita income and disposable income, increased and sustained unemployment or a decline in consumer confidence, all of which significantly
reduced discretionary spending by individuals and businesses on travel and may create a recession in the United States or globally. In
turn, that could have a negative impact on demand for our services. We also cannot predict the long-term effects of the COVID-19 pandemic
on our partners and their business and operations or the ways that the pandemic may fundamentally alter the travel industry. The aforementioned
circumstances could result in a material adverse impact on our business, financial condition, results of operations and cash flows, potentially
for a prolonged period.
Although
we currently cannot predict the full impact of the COVID-19 pandemic on our fiscal 2024 financial results relating to our operations,
we anticipate an increase in year-over-year revenue as compared to fiscal year 2023. However, the ultimate extent of the COVID-19 pandemic
and its impact on global travel and overall economic activity is constantly changing and impossible to predict currently. However, the
Company is seeing the return to normal operations.
2.
Summary of Significant Accounting Policies
Basis
of Presentation and Principles of Consolidation
The
accompanying consolidated financial statements and related disclosures have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission (“SEC”). The Financial Statements have been prepared using the accrual basis of accounting
in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United States.
The
financial statements have been prepared on a consolidated basis with those of the Company’s wholly owned subsidiaries. All intercompany
transactions and balances have been eliminated in consolidation.
Functional
and presentation currency
These
financial statements are presented in United States dollars (“USD”), which is the Company’s functional and reporting
currency. All financial information has been rounded to the nearest dollar except where otherwise indicated.
Limited
Liability of Members
Limitations
on Liability of Managers and Members. The liability of the Managers to the Company and the Members shall be limited to the extent, now
or hereafter set forth in the Articles, this Operating Agreement and as provided under the Florida Act.
No
Personal Liability. Except as otherwise provided in the Florida Act or by Applicable Law, no Members, Manager or Officer will be obligated
personally for any debt, obligation or liability of the Company or of any Company Subsidiaries, whether arising in contract, tort or
otherwise, solely by reason of being a Member, Manager and/or Officer.
Use
of Estimates
The
preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated
financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from
those estimates. These differences could have a material effect on the Company’s future results of operations and financial position.
Significant items subject to estimates and assumptions include the carrying amounts of intangible assets, depreciation and amortization.
Information
about key assumptions and estimation uncertainty that has a significant risk of resulting in a material adjustment to the
carrying amounts of the Company’s assets and liabilities within the next financial year are referenced in the notes to the
financial statements as follows:
| |
● |
The assessment of the Company to continue as a going concern; |
| |
● |
The measurement and useful life of intangible assets and property
and equipment |
| |
● |
Recoverability of long lived assets |
Cash
and Cash Equivalents
Cash
consists of amounts denominated in US dollars. The Company has not experienced any losses on such accounts. The Company considers all
highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents
as of February 28, 2023, or 2022.
Prepaids
The
Company records cash paid in advance for goods and/or services to be received in the future as prepaid expenses. Prepaid expenses are
expensed over time according to the terms of the purchase. Other current assets are recognized when it is probable that the future economic
benefits will flow to the Company and the asset has a cost or value that can be measured reliably. It is then charged to expense over
the expected number of periods during which economic benefits will be realized.
Accounts
Receivable
Accounts
receivables are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s
best estimate of the amount of probable credit losses in its existing accounts receivable.
The
Company considers accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts is required. If amounts
become uncollectible, they will be charged to operations when that determination is made.
Accounts
receivables balances as of February 28, 2023, and 2022, were 0 and $5,053, respectively. Receivables to a related party were $1,933,908
and $0 respectively. Management has determined that no allowance for credit losses is necessary as of February 28, 2023, or 2022.
Property
and Equipment
Recognition
and measurement
Items
of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. When parts of an item
of property and equipment have different estimated useful lives, they are accounted for as separate items within property and equipment.
The costs of the ongoing regular repairs and maintenance of property and equipment are recognized in the period in which they are incurred.
Depreciation
Depreciation
is recognized in profit or loss over the estimated useful lives of each part of an item of property and equipment in a manner that most
closely reflects management’s estimated future consumption of the future economic benefits embodied in the asset. The estimated
useful lives for the Company’s property and equipment are as follows:
| |
Category |
|
Method |
|
Estimated
useful life |
|
| |
Furniture
& Fixtures |
|
Straight
line |
|
5
years |
|
| |
Computer
& Equipment |
|
Straight
line |
|
3
years |
|
Intangible
assets
The
Company measures separately acquired intangible assets at cost less accumulated amortization and impairment losses. The Company recognizes
internally developed intangible assets when it has determined that the completion of such is technically feasible, and the Company has
sufficient resources to complete the development. Subsequent expenditures are capitalized when they increase the future economic benefits
of the associated asset. All other expenditures are recorded in profit or loss as incurred.
The
Company assesses whether the life of intangible asset is finite or indefinite. The Company reviews the amortization method and period
of use of its intangible assets at least annually. Changes in the expected useful life or period of consumption of future economic benefits
associated with the asset are accounted for prospectively by changing the amortization method or period as a change in accounting estimates
in profit or loss. The Company has assessed the useful life of its trademarks as indefinite.
The
estimated useful lives for the Company’s finite life intangible assets are as follows:
| |
Category |
|
Method |
|
Estimated
useful life |
|
| |
Software |
|
Straight
line |
|
3
years |
|
| |
Software
licenses |
|
Straight
line |
|
0.5
- 4 years |
|
Software
Development Costs
The
Company capitalizes internal software development costs subsequent to establishing technological feasibility of a software application
in accordance with guidelines established by “ASC 985-20-25” Accounting for the Costs of Software to Be Sold, Leased,
or Otherwise Marketed, requiring certain software development costs to be capitalized upon the establishment of technological feasibility.
The establishment of technological feasibility and the ongoing assessment of the recoverability of these costs require considerable judgment
by management with respect to certain external factors such as anticipated future revenue, estimated economic life, and changes in software
and hardware technologies. Amortization of the capitalized software development costs begins when the product is available for general
release to customers. Capitalized costs are amortized based on the straight-line method over the remaining estimated economic life of
the product.
Impairment
of Intangible Assets
In
accordance with ASC 350-30-65 “Goodwill and Other Intangible Assets”, the Company assesses the impairment of identifiable
intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company
considers important, which could trigger an impairment review include the following:
| |
1. Significant underperformance compared to historical or projected future operating results. |
| |
2. Significant changes in the manner or use of the acquired assets or the strategy for the overall business, and |
| |
3. Significant negative industry or economic
trends. |
When
the Company determines that the carrying value of an intangible asset may not be recoverable based upon the existence of one or more
of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows,
the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using
a discount rate determined by management to be commensurate with the risk inherent to the current business model. Significant management
judgment is required in determining whether an indicator of impairment exists and in projecting cash flows. Intangible assets that have
finite useful lives are amortized over their useful lives.
Leases
The
Company adopted ASU 2016-02 (Topic ASC 842) Leases, which requires a lessee to recognize a lease asset and a leases liability for operating
leases arrangements greater than twelve (12) months.
We
determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”)
assets, operating lease liabilities - current, and operating lease liabilities - noncurrent on the balance sheets. Finance leases are
included in property and equipment, other current liabilities, and other long-term liabilities in our balance sheets.
ROU
assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease
payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present
value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we generally use our incremental
borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement
date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include
options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments
is recognized on a straight-line basis over the lease term.
Reclassification
Certain
prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on the
net earnings (loss) or and financial position.
Concentration
of Credit Risk
Financial
instruments that potentially subject to concentrations of credit risk consist primarily of cash. All of the Company’s cash is held
at high credit quality financial institutions. No credit risk in accounts receivable as deemed collectable.
Fair
Value of Financial Instruments
The
Company follows accounting guidelines on fair value measurements for financial instruments measured on a recurring basis, as well as
for certain assets and liabilities that are initially recorded at their estimated fair values. Fair Value is defined as the exit price,
or the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants
as the measurement date. The Company uses the following three-level hierarchy that maximizes the use of observable inputs and minimizes
the use of unobservable inputs to value its financial instruments:
| |
● |
Level
1: Observable inputs such as unadjusted quoted prices in active markets for identical instruments. |
| |
|
|
| |
● |
Level
2: Quoted prices for similar instruments that are directly or indirectly observable in the marketplace. |
| |
|
|
| |
● |
Level
3: Significant unobservable inputs which are supported by little or no market activity and that are financial instruments whose values
are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which
the determination of fair value requires a significant judgment or estimation. |
Financial
instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair
value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety
requires it to make judgments and consider factors specific to the asset or liability. The use of different assumptions and/or estimation
methodologies may have a material effect on estimated fair values. Accordingly, the fair value estimates disclosed, or initial amounts
recorded may not be indicative of the amount that the Company or holders of the instruments could realize in a current market exchange.
The
carrying amounts of the Company’s financial instruments including cash, accounts receivable, accounts payable, accrued expenses,
convertible notes and notes payable are of approximately fair value due to the short-term maturities of these instruments.
Revenue
Recognition
The
Company recognizes revenue in accordance with ASC 606 which involves identifying the contracts with customers, identifying performance
obligations in the contracts, determining transactions price, allocating transaction price to the performance obligation and recognizing
revenue when the performance obligation is satisfied.
The
Company recognizes revenue when the customer has purchased the product, the occurrence of the earlier of date of travel or the date of
cancellation has expired, as satisfaction of the performance obligation, the sales price is fixed or determinable and collectability
is reasonably assured. Revenue for customer travel packages purchased directly from the Company are recorded gross (the amount paid to
the Company by the customer is shown as revenue and the cost of providing the respective travel package is recorded to cost of revenues).
The
Company generates revenues from sales directly to customers as well as through other distribution channels of tours and activities at
destinations throughout the world.
The
Company controls the specified travel product before it is transferred to the customer and is therefore a principal, based on but not
limited to, the following:
| |
● |
The Company is primarily responsible for fulling the promise
to provide such travel product. |
| |
● |
The Company has inventory risk before the specified travel
product has been transferred to a customer or after transfer of control to a customer. |
| |
● |
The Company has discretion in establishing the price for the
specified travel product. |
Payments
for tours or activities received in advance of services being rendered are recorded as deferred revenue and recognized as revenue at
the earlier of the date of travel or the last date of cancellation (i.e., the customer’s refund privileges lapse).
Sales
and Marketing
Selling
and administration expenses consist primarily of marketing and promotional expenses, expenses related to our participation in industry
conferences, and public relations expenses.
Sales
and marketing expenses are charged to expense as incurred and are included in selling and promotions expenses in the accompanying consolidated
financial statements. Sales and marketing expense for the years ended February 28, 2023, and 2022, was $708,047 and $1,370,889, respectively.
Income
Taxes
Income
taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. A valuation allowance on deferred tax assets is established when management considers it is more likely
than not that some portion or all of the deferred tax assets will not be realized.
Tax benefits from an uncertain tax position are
only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities,
based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a
position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate
resolution. Interest and penalties related to unrecognized tax benefits are recorded as incurred as a component of income tax
expense. The Company has not recognized any tax benefits from uncertain tax positions for any of the reporting periods
presented.
No
provision for federal income taxes is necessary in the financial statements of the subsidiaries as they have elected to be treated as
a partnership for tax purposes and therefore they are not subject to federal income tax and the tax effect of its activities accrues to
the members.
In certain circumstances, partnerships may be held to be associations taxable
as corporations. The IRS has issued regulations specifying circumstances under current law when such a finding may be made, and management,
based on those regulations that the partnership is not an association taxable as a corporation. A finding that the partnership is an association
taxable as a corporation could have a material adverse effect on the financial position and results of operations of the partnership.
Recently
adopted accounting pronouncements
In
August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—
Contracts in Entity’s Own Equity (Subtopic 815-40). The FASB issued this ASU to address issues identified as a result of the complexity
associated with GAAP for certain financial instruments with characteristics of liabilities and equity. Complexity associated with the
accounting is a significant contributing factor to numerous financial statement restatements and results in complexity for users attempting
to understand the results of applying the current guidance. In addressing the complexity, the FASB focused on amending the guidance on
convertible instruments and the guidance on the derivatives scope exception for contracts in an entity’s own equity. For convertible
instruments, the FASB decided to reduce the number of accounting models for convertible debt instruments and convertible preferred stock.
Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared
with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features
that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for
a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums
are recorded as paid-in capital. The FASB concluded that eliminating certain accounting models simplifies the accounting for convertible
instruments, reduces complexity for preparers and practitioners, and improves the decision usefulness and relevance of the information
provided to financial statement users. In addition to eliminating certain accounting models, the FASB also decided to enhance information
transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share (EPS) guidance on
the basis of feedback from financial statement users. The FASB decided to amend the guidance for the derivatives scope exception for
contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. The FASB observed that the application
of the derivatives scope exception guidance results in accounting for some contracts as derivatives while accounting for economically
similar contracts as equity. The FASB also decided to improve and amend the related EPS guidance. The amendments in this ASU are effective
for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted,
but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The FASB specified
that an entity should adopt the guidance as of the beginning of its annual fiscal year. The FASB decided to allow entities to adopt the
guidance through either a modified retrospective method of transition or a fully retrospective method of transition. The Company adopted
ASU 2020-06 on April 1, 2022 on a prospective basis. The adoption of this standard did not have an impact on the Company’s consolidated
financial statements.
In
May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50),
Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity- Classified Written Call Options. ASU
2021-04 requires accounting for modifications or exchanges of freestanding equity- classified written call options (for example, warrants)
that remain equity classified after the modification or exchange based on the economic substance of the modification or exchange. The
recognition of the modification depends on the nature of the transaction in which the equity-classified written call option is modified.
If there is more than one element in a transaction (for example, if the modification involves both a debt modification and an equity
issuance), then the guidance requires allocating the effect of the option modification to each element. ASU 2021-04 is effective for
the Company beginning in the first quarter of 2022. ASU 2021-04 should be applied prospectively to modifications or exchanges occurring
on or after the effective date of the amendments. The Company adopted ASU 2021-04 on April 1, 2022 on a prospective basis. The adoption
of this standard did not have an impact on the Company’s consolidated financial statements.
In
March 2022, the FASB issued ASU 2022-02, ASC Subtopic 326 “Credit Losses”: Troubled Debt Restructurings and Vintage Disclosures.
Since the issuance of Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments, the Board has provided resources to monitor and assist stakeholders with the implementation of
Topic 326. Post-Implementation Review (PIR) activities have included forming a Credit Losses Transition Resource Group, conducting outreach
with stakeholders of all types, developing educational materials and staff question-and-answer guidance, conducting educational workshops,
and performing an archival review of financial reports. ASU No. 2022-02 is effective for annual and interim periods beginning after December
15, 2022. The adoption of this standard did not have a significant impact on the Company’s unaudited condensed consolidated financial
statements.
The
Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will
have a material impact on its consolidated financial statements.
3.
Prepaid and Other Current Assets
Prepaid
and other current assets consisted of the following as of February 28, 2023 and as of February 28, 2022:
| | |
February
28, 2023 | | |
February
28, 2022 | |
| Prepaid marketing expenses | |
$ | 100 | | |
$ | - | |
| Prepaid other expenses | |
| 8,513 | | |
| 3,424 | |
| Prepaid cost of sales | |
| - | | |
| 53,985 | |
| Total | |
$ | 8,613 | | |
$ | 57,409 | |
4.
Leases
On
January 25, 2023, as part of the separation agreement with NextPlay Technologies Inc., the Company assumed control of a lease arrangement
for office space in Florida.
The
following summarizes the right-of-use asset and lease information about the Company’s operating lease as of February 28, 2023:
| Year ended February 28 | |
2023 | |
| Lease cost | |
| | |
| Operating Lease Cost | |
$ | 12,168 | |
| Amortization of right of use asset | |
| 7,756 | |
| Total lease cost | |
| 19,924 | |
| Cash paid from operating cash flows from operating leases | |
$ | 0 | |
| Right-of-use assets | |
| 1,020,443 | |
| Weighted average remaining lease term - operating lease (years) | |
| 5.42 | |
| Weighted average discount rate - operating lease | |
| 9.18 | % |
Future
minimum lease payments under the operating lease liability has the following non-cancellable lease payments at February 28, 2023:
Future
minimum lease payments under operating leases
| Year ended February 28, | |
| |
| 2024 | |
$ | 228,801 | |
| 2025 | |
| 233,365 | |
| 2026 | |
| 238,056 | |
| 2027 | |
| 242,874 | |
| 2028 | |
| 247,818 | |
| Thereafter | |
| 105,397 | |
| | |
| 1,296,311 | |
| Less: Imputed interest | |
| (282,397 | ) |
| Operating lease liability | |
| 1,013,914 | |
| Operating lease liability - Current | |
| 149,339 | |
| Operating lease liability - Non-current | |
$ | 864,575 | |
5.
Property and Equipment
Property
and equipment as of February 28, 2023, and 2022 consisted of the following:
| | |
February
28, 2023 | | |
February
28, 2022 | |
| Furniture and Fixtures | |
$ | 17,018 | | |
$ | 17,018 | |
| Computer and Equipment | |
| 73,548 | | |
| 70,621 | |
| Total | |
| 90,566 | | |
| 87,639 | |
| Accumulated depreciation | |
| (74,030 | ) | |
| (43,645 | ) |
| Property and Equipment, net of depreciation | |
$ | 16,536 | | |
$ | 43,994 | |
Depreciation
expense for the years ended February 28, 2023, and 2022, was $30,386 and $20,513, respectively, and is recorded in operating expenses.
During
the years ended February 28, 2023, and 2022, the Company acquired property and equipment of $2,928 and $26,772, respectively.
During
the year the Company entered into an asset purchase agreement to acquire Bookit. (see note 13)
6.
Intangible Assets
Intangible
assets as of February 28, 2023, and 2022 consisted of the following:
| | |
February 28,
2023 | | |
February 28,
2022 | |
| Software Development | |
$ | 6,268,044 | | |
$ | 3,959,133 | |
| Software Licenses | |
| 427,576 | | |
| 397,477 | |
| Trademark | |
| 6,283 | | |
| 6,283 | |
| Total | |
| 6,701,903 | | |
| 4,362,893 | |
| Accumulated amortization | |
| (3,933,543 | ) | |
| (3,172,130 | ) |
| Intangible assets, net of amortization | |
$ | 2,768,360 | | |
$ | 1,190,763 | |
Amortization
expense for the years ended February 28, 2023, and 2022, was $776,497 and $1,020,848, respectively, and recorded in operating expenses.
During
the years ended February 28, 2023, and 2022, the Company recorded impairment loss of $0 and $1,215,746, respectively, associated with
the carrying value exceeded its recoverable amount.
7.
Accounts Payable and Accrued Liabilities
As
of February 28, 2023, the Company had accounts payable of $519,136 and accrued expenses of $329,922, compared to $302,059 of
accounts payable and $13,806 of accrued expenses for the year ended February 28, 2022.
8.
Income Taxes
The
Company shall file as a partnership for income tax purposes.
The
income, gains, losses, deductions and expenses of the Company are allocated among the Members in accordance with the Members respective
Memberships’ interest.
9.
Convertible Notes
On
July 27, 2022, the Company issued a $150,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest
at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a
Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion
price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share
received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until
October 31, 2025. During the years ended February 28, 2023, and 2022, the Company recorded accrued interest of $7,101 and $0, respectively
related to the note. The note has a maturity date of December 31, 2023.
On
July 27, 2022, the Company issued a $200,000 convertible note upon the receipt of such proceeds from the counterparty. The note bears
interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger
with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a
conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for
each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per
share, until October 31, 2025. During the years ended February 28, 2023, and 2022, the Company recorded accrued interest of $9,468 and
$0, respectively, related to the note. The note has a maturity date of December 31, 2023.
On
August 5, 2022, the Company issued a $12,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest
at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a
Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion
price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share
received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until
October 31, 2025. During the years ended February 28, 2023, and 2022, the Company recorded accrued interest of $544 and $0 respectively,
related to the note. The note has a maturity date of February 5, 2023, and the holder has no intention of calling the note.
On
August 6, 2022, the Company issued a $500,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest
at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a
Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion
price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share
received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until
October 31, 2025. During the years ended February 28, 2023, and 2022, the Company recorded accrued interest of $22,575 and $0, respectively,
related to the note. The note has a maturity date of February 6, 2023, and the holder has no intention of calling the note.
On
September 14, 2022, the Company issued a $100,000 convertible note upon the receipt of such proceeds from a third party. The note bears
interest at a rate of 8% per annum and such amount will be converted to shares in a new public company issued upon the completion of
a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the
SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant
for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00
per share, until October 31, 2025. During the years ended February 28, 2023, and 2022, the Company recorded accrued interest of $3,660
and $0, respectively related to the note. The note has a maturity date of February 24, 2023, and the holder has no intention of calling
the note.
On
October 31, 2022, the Company issued a $250,000 convertible note upon the receipt of such proceeds from a third party, with an option
to increase the note to $500,000 up until November 8, 2022. In accordance with an amended agreement, the note bears interest at a rate
of 8% per annum and such amount will be converted to shares in a new public company issued upon the completion of a merger with a Special
Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price
of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received,
in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October
31, 2025. During the years ended February 28, 2023, and 2022, the Company recorded accrued interest of $6,575 and $0, respectively, related
to the note. The note has a maturity date of January 31, 2023, and the holder has no intention of calling the note.
On
November 22, 2022, the Company a $150,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest
at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a
Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion
price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share
received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until
October 31, 2025. During the year ended February 28, 2023, and 2022 the Company recorded accrued interest of $3,222 and $0, respectively
related to the note. The note has a maturity date of February 28, 2023, and the holder has no intention of calling the note.
On
December 1, 2022, the Company issued a $75,000 convertible note upon the receipt of such proceeds from a third party. The note bears
interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger
with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a
conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for
each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per
share, until October 31, 2025. During the years ended February 28, 2023 and 2022, the Company recorded accrued interest of $1,479 and
$0, respectively, related to the note. The note has a maturity date of February 28, 2023, and the holder has no intention of calling
the note.
On
December 1, 2022, the Company issued a $50,000 convertible note upon the receipt of such proceeds from a third party. The note bears
interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger
with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a
conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for
each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per
share, until October 31, 2025. During the years ended February 28, 2023, and 2022, the Company recorded accrued interest of $975 and
$0, respectively, related to the note. The note has a maturity date of July 31, 2023.
On
December 12, 2022, the Company issued a $350,000 convertible note upon the receipt of such proceeds from a third party. The note bears
interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger
with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a
conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for
each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per
share, until October 31, 2025. During the years ended February 28, 2023 and 2022, the Company recorded accrued interest of $5,984 and
$0, respectively related to the note. . The note has a maturity date of April 30, 2023 and the holder has no intention of calling the
note.
On
December 12, 2022, the Company issued a $250,000 convertible note upon the receipt of such proceeds from a third party. The note bears
interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger
with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a
conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for
each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per
share, until October 31, 2025. During the years ended February 28, 2023, and 2022, the Company recorded accrued interest of $4,274 and
$0, respectively, related to the note. The note has a maturity date of February 28, 2023.
On
January 25, 2023, the Company issued a $250,000 convertible note upon the receipt of such proceeds from a third party. The note bears
interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger
with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a
conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for
each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per
share, until October 31, 2025. During the years ended February 28, 2023 and 2022, the Company recorded accrued interest of $1,863 and
$0, respectively, related to the note. The note has a maturity date of July 31, 2023.
On
January 31, 2023, the Company issued a $600,000 convertible note upon the receipt of such proceeds from a third party. The note bears
interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger
with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a
conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for
each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per
share, until October 31, 2025. During the years ended February 28, 2023, and 2022, the Company recorded accrued interest of $3,682 and
$0, respectively, related to the note. The note has a maturity date of April 30, 2023.
On
February 21, 2023, the Company issued a $75,000 convertible note upon the receipt of such proceeds from a third party. The note bears
interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger
with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a
conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for
each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per
share, until October 31, 2025. During the years ended February 28, 2023, and 2022, the Company recorded accrued interest of $115 and
$0, respectively, related to the note. The note has a maturity date of July 31, 2023.
On
September 19, 2022, the Company entered into a Software as a Service Agreement with a prospective client in which the Company received
a $150,000 down payment upon signing of the contract. On December 31, 2022, the Company entered into an amended agreement with the counterparty
in which the down payment became a noninterest bearing share issuance obligation in which such amount will be converted to shares in
a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion
the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion,
the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s
common stock at a price of $3.00 per share, until October 31, 2025. As of February 28, 2023, the Company has classified the obligation
to issue shares in accordance with the agreement within convertible debt.
10.
Preferred Units
As
a result of the Exchange Agreement (“Exchange Agreement”) entered on January 25, 2023, NextPlay Technologies Inc. (“NextPlay”)
and NextTrip Group, LLC (“NextTrip”), NextPlay exchanged 1,000,000 Membership Interests of NextTrip for 400,000 Preferred
Units in NextTrip (see note 1). In 2022 the Company did not issue any Preferred Units.
11.
Membership Units
For
the years ended February 28, 2023 and 2022, the Company had 0 and 1,000,000 Membership Interests authorized, issued and outstanding with
a par value of $.0001 per unit. In 2023 1,000,000 Membership Interests outstanding were exchanged for Preferred Units (see note 10) and
the Member Interests were cancelled accordingly.
12.
Common Units
For
the years ended February 28, 2023 and 2022, the Company has 915,000 and 0 Common Units, par value $.0001 authorized respectively. During
the year ended February 28, 2023, the Company issued 915,000 Common Units to William Kerby and Donald Monaco (see note 1). No Common
Units were issued and outstanding in 2022.
13.
Related Party Transactions
| |
(i) |
Travel Booking Engine Purchase: |
| |
|
|
| |
|
On February 28, 2023, the
Company purchased the right, title and interest in Travel and Media Tech, LLC ‘s (“TMT”) “Bookit” or
“NextTrip 2.0” booking engine, customer lists, inclusion of all current content associated to hotel and destination
product in the booking engine (pictures, hotel descriptions, restaurant descriptions, room descriptions, amenity descriptions, and
destination information.) and source code related thereto from TMT a related entity owned by Don Monaco and William Kerby. This was
an asset purchase made by the Company as per the agreement between both entities. |
| |
|
|
| |
(ii) |
The Company’s related parties Messrs. William Kerby and
Donald Monaco, have the authority and responsibility for planning, directing, and controlling the activities of the Company. |
| |
|
|
| |
(iii) |
NextPlay and the Company entered into an agreement for NextPlay
to transfer all of its Travel Business to the Company. This transaction was accounted for retroactively (see note 1). |
| |
|
|
| |
(iv) |
Amounts due to related parties in 2023 was $281,000, 2022 $12,675,421.
The amount due in 2023 relates directly to William Kerby and Donald Monaco. |
14.
Deferred Revenue
Deferred
revenue as of the years ended February 28, 2023, and 2022 was $22,750 and $69,605, respectively.
Deferred
revenue consists of travel deposits received from users in advance of revenue recognition. The deferred revenue balance for the years
ended February 28, 2023 and 2022, was driven by cash payments from customers in advance of satisfying our performance obligations.
15.
Commitments and Contingencies
The
Company is involved, from time to time, in litigation, other legal claims and proceedings involving matters associated with or
incidental to our business, including, among other things, matters involving breach of contract claims, intellectual property,
employment issues, and other related claims and vendor matters. The Company believes that the resolution of currently pending
matters could, individually or in the aggregate, have a material adverse effect on our financial condition or results of operations.
However, assessment of the current litigation or other legal claims could change considering the discovery of facts not presently
known to the Company or by judges, juries or other finders of fact, which are not in accord with management’s evaluation of
the possible liability or outcome of such litigation or claims.
16.
Subsequent Events
The
Company has evaluated subsequent events through August 14, 2023 the date on which these financial statements were available to be issued.
The Company did not identify any material subsequent events requiring adjustments to or disclosure in its financial statements, other
than those noted below.
| |
(i.) |
As previously reported in our February 28, 2022 audited financial
statements we reported that on May 22, 2023 – Genesis Growth Tech Acquisition Corp. (“Genesis”), (NASDAQ: GGAA), a
special purpose acquisition company, and NextTrip Group LLC., a travel technology incubator based in Sunrise, Florida (“NextTrip”),
announced today that they have entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) that, upon
closing, will provide the opportunity for NextTrip to become a publicly traded company on NASDAQ. NextTrip is a travel technology company
that specializes in using proprietary technology, analytics, and strategic partnerships to provide specialized travel solutions in leisure,
wellness, and business travel. |
| |
(ii.) |
On July 25, 2023, NextTrip Holdings Inc., a Florida corporation
(“NextTrip”) terminated the Agreement and Plan of Merger, dated as of May 22, 2023 (the “Merger Agreement”),
with Genesis Growth Tech Acquisition Corp., a Cayman Islands exempted company (together with its successors, “Genesis”) because
Genesis is in material breach of multiple provisions of the Merger Agreement. |
| |
(iii.) |
On July 25, 2023, NextTrip Group LLC (NextTrip) a Florida corporation,
and Sigma Additive Solutions (SASI), a Nevada corporation signed a letter of intent reflecting the mutual intention of both parties to
merge. The consummation of the Proposed Transaction (the “Closing”) will take place at the offices of a location that is
mutually acceptable to the Parties on the first business day after the day the last of the conditions set forth in the Definitive Agreements
is satisfied or waived, or at such other place and date as is agreed between the Parties (the “Closing Date”). The Parties
shall use commercially reasonable efforts to cause the Closing Date to occur on or before November 30th, 2023, unless otherwise agreed
in writing by the parties. |
| |
(iv.) |
The holders of Convertible Notes (see note 9), which have matured
as of the issuance of the audit report have not called the note nor have, they provided notice on intention of calling the note. |
NEXTTRIP
GROUP, LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
As
of August 31, 2023 and February 28, 2023
(Unaudited)
| | |
August
31, 2023 | | |
February
28, 2023 | |
| ASSETS: | |
| | | |
| | |
| Cash | |
$ | 105,902 | | |
$ | 282,475 | |
| Receivables | |
| 5,000 | | |
| - | |
| Receivables – related party, net | |
| 1,992,630 | | |
| 1,933,908 | |
| Prepaid expenses and other current assets | |
| 42,727 | | |
| 8,613 | |
| Total Current Assets | |
| 2,146,259 | | |
| 2,224,996 | |
| Non-Current assets | |
| | | |
| | |
| Property and equipment, net | |
| 5,986 | | |
| 16,536 | |
| Intangible assets, net | |
| 2,480,161 | | |
| 2,768,360 | |
| Security deposit | |
| 15,000 | | |
| 15,000 | |
| Right of use asset | |
| 945,595 | | |
| 1,020,443 | |
| Total Non-Current Assets | |
| 3,446,742 | | |
| 3,820,339 | |
| Total Assets | |
$ | 5,593,001 | | |
$ | 6,045,335 | |
| LIABILITIES: | |
| | | |
| | |
| Current Liabilities | |
| | | |
| | |
| Accounts payable | |
$ | 582,121 | | |
$ | 519,136 | |
| Accrued expenses | |
| 377,896 | | |
| 329,922 | |
| Convertible notes | |
| 4,303,345 | | |
| 3,233,503 | |
| Convertible notes – related parties | |
| 200,010 | | |
| - | |
| Deferred revenue | |
| 79,906 | | |
| 22,750 | |
| Notes payable - related parties | |
| 573,500 | | |
| 281,000 | |
| Operating Lease Liability – current | |
| 219,706 | | |
| 149,339 | |
| Total Current Liabilities | |
| 6,336,484 | | |
| 4,535,650 | |
Non-
Current Liabilities: | |
| | | |
| | |
| Operating Lease Liability – non-current | |
| 794,208 | | |
| 864,575 | |
| Total Non-Current Liabilities | |
| 794,208 | | |
| 864,575 | |
| Total Liabilities | |
| 7,130,692 | | |
| 5,400,225 | |
| Commitments and Contingencies | |
| - | | |
| - | |
| Equity: | |
| | | |
| | |
| Preferred units: par value $10, 400,000 authorized, 400,000 issued and outstanding | |
| 4,000,000 | | |
| 4,000,000 | |
Common units: par value $0.0001, 1,000,000 authorized, 915,000
issued and outstanding | |
| 100 | | |
| 100 | |
| Additional Paid in Capital | |
| 13,295,873 | | |
| 13,295,873 | |
| Accumulated deficit | |
| (18,833,664 | ) | |
| (16,650,863 | ) |
| Total Members’ (Deficit)/Equity | |
| (1,537,691 | ) | |
| 645,110 | |
| Total Liabilities and Members’ Equity | |
$ | 5,593,001 | | |
$ | 6,045,335 | |
The
accompanying notes are an integral part of these condensed consolidated financial statements
NEXTTRIP
GROUP, LLC
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED AUGUST 31, 2023 AND 2022
(Unaudited)
| | |
For the six months ended | | |
For the three months ended | |
| | |
August 31, | | |
August 31, | | |
August 31, | | |
August 31, | |
| | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| Revenue | |
$ | 47,225 | | |
$ | 312,388 | | |
$ | 27,663 | | |
$ | 140,638 | |
| Cost of revenue | |
| (39,836 | ) | |
| (252,200 | ) | |
| (22,118 | ) | |
| (116,159 | ) |
| Gross profit | |
| 7,389 | | |
| 60,189 | | |
| 5,545 | | |
| 24,479 | |
| Operating Expenses | |
| | | |
| | | |
| | | |
| | |
| General and administrative | |
| 1,365,945 | | |
| 1,757,190 | | |
| 711,239 | | |
| 801,516 | |
| Sales and marketing | |
| 90,539 | | |
| 506,208 | | |
| 49,758 | | |
| 263,254 | |
| Depreciation and amortization | |
| 594,555 | | |
| 213,356 | | |
| 331,549 | | |
| 10,044 | |
| Total Operating Expenses | |
| 2,051,039 | | |
| 2,476,755 | | |
| 1,092,546 | | |
| 1,074,814 | |
| Operating loss | |
| (2,043,650 | ) | |
| (2,416,566 | ) | |
| (1,087,001 | ) | |
| (1,050,335 | ) |
| Other (Income)/Expenses | |
| | | |
| | | |
| | | |
| | |
| Other expenses/(income) | |
| - | | |
| 3,138 | | |
| - | | |
| (29,707 | ) |
| Interest (income) expense, net | |
| 139,151 | | |
| 396 | | |
| 73,762 | | |
| 396 | |
| Total other (income) expense | |
| 139,151 | | |
| 3,534 | | |
| 73,762 | | |
| (29,311 | ) |
| Net loss before taxes | |
| (2,182,801 | ) | |
| (2,420,100 | ) | |
| (1,160,763 | ) | |
| (1,021,024 | ) |
| Provision for income taxes | |
| - | | |
| - | | |
| - | | |
| - | |
| Net loss | |
$ | (2,182,801 | ) | |
$ | (2,420,100 | ) | |
$ | (1,160,763 | ) | |
$ | (1,021,024 | ) |
| Basic and diluted income/(loss)
per common units | |
$ | (2.39 | ) | |
$ | - | | |
$ | (1.27 | ) | |
$ | - | |
| | |
| | | |
| | | |
| | | |
| | |
| Basic and diluted income/(loss) per member interests | |
$ | - | | |
$ | (2.42 | ) | |
$ | - | | |
$ | (0.9 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Basic and diluted weighted average
number of common units | |
| 915,000 | | |
| - | | |
| 915,000 | | |
| - | |
Basic
and diluted weighted average number of member interests | |
| - | | |
| 1,000,000 | | |
| - | | |
| 1,000,000 | |
The
accompanying notes are an integral part of these condensed consolidated financial statements
NEXTTRIP
GROUP, LLC.
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS’ DEFICIT
FOR THE THREE AND SIX MONTHS ENDED AUGUST 31, 2023 AND 2022
(Unaudited)
For
the six months ended August 31, 2023
| | |
Preferred | | |
Members | | |
Common | | |
Additional Paid in | | |
Accumulated Equity | | |
Total Members’ | |
| | |
Units | | |
Amount | | |
Interest | | |
Amount | | |
Units | | |
Amount | | |
Capital | | |
(Deficit) | | |
(Deficit) | |
| Balance, February 28, 2023 | |
| 400,000 | | |
$ | 4,000,000 | | |
| - | | |
$ | | | |
| 915,000 | | |
$ | 100 | | |
$ | 13,295,873 | | |
$ | (16,650,863 | ) | |
$ | 645,110 | |
| Net Loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (2,182,801 | ) | |
| (2,182,801 | ) |
| Balance, August 31, 2023 | |
| 400,000 | | |
$ | 4,000,000 | | |
| - | | |
$ | - | | |
| 915,000 | | |
$ | 100 | | |
$ | 13,295,873 | | |
| (18,833,664 | ) | |
| (1,537,691 | ) |
For
the three months ended August 31, 2023
| | |
Preferred | | |
Members | | |
Common | | |
Additional Paid in | | |
Accumulated Equity | | |
Total Members’ | |
| | |
Units | | |
Amount | | |
Interest | | |
Amount | | |
Units | | |
Amount | | |
Capital | | |
(Deficit) | | |
(Deficit) | |
| Balance, May 31, 2023 | |
| 400,000 | | |
$ | 4,000,000 | | |
| - | | |
$ | | | |
| 915,000 | | |
$ | 100 | | |
$ | 13,295,873 | | |
$ | (17,672,901 | ) | |
$ | (376,928 | ) |
| Net Loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,160,763 | ) | |
| (1,160,763 | ) |
| Balance, August 31, 2023 | |
| 400,000 | | |
$ | 4,000,000 | | |
| - | | |
$ | - | | |
| 915,000 | | |
$ | 100 | | |
$ | 13,295,873 | | |
$ | (18,833,664 | ) | |
$ | (1,537,691 | ) |
For
the six months ended August 31, 2022
| | |
Preferred | | |
Members | | |
Common | | |
Additional Paid in | | |
Accumulated Equity | | |
Total Members’ | |
| | |
Units | | |
Amount | | |
Interest | | |
Amount | | |
Units | | |
Amount | | |
Capital | | |
(Deficit) | | |
(Deficit) | |
| Balance, February 28, 2022 | |
| - | | |
$ | - | | |
| 1,000,000 | | |
$ | 100 | | |
| - | | |
$ | - | | |
$ | - | | |
$ | (11,517,722 | ) | |
$ | (11,517,722 | ) |
| Net Loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (2,420,100 | ) | |
| (2,420,100 | ) |
| Balance, August 31, 2022 | |
| - | | |
$ | - | | |
| 1,000,000 | | |
$ | 100 | | |
| - | | |
$ | - | | |
$ | - | | |
$ | (13,937,822 | ) | |
$ | (13,937,822 | ) |
For
the three months ended August 31, 2022
| | |
Preferred | | |
Members | | |
Common | | |
Additional Paid in | | |
Accumulated
Equity | | |
Total Members’ | |
| | |
Units | | |
Amount | | |
Interest | | |
Amount | | |
Units | | |
Amount | | |
Capital | | |
(Deficit) | | |
(Deficit) | |
Balance, May 31, 2022
| |
| - | | |
$ | - | | |
| 1,000,000 | | |
$ | 100 | | |
| - | | |
$ | - | | |
$ | - | | |
$ | (13,040,966 | ) | |
$ | (13,040,966 | ) |
| Net Loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,021,024 | ) | |
| (1,021,024 | ) |
| Balance, August 31, 2022 | |
| - | | |
$ | - | | |
| 1,000,000 | | |
$ | 100 | | |
| - | | |
$ | - | | |
$ | - | | |
$ | (14,061,990 | ) | |
$ | (14,061,990 | ) |
The
accompanying notes are an integral part of these condensed consolidated financial statements
NEXTTRIP
GROUP, LLC
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED AUGUST 31, 2023 AND 2022
(Unaudited)
| | |
August 31, 2023 | | |
August 31, 2022 | |
| Cash Flows from Operating Activities: | |
| | | |
| | |
| Net Loss | |
$ | (2,182,801 | ) | |
$ | (2,420,100 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
| Depreciation and amortization | |
| 594,555 | | |
| 213,356 | |
| Changes in operating assets and liabilities: | |
| | | |
| | |
| Receivables | |
| (5,000 | ) | |
| (292,277 | ) |
| Prepaid expenses and other current assets | |
| (18,896 | ) | |
| (300,261 | ) |
| Accounts payable and accrued expenses | |
| 95,741 | | |
| 811,832 | |
| Deferred revenue | |
| 57,156 | | |
| 245,752 | |
| Right of use asset | |
| 74,848 | | |
| 36,153 | |
| Net cash used in operating activities | |
| (1,384,397 | ) | |
| (1,705,545 | ) |
Cash Flows from Investing activities: | |
| | | |
| | |
| Purchase of equipment | |
| - | | |
| (123,084 | ) |
| Purchase of intangible assets | |
| (345,806 | ) | |
| (2,030,422 | ) |
| Net cash used in investing activities | |
| (345,806 | ) | |
| (2,153,506 | ) |
Cash Flows from Financing Activities: | |
| | | |
| | |
| Proceeds from convertible notes issued | |
| 1,069,842 | | |
| - | |
| Proceeds from convertible notes – related parties | |
| 200,010 | | |
| - | |
| Advances from related party | |
| 283,778 | | |
| 3,731,635 | |
| Net cash provided by financing activities | |
| 1,553,630 | | |
| 3,731,635 | |
Decrease in cash | |
| (176,573 | ) | |
| (127,416 | ) |
| Cash balance, beginning of the period | |
| 272,475 | | |
| 231,050 | |
| Cash balance, end of the period | |
$ | 95,902 | | |
$ | 103,634 | |
| | |
| | | |
| | |
Supplemental cash flow information | |
| | | |
| | |
| Cash paid for interest | |
$ | - | | |
$ | 395.63 | |
| Cash paid for taxes | |
$ | - | | |
$ | - | |
The
accompanying notes are an integral part of these condensed consolidated financial statements
NEXTTRIP
GROUP, LLC
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.
Business Description and Going Concern
NextTrip
Group, LLC (“NextTrip” or the “Company”) was incorporated on January 7, 2021 organized under the laws of the
State of Florida. The operating agreement of NextTrip Group, LLC was entered into January 11, 2021 and made effective January 11, 2021.
The Company’s head office is located at 1560 Sawgrass Corporate Pkwy, 4th Floor, Sunrise, FL, 33323. The consolidated
financial statements include the accounts of the Company’s wholly owned subsidiaries, NextTrip Holdings Inc. incorporated October
22, 2015, and Extraordinary Vacations USA, Inc. incorporated June 24, 2002.
The
Company provides travel technology solutions with sales originating in the United States, with a primary emphasis on alternative lodging
rental (“ALR”) properties, hotel, air, cruise, and all-inclusive travel packages. Our proprietary booking engine, branded
as NextTrip 2.0, provides travel distributors access to a sizeable inventory.
On
January 25, 2023, NextPlay Technologies Inc. (“NextPlay”) and NextTrip Group, LLC (“NextTrip”) entered into an
Amended and Restated Separation Agreement (“Separation Agreement”), on Amended and Restated Operating Agreement (“Operating
Agreement”), Exchange Agreement (“Exchange Agreement”), and together (“Agreements”) whereby NextPlay
transferred their interest in the travel business to NextTrip. As per the Exchange Agreement, NextPlay exchanged 1,000,000 Membership
Units of NextTrip for 400,000 Preferred Units in NextTrip. The Preferred Units have a value of $10.00 per Unit, NextTrip had a payable
amount to NextPlay of $17,295,873. This was partial payment that was exchanged for the 400,000 Preferred Units in NextTrip as per the
Exchange Agreement. Any intercompany amount owed after the separation date are to be considered a promissory note bearing 5% interest
per annum. NextPlay has a balance owing to NextTrip of $1,942,630 as of August 31, 2023. As per ASC 505-10-45-2 the reporting of the
paid in capital is considered equity.
The
Company has accounted for the business transfer on a retroactive basis. All assets, liabilities and results of operations assumed in
this transaction are the basis of these financial statements.
The
company owns 50% of Next Innovation LLC (Joint Venture) and this entity is in the process of a first structure plan. No activities nor
operations occurred in 2023 and NextTrip Group, LLC does not have control on the company and therefore no minority interest was recorded.
On
August 3, 2023, NextTrip Group LLC (NextTrip) a Florida corporation, and Sigma Additive Solutions (SASI), a Nevada corporation signed
a letter of intent reflecting the mutual intention of both parties to merge. The consummation of the Proposed Transaction (the “Closing”)
will take place at the offices of a location that is mutually acceptable to the Parties on the first business day after the day the last
of the conditions set forth in the Definitive Agreements is satisfied or waived, or at such other place and date as is agreed between
the Parties (the “Closing Date”). The Parties shall use commercially reasonable efforts to cause the Closing Date to occur
on or before November 30, 2023, unless otherwise agreed in writing by the parties.
Going
Concern
As
of August 31, 2023, the Company had an accumulated deficit of $18,833,664, working capital deficit of $4,190,225 and has incurred losses
since incorporation. The Company will need to raise additional funds through equity or debt financings to support the on-going operations,
increase market penetration of our products, expand the marketing and development of our travel and technology driven products, provide
capital expenditures for additional equipment and development costs, payment obligations, and systems for managing the business including
covering other operating costs until the planned revenue streams are fully implemented and begin to offset our operating costs. Failure
to obtain additional capital to finance the Company’s working capital needs on acceptable terms, or at all, would negatively impact
the Company’s financial condition and liquidity.
Recent
Issues Surrounding the COVID-19 Pandemic
On
March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak and any related adverse
public health developments, has adversely affected workforces, economies, and financial markets globally, leading to an economic downturn.
The
duration and severity of the COVID-19 pandemic impeded global economic activity for an extended period of time, even as restrictions
have been lifted in many jurisdictions (including the United States) and vaccines are being made available, leading to decreased per
capita income and disposable income, increased and sustained unemployment or a decline in consumer confidence, all of which significantly
reduced discretionary spending by individuals and businesses on travel and may create a recession in the United States or globally. In
turn, that could have a negative impact on demand for our services. We also cannot predict the long-term effects of the COVID-19 pandemic
on our partners and their business and operations or the ways that the pandemic may fundamentally alter the travel industry. The aforementioned
circumstances could result in a material adverse impact on our business, financial condition, results of operations and cash flows, potentially
for a prolonged period.
Although
we currently cannot predict the full impact of the COVID-19 pandemic on our fiscal 2024 financial results relating to our operations,
we anticipate an increase in year-over-year revenue as compared to fiscal year 2023. However, the ultimate extent of the COVID-19 pandemic
and its impact on global travel and overall economic activity is constantly changing and impossible to predict currently. However, the
Company is seeing the return to normal operations.
2.
Summary of Significant Accounting Policies
Basis
of Presentation and Principles of Consolidation
The
accompanying condensed consolidated financial statements and related disclosures have been prepared pursuant to the rules and regulations
of the Securities and Exchange Commission (“SEC”) for interim financial statements. The Financial Statements have been prepared
using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United
States.
The
financial statements have been prepared on a condensed consolidated basis with those of the Company’s wholly owned subsidiaries.
All intercompany transactions and balances have been eliminated in consolidation.
These
unaudited condensed consolidated financial statements have been prepared in accordance with rules and regulations of the Securities and
Exchange Commission (“SEC”) and generally accepted accounting principles in the United States of America (“GAAP”)
for interim financial information. Accordingly, the unaudited condensed consolidated financial statements do not include all of the information
and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, we
have included all adjustments considered necessary for a fair presentation and such adjustments are of a normal recurring nature. These
unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the
year ended February 28, 2023 and notes thereto and other pertinent information contained in our annual audited report dated August 14,
2023. The results of operations for the three months ended August 31, 2023, are not necessarily indicative of the results to be expected
for the full fiscal year ending February 28, 2024.
Limited
Liability of Members
Limitations
on Liability of Managers and Members. The liability of the Managers to the Company and the Members shall be limited to the extent, now
or hereafter set forth in the Articles, this Operating Agreement and as provided under the Florida Act.
No
Personal Liability, except as otherwise provided in the Florida Act or by Applicable Law, no Members, Manager or Officer will be obligated
personally for any debt, obligation or liability of the Company or of any Company Subsidiaries, whether arising in contract, tort or
otherwise, solely by reason of being a Member, Manager and/or Officer.
Use
of Estimates
The
preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated
financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from
those estimates. These differences could have a material effect on the Company’s future results of operations and financial position.
Significant items subject to estimates and assumptions include the carrying amounts of intangible assets, depreciation and amortization.
Information
about key assumptions and estimation uncertainty that has a significant risk of resulting in a material adjustment to the carrying
amounts of the Company’s assets and liabilities within the next financial year are referenced in the notes to the financial
statements as follows:
| |
● |
The assessment of the Company to continue as a going concern; |
| |
● |
The measurement and useful life of intangible assets and property
and equipment |
| |
● |
Recoverability of long lived assets |
Cash
Cash
consists of amounts denominated in US dollars. The Company has not experienced any losses on such accounts. The Company considers all
highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. This includes a letter of credit
for $10,000. There were no cash equivalents as of August 31, 2023, or 2022.
Prepaids
The
Company records cash paid in advance for goods and/or services to be received in the future as prepaid expenses. Prepaid expenses are
expensed over time according to the terms of the purchase. Other current assets are recognized when it is probable that the future economic
benefits will flow to the Company and the asset has a cost or value that can be measured reliably. It is then charged to expense over
the expected number of periods during which economic benefits will be realized.
Receivables
Receivables
are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate
of the amount of probable credit losses in its existing receivable.
The
Company considers receivable to be fully collectible; accordingly, no allowance for doubtful accounts is required. If amounts become
uncollectible, they will be charged to operations when that determination is made.
Receivables
balances as of August 31, 2023, and February 28, 2023, were $5,000 and $0, respectively. Receivables to a related party were $1,992,630
and $1,933,908, respectively. The August 31, 2023 balance includes a receivable from TGS Esports Inc. for $50,000 which is expected to
be collected by October 15, 2023. The remaining amount of $1,942,630 due from NextPlay. Management has determined that no allowance for
credit losses is necessary as of August 31, 2023, or February 28, 2023.
Property
and Equipment
Recognition
and measurement
Items
of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. When parts of an item
of property and equipment have different estimated useful lives, they are accounted for as separate items within property and equipment.
The costs of the ongoing regular repairs and maintenance of property and equipment are recognized in the period in which they are incurred.
Depreciation
Depreciation
is recognized in profit or loss over the estimated useful lives of each part of an item of property and equipment in a manner that most
closely reflects management’s estimated future consumption of the future economic benefits embodied in the asset. The estimated
useful lives for the Company’s property and equipment are as follows:
| |
Category |
|
Method |
|
Estimated
useful life |
|
| |
Furniture
& Fixtures |
|
Straight
line |
|
5
years |
|
| |
Computer
& Equipment |
|
Straight
line |
|
3
years |
|
Intangible
assets
The
Company measures separately acquired intangible assets at cost less accumulated amortization and impairment losses. The Company recognizes
internally developed intangible assets when it has determined that the completion of such is technically feasible, and the Company has
sufficient resources to complete the development. Subsequent expenditures are capitalized when they increase the future economic benefits
of the associated asset. All other expenditures are recorded in profit or loss as incurred.
The
Company assesses whether the life of intangible asset is finite or indefinite. The Company reviews the amortization method and period
of use of its intangible assets at least annually. Changes in the expected useful life or period of consumption of future economic benefits
associated with the asset are accounted for prospectively by changing the amortization method or period as a change in accounting estimates
in profit or loss. The Company has assessed the useful life of its trademarks as indefinite.
The
estimated useful lives for the Company’s finite life intangible assets are as follows:
| |
Category |
|
Method |
|
Estimated
useful life |
|
| |
Software |
|
Straight
line |
|
3
years |
|
| |
Software
licenses |
|
Straight
line |
|
0.5
- 4 years |
|
Software
Development Costs
The
Company capitalizes internal software development costs subsequent to establishing technological feasibility of a software application
in accordance with guidelines established by “ASC 985-20-25” Accounting for the Costs of Software to Be Sold, Leased,
or Otherwise Marketed, requiring certain software development costs to be capitalized upon the establishment of technological feasibility.
The establishment of technological feasibility and the ongoing assessment of the recoverability of these costs require considerable judgment
by management with respect to certain external factors such as anticipated future revenue, estimated economic life, and changes in software
and hardware technologies. Amortization of the capitalized software development costs begins when the product is available for general
release to customers. Capitalized costs are amortized based on the straight-line method over the remaining estimated economic life of
the product.
Impairment
of Intangible Assets
In
accordance with ASC 350-30-65 “Goodwill and Other Intangible Assets”, the Company assesses the impairment of identifiable
intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company
considers important, which could trigger an impairment review include the following:
1.
Significant underperformance compared to historical or projected future operating results.
2.
Significant changes in the manner or use of the acquired assets or the strategy for the overall business, and
3.
Significant negative industry or economic trends.
When
the Company determines that the carrying value of an intangible asset may not be recoverable based upon the existence of one or more
of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows,
the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using
a discount rate determined by management to be commensurate with the risk inherent to the current business model. Significant management
judgment is required in determining whether an indicator of impairment exists and in projecting cash flows. Intangible assets that have
finite useful lives are amortized over their useful lives.
Leases
The
Company adopted ASU 2016-02 (Topic ASC 842) Leases, which requires a lessee to recognize a lease asset and a leases liability for operating
leases arrangements greater than twelve (12) months.
We
determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”)
assets, operating lease liabilities - current, and operating lease liabilities - noncurrent on the balance sheets. Finance leases are
included in property and equipment, other current liabilities, and other long-term liabilities in our balance sheets.
ROU
assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease
payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present
value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we generally use our incremental
borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement
date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include
options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments
is recognized on a straight-line basis over the lease term.
Concentration
of Credit Risk
Financial
instruments that potentially subject to concentrations of credit risk consist primarily of cash. All of the Company’s cash is held
at high credit quality financial institutions. No credit risk in accounts receivable as deemed collectable.
Fair
Value of Financial Instruments
The
Company follows accounting guidelines on fair value measurements for financial instruments measured on a recurring basis, as well as
for certain assets and liabilities that are initially recorded at their estimated fair values. Fair Value is defined as the exit price,
or the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants
as the measurement date. The Company uses the following three-level hierarchy that maximizes the use of observable inputs and minimizes
the use of unobservable inputs to value its financial instruments:
| |
● |
Level
1: Observable inputs such as unadjusted quoted prices in active markets for identical instruments. |
| |
|
|
| |
● |
Level
2: Quoted prices for similar instruments that are directly or indirectly observable in the marketplace. |
| |
|
|
| |
● |
Level
3: Significant unobservable inputs which are supported by little or no market activity and that are financial instruments whose values
are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the
determination of fair value requires a significant judgment or estimation. |
Financial
instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair
value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety
requires it to make judgments and consider factors specific to the asset or liability. The use of different assumptions and/or estimation
methodologies may have a material effect on estimated fair values. Accordingly, the fair value estimates disclosed, or initial amounts
recorded may not be indicative of the amount that the Company or holders of the instruments could realize in a current market exchange.
The
carrying amounts of the Company’s financial instruments including cash, accounts receivable, accounts payable, accrued expenses,
convertible notes and notes payable are of approximately fair value due to the short-term maturities of these instruments.
Revenue
Recognition
The
Company recognizes revenue in accordance with ASC 606 which involves identifying the contracts with customers, identifying performance
obligations in the contracts, determining transactions price, allocating transaction price to the performance obligation, and recognizing
revenue when the performance obligation is satisfied.
The
Company recognizes revenue when the customer has purchased the product, the occurrence of the earlier of date of travel or the date of
cancellation has expired, as satisfaction of the performance obligation, the sales price is fixed or determinable and collectability
is reasonably assured. Revenue for customer travel packages purchased directly from the Company are recorded gross (the amount paid to
the Company by the customer is shown as revenue and the cost of providing the respective travel package is recorded to cost of revenues).
The
Company generates revenues from sales directly to customers as well as through other distribution channels of tours and activities at
destinations throughout the world.
The
Company controls the specified travel product before it is transferred to the customer and is therefore a principal, include but not
limited to, the following:
| |
● |
The Company is primarily responsible for fulling the promise
to provide such travel product. |
| |
● |
The Company has inventory risk before the specified travel
product has been transferred to a customer or after transfer of control to a customer. |
| |
● |
The Company has discretion in establishing the price for the
specified travel product. |
Payments
for tours or activities received in advance of services being rendered are recorded as deferred revenue and recognized as revenue at
the earlier of the date of travel or the last date of cancellation (i.e., the customer’s refund privileges lapse).
From
time to time, payments are made to suppliers in advance of customer bookings as required by hotels. These payments are recognized as
costs of goods at the earlier of the date of travel or the last date of cancellation.
Loss
Per Member Interests/Common Units
Basic
loss per member interests/common units is computed by dividing net loss by the weighted average number of member interest/common units
outstanding during the period. Diluted loss per member interests/common units is computed considering the dilutive effect of preferred
stock and convertible debt using the treasury stock method. However, no diluted loss per member interests/common units can be computed
for the period as; 1) the conversion price and units for preferred units is undeterminable due to the unpredictability of future events,
and 2) convertible debt is not expected to be converted as the conversion price is substantially higher than the current value of the
member interests/common units.
Sales
and Marketing
Selling
and administration expenses consist primarily of marketing and promotional expenses, expenses related to our participation in industry
conferences, and public relations expenses.
Sales
and marketing expenses are charged to expenses as incurred and are included in selling and promotions expenses in the accompanying consolidated
financial statements. Sales and marketing expenses for the three months ended August 31, 2023, and 2022, was $49,758 and $263,254, respectively.
Sales and marketing expenses for the six months ended August 31, 2023 and 2022 was $90,539 and $506,208 respectively.
Income
Taxes
Income
taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation
allowance on deferred tax assets is established when management considers it is more likely than not that some portion or all of the
deferred tax assets will not be realized.
Tax
benefits from an uncertain tax position are only recognized if it is more likely than not that the tax position will be sustained on
examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated
financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood
of being realized upon ultimate resolution. Interest and penalties related to unrecognized tax benefits are recorded as incurred as a
component of income tax expense. The Company has not recognized any tax benefits from uncertain tax positions for any of the reporting
periods presented.
No
provision for federal income taxes is necessary in the financial statements of the subsidiaries as they have elected to be treated as
a partnership for tax purposes and therefore they are not subject to federal income tax and the tax effect of its activities accrues
to the members.
In
certain circumstances, partnerships may be held to be associations taxable as corporations. The IRS has issued regulations specifying
circumstances under current law when such a finding may be made, and management, based on those regulations that the partnership is not
an association taxable as a corporation. A finding that the partnership is an association taxable as a corporation could have a material
adverse effect on the financial position and results of operations of the partnership.
Recently
adopted accounting pronouncements
In
August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—
Contracts in Entity’s Own Equity (Subtopic 815-40). The FASB issued this ASU to address issues identified as a result of the complexity
associated with GAAP for certain financial instruments with characteristics of liabilities and equity. Complexity associated with the
accounting is a significant contributing factor to numerous financial statement restatements and results in complexity for users attempting
to understand the results of applying the current guidance. In addressing the complexity, the FASB focused on amending the guidance on
convertible instruments and the guidance on the derivatives scope exception for contracts in an entity’s own equity. For convertible
instruments, the FASB decided to reduce the number of accounting models for convertible debt instruments and convertible preferred stock.
Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared
with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features
that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for
a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums
are recorded as paid-in capital. The FASB concluded that eliminating certain accounting models simplifies the accounting for convertible
instruments, reduces complexity for preparers and practitioners, and improves the decision usefulness and relevance of the information
provided to financial statement users. In addition to eliminating certain accounting models, the FASB also decided to enhance information
transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share (EPS) guidance on
the basis of feedback from financial statement users. The FASB decided to amend the guidance for the derivatives scope exception for
contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. The FASB observed that the application
of the derivatives scope exception guidance results in accounting for some contracts as derivatives while accounting for economically
similar contracts as equity. The FASB also decided to improve and amend the related EPS guidance. The amendments in this ASU are effective
for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted,
but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The FASB specified
that an entity should adopt the guidance as of the beginning of its annual fiscal year. The FASB decided to allow entities to adopt the
guidance through either a modified retrospective method of transition or a fully retrospective method of transition. The Company adopted
ASU 2020-06 on April 1, 2022, on a prospective basis. The adoption of this standard did not have an impact on the Company’s consolidated
financial statements.
In
May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50),
Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity- Classified Written Call Options. ASU
2021-04 requires accounting for modifications or exchanges of freestanding equity- classified written call options (for example, warrants)
that remain equity classified after the modification or exchange based on the economic substance of the modification or exchange. The
recognition of the modification depends on the nature of the transaction in which the equity-classified written call option is modified.
If there is more than one element in a transaction (for example, if the modification involves both a debt modification and an equity
issuance), then the guidance requires allocating the effect of the option modification to each element. ASU 2021-04 is effective for
the Company beginning in the first quarter of 2022. ASU 2021-04 should be applied prospectively to modifications or exchanges occurring
on or after the effective date of the amendments. The Company adopted ASU 2021-04 on April 1, 2022, on a prospective basis. The adoption
of this standard did not have an impact on the Company’s consolidated financial statements.
In
March 2022, the FASB issued ASU 2022-02, ASC Subtopic 326 “Credit Losses”: Troubled Debt Restructurings and Vintage Disclosures.
Since the issuance of Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments, the Board has provided resources to monitor and assist stakeholders with the implementation of
Topic 326. Post-Implementation Review (PIR) activities have included forming a Credit Losses Transition Resource Group, conducting outreach
with stakeholders of all types, developing educational materials and staff question-and-answer guidance, conducting educational workshops,
and performing an archival review of financial reports. ASU No. 2022-02 is effective for annual and interim periods beginning after December
15, 2022. The adoption of this standard did not have a significant impact on the Company’s unaudited condensed consolidated financial
statements.
The
Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will
have a material impact on its consolidated financial statements.
3.
Prepaid and Other Current Assets
Prepaid
and other current assets consisted of the following as of August 31, 2023, and February 28, 2023:
| | |
August 31,
2023 | | |
February 28,
2023 | |
| Prepaid marketing expenses | |
$ | 100 | | |
$ | 100 | |
| Prepaid legal expenses | |
| 15,218 | | |
| - | |
| Prepaid other expenses | |
| 27,409 | | |
| 8,513 | |
| Total | |
$ | 42,727 | | |
$ | 8,613 | |
4.
Leases
On
January 25, 2023, as part of the separation agreement with NextPlay Technologies Inc., the Company assumed control of a lease arrangement
for office space in Florida.
The
following summarizes the right-of-use asset and lease information about the Company’s operating lease as of August 31, 2023:
| Period ended August 31 | |
2023 | |
| Lease cost | |
| | |
| Operating lease cost | |
$ | 18,697 | |
| Amortization of right of use asset | |
| 74,848 | |
| Total lease cost | |
| 93,545 | |
| Other information | |
| | |
| Cash paid from operating cash flows from operating leases | |
$ | 0 | |
| Right-of-use assets | |
| 945,595 | |
| Weighted average remaining lease term - operating lease (years) | |
| 4.8 | |
| Weighted average discount rate - operating lease | |
| 9.18 | % |
Future
minimum lease payments under the operating lease liability has the following non-cancellable lease payments at August 31, 2023:
| Future minimum lease payments under operating leases | |
| |
| Year ended February 28, | |
| | |
| 2024 | |
$ | 228,801 | |
| 2025 | |
| 233,365 | |
| 2026 | |
| 238,056 | |
| 2027 | |
| 242,874 | |
| 2028 | |
| 247,818 | |
| Thereafter | |
| 105,397 | |
| | |
| 1,296,311 | |
| Less: Imputed interest | |
| (282,397 | ) |
| Operating lease liability | |
| 1,013,914 | |
| Operating lease liability - Current | |
| 219,706 | |
| Operating lease liability - Non-current | |
$ | 794,208 | |
As
of August 31, 2023, the Company is in payment default on their operating lease cost to a total of $219,706 which is included in the current
portion of operating lease liability.
5.
Property and Equipment
Property
and equipment as of August 31, 2023 and February 28, 2023, consisted of the following:
| | |
August 31, 2023 | | |
February 28,
2023 | |
| Furniture and Fixtures | |
$ | 17,018 | | |
$ | 17,018 | |
| Computer and Equipment | |
| 73,548 | | |
| 73,548 | |
| Total | |
| 90,566 | | |
| 90,566 | |
| Accumulated depreciation | |
| (84,580 | ) | |
| (74,030 | ) |
| Property and Equipment, net of depreciation | |
$ | 5,986 | | |
$ | 16,536 | |
Depreciation
for the three months ended August 31, 2023 and 2022 was $5,790 and $6,706 respectively, and depreciation expense for the six months ended
August 31, 2023 and 2022 was $10,550 and $13,442, respectively, and for the year ended February 28, 2023, was $30,386, recorded in operating
expenses.
During
the period ended August 31, 2023, and the year ended February 28, 2023, the Company acquired property and equipment of $0 and $2,928,
respectively.
6.
Intangible Assets
Intangible
assets as of August 31, 2023 and year ended February 28, 2023 consisted of the following:
| | |
August
31, 2023 | | |
February 28, 2023 | |
| Software Development | |
$ | 6,214,161 | | |
$ | 6,218,044 | |
| Software Licenses | |
| 777,576 | | |
| 477,576 | |
| Trademark | |
| 6,283 | | |
| 6,283 | |
| Total | |
| 6,998,020 | | |
| 6,701,903 | |
| Accumulated amortization | |
| (4,517,859 | ) | |
| (3,933,543 | ) |
| Intangible assets, net of amortization | |
$ | 2,480,161 | | |
$ | 2,768,360 | |
Amortization
expense for the three months ended August 31, 2023 and 2022 was $255,700 and $328,306 respectively. Amortization expense for the six
months ended August 31, 2023 and 2022 was $584,005 and $199,914 respectively, and for the year ended February 28, 2023, was $776,497,
and recorded in operating expenses. Amortization for the next two years on the ending balance as of August 31, 2024, and 2025 will be
$1,023,901 and $700,984 respectively.
7.
Accounts Payable and Accrued Liabilities
As
of August 31, 2023, the Company had accounts payable of $582,121 and accrued liabilities of $377,896, compared to $519,136 of
accounts payable and $329,922 of accrued expenses for the year ended February 28, 2023.
8.
Convertible Notes
On
July 27, 2022, the Company issued a $150,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest
at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a
Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion
price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share
received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until
October 31, 2025. During the three months ended August 31, 2023 and 2022 the Company recorded accrued interest of $3,025 and $1,150,
respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $6,049 and $1,150, respectively,
(for the year ended February 28, 2023, $7,101) related to the note. The note has a maturity date of December 31, 2023.
On
July 27, 2022, the Company issued a $200,000 convertible note upon the receipt of such proceeds from the counterparty. The note bears
interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger
with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a
conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for
each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per
share, until October 31, 2025. During the three months ended August 31, 2023 and 2022 the Company recorded accrued interest of $4,033
and $1,534, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $8,066 and
$1,534, respectively, (for the year ended February 28, 2023, $9,468) related to the note. The note has a maturity date of December 31,
2023.
On
August 5, 2022, the Company issued a $12,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest
at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a
Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion
price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share
received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until
October 31, 2025. During the three months ended August 31, 2023 and 2022 the Company recorded accrued interest of $242 and $68, respectively.
During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $484 and $68, respectively, (for the
year ended February 28, 2023, $544) related to the note. The note has a maturity date of February 5, 2023, and the holder has no intention
of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On
August 6, 2022, the Company issued a $500,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest
at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a
Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion
price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share
received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until
October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $10,082 and $2,740,
respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $20,164 and $2,740, respectively,
(for the year ended February 28, 2023, $22,575) related to the note. The note has a maturity date of February 6, 2023, and the holder
has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On
September 14, 2022, the Company issued a $100,000 convertible note upon the receipt of such proceeds from a third party. The note bears
interest at a rate of 8% per annum and such amount will be converted to shares in a new public company issued upon the completion of
a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the
SPAC at a conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant
for each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00
per share, until October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $2,016
and $0, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $4,033 and $0 respectively,
(for the year ended February 28, 2023, $3,660) related to the note. The note has a maturity date of February 24, 2023, and the holder
has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On
October 31, 2022, the Company issued a $250,000 convertible note upon the receipt of such proceeds from a third party, with an option
to increase the note to $500,000 up until November 8, 2022. In accordance with an amended agreement, the note bears interest at a rate
of 8% per annum and such amount will be converted to shares in a new public company issued upon the completion of a merger with a Special
Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion price
of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share received,
in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until October
31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $5,042 and $0, respectively.
During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $10,082 and $0, respectively, (for the
year ended February 28, 2023, $6,575) related to the note. The note has a maturity date of January 31, 2023, and the holder has no intention
of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On
November 22, 2022, the Company a $150,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest
at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a
Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion
price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share
received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until
October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $3,025 and $0, respectively.
During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $6,049 and $0, respectively, (for the
year ended February 28, 2023, $3,222) related to the note. The note has a maturity date of February 28, 2023, and the holder has no intention
of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On
December 1, 2022, the Company issued a $75,000 convertible note upon the receipt of such proceeds from a third party. The note bears
interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger
with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a
conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for
each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per
share, until October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $1,512
and $0, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $3,025 and $0,
respectively, (for the year ended February 28, 2023, $1,463) related to the note. The note has a maturity date of February 28, 2023,
and the holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of
the maturity date.
On
December 1, 2022, the Company issued a $50,000 convertible note upon the receipt of such proceeds from a third party. The note bears
interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger
with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a
conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for
each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per
share, until October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $1,008
and $0, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $2,016 and $0,
respectively, (for the year ended February 28, 2023, $975) related to the note. The note has a maturity date of July 31, 2023, and the
holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity
date.
On
December 12, 2022, the Company issued a $350,000 convertible note upon the receipt of such proceeds from a third party. The note bears
interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger
with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a
conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for
each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per
share, until October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $7,048
and $0, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $14,115 and $0,
respectively, (for the year ended February 28, 2023, $5,984) related to the note. The note has a maturity date of April 30, 2023, and
the holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the
maturity date.
On
December 12, 2022, the Company issued a $250,000 convertible note upon the receipt of such proceeds from a third party. The note bears
interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger
with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a
conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for
each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per
share, until October 31, 2025. During the three months ended August 31, 2023 and 2022 the Company recorded accrued interest of $5,042
and $0, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $10,082 and $0,
respectively, (for the year ended February 28, 2023, $4,274) related to the note. The note has a maturity date of February 28, 2023,
and the holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of
the maturity date.
On
January 25, 2023, the Company issued a $250,000 convertible note upon the receipt of such proceeds from a third party. The note bears
interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger
with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a
conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for
each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per
share, until October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $5,042
and $0, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $10,082 and $0,
respectively, (for the year ended February 28, 2023, $1,863) related to the note. The note has a maturity date of July 31, 2023, and
the holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the
maturity date.
On
January 31, 2023, the Company issued a $600,000 convertible note upon the receipt of such proceeds from a third party. The note bears
interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger
with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a
conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for
each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per
share, until October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $12,099
and $0, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $24,197 and $0,
respectively, (for the year ended February 28, 2023, $3,682) related to the note. The note has a maturity date of July 31, 2023, and
the holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the
maturity date.
On
February 21, 2023, the Company issued a $75,000 convertible note upon the receipt of such proceeds from a third party. The note bears
interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger
with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a
conversion price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for
each share received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per
share, until October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $1,512
and $0, respectively. During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $3,025 and $0,
respectively, (for the year ended February 28, 2023, $115) related to the note. The note has a maturity date of July 31, 2023, and the
holder has no intention of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity
date.
On
March 13, 2023, the Company issued a $50,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest
at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a
Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion
price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share
received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until
October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $1,008 and $0, respectively.
During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $1,874 and $0 respectively, (for the
year ended February 28, 2023, $0) related to the note. The note has a maturity date of May 28, 2023, and the holder has no intention
of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On
April 4, 2023, the Company issued a $200,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest
at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a
Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion
price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share
received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until
October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $4,033 and $0, respectively.
During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $6,532 and $0 respectively, (for the
year ended February 28, 2023, $0) related to the note. The note has a maturity date of May 31, 2023, and the holder has no intention
of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On
April 24, 2023, the Company issued a $100,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest
at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a
Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion
price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share
received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until
October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $2,017 and $0 respectively.
During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $2,740 and $0 respectively, (for the
year ended February 28, 2023, $0) related to the note. The note has a maturity date of May 31, 2023, and the holder has no intention
of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On
May 12, 2023, the Company issued a $50,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest
at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a
Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion
price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share
received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until
October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $1,008 and $0 respectively.
During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $1,216 and $0 respectively, (for the
year ended February 28, 2023, $0) related to the note. The note has a maturity date of May 31, 2023, and the holder has no intention
of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On
May 12, 2023, the Company issued a $50,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest
at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a
Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion
price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share
received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until
October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $1,008 and $0, respectively.
During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $1,216 and $0, respectively, (for the
year ended February 28, 2023, $0) related to the note. The note has a maturity date of May 31, 2023, and the holder has no intention
of calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On
May 30, 2023, the Company issued a $25,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest
at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a
Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion
price of $3.00 per common share, subject to adjustments. Upon conversion, the counterparty will obtain one (1) warrant for each share
received, in which the counterparty may purchase one (1) share of the Company’s common stock at a price of $3.00 per share, until
October 31, 2025. During the three months ended August 31, 2023, and 2022 the Company recorded accrued interest of $505 and $0 respectively.
During the six months ended August 31, 2023, and 2022, the Company recorded accrued interest of $510 and $0, respectively, (for the year
ended February 28, 2023, $0) related to the note. The note has a maturity date of August 31, 2023, and the holder has no intention of
calling the note, nor is there any penalty or change in the interest rate due to the expiration of the maturity date.
On
June 9, 2023, the Company issued a $175,000 convertible note upon the receipt of such proceeds from a third party. The note bears
interest at a rate of 8% per annum and such amount will be converted to shares in a new public company upon the completion of a
merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the
SPAC at a conversion price of $3.00 per common share, subject to adjustments of conversion price. Upon conversion, the counterparty
will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1) share of the Company’s
common stock at a price of $3.00 per share, until October 31, 2025. During the three months ended August 31, 2023 and 2022 the
Company recorded accrued interest of $3,184 and $0, respectively. During the six months ended August 31, 2023, and 2022, the Company
recorded accrued interest of $3,184 and $0, respectively, (for the year ended February 28, 2023, $0) related to the note. The note
has a maturity date of August 31, 2023, and the holder has no intention of calling the note.
On
September 19, 2022, the Company entered into a Software as a Service Agreement with a prospective client in which the Company received
a $150,000 down payment upon signing of the contract. On December 31, 2022, the Company entered into an amended agreement with the counterparty
in which the down payment became a noninterest bearing share issuance obligation in which such amount will be converted to shares in
a new public company upon the completion of a merger with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion
the note will convert to shares in the SPAC at a conversion price of $3.00 per common share, subject to adjustments of conversion price.
Upon conversion, the counterparty will obtain one (1) warrant for each share received, in which the counterparty may purchase one (1)
share of the Company’s common stock at a price of $3.00 per share, until October 31, 2025. As of August 31, 2023, and as of February
28, 2023, the Company has classified the obligation to issue shares in accordance with the agreement as a current liability.
On
August 10, 2023, the Company issued a $100,050 convertible note upon the receipt of such proceeds from a third party. The note bears
interest at a rate of 0% per annum and such amount will be converted to shares in a new public company upon the completion of a merger
with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a
conversion price of $0.15 per common share, subject to adjustments of conversion price. As of August 31, 2023, the Company has classified
the obligation to issue shares in accordance with the agreement as a current liability.
On
August 10, 2023, the Company issued a $100,050 convertible note upon the receipt of such proceeds from a third party. The note bears
interest at a rate of 0% per annum and such amount will be converted to shares in a new public company upon the completion of a merger
with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a
conversion price of $0.15 per common share, subject to adjustments of conversion price. As of August 31, 2023, the Company has classified
the obligation to issue shares in accordance with the agreement as a current liability.
On
August 10, 2023, the Company issued a $200,010 convertible note upon the receipt of such proceeds from a third party. The note bears
interest at a rate of 0% per annum and such amount will be converted to shares in a new public company upon the completion of a merger
with a Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a
conversion price of $0.15 per common share, subject to adjustments of conversion price. As of August 31, 2023, the Company has classified
the obligation to issue shares in accordance with the agreement as a current liability.
On
August 10, 2023, the Company issued a $30,000 convertible note upon the receipt of such proceeds from a third party. The note bears interest
at a rate of 0% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a
Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion
price of $0.15 per common share, subject to adjustments of conversion price. As of August 31, 2023, the Company has classified the obligation
to issue shares in accordance with the agreement as a current liability.
On
August 14, 2023, the Company issued a $25,500 convertible note upon the receipt of such proceeds from a third party. The note bears interest
at a rate of 0% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a
Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion
price of $0.15 per common share, subject to adjustments of conversion price. As of August 31, 2023, the Company has classified the obligation
to issue shares in accordance with the agreement as a current liability.
On
August 14, 2023, the Company issued a $25,500 convertible note upon the receipt of such proceeds from a third party. The note bears interest
at a rate of 0% per annum and such amount will be converted to shares in a new public company upon the completion of a merger with a
Special Purpose Acquisition Corporation (“SPAC”). Upon conversion the note will convert to shares in the SPAC at a conversion
price of $0.15 per common share, subject to adjustments of conversion price. As of August 31, 2023, the Company has classified the obligation
to issue shares in accordance with the agreement as a current liability.
9.
Preferred Units
As
a result of the Exchange Agreement (“Exchange Agreement”) entered on January 25, 2023, NextPlay Technologies Inc. (“NextPlay”)
and NextTrip Group, LLC (“NextTrip”), NextPlay exchanged 1,000,000 Membership Interests of NextTrip for 400,000 Preferred
Units in NextTrip (see note 1). The preferred units have no voting rights and earn no dividends, and can be converted into common stock,
equal to one common unit for each preferred unit, through optional conversion, upon (i) mutual consent of such preferred holder and the
company or (ii) if, after 12 months from the initial date of issuance of the preferred units the preferred holder is required to convert
any preferred units to be compliant under the US Investment Company Act of 1940 or per automatic conversion (i) the completion of a qualified
listing or (ii) the date that is (48) months from the last issuance date of the preferred units, provided, however, that the preferred
holders shall have option to require the Company to redeem, any remaining units prior to such automatic conversion. In fiscal year 2022
the Company did not issue any Preferred Units.
10.
Membership Units
For
the period ended August 31, 2023, and 2022, the Company had 1,000,000 Membership Interests authorized, and 915,000 and 1,000,000 issued
and outstanding respectively with a par value of $.0001 per unit. In 2023 1,000,000 Membership Interests outstanding were exchanged for
Preferred Units (see note 9) and the Member Interests were cancelled accordingly.
11.
Common Units
For
the period ended August 31, 2023, and 2022, the Company has 1,000,000 Common Units, par value $.0001 authorized. During the year ended
February 28, 2023, the Company issued 915,000 Common Units to William Kerby and Donald Monaco (see note 1). All shares have equal voting
rights, are non-assessable, and have one vote per unit. 100 common units were issued and outstanding in the fiscal year 2022.
12.
Related Party Transactions
| |
(i) |
Travel Booking Engine Purchase: |
| |
|
|
| |
|
On February 28, 2023, the
Company purchased the right, title and interest in Travel and Media Tech, LLC ‘s (“TMT”) “Bookit” or
“NextTrip 2.0” booking engine, customer lists, inclusion of all current content associated to hotel and destination
product in the booking engine (pictures, hotel descriptions, restaurant descriptions, room descriptions, amenity descriptions, and
destination information.)and source code related thereto from TMT a related entity owned by Don Monaco and William Kerby. This was
an asset purchase made by the Company as per the agreement between both parties. |
| |
|
|
| |
(ii) |
The Company’s related parties Messrs. William Kerby and
Donald Monaco, have the authority and responsibility for planning, directing, and controlling the activities of the Company. |
| |
|
|
| |
(iii) |
NextPlay and the Company entered into an agreement for NextPlay
to transfer all of its Travel Business to the Company. This transaction was accounted for retroactively (see note 1). |
| |
|
|
| |
(iv) |
Amounts due to related parties as of August 31, 2023, was $573,500
and $281,000 as at February 28, 2023. The amount due in 2023 relates directly to William Kerby and Donald Monaco. |
13.
Deferred Revenue
Deferred
revenue as of August 31, 2023, and year ended February 28, 2023, was $79,906 and $22,750, respectively.
Deferred
revenue consists of travel deposits received from users in advance of revenue recognition. The deferred revenue balance for the periods
ended August 31, 2023, and February 28, 2023, was driven by cash payments from customers in advance of satisfying our performance obligations.
14.
Commitments and Contingencies
The
Company is involved, from time to time, in litigation, other legal claims and proceedings involving matters associated with or incidental
to our business, including, among other things, matters involving breach of contract claims, intellectual property, employment issues,
and other related claims and vendor matters. The Company believes that the resolution of currently pending matters could, individually
or in the aggregate, have a material adverse effect on our financial condition or results of operations. However, assessment of the current
litigation or other legal claims could change considering the discovery of facts not presently known to the Company or by judges, juries
or other finders of fact, which are not in accord with management’s evaluation of the possible liability or outcome of such litigation
or claims.
15.
Subsequent Event
The
Company has evaluated subsequent events through October 2, 2023, the date on which these financial statements were available to be issued.
The Company did not identify any material subsequent events requiring adjustments to or disclosure in its financial statements, other
than those noted below.
| |
1. |
The holders of Convertible Notes (see note 8), which have matured
as of the issuance of the quarter review have not called the notes, nor have they provided notice on intention of calling the note. |
ANNEX
A
SHARE
EXCHANGE AGREEMENT
BY
AND AMONG
SIGMA
ADDITIVE SOLUTIONS, INC.,
NEXTTRIP
HOLDINGS, INC.,
NEXTTRIP
GROUP, LLC
AND
WILLIAM
KERBY, IN THE CAPACITY AS THE NEXTTRIP REPRESENTATIVE
DATED
AS OF OCTOBER 12, 2023
Table
of Contents
| |
Page |
| |
|
| Article
I DEFINITIONS |
2 |
| Article
II SHARE EXCHANGE; CLOSING |
10 |
| Article
III REPRESENTATIONS AND WARRANTIES OF THE
PARENT |
12 |
| Article
IV REPRESENTATIONS AND WARRANTIES OF NEXTTRIP |
17 |
| Article
V REPRESENTATIONS AND WARRANTIES OF SIGMA |
30 |
| Article
VI CONDUCT PRIOR TO CLOSING |
39 |
| Article
VII ADDITIONAL AGREEMENTS |
42 |
| Article
VIII POST CLOSING COVENANTS |
46 |
| Article
IX CONDITIONS TO CLOSING |
46 |
| Article
X TERMINATION |
50 |
| Article
XI MISCELLANEOUS PROVISIONS |
52 |
SHARE
EXCHANGE AGREEMENT
THIS
SHARE EXCHANGE AGREEMENT, dated as of October 12, 2023 (“Agreement”), is made by and among SIGMA ADDITIVE SOLUTIONS,
INC., a Nevada corporation (“Sigma”), NEXTTRIP HOLDINGS, INC., a Florida corporation (“NextTrip”),
NEXTTRIP GROUP, LLC, a Florida limited liability company and the sole stockholder of NextTrip (the “Parent”),
and William Kerby, in the capacity as the representative from and after the Closing Date for the NextTrip shareholders as of immediately
prior to the Closing Date in accordance with the terms and conditions of this Agreement (the “NextTrip Representative”).
Each of Sigma, NextTrip, the NextTrip Representative and the Parent are sometimes referred to herein individually, as a “Party”
and collectively, as the “Parties.”
RECITALS
WHEREAS,
the Parent owns one hundred percent (100%) of the issued and outstanding shares of capital stock of NextTrip (the “NextTrip
Shares”), with the ownership of Parent in the proportions set forth on the Consideration Schedule (as defined below) in Section
1.1 of the NextTrip Disclosure Schedule (as hereinafter defined) held by the members of Parent (the “Parent Members”);
and
WHEREAS,
the Parent wishes to sell and transfer to Sigma, and Sigma is willing to purchase and acquire from the Parent, all of the NextTrip Shares
in exchange for the Restricted Sigma Shares (defined below in Article I) to be issued to the Parent Members Pro Rata, as set forth
in the Consideration Schedule; and
WHEREAS,
upon the closing of the transactions contemplated herein, NextTrip will become a wholly-owned subsidiary of Sigma;
AGREEMENT
NOW,
THEREFORE, in consideration of the foregoing premises, and the covenants, representations and warranties set forth herein, and for
other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and accepted, the Parties, intending
to be legally bound, hereby agree as follows:
Article
I
DEFINITIONS
In
addition to capitalized terms defined elsewhere in this Agreement, the following capitalized terms shall have the following respective
meanings when used in this Agreement:
“Accredited
Investor” has the meaning set forth in Rule 501(a) under the Securities Act.
“Action”
means any action, suit, inquiry, notice of violation, proceeding (including any partial proceeding such as a deposition) or investigation
pending or threatened before or by any court, arbitrator, governmental or administrative agency, regulatory authority (federal, state,
county, local or foreign), stock market, stock exchange or trading facility.
“Affiliate”
has the meaning set forth in Rule 12b-2 under the Exchange Act.
“Agreement”
has the meaning set forth in the preamble.
“APA”
means the Asset Purchase Agreement, dated as of October 6, 2023, between Sigma and Divergent Technologies, Inc.
“Business
Day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in New York, New York are required
or authorized to be closed.
“CARES
Act” means the Coronavirus Aid, Relief, and Economic Security Act.
“Charter
Amendments” mean the amendments to Sigma’s Amended and Restated Articles of Incorporation, as amended, to (a) increase
the authorized common stock to 100,000,000 shares; (b) change Sigma’s name to “NextTrip, Inc.” (or such other
name as Sigma and NextTrip may agree to), and (c) to affect such other amendments as Sigma, NextTrip and the Parent may determine necessary
or warranted.
“Clearance
Date” means the date on which the Proxy Statement has either (i) cleared comments with the SEC or (ii) the ten (10) calendar
period set forth in Rule 14a-6(a) of the Exchange Act has passed.
“Closing”
has the meaning set forth in Section 2.2.
“Closing
Date” has the meaning set forth in Section 2.2.
“Closing
Shares” means a number of shares of Restricted Sigma Shares, rounded down to the nearest whole share, determined by multiplying
(x) 19.99% by (y) the number of shares of Sigma Common Stock outstanding immediately prior to the Closing.
“Code”
means the Internal Revenue Code of 1986, as amended.
“Combined
Company” means Sigma and its direct and indirect Subsidiaries, including NextTrip, following the Closing.
“Competing
Transaction Proposal” means any bona fide proposal or offer (whether or not in writing) from a third party (other than Sigma
or NextTrip or any of their respective subsidiaries) with respect to any of the following (other than the Share Exchange, the APA and
the other transactions contemplated hereby and thereby): (i) any merger, consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution or other similar transaction involving Sigma or any of Sigma’s subsidiaries; (ii) any sale, lease, exchange,
transfer or other disposition of 19.99% or more of the consolidated assets of Sigma or any of Sigma’s subsidiaries; (iii) any issuance,
sale or other disposition of 15% or more of the total outstanding voting power of Sigma or any of Sigma’s subsidiaries; (iv) any
transaction, including a tender offer or exchange offer, that, if consummated, would result in any person (or the stockholders of any
person) acquiring, directly or indirectly, beneficial ownership, or the right to acquire beneficial ownership, or formation of any group
which beneficially owns or has the right to acquire beneficial ownership of, 15% or more of the total outstanding voting power of Sigma
or any of Sigma’s subsidiaries; or (v) any other transaction the consummation of which would reasonably be expected to impede,
interfere with, prevent or materially delay the Share Exchange.
“Consideration
Schedule” shall mean Schedule 1.1 of the NextTrip Disclosure Schedule.
“Contingent
Shares” means the Tranche 1 Contingent Shares, the Tranche 2 Contingent Shares, the Tranche 3 Contingent Shares and the Tranche
4 Contingent Shares.
“Contract”
means any written or oral contract, lease, license, indenture, note, bond, agreement, arrangement, understanding, permit, concession,
franchise or other instrument.
“Control,”
“controlled by” and “under common control with” mean, with respect to a specified Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the
ownership of stock or other securities, as executor, by contract or otherwise.
“Environmental
Laws” has the meaning set forth in Section 4.18.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of
the SEC thereunder, all as the same will then be in effect.
“First
Milestone Event” means the launch of NextTrip’s leisure travel booking platform by either (i) achieving $1,000,000 in
cumulative sales under its historical “phase 1” business, or (ii) commencement of its marketing program under its enhanced
“phase 2” business.
“Fourth
Milestone Event” means the commercial launch of PayDelay technology in the NXT2.0 system.
“Fundamental
Transaction” means that Sigma shall directly or indirectly, in one or more related transactions, (i) consolidate or merge with
or into (whether or not Sigma is the surviving corporation) another person, or (ii) sell, assign, transfer, convey or otherwise dispose
of all or substantially all of the properties or assets of Sigma to another person, or (iii) allow another person to make a purchase,
tender or exchange offer that is accepted by the holders of more than the 50% of either the outstanding shares of common stock (not including
any shares of common stock held by the person or persons making or party to, or associated or affiliated with the persons making or party
to, such purchase, tender or exchange offer), or (iv) consummate a stock purchase agreement or other business combination (including,
without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another person whereby such other person
acquires more than the 50% of the outstanding shares of common stock (not including any shares of common stock held by the other person
or other persons making or party to, or associated or affiliated with the other persons making or party to, such stock purchase agreement
or other business combination), or (v) reorganize, recapitalize or reclassify its common stock, or (vi) any “person” or “group”
(as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act), become the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued
and outstanding common stock.
“GAAP”
means, with respect to any Person, generally accepted accounting principles in the U.S. applied on a consistent basis with such Person’s
past practices.
“Governmental
Authority” means any domestic or foreign, federal or national, state or provincial, municipal or local government, governmental
authority, regulatory or administrative agency, governmental commission, department, board, bureau, agency or instrumentality, political
subdivision, commission, court, tribunal, official, arbitrator or arbitral body.
“Hazardous
Materials” has the meaning set forth in Section 4.18.
“Indebtedness”
means with respect to a Person, without duplication, (a) all indebtedness or other obligation of the Person for borrowed money, whether
current, short-term, or long-term, secured or unsecured; (b) all indebtedness of the Person for the deferred purchase price for purchases
of property outside the Ordinary Course of Business; (c) all lease obligations of the Person under leases which are capital leases in
accordance with GAAP; (d) any off-balance sheet financing of the Person including synthetic leases and project financing; (e) any payment
obligations of the Person in respect of banker’s acceptances or letters of credit (other than stand-by letters of credit in support
of ordinary course trade payables); (f) any liability of the Person with respect to interest rate swaps, collars, caps and similar hedging
obligations; (g) any liability of the Person under deferred compensation plans, phantom stock plans, severance or bonus plans, or similar
arrangements made payable as a result of the transactions contemplated herein; (h) any indebtedness referred to in clauses (a) through
(g) above of any other Person which is either guaranteed by, or secured by a security interest upon any property owned by, the Person;
and (i) accrued and unpaid interest of, and prepayment premiums, penalties or similar contractual charges arising as a result of the
discharge at Closing of, any such foregoing obligation.
“Intellectual
Property” means all intellectual property in any jurisdiction throughout the world, including, without limitation, all U.S.
and non-U.S. patents, patent applications, patent rights, trademarks, trademark applications, common law trademarks, Internet domain
names, social media accounts and pages, trade names, service marks, service mark applications, common law service marks and similar indicia
or origin, together with the goodwill associated therewith, copyrights, in both published and unpublished works, whether registered or
unregistered, copyright applications, franchises, licenses, know-how, trade secrets, technology, technical data, designs, customer lists,
confidential and proprietary information, processes and formulae, all computer software programs or applications, layouts, inventions
(whether or not patentable), development tools and all documentation and media constituting, describing or relating to the above, including
manuals, memoranda, and records, whether such intellectual property has been created, applied for or obtained anywhere throughout the
world.
“Knowledge”
shall mean, except as otherwise explicitly provided herein, actual knowledge after reasonable investigation. Sigma and its Affiliates
shall be deemed to have “Knowledge” of a matter if such matter is known to Sigma’s President and Chief Executive
Officer, Jacob Brunsberg, or Sigma’s Chief Financial Officer, Frank Orzechowski. NextTrip and its respective Affiliates, shall
be deemed to have “Knowledge” of a matter if such matter is known to William Kerby, NextTrip’s Chief Executive
Officer, or Lindsey North, NextTrip’s President. The Parent shall be deemed to have “Knowledge” of a matter
if it has actual knowledge of such matter.
“Law”
and “Laws” means, with respect to any Person, any U.S. or non-U.S., federal, national, state, provincial, local, municipal,
international, multinational or other Law (including common law), constitution, statute, code, ordinance, rule, regulation or treaty
applicable to such Person.
“Liability”
means any liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including any liability for Taxes.
“License”
means any security clearance, permit, license, variance, franchise, Order, approval, consent, certificate, registration or other authorization
of any Governmental Authority or regulatory body, and other similar rights.
“Lien”
means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind, including, without limitation, any conditional
sale or other title retention agreement, any lease in the nature thereof and the filing of or agreement to give any financing statement
under the Uniform Commercial Code of any jurisdiction and including any lien or charge arising by Law.
“Material
Adverse Effect” means, with respect to NextTrip, a material adverse effect on its business, financial condition, operations,
results of operations, assets, customer, supplier or employee relations or future prospects and, with respect to Sigma, a material adverse
effect on its Primary Market listing, SEC reporting status, liabilities or ability to consummate the Share Exchange or other transactions
contemplated hereby.
“Milestone
Covenants” has the meaning set forth in Section 2.3.
“Milestone
Event” shall mean the First Milestone Event, the Second Milestone Event, the Third Milestone Event, the Fourth Milestone Event
and the Travel Bookings Milestone Event.
“Milestone
Payment Determination Date” has the meaning set forth in Section 2.3.
“Milestone
Period” means the period commencing with the Closing Date and ending on the date the final Milestone Event has occurred or
on the fifteen (15) month anniversary of the Closing Date, whichever occurs first.
“Money
Laundering Laws” has the meaning set forth in Section 4.21.
“NextTrip”
has the meaning set forth in the preamble.
“NextTrip
Capital Stock” has the meaning set forth in Section 4.7.
“NextTrip
Disclosure Schedule” has the meaning set forth in Article IV.
“NextTrip
Most Recent Fiscal Year End” means February 28, 2023.
“NextTrip
Representative” has the meaning set forth in the Recitals.
“NextTrip
Shares” has the meaning set forth in the Recitals.
“Open
Source Technology” means any software or other Intellectual Property that is distributed as or that contain, or are derived
in any manner (in whole or in part) from, any software or other Intellectual Property that is distributed as free software, open source
or similar licensing or distribution models, or requires as a condition of use, modification or distribution that any Intellectual Property
(1) be disclosed or distributed in source code form, (2) be licensed for the purpose of making derivative works, (3) be redistributable
at no charge, or (4) grants to any third party any license, non-assertion covenant or other rights or immunities to or under any Intellectual
Property. Open Source Technology includes Intellectual Property licensed or distributed under any of the following licenses or distribution
models, or licenses or distribution models similar to any of the following: Apache License, MIT License, BSD 3-Clause “New”
or “Revised” License or BSD 2-Clause “Simplified” or “FreeBSD” License, GNU’s General Public
License (GPL), Lesser/Library GPL (LGPL), or Affero GPL, Mozilla Public License, Common Development and Distribution License (CDDL),
Eclipse Public License, Artistic License, Netscape Public License, Sun Community Source License (SCSL), Sun Industry Standards License
(SISL), the Common Public License, Creative Commons License, or any license or distribution agreement or arrangement listed on www.opensource.org/licenses/index.php
or any successor website thereof or that is considered “free” or “open source” by the Open Source Foundation
or the Free Software Foundation.
“Order”
means any order, judgment, ruling, injunction, assessment, award, decree or writ of any Governmental Authority or regulatory body.
“Ordinary
Course of Business” means the ordinary course of business consistent with past custom and practice (including with respect
to quantity and frequency).
“Parent”
has the meaning set forth in the preamble.
“Parent
Members” has the meaning set forth in the preamble.
“Party”
and “Parties” have the respective meanings set forth in the preamble.
“Person”
means all natural persons, corporations, business trusts, associations, companies, partnerships, limited liability companies, joint ventures
and other entities, governments, agencies and political subdivisions.
“Principal
Market” means the Nasdaq Capital Market.
“Pro
Rata” means, with respect to each Parent Member, the percentage set forth adjacent his or her name on the Consideration Schedule.
“Proxy
Statement” means the proxy statement on Schedule 14A filed by Sigma with the SEC relating to the Stockholders’ Meeting.
“Registration
Statements” has the meaning set forth in Section 5.12(b).
“Restricted
Sigma Shares” means the Closing Shares and the Contingent Shares in a cumulative aggregate amount of up to 6,000,000 shares
of restricted shares of Sigma Common Stock issuable as provided in this Agreement (which number will be subject to adjustment to reflect
and account for any stock split, stock dividend, combination, or other recapitalization or reclassification of Sigma effected after the
date hereof).
“SEC”
means the U.S. Securities and Exchange Commission, or any successor agency thereto.
“SEC
Reports” has the meaning set forth in Section 5.12(a).
“Second
Milestone Event” means (i) the launch of NextTrip’s groups travel booking platform and (ii) signing of at least five
(5) entities to use the groups travel booking platform.
“Securities
Act” means the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the SEC
thereunder, all as the same will be in effect at the time.
“Share
Exchange” has the meaning set forth in Section 2.1.
“Sigma”
has the meaning set forth in the preamble.
“Sigma
Common Stock” means the common stock, $0.001 par value per share, of Sigma.
“Sigma
Most Recent Fiscal Year End” means December 31, 2022.
“Sigma
Organizational Documents” has the meaning set forth in Section 5.6.
“Stockholders’
Meeting” has the meaning given to such term in Section 7.5(a).
“Subsidiary”
or “subsidiary” of any Person means any corporation, partnership, limited liability company, or other organization,
whether incorporated or unincorporated, which is Controlled by such Person. For the avoidance of doubt, the Subsidiaries of any Person
shall include any variable interest entity over which such Person or any of its Subsidiaries effects Control pursuant to contractual
arrangements and which is consolidated with such Person in accordance with generally accepted accounting principles applicable to such
Person.
“Tax
Return” means all returns, declarations, reports, estimates, statements, forms and other documents filed with or supplied to
or required to be provided to a Governmental Authority with respect to Taxes, including any schedule or attachment thereto and any amendment
thereof.
“Tax”
or “Taxes” means all taxes, assessments, duties, levies or other charge imposed by any Governmental Authority of any
kind whatsoever together with any interest, penalties, fines or additions thereto and any liability for payment of taxes whether as a
result of (a) being a member of an affiliated, consolidated, combined, unitary or similar group for any period; (b) any tax sharing,
tax indemnity or tax allocation agreement or any other express or implied agreement to indemnify any Person; (c) being liable for another
Person’s taxes as a transferee or successor otherwise for any period; or (d) operation of Law.
“Termination
Date” means December 31, 2023.
“Third
Milestone Event” means (i) the launch of NextTrip’s travel agent platform and (ii) signing up of at least 100 travel
agents to the platform (which calculation includes individual agents of an agency that signs up on behalf of multiple agents).
“Tranche
1 Contingent Shares” means 1,450,000 Restricted Sigma Shares issuable upon satisfaction of the First Milestone Event (which
number will be subject to adjustment to reflect and account for any stock split, stock dividend, combination, or other recapitalization
or reclassification of Sigma effected after the date hereof).
“Tranche
2 Contingent Shares” means 1,450,000 Restricted Sigma Shares issuable upon satisfaction of the Second Milestone Event (which
number will be subject to adjustment to reflect and account for any stock split, stock dividend, combination, or other recapitalization
or reclassification of Sigma effected after the date hereof).
“Tranche
3 Contingent Shares” means 1,450,000 Restricted Sigma Shares issuable upon satisfaction of the Third Milestone Event (which
number will be subject to adjustment to reflect and account for any stock split, stock dividend, combination, or other recapitalization
or reclassification of Sigma effected after the date hereof).
“Tranche
4 Contingent Shares” means a number of shares of Restricted Sigma Shares, equal to (x) 1,650,000 Restricted Sigma Shares less
(y) the Closing Shares, and issuable upon satisfaction of the Fourth Milestone Event (which number will be subject to adjustment to reflect
and account for any stock split, stock dividend, combination, or other recapitalization or reclassification of Sigma effected after the
date hereof).
“Transaction
Documents” means, collectively, this Agreement and all agreements, certificates, instruments and other documents to be executed
and delivered in connection with the transactions contemplated by this Agreement, including, but not limited to the exhibits hereto.
“Travel
Bookings” shall mean the booking of a Travel Product.
“Travel
Bookings Milestone Event” means for each calendar month in which $1,000,000 or more in gross Travel Bookings are generated
by the Combined Company.
“Travel
Product” means any travel or travel-related products, services or other offerings, including shopping, booking, reviewing,
searching or such similar services which are offered, made available or otherwise permitted to be booked by, through or on behalf of
NextTrip .
“Treasury
Regulations” means the income tax regulations, including temporary regulations, promulgated under the Code, as such regulations
may be amended from time to time (including corresponding provisions of succeeding regulations).
“U.S.”
means the United States of America.
Article
II
SHARE
EXCHANGE; CLOSING
Section
2.1 Share Exchange. At the Closing, the Parent shall sell, transfer, convey, assign and deliver the NextTrip Shares, representing
all of the issued and outstanding shares of NextTrip Capital Stock, to Sigma and in consideration therefor, Sigma shall issue the Restricted
Sigma Shares to the Parent Members, Pro Rata, as set forth in the Consideration Schedule (the “Share Exchange”), and
as provided in Section 2.3 below. Immediately following the Closing, NextTrip will become a wholly-owned subsidiary of Sigma.
Section
2.2 Closing. Unless this Agreement is earlier terminated pursuant to Article X hereof, upon the terms and subject to the conditions
of this Agreement, the transactions contemplated by this Agreement shall take place at a closing (the “Closing”) to
be held not later than three Business Days following the satisfaction or waiver by the party entitled to the benefit thereof of the conditions
set forth in Article IX (other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction
or waiver of such conditions), at the offices of the legal counsel of Sigma or NextTrip, as may be mutually agreed by Sigma and the Parent
prior to Closing. The date and time of the Closing is referred to herein as the “Closing Date.”
Section
2.3 Consideration. As consideration for the NextTrip Shares, each Parent Member will be entitled to its Pro Rata share of the
Restricted Sigma Shares as provided in this Section 2.3.
(a)
Closing Shares. At the Closing, Sigma will issue, or will cause the issuance of, the Closing Shares to the Parent Members
in accordance with their Pro Rata share as set forth on the Consideration Schedule.
(b)
Contingent Shares.
(i)
If on a date that is six (6) months after the Closing Date, the First Milestone Event is met, Sigma will issue, or will cause the issuance
of, the Tranche 1 Contingent Shares to the Parent Members in accordance with their respective Pro Rata shares.
(ii)
If on a date that is nine (9) months after the Closing Date, the Second Milestone Event is met, Sigma will issue, or will cause the issuance
of, the Tranche 2 Contingent Shares to the Parent Members in accordance with their respective Pro Rata shares. Such issuance may be made
as early as six (6) months after the Closing Date if the Second Milestone Event is reached between six (6) and nine (9) months after
the Closing Date.
(iii)
If on a date that is twelve (12) months after the Closing Date, the Third Milestone Event is met, Sigma will issue, or will cause the
issuance of, the Tranche 3 Contingent Shares to the Parent Members in accordance with their respective Pro Rata shares. Such issuance
may be made as early as six (6) months after the Closing Date if the Third Milestone Event is reached between six (6) and twelve (12)
months after the Closing Date.
(iv)
If on a date that is fifteen (15) months after the Closing Date, the Fourth Milestone Event is met, Sigma will issue, or will cause the
issuance of, the Tranche 4 Contingent Shares to the Parent Members in accordance with their respective Pro Rata shares. Such issuance
may be made as early as six (6) months after the Closing Date if the Fourth Milestone Event is reached between six (6) and fifteen (15)
months after the Closing Date.
(v)
Alternatively, independent of the Milestone Events set forth in Section 2.3(b)(i)-(iv) above, for each month during the fifteen (15)
month period following the Closing Date that the Travel Bookings Milestone Event is met, to the extent not previously issued the Contingent
Shares will be issuable, starting with the Tranche 1 Contingent Shares, then the Tranche 2 Contingent Shares, etc. For the avoidance
of doubt, a tranche of Contingent Shares can only be earned once up to the maximum amount of the Restricted Sigma Shares issuable under
this Agreement.
(vi)
Whether a Milestone Event is met and the Contingent Shares are issuable under this Section 2.3 shall be determined by the Parties on
a mutually agreeable date (each a “Milestone Payment Determination Date”) no later than thirty (30) days following
notice by NextTrip to Sigma that such Milestone Event has been met. If Contingent Shares are determined to be issuable under this Section,
Sigma shall issue such additional Contingent Shares within 60 days following each Milestone Payment Determination Date.
(vii)
It will be an express condition to a Parent Member’s receipt of any Contingent Shares that, as of the applicable issuance date,
each Parent Member must have signed and delivered to Sigma an investor suitability questionnaire completed to Sigma’s reasonable
satisfaction.
(viii)
During the Milestone Period, Sigma shall (i) use commercially-reasonable efforts to operate NextTrip and act in good faith and in the
spirit of fair dealing with respect to the provisions of this Section 2.3 and shall not take any action in bad faith which has the primary
purpose of reducing the earning or payment of the Contingent Shares (if any), (ii) use commercially-reasonable efforts to facilitate
the ongoing funding requirements of NextTrip during the Milestone Period and (iii) shall not negotiate, solicit or consummate a Fundamental
Transaction during the Milestone Period, other than the sale of the Legacy Business (as described below) without agreeing to accelerate
the Milestone Events and issuing the Contingent Shares in full in connection therewith (the “Milestone Covenants”).
Section
2.4 Asset Sale. At the Closing Date, Sigma may, subject to maintaining its Principal Market listing, sell, transfer and
assign assets pursuant to the APA and declare and pay a dividend or other distribution with respect to the outstanding shares of
capital stock of Sigma immediately prior to the Closing Date of the net sale proceeds, if any, available for distribution to
shareholders after paying or making arrangements to pay or otherwise satisfy all creditors of Sigma. All determinations regarding
the foregoing shall be made in good faith by the board of directors of Sigma (the “Sigma Board”) prior to the
Closing Date. Sigma shall keep NextTrip timely apprised of all actions by Sigma in these regards. In the event that the closing
under the APA has not occurred within thirty (30) days following the Closing Date, Sigma shall form a wholly-owned subsidiary and
assign its assets and related business to such entity.
Section
2.5 Directors and Officers.
(a) Sigma
Board. The Parties shall take all necessary actions such that the individual identified on Schedule 2.5(a) of the
NextTrip Disclosure Schedule, or his or her replacement designated in writing by the NextTrip Representative not less than ten (10)
days prior to the Closing Date, be appointed to the board of directors of Sigma as of the Closing Date to serve until his or her
successor is duly elected or appointed and qualified in accordance with applicable Law, or until his or her earlier death,
resignation or removal in accordance with the Sigma Organizational Documents. The Parties also agree that following the date of each
Milestone Event, one (1) individual designated in writing by the NextTrip Representative shall be appointed to Sigma’s Board
to replace a then existing director of the Sigma Board (other than the individuals previously appointed by NextTrip). The Parties
further agree that during the Milestone Period no changes shall be made to the authorized number of directors of Sigma without the
written consent or approval of the NextTrip Representative.
(b)
Officers of Sigma.The Parties shall take all necessary actions such that, from and after the Closing, until their respective
successors are duly elected or appointed and qualified in accordance with applicable Law, or until their earlier death, resignation or
removal in accordance with the Sigma Organizational Documents of Sigma, (i) William Kerby shall be appointed as the Chief Executive Officer
of Sigma and shall have executed an executive employment agreement which shall be reasonably satisfactory to the Parties (the “Kerby
Employment Agreement”) and (ii) the other officers of Sigma prior to the Closing shall remain in their respective positions
unless and until determined otherwise by the Sigma Board.
(c) NextTrip
Board of Directors and Officers. The Parties shall take all necessary actions such that, from and after the Closing Date,
until their successors are duly elected or appointed and qualified in accordance with applicable Law, or until their earlier death,
resignation or removal in accordance with the organizational documents of the NextTrip, (i) the directors of the NextTrip and (ii)
the officers of the NextTrip shall, in each case, be the same as the directors and officers of NextTrip as determined by the board
of directors of NextTrip.
Section
2.6 Closing Deliveries by Sigma. At the Closing, Sigma shall deliver, or cause to be delivered, (a) certificates or book-entry
notices evidencing the Restricted Sigma Shares to the Parent Members in the denominations set forth on the Consideration Schedule, and
(b) the various other documents required to be delivered at Closing pursuant to Section 9.2 hereof.
Section
2.7 Closing Deliveries by NextTrip and the Parent. At the Closing, (a) the Parent shall deliver, or cause to be delivered,
certificate(s) representing the NextTrip Shares, accompanied by a stock power signed by Parent; and (b) NextTrip and the Parent , as
applicable, shall deliver, or cause to be delivered, to Sigma the various other documents required to be delivered at Closing pursuant
to Section 9.3 hereof.
Article
III
REPRESENTATIONS
AND WARRANTIES OF THE PARENT
The
Parent hereby represents and warrants to Sigma that the statements contained in this Article III are true, correct and complete
as of the date of this Agreement and as of the Closing Date.
Section
3.1 Authority. The Parent has all requisite authority and power to enter into and deliver this Agreement and any of the other
Transaction Documents to which Parent is a party, and any other certificate, agreement, document or instrument to be executed and delivered
by the Parent in connection with the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby. This Agreement has been, and each of the Transaction Documents to
which the Parent is a party will be, duly and validly authorized and approved, executed and delivered by the Parent.
Section
3.2 Binding Obligations. Assuming this Agreement and the Transaction Documents have been duly and validly authorized, executed
and delivered by the parties hereto and thereto other than the Parent , this Agreement and each of the Transaction Documents to which
the Parent is a party are duly authorized, executed and delivered by the Parent , and constitute the legal, valid and binding obligations
of the Parent, enforceable against the Parent in accordance with their respective terms, except as such enforcement is limited by general
equitable principles, or by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors’ rights generally.
Section
3.3 No Conflicts. Neither the execution or delivery by the Parent of this Agreement or any Transaction Document to which the
Parent is a party, nor the consummation or performance by the Parent of the transactions contemplated hereby or thereby will, directly
or indirectly, (a) contravene, conflict with, constitute a default (or an event or condition which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination or acceleration of, any agreement or instrument to which the Parent is
a party or by which the properties or assets of the Parent are bound; or (b) contravene, conflict with, result in any breach of, or constitute
a default (or an event that with notice or lapse of time or both would become a default) under, impair the rights of such Parent under,
or alter the obligations of any Person under, or create in any Person the right to terminate, amend, accelerate or cancel, or require
any notice, report or other filing (whether with a Governmental Authority or any other Person) pursuant to, or result in the creation
of a Lien on any of the assets or properties of the Parent or NextTrip under, any note, bond, mortgage, indenture, Contract, License,
permit, franchise or other instrument or obligation to which the Parent is a party or any of the Parent’s assets and properties
are bound or affected, except, in the case of any such contraventions, conflicts, violations, or other occurrences as would not have
a Material Adverse Effect on the Parent, NextTrip, Sigma or the Share Exchange.
Section
3.4 Ownership of NextTrip Shares. The Parent is the sole record and beneficial owner, of, and owns, of record and beneficially,
and has good, valid and indefeasible title to and the right to transfer to Sigma pursuant to this Agreement the NextTrip Shares free
and clear of any and all Liens. There are no options, rights, voting trusts, stockholder agreements or any other Contracts or understandings
to which the Parent is a party or by which the Parent or the NextTrip Shares are bound with respect to the issuance, sale, transfer,
voting or registration of the NextTrip Shares. Parent has sole managerial and dispositive authority with respect to the NextTrip Shares
and has not granted any 3rd party a proxy, option or other right to buy the NextTrip Shares or any interest therein that has not expired
or been validly withdrawn. At the Closing Date, Sigma will acquire good, valid and marketable title to the NextTrip Shares free and clear
of any and all Liens.
Section
3.5 Certain Proceedings. There is no Action pending against, or to the Knowledge of the Parent, threatened against or affecting,
the Parent by any Governmental Authority or other Person with respect to the Parent that challenges, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the transactions contemplated by this Agreement.
Section
3.6 Brokers or Finders. No Person has, or as a result of the transactions contemplated herein will have, any right or valid
claim against the Parent or NextTrip for any commission, fee or other compensation as a finder or broker, or in any similar capacity,
based upon arrangements made by or on behalf of the Parent or NextTrip. The Parent shall be solely responsible for payment of any undisclosed
obligation.
Section
3.7 Investment Representations.
(a)
The Parent understands and agrees that, if deemed acquired by the Parent hereunder, the Restricted Sigma Shares are being acquired for
investment purposes for its own account and not with a view to the resale or distribution of any part thereof, and the Parent has no
present intention of selling or otherwise distributing his/her/its Restricted Sigma Shares, except in compliance with applicable securities
Laws.
(b)
The Parent understands and agrees that the Restricted Sigma Shares issued hereunder are characterized as “restricted securities”
under the Securities Act inasmuch as this Agreement contemplates that, if acquired by the Parent pursuant hereto, the Restricted Sigma
Shares would be acquired in a transaction not involving a public offering. The Parent understands and agrees that the Restricted Sigma
Shares will be issued hereunder in reliance upon an exemption from registration afforded under Section 4(a)(2) of the Securities Act
and Rule 506(b) thereunder. The Parent further acknowledges and agrees that upon issuance, the Restricted Sigma Shares may not be resold
without registration under the Securities Act or in reliance upon an available exemption therefrom. The Parent represents that it is
familiar with Rule 144 promulgated under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby,
and specifically those in subparagraph (i) thereof, and otherwise by the Securities Act.
(c)
The Parent understands and agrees that the Restricted Sigma Shares issued pursuant to this Agreement have not been registered under the
Securities Act or the securities Laws of any state of the U.S.
(d)
The Parent understands that the Restricted Sigma Shares are being offered and issued to the Parent in reliance upon the truth and accuracy
of the representations, warranties, agreements, acknowledgments and understandings of the Parent set forth in this Agreement, in order
that Sigma may determine the applicability and availability of the exemptions from registration of the Restricted Sigma Shares on which
Sigma is relying.
(e)
The Parent further represents and warrants to Sigma that (i) it qualifies as an Accredited Investor; (ii) it consents to the placement
of a legend on any certificate or other document evidencing the Restricted Sigma Shares substantially in the form set forth in Section
3.8(a); (iii) it has sufficient knowledge and experience in finance, securities, investments and other business matters to be able
to protect its interests in connection with the transactions contemplated by this Agreement; (iv) it has consulted, to the extent that
he, she or it has deemed necessary, with its tax, legal, accounting and financial advisors concerning his, her or its investment in the
Restricted Sigma Shares and can afford to bear such risks for an indefinite period of time, including, without limitation, the risk of
losing its entire investment in the Restricted Sigma Shares; (v) it has been furnished during the course of the transactions contemplated
by this Agreement with all other public information regarding Sigma that it has requested and all such public information is sufficient
for it to evaluate the risks of investing in the Restricted Sigma Shares; (vi) it has been afforded the opportunity to ask questions
of and receive answers concerning Sigma and the terms and conditions of the issuance of the Restricted Sigma Shares; (vii) it is not
relying on any representations and warranties concerning Sigma made by Sigma or any officer, employee or agent of Sigma, other than those
contained in this Agreement or the SEC Reports; (viii) it will not sell or otherwise transfer the Restricted Sigma Shares, unless either
(A) the transfer of the Restricted Sigma Shares is registered under the Securities Act or (B) an exemption from such registration is
available; (ix) it understands and acknowledges that Sigma is under no obligation to register the Restricted Sigma Shares for sale under
the Securities Act; (x) it represents that the address furnished to Sigma is its principal office; (xi) it understands and acknowledges
that the Restricted Sigma Shares have not been recommended by any federal or state securities commission or regulatory authority, that
the foregoing authorities have not confirmed the accuracy or determined the adequacy of any information concerning Sigma that has been
supplied to it and that any representation to the contrary is a criminal offense; and (xii) it acknowledges that the representations,
warranties and agreements made by it herein shall survive the execution and delivery of this Agreement and the issuance of the Restricted
Sigma Shares.
(f)
The Parent is aware of, has received and had an opportunity to review (i) Sigma’s Annual Report on Form 10-K for the year ended
December 31, 2022; and (ii) Sigma’s current reports on Form 8-K, proxy statements, Form 10-Qs (which filings can be accessed by
going to www.sec.gov), from January 1, 2023, to the date of such Parent’s entry into this Agreement, in each case (i) through (ii),
including the audited and unaudited financial statements, description of business, risk factors, results of operations, certain transactions
and related business disclosures described therein (collectively the “Disclosure Documents”) and an independent investigation
made by it of Sigma. Parent acknowledges that due to its receipt of and review of the Disclosure Documents, it has received similar information
as would be included in a Registration Statement filed under the Securities Act.
(g)
Parent has not become aware of and has not been offered the Restricted Sigma Shares by any form of general solicitation or advertising,
including, but not limited to, advertisements, articles, notices or other communications published in any newspaper, magazine, or other
similar media or television or radio broadcast or any seminar or meeting where, to the Parent’s Knowledge, those individuals that
have attended have been invited by any such or similar means of general solicitation or advertising.
Section
3.8 Stock Legends. The Parent hereby agrees and acknowledges as follows:
(a)
The certificates or book-entry notices evidencing the Restricted Sigma Shares and each certificate or book entry issued in transfer thereof,
will bear the following or similar legend:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED
OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS OR (2) PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS, IN WHICH CASE THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY AN OPINION OF COUNSEL, WHICH COUNSEL AND OPINION
ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED IN
THE MANNER CONTEMPLATED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS.
(b)
The certificates or book entries representing the Restricted Sigma Shares, and each certificate or book entry issued in transfer thereof,
will also bear any other legend required under any applicable Law, including, without limitation, any state corporate and state securities
law, or Contract.
Section
3.9 Insider Trading. The Parent certifies and confirms that it has not directly, or through any third parties, purchased,
nor caused to be purchased in the public marketplace any publicly-traded shares of Sigma. The Parent further certifies and confirms that
it has not communicated the nature of the transactions contemplated herein, is not aware of any disclosure of non-public information
regarding Sigma or the transactions contemplated herein and is not a party to any insider trading in Sigma’s securities. The Parent
further certifies and confirms that it has not “tipped” any related parties or third parties regarding the transactions contemplated
herein, or advised any parties to purchase, sell or otherwise trade Sigma’s securities.
Section
3.10 Closing Date Releases.
(a)
Effective on the Closing Date, the Parent for itself and its successors and assigns, hereby releases, acquits and forever discharges
NextTrip and its respective Affiliates, officers, directors, employees and agents and their respective successors and assigns of and
from any and all claims, demands, liabilities, responsibilities, disputes, causes of action and obligations of every nature whatsoever,
liquidated or unliquidated, known or unknown, matured or unmatured, fixed or contingent, that the Parent has, owns or holds as of the
Closing Date, or have at any time previously had, owned or held against such parties, including, without limitation, all Liabilities
created as a result of the, gross negligence and willful acts of NextTrip or the negligence of NextTrip or its employees and agents,
or under a theory of strict liability, existing as of the Closing Date; provided, however, that such release shall not cover any claims
arising under this Agreement.
(b)
As of the date of this Agreement, the Parent hereby represents and warrants that the Parent has not previously assigned or transferred,
or purported to assign or transfer, to any Person or entity whatsoever all or any part of the claims, demands, liabilities, responsibilities,
disputes, causes of action or obligations released in Section 3.10(a). The Parent represents and warrants that the Parent has
read and understands all of the provisions of this Section 3.10 and that the Parent has been represented by legal counsel of the
Parent’s own choosing in connection with the negotiation, execution and delivery of this Agreement.
(c)
The release provided by the Parent pursuant to Section 3.10(a) shall apply notwithstanding that the matter for which release is
provided may relate to the ordinary, sole or contributory negligence, gross negligence, willful misconduct or violation of law by a released
party, including NextTrip and its Affiliates, officers, directors, employees and agents, and for liabilities based on theories of strict
liability, and shall be applicable whether or not negligence of the released party is alleged or proven, it being the intention of the
Parties to release the released party from and against its ordinary, sole and contributory negligence and gross negligence as well as
liabilities based on the willful actions or omissions of the released party and Liabilities based on theories of strict liability.
Section
3.11 Proxy Statement Information. None of the information supplied or to be supplied by the Parent to Sigma for inclusion
in the Proxy Statement or any amendment or supplement thereto will contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
Section
3.12 No Untrue Representation or Warranty. No representation or warranty contained in this Agreement or any attachment, schedule,
exhibit, certificate or instrument furnished to Sigma by the Parent pursuant hereto, or in connection with the transactions contemplated
hereby, contains any untrue statement of a material fact, or omits to state any material fact necessary to make the statements contained
herein or therein not misleading.
Article
IV
REPRESENTATIONS
AND WARRANTIES OF NEXTTRIP
NextTrip
represents and warrants to Sigma, subject to the exceptions and qualifications specifically set forth or disclosed in writing in the
disclosure schedule delivered by NextTrip to Sigma contemporaneously with the execution of this Agreement (collectively, the “NextTrip
Disclosure Schedule”) that the statements contained in this Article IV are true, correct and complete as of the date
of this Agreement and as of the Closing Date. Each reference to “NextTrip” below shall include a reference to NextTrip’s
subsidiaries.
Section
4.1 Organization and Qualification. NextTrip is a corporation duly organized, validly existing and in good standing under
the Laws of the jurisdiction of its incorporation or organization, has all requisite corporate authority and power, Licenses, authorizations,
consents and approvals to carry on its business as presently conducted and to own, hold and operate its properties and assets as now
owned, held and operated by it, and is duly qualified to do business and in good standing in each jurisdiction in which the failure to
be so qualified would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on NextTrip.
Section
4.2 Authority. NextTrip has all requisite authority and power (corporate and other), Licenses, authorizations, consents and
approvals to enter into and deliver this Agreement and any of the other Transaction Documents to which NextTrip is a party and any other
certificate, agreement, document or instrument to be executed and delivered by NextTrip in connection with the transactions contemplated
hereby and thereby and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the other Transaction Documents by NextTrip and the performance by NextTrip
of its obligations hereunder and thereunder and the consummation by NextTrip of the transactions contemplated hereby and thereby have
been duly authorized by all necessary action on the part of NextTrip. NextTrip does not need to give any notice to, make any filing with,
or obtain any authorization, consent or approval of any Person or Governmental Authority in order for the Parties to execute, deliver
or perform this Agreement or the transactions contemplated hereby. This Agreement has been, and each of the Transaction Documents to
which NextTrip is a party will be, duly and validly authorized and approved, executed and delivered by NextTrip.
Section
4.3 Binding Obligations. Assuming this Agreement and the Transaction Documents have been duly and validly authorized, executed
and delivered by the parties hereto and thereto other than NextTrip, this Agreement and each of the Transaction Documents to which NextTrip
is a party is duly authorized, executed and delivered by NextTrip and constitutes the legal, valid and binding obligations of NextTrip
enforceable against NextTrip in accordance with its terms, except as such enforcement is limited by general equitable principles, or
by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors’ rights generally.
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4.4 No Conflicts. Neither the execution nor the delivery by NextTrip of this Agreement or any Transaction Document to which
NextTrip is a party, nor the consummation or performance by NextTrip of the transactions contemplated hereby or thereby will, directly
or indirectly, (a) contravene, conflict with, or result in a violation of any provision of the NextTrip Organizational Documents; (b)
contravene, conflict with or result in a violation of any Law, Order, charge or other restriction or decree applicable to NextTrip, or
by which NextTrip or any of its respective assets and properties are bound or affected; (c) contravene, conflict with, result in any
breach of, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, impair the rights
of NextTrip under, or alter the obligations of any Person under, or create in any Person the right to terminate, amend, accelerate or
cancel, or require any notice, report or other filing (whether with a Governmental Authority or any other Person) pursuant to, or result
in the creation of a Lien on any of the assets or properties of NextTrip under, any note, bond, mortgage, indenture, Contract, License,
permit, franchise or other instrument or obligation to which NextTrip is a party or by which NextTrip or any of its respective assets
and properties are bound or affected; or (d) contravene, conflict with, or result in a violation of, the terms or requirements of, or
give any Governmental Authority the right to revoke, withdraw, suspend, cancel, terminate or modify, any licenses, permits, authorizations,
approvals, franchises or other rights held by NextTrip or that otherwise relate to the business of, or any of the properties or assets
owned or used by, NextTrip, except, in the case of clauses (b), (c), or (d), for any such contraventions, conflicts, violations, or other
occurrences as would not have a Material Adverse Effect on NextTrip.
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4.5 Subsidiaries. Except as set forth on Schedule 4.5, NextTrip does not own, directly or indirectly, any equity or other
ownership interest in any corporation, limited liability company, limited or general partnership, joint venture or other entity or enterprise.
There are no Contracts or other obligations (contingent or otherwise) of NextTrip to retire, repurchase, redeem or otherwise acquire
any outstanding shares of capital stock of, or other ownership interests in, any other Person or to provide funds to or make any investment
(in the form of a loan, capital contribution or otherwise) in any other Person.
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4.6 Organizational Documents. NextTrip has delivered or made available to Sigma true and correct copies of the Certificate
of Incorporation and Bylaws of NextTrip and each of its subsidiaries and Affiliates, and any other organizational documents of NextTrip
and each of its subsidiaries and Affiliates, each as amended to date, and each such instrument is in full force and effect (collectively,
the “NextTrip Organizational Documents”). Neither NextTrip, nor its subsidiaries or Affiliates are in violation of
any of the provisions of the NextTrip Organizational Documents. The minute books (containing the records or meetings of the stockholders,
the board of directors and any committees of the board of directors), as provided or made available to Sigma, are correct and complete.
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4.7 Capitalization. The authorized and outstanding capital stock and other voting securities of NextTrip (the “NextTrip
Capital Stock”) and each of its subsidiaries and Affiliates is set forth in Section 4.7 of the NextTrip Disclosure Schedule.
Except as set forth on such schedule, no shares of capital stock or other voting securities of NextTrip and each of its subsidiaries
or Affiliates were issued, reserved for issuance or outstanding. NextTrip owns of record and beneficially all of the capital stock or
other voting securities of each of its subsidiaries and Affiliates. All the outstanding shares of NextTrip and all the outstanding capital
stock of each of its subsidiaries and affiliates are duly authorized, validly issued, fully paid and nonassessable and not subject to
or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar
right under any provision of the Laws of the applicable jurisdiction of formation, the NextTrip Organizational Documents, or any Contract
to which NextTrip is a party or otherwise bound. There are not any bonds, debentures, notes or other Indebtedness of NextTrip or any
of its subsidiaries of Affiliates having the right to vote (or convertible into, or exchangeable for, securities having the right to
vote) on any matters on which holders of the NextTrip Shares, or other voting securities may vote. There are no options, warrants, rights,
convertible or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units,
commitments, Contracts, arrangements or undertakings of any kind to which NextTrip is a party or by which it is bound (x) obligating
NextTrip or its subsidiaries and Affiliates, to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of
or other equity interest in, NextTrip or its subsidiaries or Affiliates; (y) obligating NextTrip or its subsidiaries or Affiliates to
issue, grant, extend or enter into any such option, warrant, call, right, security, commitment, Contract, arrangement or undertaking;
or (z) that give any Person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights
occurring to holders of the capital stock or other equity interests of NextTrip or any of its subsidiaries and Affiliates. There are
no outstanding Contracts or obligations of NextTrip to repurchase, redeem or otherwise acquire any shares of capital stock or other equity
interests of NextTrip or any of its subsidiaries and Affiliates. There are no registration rights, proxies, voting trust agreements or
other agreements or understandings with respect to any class or series of any capital stock or other security of NextTrip and each of
its subsidiaries and Affiliates.
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4.8 Brokers or Finders. No Person has, or as a result of the transactions contemplated herein will have, any right or valid
claim against NextTrip or the Parent for any commission, fee or other compensation as a finder or broker, or in any similar capacity,
based upon arrangements made by or on behalf of NextTrip or the Parent. The Parent shall be solely responsible for payment of any undisclosed
obligation and the Parent.
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4.9 Compliance with Laws. The business and operations of NextTrip have been and are being conducted in accordance with all
applicable Laws and Orders. NextTrip is not in conflict with, or in default or violation of and, to the Knowledge of NextTrip, is not
under investigation with respect to and has not been threatened to be charged with or given notice of any violation of or default under,
any (a) Law, rule, regulation, judgment or Order; or (b) note, bond, mortgage, indenture, Contract, License, permit, franchise or other
instrument or obligation to which NextTrip is a party or by which NextTrip, any of its subsidiaries or Affiliates or any of their respective
assets and properties are bound or affected. There is no agreement, judgment or Order binding upon NextTrip or any of its subsidiaries
or Affiliates which has, or could reasonably be expected to have, the effect of prohibiting or materially impairing any business practice
of NextTrip or the conduct of business by NextTrip as currently conducted. NextTrip has filed all forms, reports and documents required
to be filed with any Governmental Authority and NextTrip has made available such forms, reports and documents to Sigma. As of their respective
dates, such forms, reports and documents complied in all material respects with the applicable requirements pertaining thereto and none
of such forms, reports and documents contain any untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not
misleading.
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4.10 Certain Proceedings. There is no Action pending against, or to the Knowledge of NextTrip, threatened against or affecting,
NextTrip or any subsidiary of NextTrip, by any Governmental Authority or other Person with respect to NextTrip or any subsidiary of NextTrip,
or its business or that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any
of the transactions contemplated by this Agreement. NextTrip and its subsidiaries, are not, and to the Knowledge of NextTrip have not
been, a party to any material litigation or, within the past two (2) years, the subject of any threat of material litigation (litigation
shall be deemed “material” if the amount at issue exceeds the lesser of $10,000 per matter or $25,000 in the aggregate).
NextTrip and its subsidiaries are not in violation of and, to the Knowledge of NextTrip, are not under investigation with respect to
and have not been threatened to be charged with or given notice of any violation of any applicable Law, rule, regulation, judgment or
Order. Neither NextTrip, nor its subsidiaries, nor to NextTrip’s Knowledge, any past or present director or officer (in his or
her capacity as such) or affiliate of NextTrip or its subsidiaries, is or has been the subject of any civil, criminal, or administrative
Action involving a claim or violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty.
Neither NextTrip, nor its subsidiaries, nor, to NextTrip’s Knowledge, any past or present director or officer (in his or her capacity
as such) or affiliate of NextTrip or its subsidiaries, have any reason to believe that they will be the subject of any civil, criminal,
or administrative Action involving a claim or violation of or liability under federal or state securities laws or a claim of breach of
fiduciary duty. Neither NextTrip, nor its subsidiaries, nor, to NextTrip’s Knowledge, any past or present director or officer (in
his or her capacity as such) or affiliate of NextTrip or its subsidiaries, has any reason to believe that they will be the subject of
any civil, criminal, or administrative Action brought by any federal or state agency.
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4.11 Contracts. Except as set forth in Section 4.11 of the NextTrip Disclosure Schedule, there are no Contracts that
are material to the business, properties, assets, condition (financial or otherwise), results of operations or prospects of NextTrip.
NextTrip is not in violation of or in default under (nor does there exist any condition which upon the passage of time or the giving
of notice would cause such a violation of or default under) any Contract to which it is a party or to which it or any of its properties
or assets is subject, except for violations or defaults that would not, individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect of NextTrip.
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4.12 Financial Statements and Tax Matters.
(a)
Financial Statements; Books and Records; Accounts Receivable.
(i)
NextTrip has delivered to Sigma the financial statements attached as Section 4.12(a)(i) of the NextTrip Disclosure Schedule hereto
(the “NextTrip Financial Statements”). The NextTrip Financial Statements fairly present in all material respects the
financial position of NextTrip as of and for the dates thereof and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.
(ii)
The books and records of NextTrip are complete and correct in all material respects and have been maintained in accordance with sound
business practices consistent with industry standards.
(iii)
The accounts receivable of NextTrip are reflected on the books and records of NextTrip and represent valid obligations arising from the
sale of products or performance of services in the Ordinary Course of Business. To the Knowledge of NextTrip, the accounts receivable
are current and collectible, net of the respective reserves established on NextTrip’s books and records in accordance with past
practices consistently applied. To the Knowledge of NextTrip, there is no contest, claim or right of set-off under any Contract relating
to accounts receivable with respect to the amount or validity of such accounts receivable. Section 4.12(a)(iii) of the NextTrip
Disclosure Schedule sets forth a complete and accurate aging report of such accounts receivable.
(b)
Absence of Certain Changes. Since the date of the latest balance sheet included in the NextTrip Financial Statements, NextTrip
has been operated, in the ordinary course and consistent with past practice and, in any event, there has not been: (i) any material adverse
change in the business, condition (financial or otherwise), operations, results of operations or prospects of NextTrip; (ii) any loss
or, to the Knowledge of NextTrip, any threatened or contemplated loss, of business of any customers or suppliers of NextTrip which, individually
or in the aggregate, could reasonably be expected to have a Material Adverse Effect on NextTrip; (iii) any loss, damage, condemnation
or destruction to any of the properties of NextTrip (whether or not covered by insurance); (iv) any borrowings by NextTrip other than
trade payables arising in the ordinary course of the business and consistent with past practice; or (v) any sale, transfer or other disposition
of any of the assets other than in the ordinary course of the business and consistent with past practice.
(c)
Tax Returns; Taxes. NextTrip has filed all Tax Returns required to be filed (if any) by or on behalf of NextTrip and has
paid all Taxes of NextTrip required to have been paid (whether or not reflected on any Tax Return). No Governmental Authority in any
jurisdiction has made a claim, assertion or threat to NextTrip that NextTrip is or may be subject to taxation by such jurisdiction; there
are no Liens with respect to Taxes on NextTrip’s property or assets; and there are no Tax rulings, requests for rulings, or closing
agreements relating to NextTrip for any period (or portion of a period) that would affect any period after the date hereof. All Taxes
that NextTrip is or was required by Law to withhold or collect have been withheld and collected and have been timely paid over in the
appropriate amounts to the proper Governmental Authority as required by Law. NextTrip has not distributed stock or shares of another
entity, nor has NextTrip had its shares or stock distributed by another entity, in a transaction that was purported or intended to be
governed in whole or in part by Section 355 of the Code. All related-party transactions involving NextTrip have complied with all transfer
pricing requirements in all jurisdictions in which the NextTrip does business, including at arm’s length prices and terms in compliance
with Section 482 of the Code. NextTrip has not obtained or sought any Tax savings, Tax deferrals or other Tax benefits under the CARES
Act. NextTrip has established adequate accruals and reserves, in accordance with GAAP, on the NextTrip Financial Statements for all Taxes
payable by NextTrip for all taxable periods and portions thereof. The consummation of the transactions contemplated by this Agreement,
by itself or together with any other contracts, transactions or events, will not cause any amounts to fail to be deductible for U.S.
federal income tax purposes by virtue of Section 280G of the Code.
(d)
No Adjustments, Changes. Neither NextTrip nor any other Person on behalf of NextTrip (i) has executed or entered into a
closing agreement pursuant to Section 7121 of the Code or any predecessor provision thereof or any similar provision of state, local
or foreign law; or (ii) has agreed to or is required to make any adjustments pursuant to Section 481(a) of the Code or any similar provision
of state, local or foreign law.
(e)
No Disputes. There is no pending audit, examination, investigation, dispute, proceeding or claim with respect to any Taxes
of NextTrip, nor is any such claim or dispute pending or contemplated. NextTrip has delivered to Sigma true, correct and complete copies
of all Tax Returns and examination reports and statements of deficiencies assessed or asserted against or agreed to by NextTrip, if any,
since its inception and any and all correspondence with respect to the foregoing.
(f)
Not a U.S. Real Property Holding Corporation. NextTrip is not and has not been a U.S. real property holding corporation
within the meaning of Section 897(c)(2) of the Code at any time during the applicable period specified in Section 897(c)(1)(A)(ii) of
the Code.
(g)
No Tax Allocation, Sharing. NextTrip is not and has not been a party to any Tax allocation or sharing agreement.
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4.13 Internal Accounting Controls. NextTrip maintains a system of internal accounting controls sufficient to provide reasonable
assurance that (a) transactions are executed in accordance with management’s general or specific authorizations; (b) transactions
are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and
to maintain asset accountability; (c) access to assets is permitted only in accordance with management’s general or specific authorization;
and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences. NextTrip has established disclosure controls and procedures for NextTrip and designed such disclosure
controls and procedures to ensure that material information relating to NextTrip is made known to the officers by others within NextTrip.
NextTrip’s officers have evaluated the effectiveness of NextTrip’s controls and procedures. Since NextTrip’s Most Recent
Fiscal Year End, there have been no significant changes in NextTrip’s internal controls or, to the Knowledge of NextTrip, in other
factors that could significantly affect NextTrip’s internal controls.
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4.14 Labor Matters.
(a)
There are no collective bargaining or other labor union agreements to which NextTrip is a party or by which it is bound. No material
labor dispute exists or, to the Knowledge of NextTrip, is imminent with respect to any of the employees of NextTrip.
(b)
Section 4.14 of the NextTrip Disclosure Schedule sets forth a list of all NextTrip employees, independent contractors or other
Persons providing comparable services to it. NextTrip is in full compliance with all Laws regarding employment, wages, hours, benefits,
equal opportunity, collective bargaining, the payment of Social Security and other taxes, and occupational safety and health. NextTrip
is not liable for the payment of any compensation, damages, taxes, fines, penalties or other amounts, however designated, for failure
to comply with any of the foregoing Laws.
(c)
To the Knowledge of NextTrip, no director, officer or employee of NextTrip is a party to, or is otherwise bound by, any Contract (including
any confidentiality, non-competition or proprietary rights agreement) with any other Person that in any way adversely affects or will
materially affect (i) the performance of his or her duties as a director, officer or employee of NextTrip; or (ii) the ability of NextTrip
to conduct its business. Each employee of NextTrip is employed on an at-will basis and NextTrip does not have any Contract with any of
its employees which would interfere with its ability to discharge its employees.
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4.15 Employee Benefits.
(a)
NextTrip does not, and since its inception never has, maintained or contributed to any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, arrangement or understanding (whether or not legally binding) providing benefits to
any current or former employee, officer or director of NextTrip. There are not any employment, consulting, indemnification, severance
or termination agreements or arrangements between NextTrip and any current or former employee, officer or director of NextTrip, nor does
NextTrip have any general severance plan or policy.
(b)
NextTrip does not, and since its inception never has, maintained or contributed to any “employee pension benefit plans” (as
defined in Section 3(2) of ERISA), “employee welfare benefit plans” (as defined in Section 3(1) of ERISA) or any other benefit
plan for the benefit of any current or former employees, consultants, officers or directors of NextTrip.
(c)
Neither the consummation of the transactions contemplated hereby alone, nor in combination with another event, with respect to each director,
officer, employee and consultant of NextTrip, will result in (i) any payment (including, without limitation, severance, unemployment
compensation or bonus payments) becoming due from NextTrip; (ii) any increase in the amount of compensation or benefits payable to any
such individual; or (iii) any acceleration of the vesting or timing of payment of compensation payable to any such individual. No arrangement
or other Contract of NextTrip provides benefits or payments contingent upon, triggered by, or increased as a result of a change in the
ownership or effective control of NextTrip.
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4.16 Title to Assets. NextTrip has sufficient title to, or valid leasehold interests in, all of its properties and assets used
in the conduct of its businesses. All such assets and properties, other than assets and properties in which NextTrip has leasehold interests,
are free and clear of all Liens, except for Liens that, in the aggregate, do not and will not materially interfere with the ability of
NextTrip to conduct business as currently conducted.
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4.17 Intellectual Property; Data Privacy.
(a)
Section 4.17(a) of the NextTrip Disclosure Schedules sets forth a true, complete and correct list of all applications and registrations
of Intellectual Property owned by NextTrip (“NextTrip’s Registered IP”). NextTrip is the sole and exclusive
owner of all of NextTrip’s Registered IP. All required filings and fees related to NextTrip’s Registered IP have been timely
filed and paid, and all NextTrip’s Registered IP is otherwise in good standing.
(b)
Section 4.17(b) of NextTrips’ Disclosure Schedules sets forth a true, complete, and correct list of all Intellectual Property which
NextTrip uses or holds for use, which is not NextTrip’s Registered IP (“NextTrip’s IP”). NextTrip’s
Registered IP and NextTrip’s IP together (“NextTrip Intellectual Property”) constitutes all of the Intellectual Property
needed, used or held for use by NextTrip to operate its business as presently conducted. NextTrip is the sole and exclusive owner of
or has a valid and enforceable license or other right to use the NextTrip Intellectual Property, as a case maybe, free and clear of any
Liens and, to the Knowledge of NextTrip, any infringing or diluting uses thereof by third parties.
(c)
All of the NextTrip Intellectual Property is valid and enforceable, and all registrations of NextTrip Intellectual Property are subsisting
and in full force and effect and have not been cancelled. NextTrip has taken all reasonable and necessary steps to maintain and enforce
the NextTrip Intellectual Property. NextTrip has neither abandoned nor granted any license, permit or other consent or authorization
to any third party to use any of the NextTrip Intellectual Property. None of the NextTrip Intellectual Property is subject to any outstanding
order, decree, judgment, stipulation, injunction or restriction or agreement restricting the scope or use thereof. To the Knowledge of
NextTrip, none of the NextTrip Intellectual Property, the conduct of the Company’s business as currently and formerly conducted
and as proposed to be conducted, or the products and services of the NextTrip, in each case, has not infringed, misappropriated, or otherwise
violated and will not infringe, misappropriate, or otherwise violate the Intellectual Property or other rights of any kind of any third
party. There are, and have been formerly, no threats, claims, suits, actions or other proceedings (including any oppositions, interferences,
reviews, or re-examinations) settled or pending or, to the Knowledge of the NextTrip, threatened in writing that allege any such infringement,
misappropriation or violation or challenging the validity, enforceability, registrability, or ownership of any NextTrip Intellectual
Property.
(d)
No Person has infringed, misappropriated, or otherwise violated any of NextTrip’s Intellectual Property.
(e)
NextTrip has taken all necessary steps to maintain and protect, and to provide for the continuity, integrity, and security of, trade
secrets and other confidential information of or held by NextTrip, including requiring all Persons having access thereto to execute written
non-disclosure agreements. NextTrip has used commercially reasonable efforts to enter into written agreements with current and former
employees, and with current and former independent contractors, who are or were involved in or have contributed to the invention, creation,
or development of any NextTrip Intellectual Property during the course of employment or engagement with the NextTrip, whereby the employee
or independent contractor (1) acknowledges NextTrip’s exclusive ownership of all Intellectual Property invented, created, or developed
by such employee or independent contractor within the scope of his or her employment or engagement with NextTrip; (2) grants to the NextTrip
a present, irrevocable assignment of any ownership interest such employee or independent contractor may have in or to such Intellectual
Property, to the extent such Intellectual Property does not constitute a “work made for hire” under applicable Law; and (3)
irrevocably waives any right or interest, including any moral rights, regarding any such Intellectual Property, to the extent permitted
by applicable Law.
(f)
The computer programs, software and code, whether in source code, object code, or executable code format, including systems software,
application software (including mobile apps), firmware, middleware, programming tools, scripts, routines, interfaces, input and output
formats, libraries, data, data models and databases, and all related specifications and documentation, including developer notes, comments
and annotations, operating instructions, user manuals, training materials and tangible media relating to any of the foregoing (“Software”),
information technology and computer systems (including the computers, computer software, databases, firmware, middleware, servers, workstations,
routers, hubs, switches, interfaces, data communications lines, websites, applications and all other information technology equipment
and software, and all associated documentation) of NextTrip (collectively, “NextTrip Business Systems”) are reasonably
sufficient for the immediate and anticipated needs of the business and operations of NextTrip. NextTrip Business Systems are in sufficiently
good working condition to perform all information technology operations and include sufficient licensed capacity for all software, in
each case as necessary for the conduct of the business and operations of NextTrip as currently conducted and as currently contemplated
to be conducted. NextTrip maintains commercially reasonable back-up and data recovery, disaster recovery and business continuity plans,
procedures and facilities, acts in compliance therewith, and tests such plans and procedures on a regular basis, and such plans and procedures
have been proven effective in all material respects upon such testing.
(g)
NextTrip’s data, privacy and security practices comply, and at all times have complied, in all material respects, with all Laws
relating to the processing of personal data, data privacy, data or cyber security, breach notification, or data localization, including
the Federal Trade Commission Act, the California Consumer Privacy Act (CCPA), GDPR and HIPAA for the conduct of business as currently
conducted, and in connection with the consummation of the transactions contemplated by this Agreement.
(h)
NextTrip has implemented and at all times has maintained reasonable and appropriate organizational, physical, administrative and technical
measures consistent with the industry in which NextTrip operates to protect the operation, confidentiality, integrity and security of
all of NextTrip’s confidential and other data and information in the conduct of the business of the NextTrip (“NextTrip
Business Data”) and the NextTrip Business Systems, against misuse. NextTrip Business Systems are free from material bugs and
other defects and do not contain any “virus,” “worm,” “spyware” or other malicious software.
(i)
NextTrip has obligated all third party service providers, outsourcers, and processors of confidential information on their behalf
and all third parties managing NextTrip Business Systems on their behalf to appropriate contractual terms relating to the processing
of NextTrip Business Data (as applicable and as required by Data Protection and Security Requirements) and information security and
have taken reasonable measures to ensure that such third parties have complied with their contractual obligations. Without limiting
the generality of the foregoing, NextTrip has entered into business associate agreements with vendors and customers in all
situations where required by applicable Law.
(j)
NextTrip has not received any notice of any claims, investigations, for alleged violations of Data Protection and Security Requirements
with respect to personal data subject to processing by, or under the control of, NextTrip, and, to the Knowledge of the NextTrip, there
are no facts or circumstances that are likely to form the basis for any such claims, investigations or allegations.
(k)
NextTrip has obtained the right to use all Software (i) used in its business, other than off-the-shelf Software (“Licensed Software”)
and (ii) developed by NextTrip and that is used in the business of the NextTrip (“NextTrip Owned Software”). The NextTrip
is in compliance with all material provisions of any Contract pursuant to which the NextTrip has the right to use the Licensed Software.
(l)
Section 4.17(l) of the Disclosure Schedule identifies all Open Source Technology that is or has been used by the NextTrip in the
development of or incorporated into, combined with, linked with, distributed with, provided to any Person as a service, provided via
a network as a service or application, or otherwise made available with, any NextTrip Owned Software. The NextTrip has not used any Open
Source Technology in a manner that requires, or would reasonably be expected to require, the (i) disclosure or distribution of any NextTrip
Owned Software in source code form, (ii) license or other provision of any NextTrip Owned Software on a royalty-free basis, or (iii)
grant of any license, non-assertion covenant or other rights or immunities under any NextTrip Owned Software or rights to modify, make
derivative works based on, decompile, disassemble or reverse engineer any NextTrip Owned Software, including any “copyleft”
license. NextTrip has complied with all notice, attribution and other requirements of each applicable Open Source Technology license.
(m)
No NextTrip Owned Software (or, to the Knowledge of the NextTrip, other software) used in the business or operations of the NextTrip
or provision of any NextTrip product or service contains any “time bomb,” “Trojan horse,” “back door,”
“worm,” virus, malware, spyware, or other device or code (“Malicious Code”) that would reasonably be expected
to impair the normal and authorized operation of any computer system, network or device or damage, destroy or prevent the access to or
use of any data without consent.
(n)
The NextTrip is in actual possession of and has exclusive control over all source code for all NextTrip Owned Software. The NextTrip
possesses all source code and other documentation and materials necessary or useful to compile, maintain and operate all NextTrip Owned
Software. NextTrip has not disclosed, delivered, licensed or otherwise made available, and do not have a duty or obligation (whether
present, contingent or otherwise) to disclose, deliver, license or otherwise make available, any source code for any NextTrip Owned Software
to any Person, other than in the performance of services for the NextTrip.
To
the best of NextTrip’s Knowledge, NextTrip is in compliance in all material respects with all applicable Laws pertaining to (i)
data security, cybersecurity, privacy, and (ii) the collection, storage, use, access, disclosure, processing, security, and transfer
of personal data, to the extent that it is subject to same. Except as set forth in Schedule 4.17 of the NextTrip Disclosure Schedule,
NextTrip does not have any premises, employees or tangible assets, and does not conduct any business activities, in any country other
than the U.S.
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4.18 Environmental Laws NextTrip (a) is in compliance with all Environmental Laws (as defined below); (b) has received all
Licenses or other approvals required under applicable Environmental Laws to conduct its business; and (c) is in compliance with all terms
and conditions of any such License or approval where, in each of the foregoing clauses (a), (b) and (c), the failure to so comply could
be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect on NextTrip. The term “Environmental
Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous
substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands or demand letters, injunctions, judgments, Licenses, notices or notice letters, Orders, permits, plans or regulations
issued, entered, promulgated or approved thereunder.
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4.19 Transactions with Affiliates and Employees. Except as set forth in Section 4.19 of the NextTrip Disclosure Schedule,
no officer, director, employee of NextTrip or any Affiliate of any such Person (each, a “Related Party”), has or has
had, either directly or indirectly, an interest in any transaction with NextTrip (other than for services as employees, officers and
directors), including any Contract or other arrangement providing for the furnishing of services, materials, or other items, to or by,
providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such Person or, to the Knowledge
of NextTrip, any entity in which any such Person has an interest or is an officer, director, trustee or partner. Except as set forth
in Section 4.19 of the NextTrip Disclosure Schedule, NextTrip is not dependent on any services or materials owned by any Related
Party.
Section
4.20 Liabilities. Except as set forth on Section 4.20 of the NextTrip Disclosure Schedule, NextTrip has no Liability
(and there is no Action pending, or to the Knowledge of NextTrip, threatened against NextTrip that would reasonably be expected to give
rise to any Liability). NextTrip is not a guarantor nor is it otherwise liable for any Liability or obligation (including Indebtedness)
of any other Person. There are no financial or contractual obligations (including any obligations to issue capital stock or other securities)
executory after the Closing Date.
Section
4.21 Money Laundering Laws. The operations of NextTrip are and have been conducted at all times in compliance with applicable
financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money
laundering statutes of all U.S. and non-U.S. jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations
or guidelines, issued, administered or enforced by any Governmental Authority (collectively, the “Money Laundering Laws”)
and no Proceeding involving NextTrip with respect to the Money Laundering Laws is pending or, to the Knowledge of NextTrip, threatened.
Section
4.22 Foreign Corrupt Practices. Neither NextTrip, nor, to the Knowledge of NextTrip, any director, officer, agent, employee
or other Person acting on behalf of NextTrip has, in the course of its actions for, or on behalf of, NextTrip (a) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (b) made any direct
or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (c) violated or is in violation
of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (d) made any unlawful bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any foreign or domestic government official or employee.
Section
4.23 Absence of Certain Changes or Events. Except as set forth in Section 4.23 of the NextTrip Disclosure Schedule,
since the NextTrip Most Recent Fiscal Year End (a) NextTrip has conducted its business only in Ordinary Course of Business; and (b) there
has not been any change in the assets, Liabilities, financial condition or operating results of NextTrip, except changes in the Ordinary
Course of Business that have not caused, in the aggregate, a Material Adverse Effect on NextTrip. NextTrip has not taken any steps to
seek protection pursuant to any Law or statute relating to bankruptcy, insolvency, reorganization, receivership, liquidation or winding
up, nor does NextTrip have any Knowledge or reason to believe that any of their respective creditors intend to initiate involuntary bankruptcy
proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so.
Section
4.24 Disclosure. No representation or warranty of NextTrip contained in this Agreement and no statement or disclosure made
by or on behalf of NextTrip to Sigma pursuant to this Agreement or any other agreement contemplated herein contains an untrue statement
of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading.
Section
4.25 Insurance. Except as would not reasonably be expected, either individually or in the aggregate, to have a Material Adverse
Effect on NextTrip, (a) NextTrip and its subsidiaries are insured with reputable insurers against such risks and in such amounts as the
management of NextTrip reasonably has determined to be prudent and consistent with industry practice, and NextTrip and its subsidiaries
are in compliance in all material respects with their insurance policies and are not in default under any of the terms thereof, (b) each
such policy is outstanding and in full force and effect and, except for policies insuring against potential liabilities of officers,
directors and employees of NextTrip and its subsidiaries, NextTrip or its relevant subsidiary is the sole beneficiary of such policies,
(c) all premiums and other payments due under any such policy have been paid, and all claims thereunder have been filed in due and timely
fashion, (d) there is no claim for coverage by NextTrip or its subsidiaries pending under any insurance policy as to which coverage has
been questioned, denied or disputed by the underwriters of such insurance policy and (e) neither NextTrip nor its subsidiaries has received
notice of any threatened termination of, material premium increase with respect to, or material alteration of coverage under, any insurance
policies.
Section
4.26 Investment Company. NextTrip is not, and is not an affiliate of, and immediately following the Closing will not have
become, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
Section
4.27 Proxy Statement Information. None of the information supplied or to be supplied by NextTrip to Sigma for inclusion in
the Proxy Statement or any amendment or supplement thereto will contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
Section
4.28 Proxy Statement Financial Statements. Using commercially reasonable efforts, NextTrip and its officers and employees
shall assist Sigma and its accountants and auditors in preparing audited and unaudited financial statements as required by Regulation
S-X and as required and requested from time to time by the SEC and the SEC’s rules and requirements for inclusion in the Proxy
Statement and any and all other filings with the SEC that such financial statements are required to be included in, and shall further
supply Sigma all information, reports, documentation and financial information reasonably requested in connection therewith. The costs
of all audits and the preparation of all financial information required pursuant to this Section 4.28 shall be paid by NextTrip.
Section
4.29 No Untrue Representation or Warranty. No representation or warranty contained in this Agreement or any attachment, schedule,
exhibit, certificate or instrument furnished to Sigma by NextTrip pursuant hereto, or in connection with the transactions contemplated
hereby, contains any untrue statement of a material fact, or omits to state any material fact necessary to make the statements contained
herein or therein not misleading.
Article
V
REPRESENTATIONS AND WARRANTIES OF SIGMA
Sigma
hereby represents and warrants to NextTrip and the Parent, subject to the exceptions and qualifications specifically set forth or disclosed
in the SEC Reports or specifically set forth or disclosed in writing in the disclosure schedule delivered by Sigma to NextTrip contemporaneously
with the execution of this Agreement (the “Sigma Disclosure Schedule”), that the statements contained in this Article
V are correct and complete as of the date of this Agreement and as of the Closing Date. All references below to Sigma’s “subsidiaries”
shall only refer to Sigma’s subsidiaries and not any minority owned subsidiaries. Each reference to Sigma below shall include where
applicable and warranted, a reference to Sigma’s subsidiaries.
Section
5.1 Organization and Qualification. Sigma is a corporation duly organized, validly existing and in good standing under
the Laws of the jurisdiction of its incorporation or organization, has all requisite corporate authority and power, Licenses,
authorizations, consents and approvals to carry on its business as presently conducted and to own, hold and operate its properties
and assets as now owned, held and operated by it, and is duly qualified to do business and in good standing in each jurisdiction in
which the failure to be so qualified would not reasonably be expected, individually or in the aggregate, to have a Material Adverse
Effect on Sigma. The Sigma Common Stock is presently quoted on the Principal Market and, except as disclosed in the SEC Reports,
Sigma has not received any notice from the SEC that it has or will commence, institute or bring a proceeding pursuant to Section
12(j) of the Exchange Act.
Section
5.2 Authority. Sigma has all requisite authority and power, Licenses, authorizations, consents and approvals to enter
into and deliver this Agreement and any of the other Transaction Documents to which Sigma is a party and any other certificate,
agreement, document or instrument to be executed and delivered by Sigma in connection with the transactions contemplated hereby and
thereby and, to perform their respective obligations hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby, subject to approval of the issuance of the Restricted Sigma Shares at the Stockholders Meeting. The execution and
delivery of this Agreement and the other Transaction Documents by Sigma and the performance by Sigma of its respective obligations
hereunder and thereunder and the consummation by Sigma of the transactions contemplated hereby and thereby have been duly authorized
by all necessary action on the part of Sigma. Sigma is not required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any Person or Governmental Authority in order for the Parties to execute, deliver or perform
this Agreement or the transactions contemplated hereby other than filings and notices required by SEC rules and regulations and
requirements of the Principal Market, all of which have been or will be timely made. This Agreement has been, and each of the
Transaction Documents to which Sigma is a party will be, duly and validly authorized and approved, executed and delivered by
Sigma.
Section
5.3 Binding Obligations. Assuming this Agreement and the Transaction Documents have been duly and validly authorized, executed
and delivered by the parties hereto and thereto other than Sigma, this Agreement and each of the Transaction Documents to which Sigma
is a party are duly authorized, executed and delivered by Sigma and constitutes the legal, valid and binding obligations of Sigma enforceable
against Sigma in accordance with their respective terms, except as such enforcement is limited by general equitable principles, or by
bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors’ rights generally.
Section
5.4 No Conflicts. Neither the execution nor the delivery by Sigma of this Agreement or any Transaction Document to which Sigma
is a party, nor the consummation or performance by Sigma of the transactions contemplated hereby or thereby (except as discussed below)
will, directly or indirectly, (a) contravene, conflict with, or result in a violation of any provision of Sigma Organizational Documents;
(b) contravene, conflict with or result in a violation of any Law, Order, charge or other restriction or decree of any Governmental Authority
or any rule or regulation of the Principal Market applicable to Sigma, or by which Sigma or any of its respective assets and properties
are bound or affected; (c) contravene, conflict with, result in any breach of, or constitute a default (or an event that with notice
or lapse of time or both would become a default) under, impair the rights of Sigma under, or alter the obligations of any Person under,
or create in any Person the right to terminate, amend, accelerate or cancel, or require any notice, report or other filing (whether with
a Governmental Authority or any other Person) pursuant to, or result in the creation of a Lien on any of the assets or properties of
Sigma under, any note, bond, mortgage, indenture, Contract, License, permit, franchise or other instrument or obligation to which Sigma
is a party or by which Sigma or any of its respective assets and properties are bound or affected (except as relating to notes, bonds,
mortgages, indentures, Contracts and other instruments requiring approval of counterparties which have not been obtained as of the date
of this Agreement, as set forth in Section 5.4 of the Sigma Disclosure Schedule, but which will be obtained prior to Closing);
or (d) contravene, conflict with, or result in a violation of, the terms or requirements of, or give any Governmental Authority the right
to revoke, withdraw, suspend, cancel, terminate or modify, any Licenses, permits, authorizations, approvals, franchises or other rights
held by Sigma or that otherwise relate to the business of, or any of the properties or assets owned or used by, Sigma, except, in the
case of clauses (b), (c) or (d), for any such contraventions, conflicts, violations, or other occurrences as would not have a Material
Adverse Effect on Sigma.
Section
5.5 Subsidiaries. Except as set forth in Section 5.5 of the Sigma Disclosure Schedule, Sigma does not own, directly
or indirectly, any equity or other ownership interest in any corporation, limited liability company, limited or general partnership,
joint venture or other entity or enterprise. Except as set forth in Section 5.5 of the Sigma Disclosure Schedule, there are no
Contracts or other obligations (contingent or otherwise) of Sigma to retire, repurchase, redeem or otherwise acquire any outstanding
shares of capital stock of, or other ownership interests in, any other Person or to provide funds to or make any investment (in the form
of a loan, capital contribution or otherwise) in any other Person.
Section
5.6 Organizational Documents. Sigma has delivered or made available to NextTrip a true and correct copy of the Articles of
Incorporation and Bylaws of Sigma and any other organizational documents of Sigma, each as amended, and each such instrument is in full
force and effect (the “Sigma Organizational Documents”). Sigma is not in violation of any of the provisions of its
Sigma Organizational Documents. The minute books (containing the records or meetings of the stockholders, the board of directors and
any committees of the board of directors), as provided or made available to NextTrip, are correct and complete.
Section
5.7 Capitalization.
(a)
The authorized and outstanding capital stock or other voting securities of Sigma (the “Sigma Capital Stock”) and each
of its subsidiaries is set forth in Section 5.7 of the Sigma Disclosure Schedule. Except as set forth in Section 5.7 of
the Sigma Disclosure Schedule, no shares of capital stock or other voting securities of Sigma and each of its majority subsidiaries are
issued, reserved for issuance or outstanding. Sigma owns of record and beneficially all of the capital stock or other voting securities
of each of its subsidiaries. All the outstanding Sigma Common Stock shares and all the outstanding capital stock of each of its subsidiaries
are duly authorized, validly issued, fully paid and nonassessable and not subject to or issued in violation of any purchase option, call
option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the Laws of the applicable
jurisdiction of formation, the Sigma Organizational Documents or any Contract to which Sigma is a party or otherwise bound. There are
not any bonds, debentures, notes or other Indebtedness of Sigma or any of its subsidiaries having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any matters on which holders of the Sigma Common Stock or other voting securities
may vote. Except as set forth in the SEC Filings, there are no options, warrants, rights, convertible or exchangeable securities, “phantom”
stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind
to which Sigma is a party or by which it is bound (x) obligating Sigma or its subsidiaries, to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible or exercisable
for or exchangeable into any capital stock of or other equity interest in, Sigma or its subsidiaries; (y) obligating Sigma or its subsidiaries
to issue, grant, extend or enter into any such option, warrant, call, right, security, commitment, Contract, arrangement or undertaking;
or (z) that give any Person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights
occurring to holders of the capital stock or other equity interests of Sigma and each of its subsidiaries. There are no outstanding Contracts
or obligations of Sigma to repurchase, redeem or otherwise acquire any shares of capital stock or other equity interests of Sigma or
any of its subsidiaries. Except at set forth in Schedule 5.7 of the Sigma Disclosure Schedule, there are no registration rights, proxies,
voting trust agreements or other agreements or understandings with respect to any class or series of any capital stock or other security
of Sigma and each of its subsidiaries, which has not previously been satisfied or waived.
(b)
The issuance of the Restricted Sigma Shares to the Parent has been duly authorized and, upon delivery to the Parent Members of certificates
therefor, at Closing, in accordance with the terms of this Agreement, the Restricted Sigma Shares will have been validly issued and fully
paid, and will be nonassessable, have the rights, preferences and privileges specified, will be free of preemptive rights and will be
free and clear of all Liens and restrictions, other than Liens created by the Parent and restrictions on transfer imposed by this Agreement
and the Securities Act.
Section
5.8 Compliance with Laws. The business and operations of Sigma have been and are being conducted in accordance with all applicable
Laws and Orders. Except as set forth in Section 5.8 of the Sigma Disclosure Schedule, Sigma is not in conflict with, or in default
or violation of and, to the Knowledge of Sigma, is not under investigation with respect to and has not been threatened to be charged
with or given notice of any violation of or default under, any (a) Law, rule, regulation, judgment or Order; or (b) note, bond, mortgage,
indenture, Contract, License, permit, franchise or other instrument or obligation to which Sigma is a party or by which Sigma, any of
its subsidiaries or Affiliates or any of their respective assets and properties are bound or affected. There is no agreement, judgment
or Order binding upon Sigma or any of its subsidiaries or Affiliates which has, or could reasonably be expected to have, the effect of
prohibiting or materially impairing any business practice of Sigma or the conduct of business by Sigma as currently conducted. Sigma
has filed all forms, reports and documents required to be filed with any Governmental Authority and Sigma has made available such forms,
reports and documents to NextTrip. As of their respective dates, such forms, reports and documents complied in all material respects
with the applicable requirements pertaining thereto and none of such forms, reports and documents contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
Section
5.9 Certain Proceedings. Except as set forth in Section 5.9 of the Sigma Disclosure Schedule, there is no Action pending
against, or to the Knowledge of Sigma, threatened against or affecting, Sigma by any Governmental Authority or other Person with respect
to Sigma or its business or that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering
with, any of the transactions contemplated by this Agreement. Except as set forth in Section 5.9 of the Sigma Disclosure Schedule,
Sigma has not been a party to any material litigation or, within the past two (2) years, the subject of any threat of material litigation
(litigation shall be deemed “material” if the amount at issue exceeds the lesser of $10,000 per matter or $25,000
in the aggregate). Sigma is not in violation of and, to the Knowledge of Sigma, is not under investigation with respect to and has not
been threatened to be charged with or given notice of any violation of, any applicable Law, rule, regulation, judgment or Order. Except
as set forth in Section 5.9 of the Sigma Disclosure Schedule, neither Sigma nor to Sigma’s Knowledge any past or present
director or officer (in his or her capacity as such) or affiliate, is or has been the subject of any civil, criminal, or administrative
Action involving a claim or violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty in
the past ten (10) years. Neither Sigma nor to Sigma’s Knowledge any past or present director or officer (in his or her capacity
as such) or affiliate, have any reason to believe that they will be the subject of any civil, criminal, or administrative Action involving
a claim or violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. Neither Sigma nor
to Sigma’s Knowledge any past or present director or officer (in his or her capacity as such) or affiliate, have any reason to
believe that they will be the subject of any civil, criminal, or administrative Action brought by any federal or state agency.
Section
5.10 No Brokers or Finders. Except as set forth in Section 5.10 of the Sigma Disclosure Schedule, no Person has, or
as a result of the transactions contemplated herein will have, any right or valid claim against Sigma for any commission, fee or other
compensation as a finder or broker, or in any similar capacity, based upon arrangements made by or on behalf of Sigma. Subject to the
final sentence of this section, Sigma shall be solely responsible for payment of any undisclosed obligation.
Section
5.11 Contracts. Except as disclosed in the SEC Reports, there are no Contracts that are material to the business, properties,
assets, condition (financial or otherwise), results of operations or prospects of Sigma. Sigma is not in violation of or in default under
(nor does there exist any condition which upon the passage of time or the giving of notice would cause such a violation of or default
under) any Contract to which it is a party or to which it or any of its properties or assets is subject, except for violations or defaults
that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect of Sigma.
Section
5.12 SEC Reports.
(a)
Since January 1, 2020, Sigma has filed all reports, schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the Exchange Act (the “SEC Reports”).
(b)
As of their respective dates, the SEC Reports and any registration statements filed by Sigma under the Securities Act (the “Registration
Statements”) complied in all material respects with the requirements of the Exchange Act and the Securities Act, as applicable,
and the rules and regulations of the SEC promulgated thereunder, and none of the SEC Reports or Registration Statements, when filed,
contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they were made, not misleading. All material Contracts to which
Sigma is a party or to which the property or assets of Sigma are subject have been filed as exhibits to the SEC Reports and the Registration
Statements as and to the extent required under the Exchange Act and the Securities Act, as applicable. The financial statements of Sigma
included in the SEC Reports and the Registration Statements complied in all respects with applicable accounting requirements and the
rules and regulations of the SEC with respect thereto as in effect at the time of filing, were prepared in accordance with GAAP applied
on a consistent basis during the periods involved (except as may be indicated in the notes thereto, or, in the case of unaudited statements
as permitted by Form 10-Q), and fairly present in all material respects (subject in the case of unaudited statements, to normal, recurring
audit adjustments) the financial position of Sigma as at the dates thereof and the results of its operations and cash flows for the periods
then ended. The disclosure set forth in the SEC Reports and Registration Statements regarding Sigma’s business is current and complete
and accurately reflects operations of Sigma as it exists as of the date hereof. There is no order issued by the SEC suspending the effectiveness
of any outstanding Registration Statement and there are no proceedings for that purpose that have been initiated or threatened by the
SEC.
Section
5.13 Internal Accounting Controls. Sigma maintains a system of internal accounting controls sufficient to provide reasonable
assurance that (a) transactions are executed in accordance with management’s general or specific authorizations; (b) transactions
are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and
to maintain asset accountability; (c) access to assets is permitted only in accordance with management’s general or specific authorization;
and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences. Sigma has established disclosure controls and procedures for Sigma and designed such disclosure
controls and procedures to ensure that material information relating to Sigma is made known to the officers by others within Sigma. Sigma’s
officers have evaluated the effectiveness of Sigma’s controls and procedures. Since the Sigma Most Recent Fiscal Year End, there
have been no significant changes in Sigma’s internal controls or, to the Knowledge of Sigma, in other factors that could significantly
affect Sigma’s internal controls.
Section
5.14 Listing and Maintenance Requirements. Except as set forth in the SEC Reports, Sigma is, and has no reason to believe
that it will not in the foreseeable future continue to be, in compliance with the listing and maintenance requirements for continued
listing or quotation of the Sigma Common Stock on the Principal Market or any other trading market on which the Sigma Common Stock is
currently listed or quoted. The issuance and sale of the Restricted Sigma Shares under this Agreement, assuming the approval of Sigma’s
stockholders for the issuance of such Sigma Shares at the Stockholders’ Meeting is received, will not contravene the rules and
regulations of the Principal Market.
Section
5.15 DTC Eligibility. The Restricted Sigma Shares are eligible for clearance and settlement through The Depository Trust Company
(“DTC”). Sigma’s transfer agent is a participant in the DTC Fast Automated Securities Transfer (“FAST”)
program and the Sigma Common Stock is eligible as a DTC FAST issue. There is no DTC “chill” or equivalent on the Sigma Common
Stock.
Section
5.16 Application of Takeover Protections. Sigma has taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover
provision under the Sigma Organizational Documents or the Laws of its state of incorporation that is or could become applicable to the
transactions contemplated hereby.
Section
5.17 Tax Matters.
(a)
Tax Returns. Sigma and its subsidiaries have filed all Tax Returns required to be filed (if any) by or on behalf of Sigma
and such subsidiary and have paid all Taxes of such entity required to have been paid (whether or not reflected on any Tax Return). No
Governmental Authority in any jurisdiction has made a claim, assertion or threat to Sigma or any of its subsidiaries that Sigma or such
subsidiary is or may be subject to taxation by such jurisdiction; there are no Liens with respect to Taxes on Sigma’s or any of
its subsidiaries’ property or assets; and there are no Tax rulings, requests for rulings, or closing agreements relating to Sigma
or any of its subsidiaries for any period (or portion of a period) that would affect any period after the date hereof.
(b)
No Adjustments, Changes. Neither Sigma nor any other Person on behalf of Sigma (i) has executed or entered into a closing
agreement pursuant to Section 7121 of the Code or any predecessor provision thereof or any similar provision of state, local or foreign
law; or (ii) has agreed to or is required to make any adjustments pursuant to Section 481(a) of the Code or any similar provision of
state, local or foreign law.
(c)
No Disputes. There is no pending audit, examination, investigation, dispute, proceeding or claim with respect to any Taxes
of Sigma or any of its subsidiaries, nor is any such claim or dispute pending or contemplated. Sigma has delivered to the NextTrip true,
correct and complete copies of all Tax Returns and examination reports and statements of deficiencies assessed or asserted against or
agreed to by Sigma or any of its subsidiaries, if any, for the past three years, and any and all correspondence with respect to the foregoing.
(d)
Not a U.S. Real Property Holding Corporation. Neither Sigma nor any of its subsidiaries is and has not been a U.S. real
property holding corporation within the meaning of Section 897(c)(2) of the Code at any time during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code.
(e)
No Tax Allocation, Sharing. Neither Sigma nor any its subsidiaries is party to, and has not been a party to, any Tax allocation
or sharing agreement.
Section
5.18 Labor Matters.
(a)
There are no collective bargaining or other labor union agreements to which Sigma is a party or by which it is bound. No material labor
dispute exists or, to the Knowledge of Sigma, is imminent with respect to any of the employees of Sigma.
(b)
Sigma is in full compliance with all Laws regarding employment, wages, hours, benefits, equal opportunity, collective bargaining, the
payment of Social Security and other taxes, and occupational safety and health. Sigma is not liable for the payment of any compensation,
damages, taxes, fines, penalties or other amounts, however designated, for failure to comply with any of the foregoing Laws.
(c)
To the Knowledge of Sigma, no director, officer or employee of Sigma is a party to, or is otherwise bound by, any Contract (including
any confidentiality, non-competition or proprietary rights agreement) with any other Person that in any way adversely affects or will
materially affect (i) the performance of his or her duties as a director, officer or employee of Sigma; or (ii) the ability of Sigma
to conduct its business. Except as set forth in Section 5.18 of the Sigma Disclosure Schedule, each employee of Sigma is employed
on an at-will basis and Sigma does not have any Contract with any of its employees which would interfere with its ability to discharge
its employees.
Section
5.19 Employee Benefits.
(a)
Except as set forth in Section 5.19 of the Sigma Disclosure Schedule or in the SEC Filings, Sigma does not, and since its inception
never has, maintained or contributed to any bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical or
other plan, arrangement or understanding (whether or not legally binding) providing benefits to any current or former employee, officer
or director of Sigma. Except as set forth in Section 5.19 of the Sigma Disclosure Schedule or the SEC Filings, there are not any
employment, consulting, indemnification, severance or termination agreements or arrangements between Sigma and any current or former
employee, officer or director of Sigma, nor does Sigma have any general severance plan or policy.
(b)
Except as set forth in the SEC Filings, Sigma does not, and for the past five (5) years has not, maintained or contributed to any “employee
pension benefit plans” (as defined in Section 3(2) of ERISA), “employee welfare benefit plans” (as defined in Section
3(1) of ERISA) or any other benefit plan for the benefit of any current or former employees, consultants, officers or directors of Sigma.
(c)
Except as set forth in Section 5.19 of the Sigma Disclosure Schedule, neither the consummation of the transactions contemplated
hereby alone, or in combination with another event, with respect to each director, officer, employee and consultant of Sigma, will result
in (i) any payment (including, without limitation, severance, unemployment compensation or bonus payments) becoming due from Sigma; (ii)
any increase in the amount of compensation or benefits payable to any such individual; or (iii) any acceleration of the vesting or timing
of payment of compensation payable to any such individual. Except as set forth in Section 5.19 of the Sigma Disclosure Schedule,
no arrangement or other Contract of Sigma provides benefits or payments contingent upon, triggered by, or increased as a result of a
change in the ownership or effective control of Sigma.
Section
5.20 Title to Assets. Sigma has sufficient title to, or valid leasehold interests in, all of its properties and assets used
in the conduct of its businesses. All such assets and properties, other than assets and properties in which Sigma has leasehold interests,
are free and clear of all Liens, except for Liens that, in the aggregate, do not and will not materially interfere with the ability of
Sigma to conduct business as currently conducted.
Section
5.21 Intellectual Property. The SEC Reports describe all Intellectual Property used by Sigma in its business as presently
conducted, which constitutes all of its Intellectual Property needed by Sigma to operate its business as presently conducted. Sigma is
the sole and exclusive owner of or has a license or other right to use the Intellectual Property, free and clear of any Liens and, to
the Knowledge of Sigma, any infringing uses thereof by third parties. Sigma has neither abandoned nor granted any license, permit or
other consent or authorization to any third party to use any of its Intellectual Property except in the Ordinary Course of Business and
except as provided in the APA and as set forth in Subject 5.21 of the Disclosure Schedule or in the SEC Reports. None of its Intellectual
Property is subject to any outstanding order, decree, judgment, stipulation, injunction or restriction or agreement restricting the scope
or use thereof. To the actual knowledge of Sigma’s President and Chief Executive Officer, Jacob Brunsberg, or Sigma’s Chief
Financial Officer, Frank Orzechowski, none of its Intellectual Property infringes on any trademarks, Internet domain names, copyrights
or any other intellectual property rights of any kind of any third party.
Section
5.22 Environmental Laws. Sigma (a) is in compliance with all Environmental Laws; (b) has received all Licenses or other approvals
required under applicable Environmental Laws to conduct its business: and (c) is in compliance with all terms and conditions of any such
License or approval where, in each of the foregoing clauses (a), (b) and (c), the failure to so comply could be reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect on Sigma.
Section
5.23 Transactions with Affiliates and Employees. Except as disclosed in the SEC Reports or Section 5.23 of the Sigma
Disclosure Schedule, no officer, director, employee or stockholder of Sigma or any Affiliate of any such Person, has or has had, either
directly or indirectly, a material interest in any transaction with Sigma (other than for services as employees, officers and directors),
including any Contract or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any such Person or, to the Knowledge of Sigma, any entity in which any
such Person has an interest or is an officer, director, trustee or partner.
Section
5.24 Liabilities. Sigma has no Liability (and there is no Action pending, or to the Knowledge of Sigma, threatened against
Sigma that would reasonably be expected to give rise to any Liability), except as set forth in the SEC Reports or in Section 5.24
of the Sigma Disclosure Schedule. Sigma is not a guarantor nor is it otherwise liable for any Liability or obligation (including
Indebtedness) of any other Person. There are no financial or contractual obligations (including any obligations to issue capital stock
or other securities) executory after the Closing Date.
Section
5.25 Investment Company. Sigma is not, and is not an affiliate of, and immediately following the Closing will not have become,
an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
Section
5.26 Money Laundering Laws. The operations of Sigma are and have been conducted at all times in compliance with applicable
financial recordkeeping and reporting requirements of the Money Laundering Laws and no Proceeding involving Sigma with respect to the
Money Laundering Laws is pending or, to the Knowledge of Sigma, threatened.
Section
5.27 Foreign Corrupt Practices. Neither Sigma, nor, to the Knowledge of Sigma, any director, officer, agent, employee or other
Person acting on behalf of Sigma has, in the course of its actions for, or on behalf of, Sigma (a) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from corporate funds; (c) violated or is in violation of any provision
of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (d) made any unlawful bribe, rebate, payoff, influence payment, kickback
or other unlawful payment to any foreign or domestic government official or employee.
Section
5.28 Absence of Certain Changes or Events. Except as set forth in the SEC Reports, from the Sigma Most Recent Fiscal Year
End (a) Sigma has conducted its business only in Ordinary Course of Business; (b) there has not been any change in the assets, Liabilities,
financial condition or operating results of Sigma, except changes in the Ordinary Course of Business that have not caused, in the aggregate,
a Material Adverse Effect on Sigma; and (c) Sigma has not completed or undertaken any of the actions set forth in Section 6.2.
Sigma has not taken any steps to seek protection pursuant to any Law or statute relating to bankruptcy, insolvency, reorganization, receivership,
liquidation or winding up, nor does Sigma have any Knowledge or reason to believe that any of their respective creditors intend to initiate
involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so.
Section
5.29 Undisclosed Events. No event, Liability, development or circumstance has occurred or exists, or is contemplated to occur
with respect to Sigma, or its businesses, properties, prospects, operations or financial condition, that would be required to be disclosed
by Sigma under applicable securities laws on a registration statement on Form S-1 filed with the SEC relating to an issuance and sale
by Sigma of its common stock and which has not been publicly announced or will not be publicly announced in a Current Report on Form
8-K filed by Sigma filed within four (4) Business Days after the Closing.
Section
5.30 Insurance. Except as would not reasonably be expected, either individually or in the aggregate, to have a Material Adverse
Effect on Sigma, (a) Sigma and its subsidiaries are insured with reputable insurers against such risks and in such amounts as the management
of Sigma reasonably has determined to be prudent and consistent with industry practice, and Sigma and its subsidiaries are in compliance
in all material respects with their insurance policies and are not in default under any of the terms thereof, (b) each such policy is
outstanding and in full force and effect and, except for policies insuring against potential liabilities of officers and directors of
Sigma and its subsidiaries, Sigma or its relevant subsidiary is the sole beneficiary of such policies, (c) all premiums and other payments
due under any such policy have been paid or provided for, and all claims thereunder have been filed in due and timely fashion, (d) there
is no claim for coverage by Sigma or its subsidiaries pending under any insurance policy as to which coverage has been questioned, denied
or disputed by the underwriters of such insurance policy and (e) neither Sigma nor its subsidiaries has received notice of any threatened
termination of, material premium increase with respect to, or material alteration of coverage under, any insurance policies.
Section
5.31 Disclosure. All documents and other papers delivered or made available by or on behalf of Sigma in connection with this
Agreement are true, complete, correct and authentic in all material respects. No representation or warranty of Sigma contained in this
Agreement and no statement or disclosure made by or on behalf of Sigma to NextTrip or the Parent pursuant to this Agreement or any other
agreement contemplated herein contains an untrue statement of a material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading.
Article
VI
CONDUCT PRIOR TO CLOSING
Section
6.1 Conduct of Business. At all times during the period commencing with the execution and delivery of this Agreement and continuing
until the earlier of the termination of this Agreement pursuant to the terms hereof or the Closing, Sigma and NextTrip shall (a) carry
on their respective businesses diligently and in the usual, regular and Ordinary Course of Business, in substantially the same manner
as currently being conducted and in compliance with all applicable Laws, except (i) as to Sigma as it relates (y) to the transactions
contemplated by the APA and (z) the sale of equity under that certain at-the-market agreement in an amount not to exceed $1,500,000 and
(ii) as to NextTrip as it relates to the sale of debt or equity securities prior to the Closing Date in the amount not to exceed $2,000,000;
(b) pay or perform its material obligations when due; (c) use its commercially reasonable efforts, consistent with past practices and
policies, to preserve intact its present business organization, keep available the services of its present officers and employees and
preserve its relationships with customers, suppliers, distributors, licensors, licensees and others with which it has business dealings;
and (d) keep their business and properties substantially intact, including their present operations, physical facilities and working
conditions. In furtherance of the foregoing and subject to applicable Law, Sigma on the one hand and NextTrip on the other shall confer
with the other Party, as promptly as practicable, prior to taking any material actions or making any material management decisions with
respect to the conduct of the business of Sigma or NextTrip, except (i) as to Sigma as it relates (y) to the transactions contemplated
by the APA and (z) the sale of equity under that certain at-the-market agreement in an amount not to exceed $1,500,000 and (ii) as to
NextTrip as it relates to the sale of debt or equity securities prior to the Closing Date in the amount not to exceed $2,000,000. Any
of the obligations of Sigma and NextTrip as set forth in this Section 6.1 may be waived with the written consent of Sigma (as
to NextTrip) and NextTrip (as to Sigma).
Section
6.2 Restrictions on Conduct of Business. Without limiting the generality of the terms of Section 6.1 hereof, except
as required by the terms hereof, except (i) as to Sigma as it relates (y) to the transactions contemplated by the APA and (z) the sale
of equity under that certain at-the-market agreement in an amount not to exceed $1,500,000 and (ii) as to NextTrip as it relates to the
sale of debt or equity securities prior to the Closing Date in the amount not to exceed $2,000,000, and except to the extent that the
other Party (either Sigma or NextTrip, for purposes of Section 6.2) shall otherwise consent in writing, which shall not be unreasonably
withheld, at all times during the period commencing with the execution and delivery of this Agreement and continuing until the earlier
of the termination of this Agreement pursuant to the terms hereof or the Closing, Sigma and NextTrip shall not do any of the following,
where applicable:
(a)
except as required by applicable Law, waive any stock repurchase rights, accelerate, amend or change the period of exercisability of
options or restricted stock, or reprice options granted under any employee, consultant or director stock plans or authorize cash payments
in exchange for any options granted under any of such plans;
(b)
enter into any partnership arrangements, joint development agreements or strategic alliances, other than in the Ordinary Course of Business;
(c)
increase the compensation or fringe benefits of, or pay any bonuses or special awards to, any present or former director, officer, stockholder
or employee of Sigma or NextTrip (except for increases in salary or wages in the Ordinary Course of Business, or, as it relates to NextTrip
in an amount not to exceed $100,000 per annum to any one employee or executive) or increase any fees to any independent contractors;
(ii) grant any severance or termination pay to any present or former director, officer or employee of Sigma or NextTrip; (iii) enter
into, amend or terminate any employment Contract, independent contractor agreement or collective bargaining agreement, written or oral;
or (iv) establish, adopt, enter into, amend or terminate any bonus, profit sharing, incentive, severance, or other plan, agreement, program,
policy, trust, fund or other arrangement that would be an employee benefit plan if it were in existence as of the date of this Agreement,
except as required by applicable Law;
(d)
except as contemplated by this Agreement, approved by the Parent (as it relates to Sigma) or Sigma (as it relates to NextTrip), or pursuant
to agreements in place at the time this Agreement is entered into, issue, deliver, sell, authorize, pledge or otherwise encumber, or
propose any of the foregoing with respect to, any shares of capital stock or any securities convertible into, or exercisable or exchangeable
for, shares of capital stock of Sigma or NextTrip, or subscriptions, rights, warrants or options to acquire any shares of capital stock
or any securities convertible into, or exercisable or exchangeable for, shares of capital stock of Sigma or NextTrip, or enter into other
Contracts or commitments of any character obligating it to issue any such shares of capital stock of Sigma or NextTrip or securities
convertible into, or exercisable or exchangeable for, shares of capital stock of Sigma or NextTrip;
(e)
cause, permit or propose any amendments to any Sigma or NextTrip Organizational Documents;
(f)
acquire or agree to acquire by merging or consolidating with, or by purchasing any equity interest in or a portion of the assets of,
or by any other manner, any business or any corporation, limited liability company, general or limited partnership, joint venture, association,
business trust or other business enterprise or entity, or otherwise acquire or agree to acquire any assets other than in the Ordinary
Course of Business;
(g)
adopt a plan of merger, complete or partial liquidation, dissolution, consolidation, restructuring, recapitalization or other reorganization;
(h)
except as required by applicable Law, adopt or amend any employee benefit plan or employee stock purchase or employee stock option plan,
or enter into any employment Contract or collective bargaining agreement (other than offer letters and letter agreements entered into
in the Ordinary Course of Business with employees who are terminable “at will”), pay any special bonus or special remuneration
to any director or employee other than in the Ordinary Course of Business, or increase the salaries or wage rates or fringe benefits
(including rights to severance or indemnification) of its officers;
(i)
except in the Ordinary Course of Business, modify, amend or terminate any Contract to which Sigma or NextTrip is a party, or waive, delay
the exercise of, release or assign any rights or claims thereunder;
(j)
sell, lease, license, mortgage or otherwise encumber or subject to any Lien or otherwise dispose of any of its properties or assets,
except in the Ordinary Course of Business;
(k)
(i) incur any Indebtedness or guarantee any such Indebtedness of another Person, issue or sell any debt securities or warrants or other
rights to acquire any debt securities of Sigma or NextTrip, guarantee any debt securities of another Person, enter into any “keep
well” or other agreement to maintain any financial statement condition of another Person or enter into any arrangement having the
economic effect of any of the foregoing, except for endorsements and guarantees for collection, short-term borrowings and lease obligations,
in each case incurred in the Ordinary Course of Business; or (ii) make any loans, advances or capital contributions to, or investment
in, any other Person, other than to Sigma or NextTrip;
(l)
pay, discharge or satisfy any claims (including claims of stockholders), Liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), except for the payment, discharge or satisfaction of liabilities or obligations in the Ordinary Course of Business
or in accordance with their terms as in effect on the date hereof, or waive, release, grant, or transfer any rights of material value
or modify or change in any material respect any existing License, Contract or other document, other than in the Ordinary Course of Business;
(m)
change any financial reporting or accounting principle, methods or practices used by it unless otherwise required by applicable Law or
GAAP;
(n)
settle or compromise any litigation (whether or not commenced prior to the date of this Agreement);
(o)
(i) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock; (ii) split,
combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock; or (iii) purchase, redeem or otherwise acquire any shares of capital stock of Sigma
or NextTrip or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities;
(p)
enter into any transaction with any of its directors, officers, stockholders, or Affiliates;
(q)
make any capital expenditure in excess of $100,000, which shall exclude any transaction fees associated with this Agreement;
(r)
(i) grant any license or sublicense of any rights under or with respect to any Intellectual Property; (ii) dispose of or let lapse and
Intellectual Property, or any application for the foregoing, or any license, permit or authorization to use any Intellectual Property;
or (iii) amend, terminate any other Contract, license or permit to which Sigma or NextTrip is a party;
(s)
file or amend any material Tax Return, or otherwise make, or permit to be made, without the prior written consent of the other Party
any material Tax election which would affect Sigma or NextTrip; or
(t)
commit to or otherwise to take any of the actions described in this Section 6.2.
Article
VII
ADDITIONAL AGREEMENTS
Section
7.1 Access to Information. Each of Sigma and NextTrip shall afford the other Party, its accountants, counsel and other representatives
(including the Parent), reasonable access, during normal business hours, to the properties, books, records and personnel of such Party
at any time prior to the Closing in order to enable each Party to obtain all information concerning the business, assets and properties,
results of operations and personnel of the other Party as each Party may reasonably request. No information obtained in the foregoing
investigation by a Party pursuant to this Section 7.1 shall affect or be deemed to modify any representation or warranty contained
herein or the conditions to the obligations of the Parties to consummate the transactions contemplated hereby.
Section
7.2 Legal Requirements. The Parties shall take all reasonable actions necessary or desirable to comply promptly with all legal
requirements which may be imposed on them with respect to the consummation of the transactions contemplated by this Agreement (including,
without limitation, furnishing all information required in connection with approvals of or filings with any Governmental Authority, and
prompt resolution of any litigation prompted hereby), and shall promptly cooperate with, and furnish information to, the other Parties
to the extent necessary in connection with any such requirements imposed upon any of them in connection with the consummation of the
transactions contemplated by this Agreement.
Section
7.3 Notification of Certain Matters. NextTrip shall give prompt notice to Sigma, and Sigma shall give prompt notice to the
NextTrip, of the occurrence, or failure to occur, of any event, which occurrence or failure to occur would be reasonably likely to cause
(a) any representation or warranty contained in this Agreement to be untrue or inaccurate at the Closing, such that the conditions set
forth in Article IX hereof, as the case may be, would not be satisfied or fulfilled as a result thereof; or (b) any material failure
of any NextTrip, the Parent or Sigma, as the case may be, or of any officer, director, employee or agent thereof, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it under this Agreement. Notwithstanding the foregoing, the
delivery of any notice pursuant to this Section 7.3 shall not limit or otherwise affect the rights and remedies available hereunder
to the Party receiving such notice.
Section
7.4 Acquisition Proposals.
(a)
From the date of this Agreement until the Closing Date or, if earlier, the termination of this Agreement, neither Sigma nor any representative
of Sigma will, directly or indirectly: (i) solicit, initiate, knowingly encourage, induce or facilitate the making, submission or announcement
of any Competing Transaction Proposal from any Person other than NextTrip or the Parent (a “Third Party”) or take
any action that could reasonably be expected to lead to a Competing Transaction Proposal; (ii) furnish any information regarding Sigma
to any Third Party in connection with or in response to a Competing Transaction Proposal or an inquiry or indication of interest; (iii)
engage in or continue any discussions or negotiations with any Third Party with respect to any Competing Transaction Proposal; (iv) approve,
endorse or recommend any Competing Transaction Proposal; or (v) enter into any letter of intent or similar document or any Contract contemplating
or otherwise relating to any Competing Transaction Proposal.
(b)
Concurrently with the execution of this Agreement, Sigma shall (i) immediately cease and cause to be terminated any existing discussions
with any Person that relate to any Competing Transaction Proposal; and (ii) cause any physical or virtual data room containing any such
information to no longer be accessible to or by any Person other than NextTrip, the Parent and their respective representatives.
Section
7.5 Sigma Stockholders’ Meeting.
(a)
Sigma shall take all action necessary and within its powers under applicable Law to call, give notice of and hold a meeting (such meeting,
the “Stockholders’ Meeting”) of the holders of Sigma Common Stock to vote on, among other things, (i) the issuance
of the Restricted Sigma Shares (including the Contingent Shares) pursuant to the terms of this Agreement, and (ii) the Charter Amendments
(collectively, the “Stockholder Approval Matters”). The Stockholders’ Meeting shall be held as promptly as practicable
after the Clearance Date and the mailing of the Proxy Statement to Sigma’s stockholders. Sigma shall utilize commercially reasonable
best efforts to ensure that all proxies solicited in connection with the Stockholders’ Meeting are solicited in compliance with
all applicable Laws.
(b)
Sigma agrees that (i) the Sigma Board shall recommend that the holders of Sigma Common Stock vote to approve the Stockholder Approval
Matters and shall use commercially reasonable efforts to promptly solicit such approval, (ii) the Proxy Statement shall include a statement
to the effect that the Sigma Board recommends that Sigma’s stockholders vote to approve the Stockholder Approval Matters (the recommendation
of the Sigma Board that Sigma’s stockholders vote to approve the Stockholder Approval Matters being referred to as the “Board
Recommendation”); and (iii) the Board Recommendation shall not be withdrawn or modified in a manner adverse to Sigma, and no
resolution by the Sigma Board or any committee thereof to withdraw or modify the Board Recommendation in a manner adverse to Sigma shall
be adopted or proposed.
(c)
Notwithstanding anything herein to the contrary, (i) in the event that the issuance of the Restricted Sigma Shares (including the Contingent
Shares) pursuant to the terms of this Agreement is approved at the Stockholders Meeting, but any of Charter Amendments are not approved
at the Stockholders Meeting, Sigma shall call a special meeting or meetings of the stockholders as soon as practicable thereafter to
seek stockholder approval to obtain approval of Charter Amendments not so approved; and (ii) in the event that the issuance of the Restricted
Sigma Shares (including the Contingent Shares) pursuant to the terms of this Agreement is approved at the Stockholders Meeting, but the
Charter Amendment relating to the increase in authorized shares is not approved, to the extent that Sigma does not have sufficient shares
of Common Stock authorized to issue any of the Contingent Shares, in lieu thereof, Sigma shall issue NextTrip shares of a new series
of convertible preferred stock in form and substance satisfactory to the NextTrip Representative which, among other things, will provide
for voting on an as converted basis and be automatically converted into shares of Common Stock once stockholder approval for the increase
in authorized shares has been obtained.
Section
7.6 Proxy Statement; Listing.
(a)
As promptly as practicable after the date of this, and in no event later than 20 Business Days following the date hereof, the Parties
hereto shall prepare, and Sigma shall cause to be filed with the SEC, promptly, the Proxy Statement. Sigma shall use commercially reasonable
best efforts to cause the Proxy Statement to comply with the applicable rules and regulations promulgated by the SEC and the Principal
Market, to respond promptly to any comments of the SEC or the Principal Market or their respective staff and to clear comments, if any,
on the Proxy Statement as promptly as practicable after it is filed with the SEC. Sigma shall also use commercially reasonable efforts
to cause the Proxy Statement to be mailed to the stockholders of Sigma as promptly as practicable after the Clearance Date. If at any
time prior to the Closing Date any event shall occur that should be set forth in an amendment of or a supplement to the Proxy Statement,
Sigma shall prepare and shall file with the SEC such amendment or supplement as soon thereafter as is reasonably practicable. Sigma shall
use commercially reasonable efforts to cause the Proxy Statement to clear comments with the SEC, if any.
(b)
Each of NextTrip and the Parent, individually, shall reasonably cooperate with Sigma and promptly provide, and require its representatives,
advisors, accountants and attorneys to promptly provide, Sigma and its representatives, advisors, accountants and attorneys, with all
such information regarding such party as is required by law to be included in the Proxy Statement or reasonably requested from Sigma
to be included in the Proxy Statement. NextTrip and the Parent and their representatives will be given a reasonable opportunity to be
involved in the drafting of the Proxy Statement and any amendment or supplement thereto and any such correspondence prior to its filing
with the SEC. Following the Clearance Date, Sigma shall use its commercially reasonable best efforts to file any amendments or supplements
to the Proxy Statement required by applicable Law.
(c)
Sigma will use its commercially reasonable best efforts to cause the Restricted Sigma Shares to be issued in connection with the Share
Exchange, to be approved for listing on the Principal Market and to continue to trade on the Principal Market following the Closing.
(d)
Except as required by law or as Sigma and NextTrip may mutually agree, Sigma shall not adjourn or postpone the Stockholders’ Meeting
beyond the date on which the Stockholders’ Meeting was (or was required to be) originally scheduled; provided that Sigma shall
be permitted to adjourn or postpone the Stockholders’ Meeting if as of the time for which such meeting is originally scheduled
there are insufficient shares of Sigma Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct
the business of such meeting.
Section
7.7 Line of Credit. NextTrip shall provide a line of credit to Sigma in the amount up to $400,000 (the “Line of
Credit”) payable in tranches over the period ending four (4) months following the date hereof, unless the earlier termination
of this Agreement; provided, however, that any additional capital raised by Sigma following the date hereof, including but not limited
to via the At-the-Market Issuance Sales Agreement with Lake Street Capital Markets, LLC, shall proportionally reduce the maximum amount
available under the Line of Credit on a dollar-for-dollar basis. The purpose of the Line of Credit is to provide Sigma funding to support
its operations, pay legal fees due in connection with negotiation of, and transactions contemplated by, this Agreement and related agreements,
and pay debts of Sigma. The Line of Credit will be evidenced by a promissory note of Sigma in reasonably acceptable form to both Sigma
and NextTrip. Funding requests under the Line of Credit shall be approved by the NextTrip Representative and the Sigma Board
Section
7.8 D&O Insurance. As of the Closing Date, if possible, or as soon as possible thereafter in connection with the issuance
of the Contingent Shares, Sigma shall obtain, and fully pay, at NextTrip’s expense, the premium for a six year prepaid “tail”
policy for the extension of the coverage under Sigma’s existing directors’ and officers’ liability insurance policies,
for claims reporting or discovery period of six years from and after the Closing Date or such later date, on terms and conditions providing
coverage retentions, limits and other material terms (other than premiums payable) substantially equivalent to the current policies of
directors’ and officers’ liability insurance maintained by Sigma, as the case may be, with respect to matters arising on
or before the Closing Date or such late date, covering without limitation the transactions contemplated hereby.
Section
7.9 Updates to Disclosure Schedule. The Parties shall supplement their respective Disclosure Schedules prior to the Closing
by delivery to the other Parties, at least five (5) days prior to the Closing Date of any such supplement (a “Disclosure Supplement”).
Each Disclosure Supplement shall be in writing and shall be delivered in accordance with this Agreement. Unless the existence of any
matter set forth in any such Disclosure Supplement which was not disclosed at the time of the signing of this Agreement (a “New
Matter”) would have a Material Adverse Effect, the Disclosure Schedule referred to herein shall be deemed amended and supplemented
as of the Closing Date by all information including, without limitation, any New Matter set forth in any Disclosure Supplement and the
warranties and representations of the Parties herein shall be deemed amended) and supplemented by all such information set forth in each
Disclosure Supplement. In such event all references to Disclosure Schedule shall include all Disclosure Supplements. To the extent that
the existence of any New Matter would have a Material Adverse Effect, the Parties, as applicable, shall have the right hereunder (a)
to terminate this Agreement by written notice pursuant to Section 10.1(f) or 10.1(g), as applicable, within five (5) days
after receipt of the Disclosure Supplement which includes the New Matter, but prior to the Closing or (b) to consummate the transactions
contemplated hereby.
Article
VIII
POST CLOSING COVENANTS
Section
8.1 General. In case at any time after the Closing any further action is necessary to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as
any other Party reasonably may request.
Section
8.2 Public Announcements. Sigma shall file with the SEC a Form 8-K, describing the material terms of the transactions contemplated
hereby as soon as practicable after the date of this Agreement, but in no event more than four (4) business days following the date hereof.
Prior to the Closing Date, Sigma, NextTrip and the Parent (each a “Material Party”) shall consult with each other
in issuing the Form 8-K and any press releases or otherwise making public statements or filings and other communications with the SEC
or any regulatory agency or the Principal Market with respect to the transactions contemplated hereby, and no Party shall issue any such
press release or otherwise make any such public statement, filings or other communications without the prior written consent of the other
Material Parties, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such
disclosure is required by Law, in which case the disclosing Party shall use commercially reasonable efforts to provide the other Material
Parties with prior notice of no less than three (3) calendar days, of such disclosure and shall incorporate in the disclosure the reasonable
comments of the other Material Parties.
Article
IX
CONDITIONS TO CLOSING
Section
9.1 Conditions to Closing.
(a)
Conditions to Obligation of the Parties Generally. Neither of the Parties shall be obligated to consummate the transactions
to be performed by each of them in connection with the Closing if, on the Closing Date, (i) any Action shall be pending or threatened
before any Governmental Authority wherein an Order or charge would (A) prevent consummation of any of the transactions contemplated by
this Agreement or (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation; or (ii) any
Law or Order which would have any of the foregoing effects shall have been enacted or promulgated by any Governmental Authority; or (iii)
Sigma Common Stock is not listed on the Principal Market or the Principal Market shall have notified Sigma that the Sigma Common Stock
will be delisted in connection with the Closing.
(b)
Contemporaneous Election of New Directors. At Closing, the Sigma board of directors shall be comprised of five (5) members,
one (1) of which shall be the individual identified and set forth on Schedule 2.5(a) of the NextTrip Disclosure Schedule and at least
three of which shall be independent in accordance with the rules of the Principal Market. No change shall be made to the authorized number
of Sigma directors as provided in Section 2.5.
(c)
Contemporaneous Charter Amendments. Subject to the provisions set forth in Section 7.5(c), at or in connection with
Closing, pursuant to the Charter Amendments, Sigma shall change its name to “NextTrip, Inc.”, or such other name as
is mutually agreed to by Sigma and the Parent and reflected in the Charter Amendments.
(d)
Principal Market Listing. In the event the Principal Market determines that the Share Exchange (or any other related transaction
or transactions) constitutes, or will constitute, a “back-door listing” or “reverse merger,” the Parties shall
cooperate in good faith to seek to ensure that the Combined Company (and the Sigma Common Stock) qualifies for initial listing on the
Principal Market, pursuant to the applicable guidance and requirements of the Principal Market as of the Closing.
(e)
Sigma Stockholders’ Meeting. Subject to the provisions set forth in Section 7.5(c), the Stockholder Approval
Matters shall have been approved at the Stockholders’ Meeting.
Section
9.2 Conditions to Obligation of NextTrip and the Parent. The obligations of NextTrip and the Parent to close the transactions
contemplated herein and perform their respective obligations under this Agreement are subject, at the option of NextTrip and the Parent,
to the fulfillment on or prior to the Closing Date of the following conditions, any one or more of which may be waived by NextTrip and
the Parent in writing:
(a)
The representations and warranties of Sigma set forth in this Agreement shall be true and correct in all material respects as of the
Closing Date, except to the extent such representations and warranties are specifically made as of a particular date, in which case such
representations and warranties shall be true and correct as of such date and except to the extent that such representations and warranties
are qualified by terms such as “material” and “Material Adverse Effect,” in which case such representations and
warranties shall be true and correct in all respects at the Closing Date;
(b)
Sigma shall have performed and complied with all of its covenants hereunder in all material respects through the Closing;
(c)
No action, suit, or proceeding shall be pending or, to the Knowledge of Sigma, threatened before any Governmental Authority wherein an
Order or charge would (i) affect adversely the right of the Parent to own the Restricted Sigma Shares; or (ii) affect adversely the right
of Sigma to own NextTrip or to operate its business (and no such Order or charge shall be in effect), nor shall any Law or Order which
would have any of the foregoing effects have been enacted or promulgated by any Governmental Authority;
(d)
No event, change or development shall exist or shall have occurred since Sigma’s Most Recent Fiscal Year End that has had or is
reasonably likely to have a Material Adverse Effect on Sigma;
(e)
Sigma’s net Liabilities as of immediately prior to Closing shall not exceed a maximum of $100,000 in the aggregate, provided, however,
that any amounts advanced to Sigma pursuant to the Line of Credit shall be excluded from the calculation of such net Liabilities;
(f)
All consents, waivers, approvals, authorizations or Orders required to be obtained, and all filings required to be made, by Sigma for
the authorization, execution and delivery of this Agreement and the consummation by it of the transactions contemplated by this Agreement,
shall have been obtained and made by Sigma and Sigma shall have delivered proof of same to NextTrip and the Parent;
(g)
Sigma shall have filed all reports and other documents required to be filed by it under the U.S. federal securities laws through the
Closing Date;
(h)
The Sigma Common Stock shall be listed on the Principal Market, and no reason shall exist as to why such listing shall not continue immediately
following the Closing;
(i)
Trading in the Sigma Common Stock shall not have been suspended by the SEC, the Principal Market or any regulatory body at any time since
the date of execution of this Agreement;
(j)
Sigma shall have obtained the eligibility of the Restricted Sigma Shares for clearance and settlement through DTC and no reason shall
exist as to why such DTC eligibility shall not continue immediately following the Closing;
(k)
Sigma shall have delivered to NextTrip and the Parent a certificate, dated the Closing Date, executed by an officer of Sigma, certifying
the satisfaction of the conditions specified in Section 9.1(a)(iii) and Section 9.2(a) through 9.2(i), inclusive,
relating to Sigma;
(l)
Sigma shall have delivered to NextTrip and the Parent a certificate duly executed by the Secretary of Sigma and dated as of the Closing
Date, as to the resolutions as adopted by Sigma’s board of directors, in a form reasonably acceptable to NextTrip, approving this
Agreement and the Transaction Documents to which it is a party and the transactions contemplated hereby and thereby;
(m)
Sigma shall have delivered to NextTrip and the Parent the written resignations as of the Closing of one current director and the current
president and chief executive officer of Sigma; and
(n)
Sigma shall have delivered to NextTrip and the Parent (i) proof of the appointment of the individual identified on Schedule 2.5(a) of
the NextTrip Disclosure Schedule as a director and of William Kerby as chief executive officer of Sigma and (ii) a duly executed copy
of the Kerby Employment Agreement as provided in Section 2.5(b); and
(o)
All actions to be taken by Sigma in connection with consummation of the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to affect the transactions contemplated hereby shall be reasonably satisfactory in form and
substance to NextTrip and the Parent.
Section
9.3 Conditions to Obligation of Sigma. The obligations of Sigma to close the transactions contemplated hereby and perform
its obligations under this Agreement at Closing, are subject, at the option of Sigma, to the fulfillment on or prior to the Closing Date
of the following conditions, any one or more of which may be waived by Sigma in writing:
(a)
The representations and warranties of NextTrip and the Parent set forth in this Agreement shall be true and correct in all material respects
as of the Closing Date, except to the extent such representations and warranties are specifically made as of a particular date, in which
case such representations and warranties shall be true and correct as of such date and except to the extent that such representations
and warranties are qualified by terms such as “material” and “Material Adverse Effect,” in which case such representations
and warranties shall be true and correct in all respects at the Closing Date;
(b)
NextTrip and the Parent shall have performed and complied with all of their covenants hereunder in all material respects through the
Closing Date;
(c)
No action, suit, or proceeding shall be pending or, to the Knowledge of Sigma, threatened before any Governmental Authority wherein an
Order or charge would (i) affect adversely the right of the Parent to own the Restricted Sigma Shares; or (ii) affect adversely the right
of NextTrip to own its assets or to operate its business (and no such Order or charge shall be in effect), nor shall any Law or Order
which would have any of the foregoing effects have been enacted or promulgated by any Governmental Authority;
(d)
No event, change or development shall exist or shall have occurred since NextTrip’s Most Recent Fiscal Year End that has had or
is reasonably likely to have a Material Adverse Effect on NextTrip;
(e)
All consents, waivers, approvals, authorizations or Orders required to be obtained, and all filings required to be made, by NextTrip
for the authorization, execution and delivery of this Agreement and the consummation by it of the transactions contemplated by this Agreement,
shall have been obtained and made by NextTrip and NextTrip shall have delivered proof of same to Sigma;
(f)
All consents, waivers, approvals, authorizations or Orders required to be obtained, and all filings required to be made, by NextTrip
for the authorization, execution and delivery of this Agreement and the consummation by it of the transactions contemplated by this Agreement,
shall have been obtained and made by NextTrip and NextTrip shall have delivered proof of same to Sigma;
(g)
All outstanding convertible indebtedness of NextTrip shall have been converted at or prior to the Closing into shares of NextTrip common
stock.
(g)
NextTrip shall have delivered to Sigma a certificate, dated the Closing Date, executed by an officer of NextTrip, certifying the satisfaction
of the conditions specified in Section 9.3(a) through 9.3(f), inclusive, relating to NextTrip;
(h)
The Parent shall have delivered to Sigma a certificate, dated the Closing Date, executed by the Parent, certifying the satisfaction of
the conditions specified in Section 9.3(a) and 9.3(b) relating to the Parent;
(i)
NextTrip shall have delivered to Sigma a certificate duly executed by the Secretary of NextTrip and dated as of the Closing Date, as
to the resolutions as adopted by NextTrip’s board of directors, in a form reasonably acceptable to Sigma, approving this Agreement
and the Transaction Documents to which it is a party and the transactions contemplated hereby and thereby; and
(j)
All actions to be taken by NextTrip and the Parent in connection with consummation of the transactions contemplated hereby and all payments,
certificates, opinions, instruments, and other documents required to affect the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to Sigma.
Article
X
TERMINATION
Section
10.1 Grounds for Termination. Anything herein or elsewhere to the contrary notwithstanding, this Agreement may be terminated
and the transactions contemplated hereby may be abandoned at any time prior to the Closing Date:
(a)
by the written agreement of Sigma, NextTrip and the Parent;
(b)
by NextTrip and the Parent (by written notice of termination from NextTrip and the Parent to Sigma, in which reference is made to this
subsection) if the Closing has not occurred on or prior to the Termination Date, unless the failure of the Closing to have occurred is
attributable to a failure on the part of NextTrip or the Parent to perform any material obligation to be performed by NextTrip or the
Parent pursuant to this Agreement at or prior to the Closing;
(c)
by Sigma (by written notice of termination from Sigma to NextTrip and the Parent, in which reference is made to this subsection) if the
Closing has not occurred on or prior to the Termination Date, unless the failure of the Closing to have occurred is attributable to a
failure on the part of Sigma to perform any material obligation required to be performed by Sigma pursuant to this Agreement at or prior
to the Closing;
(d)
by Sigma or NextTrip (by written notice of termination from such Party to the other Party) if a Governmental Authority of competent jurisdiction
shall have issued a final non-appealable Order, or shall have taken any other action having the effect of, restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated hereby; provided, however, that the right to terminate this Agreement
under this Section 10.1(d) shall not be available to a Party if such Order was primarily due to the failure of such Party to perform
any of its obligations under this Agreement;
(e)
by Sigma, NextTrip or the Parent (by written notice of termination from such Party to the other Parties) if any event shall occur after
the date hereof that shall have made it impossible to satisfy a condition precedent to the terminating Party’s obligations to perform
its obligations hereunder, unless the occurrence of such event shall be due to the failure of the terminating Party to perform or comply
with any of the agreements, covenants or conditions hereof to be performed or complied with by such Party at or prior to the Closing;
(f)
by NextTrip or the Parent (by written notice of termination from NextTrip to Sigma, in which reference is made to this subsection) if,
since the date of this Agreement, there shall have occurred any Material Adverse Effect on Sigma, or there shall have occurred any event
or circumstance that, in combination with any other events or circumstances, could reasonably be expected to have, a Material Adverse
Effect with respect to Sigma;
(g)
by Sigma (by written notice of termination from Sigma to NextTrip, in which reference is made to this subsection) if, (i) since the date
of this Agreement, there shall have occurred any Material Adverse Effect on NextTrip, or there shall have occurred any event or circumstance
that, in combination with any other events or circumstances, could reasonably be expected to have, a Material Adverse Effect with respect
to NextTrip; or (ii) the Subsequently Delivered NextTrip Disclosure Schedules disclose anything which (A) has, or could reasonably be
expected to have, a Material Adverse Effect with respect to NextTrip, (B) results in any representation, warranty or covenant made herein
by NextTrip or the Parent being materially incorrect or misleading at the time it was made, (C) departs materially, from any written
or oral disclosures relating to NextTrip or the Parent (or its financial statements, liabilities, agreements, litigation, assets, operations
or prospects) which has been provided by NextTrip or the Parent, or their representatives, to Sigma or its representatives, prior to
the date of this Agreement, or (D) materially affects the ability of NextTrip or the Parent to complete the transactions contemplated
herein and such has not been cured within the applicable Disclosure Schedule Cure Period;
(h)
by NextTrip (by written notice of termination from NextTrip to Sigma, in which reference is made to the specific provision(s) of this
subsection giving rise to the right of termination) if (i) any of Sigma’s representations and warranties shall have been materially
inaccurate as of the date of this Agreement or as of a date subsequent to the date of this Agreement (as if made on such subsequent date),
such that the condition set forth in Section 9.2(a) would not be satisfied and such inaccuracy has not been cured by Sigma within
five (5) Business Days after its receipt of written notice thereof and remains uncured at the time notice of termination is given, (ii)
any of Sigma’s covenants contained in this Agreement shall have been breached, such that the condition set forth in Section
9.2(b) would not be satisfied; or
(i)
by Sigma (by written notice of termination from Sigma to NextTrip and the Parent, in which reference is made to the specific provision(s)
of this subsection giving rise to the right of termination) if (i) any of NextTrip’s or the Parent’s representations and
warranties shall have been materially inaccurate as of the date of this Agreement or as of a date subsequent to the date of this Agreement
(as if made on such subsequent date), such that the condition set forth in Section 9.3(a) would not be satisfied and such inaccuracy
has not been cured by NextTrip or the Parent within five (5) Business Days after its receipt of written notice thereof and remains uncured
at the time notice of termination is given; or (ii) any of NextTrip’s or the Parent’s covenants contained in this Agreement
shall have been breached, such that the condition set forth in Section 9.3(b) would not be satisfied.
Section
10.2 Procedure and Effect of Termination. In the event of the termination of this Agreement by Sigma, NextTrip or the Parent
pursuant to Section 10.1 hereof, written notice thereof shall forthwith be given to the other two Parties. If this Agreement is
terminated as provided herein (a) each Party will redeliver all documents, work papers and other material of any other Party relating
to the transactions contemplated hereby, whether so obtained before or after the execution hereof, to the Party furnishing the same;
provided, that each Party may retain one copy of all such documents for archival purposes in the custody of its outside counsel; and
(b) all filings, applications and other submission made by any Party to any Person, including any Governmental Authority, in connection
with the transactions contemplated hereby shall, to the extent practicable, be withdrawn by such Party from such Person.
Section
10.3 Effect of Termination. If this Agreement is terminated pursuant to Section 10.1 hereof, this Agreement shall become
void and of no further force and effect, except for the provisions of (a) Article XI; (b) Sections 3.6, 4.8 and
5.10 hereof relating to brokers’ fees or commissions; and (iv) Section 10.2 and this Section 10.3.
Article
XI
MISCELLANEOUS PROVISIONS
Section
11.1 Expenses. Except as otherwise expressly provided in this Agreement, each Party will bear its respective expenses incurred
in connection with the preparation, execution, and performance of this Agreement and the transactions contemplated by this Agreement,
including all fees and expenses of agents, representatives, counsel, and accountants. In the event of termination of this Agreement,
the obligation of each Party to pay its own expenses will be subject to any rights of such Party arising from a breach of this Agreement
by another Party.
Section
11.2 Confidentiality.
(a)
The Parties will maintain in confidence, and will cause their respective directors, officers, employees, agents, and advisors to maintain
in confidence, any written, oral, or other information obtained in confidence from another Person in connection with this Agreement or
the transactions contemplated by this Agreement, unless (i) such information is already known to such Party or to others not bound by
a duty of confidentiality or such information becomes publicly available through no fault of such Party; (ii) the use of such information
is necessary or appropriate in making any required filing with the SEC or the Principal Market, or obtaining any consent or approval
required for the consummation of the transactions contemplated by this Agreement; or (iii) the furnishing or use of such information
is required by or necessary or appropriate in connection with legal proceedings.
(b)
In the event that any Party is required to disclose any information of another Person pursuant to clause (ii) or (iii)
of Section 11.2(a) above, the Party requested or required to make the disclosure (the “disclosing party”) shall
provide the Person that provided such information (the “providing party”) with prompt notice of any such requirement
so that the providing party may seek a protective Order or other appropriate remedy and/or waive compliance with the provisions of this
Section 11.2. If, in the absence of a protective Order or other remedy or the receipt of a waiver by the providing party, the
disclosing party is nonetheless, in the opinion of counsel, legally compelled to disclose the information of the providing party, the
disclosing party may, without liability hereunder, disclose only that portion of the providing party’s information which such counsel
advises is legally required to be disclosed, provided that the disclosing party exercises its reasonable efforts to preserve the confidentiality
of the providing party’s information, including, without limitation, by cooperating with the providing party to obtain an appropriate
protective Order or other relief assurance that confidential treatment will be accorded the providing party’s information.
(c)
If the transactions contemplated by this Agreement are not consummated, each Party will return or destroy all of such written information
each party has regarding the other Parties, subject to customary backup and related procedures relating to such information.
Section
11.3 Notices. All notices, approvals, consents, requests, and other communications hereunder shall be in writing and shall
be delivered (i) by personal delivery, or (ii) by national overnight courier service, or (iii) by certified or registered mail, return
receipt requested, or (iv) via email. Notice shall be effective upon receipt except for notice via email, which shall be effective only
when the recipient, by return or reply email or notice delivered by other method provided for in this Section 11.3, acknowledges
having received that email (with an automatic “read receipt” or similar notice not constituting an acknowledgement of an
email receipt for purposes of this Section 11.3, but which acknowledgement of acceptance shall include cases where recipient ‘replies’
to such prior email, including the body of the prior email in such ‘reply’). Such notices shall be sent to the applicable
party or Parties at the address specified below, subject to notice of changes thereof from any party with at least ten (10) business
days’ notice to the other Parties. If any notice, demand, consent, request, instruction or other communication cannot be delivered
because of a changed address of which no notice was given (in accordance with this Section 11.3), or the refusal to accept same,
the notice, demand, consent, request, instruction or other communication shall be deemed received on the second Business Day the notice
is sent (as evidenced by a sworn affidavit of the sender). All such notices, demands, consents, requests, instructions and other communications
will be sent to the following physical and email addresses as applicable:
| |
If
to Sigma to: |
3900
Paseo del Sol |
| |
|
Santa
Fe, New Mexico 87507 |
| |
|
Attention:
Jacob Brunsberg, President and CEO |
| |
|
Email:
jacob.brunsberg@sigmaadditive.com |
| |
|
|
| |
With a copy to (which shall not constitute notice):
|
| |
|
|
| |
|
TroyGould
PC |
| |
|
1801
Century Park East, Suite 1600
|
| |
|
Los
Angeles, CA 90067
|
| |
|
Attention:
Dale Short, Esq.
|
| |
|
Email:
dshort@troygould.com
|
| |
If
to NextTrip or the
Parent to: |
1560
Sawgrass Corporate Parkway, Suite 400 |
| |
|
Sunrise,
FL 33323 |
| |
|
Attention:
William Kerby, CEO |
| |
|
Email:
bill.kerby@nexttrip.com |
| |
With a copy to (which shall not constitute notice): |
| |
|
|
| |
|
Procopio,
Cory, Hargreaves & Savitch, LLP |
| |
|
12544
High Bluff Drive, Suite 400 |
| |
|
San
Diego, CA 92130 |
| |
|
Attention:
Christopher L. Tinen, Esq. |
| |
|
Email:
christopher.tinen@procopio.com |
or
such other addresses as shall be furnished in writing by any Party in the manner for giving notices hereunder.
Section
11.4 Further Assurances. The Parties agree (a) to furnish upon request to each other such further information; (b) to execute
and deliver to each other such other documents; and (c) to do such other acts and things, all as the other Parties may reasonably request
for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement.
Section
11.5 Waiver. The rights and remedies of the Parties are cumulative and not alternative. Neither the failure nor any delay
by any Party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate
as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude
any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum
extent permitted by applicable Law, (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement
can be discharged by one Party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the
other Parties; (b) no waiver that may be given by a Party will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one Party will be deemed to be a waiver of any obligation of such Party or of the right of the Party giving
such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this
Agreement.
Section
11.6 Entire Agreement and Modification. This Agreement supersedes all prior agreements between the Parties with respect to
its subject matter and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the
terms of the agreement between the Parties with respect to its subject matter. This Agreement may not be amended except by a written
agreement executed by the Party against whom the enforcement of such amendment is sought, provided that Error! Reference source not found.
may only be amended after the Closing as set forth in Error! Reference source not found..
Section
11.7 Assignments, Successors, and No Third-Party Rights. No Party may assign any of its rights under this Agreement without
the prior consent of the other Parties. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon,
and inure to the benefit of and be enforceable by the respective successors and permitted assigns of the Parties. Except as set forth
in Article I hereof, nothing expressed or referred to in this Agreement will be construed to give any Person other than the Parties
any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement.
Section
11.8 Severability. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction,
the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable
only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.
Section
11.9 Section Headings. The headings of Articles and Sections in this Agreement are provided for convenience only and will
not affect its construction or interpretation. All references to “Article” or “Articles” or “Section”
or “Sections” refer to the corresponding Article or Articles or Section or Sections of this Agreement, unless the
context indicates otherwise.
Section
11.10 Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event
an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and
no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions
of this Agreement. Any reference to any federal, state, local, or foreign statute or Law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. Unless otherwise expressly provided, the word “including”
shall mean including without limitation. The Parties intend that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation, warranty, or covenant contained herein in any respect, the fact
that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not detract from or mitigate the fact that the Party is in breach of such representation,
warranty, or covenant. All words used in this Agreement will be construed to be of such gender or number as the circumstances require.
Section
11.11 Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original
copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. In the event that
any signature is delivered by facsimile transmission, electronic delivery, or by e-mail delivery of a “.pdf” format data
file, such signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed)
with the same force and effect as if such facsimile, electronic copy, or “.pdf” signature page was an original thereof.
Section
11.12 Specific Performance. Each of the Parties acknowledges and agrees that the other Parties would be damaged irreparably
in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached.
Accordingly, each of the Parties agrees that the other Parties shall be entitled to an injunction or injunctions to prevent breaches
of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted
in any court of the U.S. or any state thereof having jurisdiction over the Parties and the matter (subject to the provisions set forth
in Section 11.13 below), in addition to any other remedy to which they may be entitled, at Law or in equity.
Section
11.13 Governing Law; Submission to Jurisdiction. This Agreement shall be governed by and construed in accordance with the
Laws of the State of Delaware, without regard to conflicts of Laws principles. Each of the Parties submits to the jurisdiction of any
state or federal court sitting in Delaware in any action or proceeding arising out of or relating to this Agreement and agrees that all
claims in respect of the action or proceeding may be heard and determined in any such court. Each of the Parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might
be required of any other Party with respect thereto. Any Party may make service on any other Party by sending or delivering a copy of
the process to the Party to be served at the address and in the manner provided for the giving of notices in Section 11.3. Nothing
in this Section 11.13, however, shall affect the right of any Party to serve legal process in any other manner permitted by Law
or at equity. Each Party agrees that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced
by suit on the judgment or in any other manner provided by Law or at equity.
Section
11.14 Waiver of Jury Trial. EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section
11.15 Review and Construction of Documents. Each Party herein expressly represents and warrants to all other Parties hereto
that (a) before executing this Agreement, said Party has fully informed itself of the terms, contents, conditions and effects of this
Agreement; (b) said Party has relied solely and completely upon its own judgment in executing this Agreement; (c) said Party has had
the opportunity to seek and has obtained the advice of its own legal, tax and business advisors before executing this Agreement; (d)
said Party has acted voluntarily and of its own free will in executing this Agreement; and (e) this Agreement is the result of arm’s
length negotiations conducted by and among the Parties and their respective counsel.
Section
11.16 NextTrip Representative.
(a)
Parent, as the sole shareholder of NextTrip, hereby irrevocably constitutes and appoints William Kerby, in his capacity as the NextTrip
Representative, as the true and lawful agent and attorney-in-fact of such Person with full powers of substitution to act in the name,
place and stead of thereof with respect to the performance on behalf of such Person under the terms and provisions of this Agreement
and the Ancillary Documents to which the NextTrip Representative is a party or otherwise has rights in such capacity (together with this
Agreement, the “NextTrip Representative Documents”), as the same may be from time to time amended, and to do or refrain
from doing all such further acts and things, and to execute all such documents on behalf of such Person, if any, as the NextTrip Representative
will deem necessary or appropriate in connection with any of the transactions contemplated under the NextTrip Representative Documents.
All decisions and actions by the NextTrip Representative, shall be binding upon Parent in its capacity as the sole shareholder of NextTrip
and its respective successors and assigns, and neither it nor any other Party shall have the right to object, dissent, protest or otherwise
contest the same. The provisions of this Section 11.16 are irrevocable and coupled with an interest. The NextTrip Representative hereby
accepts its appointment and authorization as the NextTrip Representative under this Agreement.
(b)
If the NextTrip Representative shall die, become disabled, dissolve, resign or otherwise be unable or unwilling to fulfill its responsibilities
as representative and agent of Parent, then the Parent shall, within ten (10) days after such death, disability, dissolution, resignation
or other event, appoint a successor NextTrip Representative promptly thereafter (but in any event within two (2) Business Days after
such appointment) notify Sigma in writing of the identity of such successor. Any such successor so appointed shall become the “NextTrip
Representative” for purposes of this Agreement.
Section
11.17 Non-Survival of Representations, Warranties. The representations and warranties of the Parent, NextTrip and Sigma contained
in this Agreement or in any certificate or instrument delivered by or on behalf of any of Parent, NextTrip and Sigma pursuant to this
Agreement shall not survive the Closing Date, and from and after the Closing Date, the Parent, NextTrip and Sigma and their respective
representatives shall not have any further obligations, nor shall any claim be asserted or action be brought against any of Parent, NextTrip
and Sigma or their respective representatives with respect thereto. The covenants and agreements made by the Parent, NextTrip and Sigma
in this Agreement or in any certificate or instrument delivered pursuant to this Agreement, including any rights arising out of any breach
of such covenants or agreements, shall not survive the Closing Date, except for those covenants and agreements contained herein and therein
that by their terms apply or are to be performed in whole or in part after the Closing Date (which such covenants shall survive the Closing
Date and continue until fully performed in accordance with their terms).
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURES BEGIN ON IMMEDIATELY FOLLOWING PAGE.]
IN
WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first above written.
| |
SIGMA: |
| |
|
|
| |
Sigma
Additive Solutions, Inc. |
| |
a
Nevada corporation |
| |
|
|
| |
By: |
/s/ Jacob Brunsberg |
| |
|
|
| |
Name: |
Jacob
Brunsberg |
| |
|
|
| |
Title: |
President
and Chief Executive Officer |
| |
|
|
| |
NEXTTRIP: |
| |
|
|
| |
NextTrip
Holdings, Inc. |
| |
a
Florida corporation |
| |
|
|
| |
By: |
/s/
William Kerby |
| |
|
|
| |
Name: |
William
Kerby |
| |
|
|
| |
Title: |
Chief
Executive Officer |
| |
PARENT: |
| |
|
|
| |
NextTrip
Group, LLC |
| |
|
|
| |
By: |
/s/
William Kerby |
| |
|
|
| |
Name:
|
William
Kerby |
| |
|
|
| |
Title: |
Chief
Executive Officer |
| |
|
|
| |
NEXTTRIP
REPRESENTATIVE: |
| |
|
|
| |
William
Kerby, solely in the capacity as the NextTrip Representative hereunder |
| |
|
|
| |
By: |
/s/
William Kerby |
| |
|
|
| |
Name:
|
William
Kerby |
FIRST
AMENDMENT TO
SHARE
EXCHANGE AGREEMENT
THIS
FIRST AMENDMENT TO SHARE EXCHANGE AGREEMENT, dated as of November 19, 2023 (“First Amendment”), by and
among by SIGMA ADDITIVE SOLUTIONS, INC., a Nevada corporation (“Sigma”), NEXTTRIP HOLDINGS, INC., a
Florida corporation (“NextTrip”), NEXTTRIP GROUP, LLC, a Florida limited liability company and the sole stockholder
of NextTrip (the “Parent”), and William Kerby, in the capacity as the representative from and after the Closing Date
for the NextTrip shareholders as of immediately prior to the Closing Date in accordance with the terms and conditions of the Agreement
(the “NextTrip Representative”). Each of Sigma, NextTrip, the NextTrip Representative and the Parent are sometimes
referred to herein individually, as a “Party” and collectively, as the “Parties.” Capitalized terms
used but not otherwise defined in this First Amendment shall have the respective terms assigned thereto in the Agreement (defined below).
WHEREAS,
the Parties have entered into that certain Share Exchange Agreement, dated October 12, 2023 (the “Agreement”), and,
pursuant to Section 11.6 of the Agreement, the Parties desire to amend the Agreement for purposes of amending Section 7.5(c) of the Agreement.
NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained herein and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:
1.
Amendments to Agreement. Section 7.5(c) of the Agreement is hereby amended and restated in its entirety to read as follows:
(c)
Notwithstanding anything herein to the contrary, (i) in the event that the issuance of the Restricted Sigma Shares (including the Contingent
Shares) pursuant to the terms of this Agreement is approved at the Stockholders Meeting, but any of Charter Amendments are not approved
at the Stockholders Meeting, Sigma shall call a special meeting or meetings of the stockholders as soon as practicable thereafter to
seek stockholder approval to obtain approval of Charter Amendments not so approved; and (ii) in the event that the issuance of the Restricted
Sigma Shares (including the Contingent Shares) pursuant to the terms of this Agreement is approved at the Stockholders Meeting, but the
Charter Amendment relating to the increase in authorized shares is not approved, to the extent that Sigma does not have sufficient shares
of Common Stock authorized to issue the Restricted Sigma Shares (including the Contingent Shares), in lieu thereof, Sigma shall issue
NextTrip shares of a new series of convertible preferred stock in form and substance satisfactory to the NextTrip Representative which,
among other things, will provide for voting on an as converted basis and shall be automatically converted (on a one-for-one basis) into
shares of Common Stock once stockholder approval of the increase in authorized shares has been obtained.
2.
No Further Modifications. Except as specifically amended by this First Amendment, all of the terms, covenants, and provisions
of the Agreement and the documents referenced therein shall remain in full force and effect in accordance with their respective terms.
Except as expressly modified by this First Amendment, the Agreement is hereby ratified and confirmed in all respects. In the event of
any inconsistency between the provisions of the Agreement and this First Amendment, the terms of this First Amendment shall control.
3.
Counterparts. This First Amendment may be executed in one or more counterparts, each of which will be deemed to be an original
copy of this First Amendment and all of which, when taken together, will be deemed to constitute one and the same agreement. In the event
that any signature is delivered by facsimile transmission, electronic delivery, or by e-mail delivery of a “.pdf” format
data file, such signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed)
with the same force and effect as if such facsimile, electronic copy, or “.pdf” signature page was an original thereof.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURES BEGIN
ON IMMEDIATELY FOLLOWING PAGE]
IN
WITNESS WHEREOF, the Parties have caused this First Amendment to be executed as of the date first above written.
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SIGMA: |
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|
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Sigma
Additive Solutions, Inc. |
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a
Nevada corporation |
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|
|
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By: |
/s/
Jacob Brunsberg |
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|
|
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Name: |
Jacob
Brunsberg |
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|
|
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Title: |
President
and Chief Executive Officer |
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|
|
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NEXTTRIP: |
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|
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NextTrip
Holdings, Inc. |
| |
a
Florida corporation |
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|
|
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By: |
/s/ William
Kerby |
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|
|
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Name: |
William
Kerby |
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|
|
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Title: |
Chief
Executive Officer |
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|
|
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PARENT: |
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|
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NextTrip
Group, LLC |
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|
|
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By: |
/s/ William Kerby |
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|
|
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Name:
|
William
Kerby |
| |
|
|
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Title: |
Chief
Executive Officer |
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|
|
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NEXTTRIP
REPRESENTATIVE: |
| |
|
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William
Kerby, solely in the capacity as the |
| |
NextTrip
Representative hereunder |
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|
|
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By: |
/s/
William Kerby |
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|
|
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Name:
|
William
Kerby |
ANNEX
B
AMENDMENT
NO. FOUR TO AMENDED AND RESTATED ARTICLES OF INCORPORATION, AS AMENDED,
OF
SIGMA ADDITIVE SOLUTIONS, INC.
1.
The first paragraph of ARTICLE I of the Amended and Restated Articles of Incorporation, as amended, of Sigma Additive Solutions,
Inc. is hereby amended to read in its entirety as follows:
“The
name of the Corporation shall be NextTrip, Inc.”
2.
The first two paragraphs of ARTICLE IV of the Amended and Restated Articles of Incorporation, as amended, of Sigma Additive
Solutions, Inc. are hereby amended to read in their entirety as follows:
“The
total number of shares of all classes of capital stock which the corporation shall have authority to issue is 110,000,000 shares.
Stockholders shall not have any preemptive rights, nor shall stockholders have the right to cumulative voting in the election of directors
or for any other purpose.
The
classes and the aggregate number of shares of stock of each class which the corporation shall have authority to issue are as follows:
(a)
100,000,000 shares of common stock, $0.001 par value (“Common Stock”);
(b)
10,000,000 shares of preferred stock, $0.001 par value (“Preferred Stock”).”
ANNEX
C
**CONFIDENTIAL**
October
12, 2023
Sigma
Additive Solutions, Inc.
3900 Paseo del Sol
Santa
Fe, NM 87507
Members
of the Sigma Additive Solutions Board of Directors:
We
understand that Sigma Additive Solutions, Inc. (“Sigma”), proposes to enter into a Share Exchange Agreement (the “Agreement”)
by and among Sigma, NextTrip Holdings, Inc., a Florida corporation (“NextTrip”), NextTrip Group LLC, a Florida limited
liability company and the sole stockholder of NextTrip (the “Parent”), and William Kerby, in the capacity as the representative
from and after the Closing Date for the NextTrip stockholders as of immediately prior to the Closing Date in accordance with the terms
and conditions of this Agreement (the “NextTrip Representative”). Each of Sigma, NextTrip, the NextTrip Representative and
the Parent are sometimes referred to herein individually, as a “Party” and collectively, as the “Parties.” We
have further been advised that at the Closing, the Parent shall sell, transfer, convey, assign and deliver the NextTrip Shares, representing
all of the issued and outstanding shares of NextTrip Capital Stock, to Sigma and in consideration therefor, Sigma shall issue the Restricted
Sigma Shares to the members of Parent (“Parent Members”), Pro Rata, as set forth in the Consideration Schedule (the “Share
Exchange”). Upon the closing of the transactions contemplated in the Agreement, NextTrip will become a wholly-owned subsidiary
of Sigma.
Based
on the draft Agreement that we have been provided, at Closing, Parent Members will receive 19.99% of Sigma’s Common Stock based
on the Sigma Common Stock outstanding at Closing (the “Closing Shares”). The draft Agreement further provides that if on
a date that is six (6) months after the Closing Date, the First Milestone Event is met, Sigma will issue, or will cause the issuance
of, the Tranche 1 Contingent Shares, equal to 1,450,000 shares, to the Parent Members in accordance with their respective Pro Rata shares.
The draft Agreement also provides that if on a date that is nine (9) months after the Closing Date, the Second Milestone Event is met,
Sigma will issue, or will cause the issuance of, the Tranche 2 Contingent Shares, equal to 1,450,000 shares, to the Parent Members in
accordance with their respective Pro Rata shares. Such issuance may be made as early as six (6) months after the Closing Date if the
Second Milestone Event is reached between six (6) and nine (9) months after the Closing Date. Additionally, the draft Agreement provides
that if on a date that is twelve (12) months after the Closing Date, the Third Milestone Event is met, Sigma will issue, or will cause
the issuance of, the Tranche 3 Contingent Shares, equal to 1,450,000 shares, to the Parent Members in accordance with their respective
Pro Rata shares. Such issuance may be made as early as six (6) months after the Closing Date if the Third Milestone Event is reached
between six (6) and twelve (12) months after the Closing Date. If on a date that is fifteen (15) months after the Closing Date, the Fourth
Milestone Event is met, Sigma will issue, or will cause the issuance of, the Tranche 4 Contingent Shares, equal to 1,650,000 shares less
the shares issued at Closing, to the Parent Members in accordance with their respective Pro Rata shares. Such issuance may be made as
early as six (6) months after the Closing Date if the Fourth Milestone Event is reached between six (6) and fifteen (15) months after
the Closing Date. Independent of the foregoing Milestone Events, for each month during the fifteen (15) month period following the Closing
Date that the Travel Bookings Milestone Event is met, to the extent not previously issued the Contingent Shares will be issuable, starting
with the Tranche 1 Contingent Shares, then the Tranche 2 Contingent Shares, etc. For the avoidance of doubt, a tranche of Contingent
Shares can only be earned once up to the maximum amount of the Restricted Sigma Shares issuable under the Agreement. Based on the Milestone
Events, Parent Members could own up to 6 million Sigma shares, or approximately 90% of Sigma based on the number of shares of Sigma outstanding
as of the date of this letter. The Closing Shares and the Contingent Shares collectively are known as the Restricted Sigma Shares, representing
up to 6 million shares of Sigma.
**CONFIDENTIAL**
For
purposes of this opinion, and with your consent, we have deemed the sole and aggregate consideration to Parent Members to be the Restricted
Sigma Shares (the “Consideration”). The terms and conditions of the Share Exchange are more fully set forth in the
Agreement. Any term not otherwise defined in this letter shall have the meaning ascribed to it in the Agreement.
You
have requested our opinion as to the fairness, from a financial point of view, of the Consideration to be issued to the Parent Members
in connection with the Share Exchange. We have not been requested to opine as to, and our opinion does not in any manner address, the
underlying business decision to proceed with or effect the Share Exchange.
In
connection with our review of the Share Exchange, and in arriving at our opinion, we have among other things:
| |
1. |
Reviewed
a draft of the Agreement dated as of October 12, 2023 and provided to us by Sigma on October 12, 2023; |
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|
|
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2. |
Reviewed
current financial projections for the Parent on a stand-alone basis for the fiscal years ended December 31, 2024 through December
31, 2028 prepared and furnished to us by management of the Parent (the “Parent Projections”); |
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|
|
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3. |
Analyzed
public information with respect to certain other companies in lines of business that we believe to be comparable to the Parent, in
whole or in part, which included an examination of current public market prices and resulting valuation statistics; |
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|
|
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4. |
Reviewed
the financial terms, to the extent publicly available, of certain other acquisitions involving the acquisition of companies we believe,
in our sole discretion, to be comparable to the Parent, in whole or in part; |
| |
|
|
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5. |
Performed
a discounted cash flow analysis of the Parent on a standalone basis based on the Parent Projections, as applicable; and |
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|
|
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6. |
Performed
other research and analysis and considered such other factors as we deemed appropriate. |
In
addition, we have conducted such other analyses, examinations and inquiries and considered such other financial, economic and market
criteria as we have deemed necessary and appropriate in arriving at our opinion.
We
have relied upon and assumed, without independent verification, the accuracy and completeness of all information that was publicly available
or was furnished, or otherwise made available, to us by Sigma, NextTrip and/or the Parent. We have further assumed that the financial
information provided has been prepared on a reasonable basis in accordance with industry and past management practice, and that management
of neither Sigma nor the Parent is aware of any information or facts that would make any information provided to us incomplete or misleading.
Without limiting the generality of the foregoing, for the purpose of this opinion, we have assumed that with respect to financial forecasts,
estimates and other forward-looking information reviewed by us, that such information has been reasonably prepared based on assumptions
reflecting the best currently available estimates and judgments of the management of the Parent as to the expected future results of
operations and financial condition of the Parent and have not evaluated or otherwise tested such financial forecasts, estimates and other
forward-looking information or the underlying assumptions. We express no opinion as to any such financial forecasts, estimates or forward-looking
information or the assumptions on which they were based.
**CONFIDENTIAL**
In
connection with our opinion, we have assumed and relied upon, without independent verification, the accuracy and completeness of all
of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by us. Our opinion
does not address any legal, regulatory, tax or accounting issues.
In
arriving at our opinion, we have assumed that the Agreement will be in all material respects identical to the last draft of each
such Agreement reviewed by us. We have relied upon and assumed, without independent verification, that (i) the representations and
warranties of all parties set forth in the Agreement and all related documents and instruments that are referred to therein are true
and correct, (ii) each party to the Agreement will fully and timely perform all of the covenants and agreements required to
be performed by such party thereunder, (iii) the Share Exchange will be consummated pursuant to the terms of the Agreement without
amendment of any term or condition thereof the effect of which would be in any way meaningful to our analysis, and (iv) all
conditions to the consummation of the Share Exchange will be satisfied without waiver by any party of any conditions or obligations
thereunder the effect of which would be in any way meaningful to our analysis. Additionally, we have assumed that all the necessary
regulatory approvals and consents required for the Share Exchange will be obtained in a manner that will not adversely affect Sigma
or the contemplated benefits of the Share Exchange to Sigma.
In
arriving at our opinion, we have not performed any appraisals or valuations of any specific assets or liabilities (fixed, contingent,
or other) of Sigma or the Parent, and have not been furnished or provided with any such appraisals or valuations, nor have we evaluated
the solvency of Sigma or the Parent under any state or federal law relating to bankruptcy, insolvency, or similar matters. The analyses
performed by us in connection with this opinion were going concern analyses. We were not requested to opine, and no opinion is hereby
rendered, as to whether any analyses of Sigma or the Parent, other than as a going concern, is appropriate in the circumstances and,
accordingly, we have performed no such analyses. Without limiting the generality of the foregoing, we have undertaken no independent
analysis of any pending or threatened litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which
Sigma, the Parent, or any of their respective affiliates is a party or may be subject, and at the direction of Sigma and with its consent,
our opinion makes no assumption concerning, and therefore does not consider, the possible assertion of claims, outcomes or damages arising
out of any such matters.
This
opinion is necessarily based upon the information available to us and facts and circumstances as they exist and are subject to evaluation
on the date hereof; events occurring after the date hereof could materially affect the assumptions used in preparing and rendering this
opinion. We are not expressing any opinion herein as to any change in the price at which shares of Sigma’s common stock may trade
following announcement of the Share Exchange or at any future time after the date hereof. We have not undertaken to reaffirm or revise
this opinion or otherwise comment upon any events occurring after the date hereof and do not have any obligation to update, revise or
reaffirm this opinion.
We,
as a customary part of our investment banking business, engage in the valuation of businesses and their securities in connection with
mergers and acquisitions, underwriting and secondary distributions of securities, private placements and other valuations for estate,
corporate, and other purposes. We will receive a fee from Sigma for providing this opinion. This opinion fee is not contingent upon the
consummation of the Share Exchange. Further, Sigma has agreed to reimburse our expenses and indemnify us against certain liabilities
that may arise in relation to our engagement. In the ordinary course of our business, we and our affiliates may actively trade securities
of Sigma for our own account or the account of our customers and, accordingly, we may at any time hold a long or short position in such
securities.
**CONFIDENTIAL**
Other
than currently serving as sales manager for Sigma’s ATM program, we have not performed material financial advisory or investment
banking services for Sigma in the past. In the future, we may provide other financial advisory and investment banking services to Sigma
for which we would expect to receive compensation. We have not performed material financial advisory or investment banking services for
the Parent or the NextTrip Representative.
Consistent
with applicable legal and regulatory requirements, Lake Street Capital Markets, LLC has adopted policies and procedures to establish
and maintain the independence of our research departments and personnel. As a result, our research analysts may hold views, make statements
or investment recommendations and/or publish research reports with respect to Sigma and the Share Exchange that differ from the views
of our investment banking personnel.
This
opinion is furnished pursuant to our engagement letter dated February 15, 2023. This opinion is directed to the Board of Directors
of Sigma for its use in connection with its consideration of the Share Exchange and is not intended to be and does not constitute a recommendation
to the shareholders of Sigma. This opinion shall not be published or otherwise used, nor shall any public references to us be made, without
our prior written approval. This opinion has been approved for issuance by the Lake Street Capital Markets, LLC Fairness Opinion Committee.
This
opinion addresses only the fairness, from a financial point of view, to Sigma of the Consideration to be issued by Sigma to Parent Members
in connection with the Share Exchange. Our opinion does not constitute a recommendation that Sigma should complete the Share Exchange.
We have not been requested to opine as to, and our opinion does not in any manner address the relative merits of the Share Exchange in
comparison to any alternatives to the Share Exchange, Sigma’s underlying decision to proceed with the Share Exchange, or any other
aspect of the Share Exchange, or alternatives to the Share Exchange available to Sigma.
Based
upon and subject to the foregoing and based upon such other factors as we consider relevant, it is our opinion as of the date hereof
that the Consideration to be issued to Parent Members in connection with the Share Exchange is fair, from a financial point of view,
to Sigma.
Sincerely,
/s/
Lake Street Capital Markets, LLC
ANNEX
D
SIGMA
ADDITIVE SOLUTIONS, INC.
2023 EQUITY INCENTIVE PLAN
1.
Purpose; Eligibility.
1.1
General Purpose. The name of this plan is the
Sigma Additive Solutions, Inc. 2023 Equity Incentive Plan (the “Plan”). The purposes of the Plan are to (a) enable
Sigma Labs, Inc. (DBA Sigma Additive Solutions), a Nevada corporation (the “Company”), and any Affiliate to attract
and retain the types of Employees, Consultants and Directors who will contribute to the Company’s long range success; (b) provide
incentives that align the interests of Employees, Consultants and Directors with those of the shareholders of the Company; and (c) promote
the success of the Company’s business.
1.2
Eligible Award Recipients. The persons eligible
to receive Awards are the Employees, Consultants and Directors of the Company and its Affiliates, and such other individuals designated
by the Committee who are reasonably expected to become Employees, Consultants and Directors after the receipt of Awards.
1.3
Available Awards. Awards that may be granted
under the Plan include: (a) Incentive Stock Options, (b) Non-qualified Stock Options, (c) Stock Appreciation Rights, (d) Restricted Awards,
(e) Performance Share Awards, (f) Cash Awards, and (g) Other Equity-Based Awards.
2.
Definitions.
“Affiliate”
means a corporation or other entity that, directly or through one or more intermediaries, controls, is controlled by or is under common
control with, the Company.
“Applicable
Laws” means the requirements related to or implicated by the administration of the Plan under applicable state corporate law,
United States federal and state securities laws, the Code, any stock exchange or quotation system on which the shares of Common Stock
are listed or quoted, and the applicable laws of any foreign country or jurisdiction where Awards are granted under the Plan.
“Award”
means any right granted under the Plan, including an Incentive Stock Option, a Non-qualified Stock Option, a Stock Appreciation Right,
a Restricted Award, a Performance Share Award, a Cash Award, or an Other Equity-Based Award.
“Award
Agreement” means a written agreement, contract, certificate or other instrument or document evidencing the terms and conditions
of an individual Award granted under the Plan which may, in the discretion of the Company, be transmitted electronically to any Participant.
Each Award Agreement shall be subject to the terms and conditions of the Plan.
“Beneficial
Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating
the beneficial ownership of any particular Person, such Person shall be deemed to have beneficial ownership of all securities that such
Person has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable
only after the passage of time. The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding meaning.
“Board”
means the Board of Directors of the Company, as constituted at any time.
“Cash
Award” means an Award denominated in cash that is granted under Section 10 of the Plan.
“Cause”
means:
| |
With
respect to any Employee or Consultant, unless the applicable Award Agreement states otherwise:
(a)
If the Employee or Consultant is a party to an employment or service agreement with the Company or its Affiliates and such agreement
provides for a definition of Cause, the definition contained therein; or
(b)
If no such agreement exists, or if such agreement does not define Cause: (i) the commission of, or plea of guilty or no contest to,
a felony or a crime involving moral turpitude or the commission of any other act involving willful malfeasance or material fiduciary
breach with respect to the Company or an Affiliate; (ii) conduct that brings or is reasonably likely to bring the Company or an Affiliate
negative publicity or into public disgrace, embarrassment, or disrepute; (iii) gross negligence or willful misconduct with respect
to the Company or an Affiliate; (iv) material violation of state or federal securities laws; or (v) material violation of the Company’s
written policies or codes of conduct, including written policies related to discrimination, harassment, performance of illegal or
unethical activities, and ethical misconduct. |
| |
|
| |
With
respect to any Director, unless the applicable Award Agreement states otherwise, a determination
by a majority of the disinterested Board members that the Director has engaged in any of
the following:
(a)
malfeasance in office;
(b)
gross misconduct or neglect;
(c)
false or fraudulent misrepresentation inducing the director’s appointment;
(d)
willful conversion of corporate funds; or
(e)
repeated failure to participate in Board meetings on a regular basis despite having received proper notice of the meetings in advance. |
The
Committee, in its absolute discretion, shall determine the effect of all matters and questions relating to whether a Participant has
been discharged for Cause.
“Change
in Control”
| |
(a)
The direct or indirect sale, transfer, conveyance or other disposition (other than by way
of merger or consolidation), in one or a series of related transactions, of all or substantially
all of the properties or assets of the Company and its subsidiaries, taken as a whole, to
any Person that is not a subsidiary of the Company;
(b)
The date which is 10 business days prior to the consummation of a complete liquidation or dissolution of the Company;
(c)
The acquisition by any Person of Beneficial Ownership of 51% or more (on a fully diluted basis) of either (i) the then outstanding
shares of Common Stock of the Company, taking into account as outstanding for this purpose such Common Stock issuable upon the exercise
of options or warrants, the conversion of convertible stock or debt, and the exercise of any similar right to acquire such Common
Stock (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”);
provided, however, that for purposes of this Plan, the following acquisitions shall not constitute a Change in Control: (A)
any acquisition by the Company or any Affiliate, (B) any acquisition by any employee benefit plan sponsored or maintained by the
Company or any subsidiary, (C) any acquisition which complies with clauses, (i), (ii) and (iii) of subsection (d) of this definition
or (D) in respect of an Award held by a particular Participant, any acquisition by the Participant or any group of persons including
the Participant (or any entity controlled by the Participant or any group of persons including the Participant); or
(d)
The consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving
the Company that requires the approval of the Company’s shareholders, whether for such transaction or the issuance of securities
in the transaction (a “Business Combination”), unless immediately following such Business Combination: (i) more
than 50% of the total voting power of (A) the entity resulting from such Business Combination (the “Surviving Company”),
or (B) if applicable, the ultimate parent entity that directly or indirectly has beneficial ownership of sufficient voting securities
eligible to elect a majority of the members of the board of directors (or the analogous governing body) of the Surviving Company
(the “Parent Company”), is represented by the Outstanding Company Voting Securities that were outstanding immediately
prior to such Business Combination (or, if applicable, is represented by shares into which the Outstanding Company Voting Securities
were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same
proportion as the voting power of the Outstanding Company Voting Securities among the holders thereof immediately prior to the Business
Combination; (ii) no Person (other than any employee benefit plan sponsored or maintained by the Surviving Company or the Parent
Company) is or becomes the Beneficial Owner, directly or indirectly, of 50% or more of the total voting power of the outstanding
voting securities eligible to elect members of the board of directors of the Parent Company (or the analogous governing body) (or,
if there is no Parent Company, the Surviving Company); and (iii) at least a majority of the members of the board of directors (or
the analogous governing body) of the Parent Company (or, if there is no Parent Company, the Surviving Company) following the consummation
of the Business Combination were Board members at the time of the Board’s approval of the execution of the initial agreement
providing for such Business Combination. |
“Code”
means the Internal Revenue Code of 1986, as it may be amended from time to time. Any reference to a section of the Code shall be deemed
to include a reference to any regulations promulgated thereunder.
“Committee”
means a committee of one or more members of the Board appointed by the Board to administer the Plan in accordance with Section 3.3 and
Section 3.4.
“Common
Stock” means the common stock, $0.001 par value per share, of the Company, or such other securities of the Company as may be
designated by the Committee from time to time in substitution thereof.
“Company”
means Sigma Additive Solutions, Inc., a Nevada corporation, and any successor thereto.
“Consultant”
means any individual who performs bona fide services to the Company or an Affiliate, other than as an Employee or Director, and who may
be offered securities registerable pursuant to a registration statement on Form S-8 under the Securities Act.
“Continuous
Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Consultant or
Director, is not interrupted or terminated. The Participant’s Continuous Service shall not be deemed to have terminated merely
because of a change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant
or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or
termination of the Participant’s Continuous Service; provided further that if any Award is subject to Section 409A of the
Code, this sentence shall only be given effect to the extent consistent with Section 409A of the Code. For example, a change in status
from an Employee of the Company to a Director of an Affiliate will not constitute an interruption of Continuous Service. The Committee
or its delegate, in its sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any
leave of absence approved by that party, including sick leave, military leave or any other personal or family leave of absence. The Committee
or its delegate, in its sole discretion, may determine whether a Company transaction, such as a sale or spin-off of a division or subsidiary
that employs a Participant, shall be deemed to result in a termination of Continuous Service for purposes of affected Awards, and such
decision shall be final, conclusive and binding.
“Deferred
Stock Units (DSUs)” has the meaning set forth in Section 8.1(b) hereof.
“Director”
means a member of the Board.
“Disability”
means, unless the applicable Award Agreement says otherwise, that the Participant is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment; provided, however, for purposes of
determining the term of an Incentive Stock Option pursuant to Section 6.10 hereof, the term Disability shall have the meaning
ascribed to it under Section 22(e)(3) of the Code. The determination of whether an individual has a Disability shall be determined
under procedures established by the Committee. Except in situations where the Committee is determining Disability for purposes of
the term of an Incentive Stock Option pursuant to Section 6.10 hereof within the meaning of Section 22(e)(3) of the Code, the Committee
may rely on any determination that a Participant is disabled for purposes of benefits under any long-term disability plan maintained
by the Company or any Affiliate in which a Participant participates.
“Disqualifying
Disposition” has the meaning set forth in Section 17.12.
“Effective
Date” shall mean the date as of which this Plan is adopted by the Board.
“Employee”
means any person, including an Officer or Director, employed by the Company or an Affiliate; provided, that, for purposes of determining
eligibility to receive Incentive Stock Options, an Employee shall mean an employee of the Company or a parent or subsidiary corporation
within the meaning of Section 424 of the Code. Mere service as a Director or payment of a director’s fee by the Company or an Affiliate
shall not be sufficient to constitute “employment” by the Company or an Affiliate.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended.
“Fair
Market Value” means, as of any date, the value of the Common Stock as determined below. If the Common Stock is listed on any
established stock exchange or a national market system, including without limitation, the New York Stock Exchange or the Nasdaq Stock
Market, the Fair Market Value shall be the closing price of a share of Common Stock (or if no sales were reported the closing price on
the date immediately preceding such date) as quoted on such exchange or system on the day of determination, as reported in the Wall
Street Journal. In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith
by the Committee and such determination shall be conclusive and binding on all persons.
“Fiscal
Year” means the Company’s fiscal year.
“Free
Standing Rights” has the meaning set forth in Section 7.
“Grant
Date” means the date on which the Committee adopts a resolution, or takes other appropriate action, expressly granting an Award
to a Participant that specifies the key terms and conditions of the Award or, if a later date is set forth in such resolution, then such
date as is set forth in such resolution.
“Incentive
Stock Option” means an Option that is designated by the Committee as an incentive stock option within the meaning of Section
422 of the Code and that meets the requirements set out in the Plan.
“Incumbent
Directors” means individuals who, on the Effective Date, constitute the Board, provided that any individual becoming
a Director subsequent to the Effective Date whose election or nomination for election to the Board was approved by a vote of at least
two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company
in which such person is named as a nominee for Director without objection to such nomination) shall be an Incumbent Director. No individual
initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to Directors
or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be
an Incumbent Director.
“Non-Employee
Director” means a Director who is a “non-employee director” within the meaning of Rule 16b-3.
“Non-qualified
Stock Option” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.
“Officer”
means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder.
“Option”
means an Incentive Stock Option or a Non-qualified Stock Option granted pursuant to the Plan.
“Optionholder”
means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.
“Option
Exercise Price” means the price at which a share of Common Stock may be purchased upon the exercise of an Option.
“Other
Equity-Based Award” means an Award that is not an Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit,
or Performance Share Award that is granted under Section 10 and is payable by delivery of Common Stock and/or which is measured by reference
to the value of Common Stock.
“Participant”
means an eligible person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding
Award.
“Performance
Goals” means, for a Performance Period, the one or more goals established by the Committee for the Performance Period based
upon business criteria or other performance measures determined by the Committee in its discretion.
“Performance
Period” means the one or more periods of time not less than one fiscal quarter in duration, as the Committee may select, over
which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to
and the payment of a Performance Share Award or a Cash Award.
“Performance
Share Award” means any Award granted pursuant to Section 9 hereof.
“Performance
Share” means the grant of a right to receive a number of actual shares of Common Stock or share units based upon the performance
of the Company during a Performance Period, as determined by the Committee.
“Permitted
Transferee” means: (a) a member of the Optionholder’s immediate family (child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law,
or sister-in-law, including adoptive relationships), any person sharing the Optionholder’s household (other than a tenant or employee),
a trust in which these persons have more than 50% of the beneficial interest, a foundation in which these persons (or the Optionholder)
control the management of assets, and any other entity in which these persons (or the Optionholder) own more than 50% of the voting interests;
(b) third parties designated by the Committee in connection with a program established and approved by the Committee pursuant to which
Participants may receive a cash payment or other consideration in consideration for the transfer of a Non-qualified Stock Option; and
(c) such other transferees as may be permitted by the Committee in its sole discretion.
“Person”
means a person as defined in Section 13(d)(3) of the Exchange Act.
“Plan”
means this Sigma Labs, Inc. (DBA Sigma Additive Solutions) 2022 Equity Incentive Plan, as amended and/or amended and restated from time
to time.
“Related
Rights” has the meaning set forth in Section 7.
“Restricted
Award” means any Award granted pursuant to Section 8.
“Restricted
Period” has the meaning set forth in Section 8.
“Rule
16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.
“Securities
Act” means the Securities Act of 1933, as amended.
“Stock
Appreciation Right” means the right pursuant to an Award granted under Section 7 to receive, upon exercise, an amount payable
in cash or shares equal to the number of shares subject to the Stock Appreciation Right that is being exercised multiplied by the excess
of (a) the Fair Market Value of a share of Common Stock on the date the Award is exercised, over (b) the exercise price specified in
the Stock Appreciation Right Award Agreement.
“Stock
for Stock Exchange” has the meaning set forth in Section 6.4.
“Substitute
Award” has the meaning set forth in Section 4.6.
“Ten
Percent Shareholder” means a person who owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing
more than 10% of the total combined voting power of all classes of stock of the Company or of any of its Affiliates.
“Total
Share Reserve” has the meaning set forth in Section 4.1.
3.
Administration.
3.1
Authority of Committee. The Plan shall be administered
by the Committee or, in the Board’s sole discretion, by the Board. Subject to the terms of the Plan, the Committee’s charter
and Applicable Laws, and in addition to other express powers and authorization conferred by the Plan, the Committee shall have the authority:
(a)
to construe and interpret the Plan and apply its provisions;
(b)
to promulgate, amend, and rescind rules and regulations relating to the administration of the Plan;
(c)
to authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan;
(d)
to delegate its authority to one or more Officers of the Company with respect to Awards that do not involve “insiders” within
the meaning of Section 16 of the Exchange Act;
(e)
to determine when Awards are to be granted under the Plan and the applicable Grant Date;
(f)
from time to time to select, subject to the limitations set forth in this Plan, those eligible Award recipients to whom Awards shall
be granted;
(g)
to determine the number of shares of Common Stock to be made subject to each Award;
(h)
to determine whether each Option is to be an Incentive Stock Option or a Non-qualified Stock Option;
(i)
to prescribe the terms and conditions of each Award, including, without limitation, the exercise price and medium of payment and vesting
provisions, and to specify the provisions of the Award Agreement relating to such grant;
(j)
to determine the target number of Performance Shares to be granted pursuant to a Performance Share Award, the performance measures that
will be used to establish the Performance Goals, the Performance Period(s) and the number of Performance Shares earned by a Participant;
(k)
to amend any outstanding Awards, including for the purpose of modifying the time or manner of vesting, or the term of any outstanding
Award; provided, however, that if any such amendment impairs a Participant’s rights or increases a Participant’s obligations
under his or her Award or creates or increases a Participant’s federal income tax liability with respect to an Award, such amendment
shall also be subject to the Participant’s consent;
(l)
to determine the duration and purpose of leaves of absences which may be granted to a Participant without constituting termination of
their employment for purposes of the Plan, which periods shall be no shorter than the periods generally applicable to Employees under
the Company’s employment policies;
(m)
to make decisions with respect to outstanding Awards that may become necessary upon a Change in Control or an event that triggers anti-dilution
adjustments;
(n)
to interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan and any instrument
or agreement relating to, or Award granted under, the Plan; and
(o)
to exercise discretion to make any and all other determinations which it determines to be necessary or advisable for the administration
of the Plan.
The
Committee also may modify the purchase price or the exercise price of any outstanding Award, provided that, if the modification
effects a repricing, shareholder approval shall be required before the repricing is effective.
3.2
Committee Decisions Final. All decisions made
by the Committee pursuant to the provisions of the Plan shall be final and binding on the Company and the Participants, unless such decisions
are determined by a court having jurisdiction to be arbitrary and capricious.
3.3
Delegation. The Committee or, if no Committee
has been appointed, the Board may delegate administration of the Plan to a committee or committees of one or more members of the Board,
and the term “Committee” shall apply to any person or persons to whom such authority has been delegated. The Committee
shall have the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references
in this Plan to the Board or the Committee shall thereafter be to the committee or subcommittee), subject, however, to such resolutions,
not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee
at any time and revest in the Board the administration of the Plan. The members of the Committee shall be appointed by and serve at the
pleasure of the Board. From time to time, the Board may increase or decrease the size of the Committee, add additional members to, remove
members (with or without cause) from, appoint new members in substitution therefor, and fill vacancies, however caused, on the Committee.
The Committee shall act pursuant to a vote of the majority of its members or, in the case of a Committee comprised of only two members,
the unanimous consent of its members, whether present or not, or by the written consent of the majority of its members and minutes shall
be kept of all of its meetings and copies thereof shall be provided to the Board. Subject to the limitations prescribed by the Plan and
the Board, the Committee may establish and follow such rules and regulations for the conduct of its business as it may determine to be
advisable.
3.4
Committee Composition. Except as otherwise determined
by the Board, the Committee shall consist solely of two or more Non-Employee Directors. The Board shall have the discretion to determine
whether or not it intends to comply with the exemption requirements of Rule 16b-3. However, if the Board intends to satisfy such exemption
requirements, with respect to any insider subject to Section 16 of the Exchange Act, the Committee shall be a compensation committee
of the Board that at all times consists solely of two or more Non-Employee Directors. Within the scope of such authority, the Board or
the Committee may delegate to a committee of one or more members of the Board who are not Non-Employee Directors the authority to grant
Awards to eligible persons who are not then subject to Section 16 of the Exchange Act. Nothing herein shall create an inference that
an Award is not validly granted under the Plan in the event Awards are granted under the Plan by a compensation committee of the Board
that does not at all times consist solely of two or more Non-Employee Directors.
3.5
Indemnification. In addition to such other rights
of indemnification as they may have as Directors or members of the Committee, and to the extent allowed by Applicable Laws, the Committee
shall be indemnified by the Company against the reasonable expenses, including attorney’s fees, actually incurred in connection
with any action, suit or proceeding or in connection with any appeal therein, to which the Committee may be party by reason of any action
taken or failure to act under or in connection with the Plan or any Award granted under the Plan, and against all amounts paid by the
Committee in settlement thereof (provided, however, that the settlement has been approved by the Company, which approval shall
not be unreasonably withheld) or paid by the Committee in satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Committee did not act in good faith
and in a manner which such person reasonably believed to be in the best interests of the Company, or in the case of a criminal proceeding,
had no reason to believe that the conduct complained of was unlawful; provided, however, that within 60 days after the institution
of any such action, suit or proceeding, such Committee shall, in writing, offer the Company the opportunity at its own expense to handle
and defend such action, suit or proceeding.
4.
Shares Subject to the Plan.
4.1
Subject to adjustment in accordance with Section 14, no more than 7,000,000 shares of Common Stock (the “Total Share Reserve”).
Any shares of Common Stock granted in connection with Options, Stock Appreciation Rights and other Awards shall be counted against this
limit as one (1) share for every one (1) Option, Stock Appreciation Right or other Award granted. During the terms of the Awards, the
Company shall keep available at all times the number of shares of Common Stock required to satisfy such Awards.
4.2
Shares of Common Stock available for distribution under the Plan may consist, in whole or in part, of authorized and unissued shares,
treasury shares or shares reacquired by the Company in any manner.
4.3
Subject to adjustment in accordance with Section 14, no more than 7,000,000 shares of Common Stock may be issued in the aggregate pursuant
to the exercise of Incentive Stock Options (the “ISO Limit”).
4.4
The maximum number of shares of Common Stock subject to Awards granted during a single Fiscal Year to any Non-Employee Director, together
with any cash fees paid to such Non-Employee Director during the Fiscal Year, shall not exceed a total value of $500,000 (calculating
the value of any Awards based on the grant date fair value for financial reporting purposes).
4.5
Any shares of Common Stock subject to an Award that expires or is canceled, forfeited, or terminated without issuance of the full number
of shares of Common Stock to which the Award related will again be available for issuance under the Plan. Notwithstanding anything to
the contrary contained herein: shares subject to an Award under the Plan shall not again be made available for issuance or delivery under
the Plan if such shares are (a) shares tendered in payment of an Option, (b) shares delivered or withheld by the Company to satisfy any
tax withholding obligation, or (c) shares covered by a stock-settled Stock Appreciation Right or other Awards that were not issued upon
the settlement of the Award.
4.6
Awards may, in the sole discretion of the Committee, be granted under the Plan in assumption of, or in substitution for, outstanding
awards previously granted by an entity acquired by the Company or with which the Company combines (“Substitute Awards”).
Substitute Awards shall not be counted against the Total Share Reserve; provided that, Substitute Awards issued in connection
with the assumption of, or in substitution for, outstanding options intended to qualify as Incentive Stock Options shall be counted against
the ISO limit. Subject to applicable stock exchange requirements, available shares under a shareholder-approved plan of an entity directly
or indirectly acquired by the Company or with which the Company combines (as appropriately adjusted to reflect such acquisition or transaction)
may be used for Awards under the Plan and shall not count toward the Total Share Limit.
5.
Eligibility.
5.1
Eligibility for Specific Awards. Incentive Stock
Options may be granted only to Employees. Awards other than Incentive Stock Options may be granted to Employees, Consultants and Directors
and those individuals whom the Committee determines are reasonably expected to become Employees, Consultants and Directors following
the Grant Date.
5.2
Ten Percent Shareholders. A Ten Percent Shareholder
shall not be granted an Incentive Stock Option unless the Option Exercise Price is at least 110% of the Fair Market Value of the Common
Stock on the Grant Date and the Option is not exercisable after the expiration of five years from the Grant Date.
6.
Option Provisions. Each Option granted under
the Plan shall be evidenced by an Award Agreement. Each Option so granted shall be subject to the conditions set forth in this Section
6, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. All Options shall
be separately designated Incentive Stock Options or Non-qualified Stock Options at the time of grant, and, if certificates are issued,
a separate certificate or certificates will be issued for shares of Common Stock purchased on exercise of each type of Option. Notwithstanding
the foregoing, the Company shall have no liability to any Participant or any other person if an Option designated as an Incentive Stock
Option fails to qualify as such at any time or if an Option is determined to constitute “nonqualified deferred compensation”
within the meaning of Section 409A of the Code and the terms of such Option do not satisfy the requirements of Section 409A of the Code.
The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by
reference in the Option or otherwise) the substance of each of the following provisions:
6.1
Term. Subject to the provisions of Section 5.2
regarding Ten Percent Shareholders, no Incentive Stock Option shall be exercisable after the expiration of 10 years from the Grant Date.
The term of a Non-qualified Stock Option granted under the Plan shall be determined by the Committee; provided, however, no Non-qualified
Stock Option shall be exercisable after the expiration of 10 years from the Grant Date.
6.2
Exercise Price of an Incentive Stock Option.
Subject to the provisions of Section 5.2 regarding Ten Percent Shareholders, the Option Exercise Price of each Incentive Stock Option shall
be not less than 100% of the Fair Market Value of the Common Stock subject to the Option on the Grant Date. Notwithstanding the foregoing,
an Incentive Stock Option may be granted with an Option Exercise Price lower than that set forth in the preceding sentence if such Option
is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the
Code.
6.3
Exercise Price of a Non-qualified Stock Option.
The Option Exercise Price of each Non-qualified Stock Option shall be not less than 100% of the Fair Market Value of the Common Stock
subject to the Option on the Grant Date. Notwithstanding the foregoing, a Non-qualified Stock Option may be granted with an Option Exercise
Price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another
option in a manner satisfying the provisions of Section 409A of the Code.
6.4
Consideration. The Option Exercise Price of Common
Stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (a) in cash
or by certified or bank check at the time the Option is exercised or (b) in the discretion of the Committee, upon such terms as the Committee
shall approve, the Option Exercise Price may be paid: (i) by delivery to the Company of other Common Stock, duly endorsed for transfer
to the Company, with a Fair Market Value on the date of delivery equal to the Option Exercise Price (or portion thereof) due for the
number of shares being acquired, or by means of attestation whereby the Participant identifies for delivery specific shares of Common
Stock that have an aggregate Fair Market Value on the date of attestation equal to the Option Exercise Price (or portion thereof) and
receives a number of shares of Common Stock equal to the difference between the number of shares thereby purchased and the number of
identified attestation shares of Common Stock (a “Stock for Stock Exchange”); (ii) a “cashless” exercise
program established with a broker; (iii) by reduction in the number of shares of Common Stock otherwise deliverable upon exercise of
such Option with a Fair Market Value equal to the aggregate Option Exercise Price at the time of exercise; (iv) by any combination of
the foregoing methods; or (v) in any other form of legal consideration that may be acceptable to the Committee. Unless otherwise specifically
provided in the Option, the exercise price of Common Stock acquired pursuant to an Option that is paid by delivery (or attestation) to
the Company of other Common Stock acquired, directly or indirectly from the Company, shall be paid only by shares of the Common Stock
of the Company that have been held for more than six months (or such longer or shorter period of time required to avoid a charge to earnings
for financial accounting purposes). Notwithstanding the foregoing, during any period for which the Common Stock is publicly traded (i.e.,
the Common Stock is listed on any established stock exchange or a national market system) an exercise by a Director or Officer that involves
or may involve a direct or indirect extension of credit or arrangement of an extension of credit by the Company, directly or indirectly,
in violation of Section 402(a) of the Sarbanes-Oxley Act of 2002 shall be prohibited with respect to any Award under this Plan.
6.5
Transferability of an Incentive Stock Option.
An Incentive Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable
during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering
written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder,
shall thereafter be entitled to exercise the Option.
6.6
Transferability of a Non-qualified Stock Option.
A Non-qualified Stock Option may, in the sole discretion of the Committee, be transferable to a Permitted Transferee, upon written approval
by the Committee to the extent provided in the Award Agreement. If the Non-qualified Stock Option does not provide for transferability,
then the Non-qualified Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by
delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death
of the Optionholder, shall thereafter be entitled to exercise the Option.
6.7
Vesting of Options. Each Option may, but need
not, vest and therefore become exercisable in periodic installments that may, but need not, be equal. The Option may be subject to such
other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the
Committee may deem appropriate. The vesting provisions of individual Options may vary. No Option may be exercised for a fraction of a
share of Common Stock. The Committee may, but shall not be required to, provide for an acceleration of vesting and exercisability in
the terms of any Award Agreement upon the occurrence of a specified event.
6.8
Termination of Continuous Service. Unless otherwise
provided in an Award Agreement or in an employment agreement the terms of which have been approved by the Committee, in the event an
Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability), the Optionholder may
exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination) but
only within such period of time ending on the earlier of (a) the date three months following the termination of the Optionholder’s
Continuous Service or (b) the expiration of the term of the Option as set forth in the Award Agreement; provided that, if the
termination of Continuous Service is by the Company for Cause, all outstanding Options (whether or not vested) shall immediately terminate
and cease to be exercisable. If, after termination, the Optionholder does not exercise his or her Option within the time specified in
the Award Agreement, the Option shall terminate.
6.9
Extension of Termination Date. An Optionholder’s
Award Agreement may also provide that if the exercise of the Option following the termination of the Optionholder’s Continuous
Service for any reason would be prohibited at any time because the issuance of shares of Common Stock would violate the registration
requirements under the Securities Act or any other state or federal securities law or the rules of any securities exchange or interdealer
quotation system, then the Option shall terminate on the earlier of (a) the expiration of the term of the Option in accordance with Section
6.1 or (b) the expiration of a period after termination of the Participant’s Continuous Service that is three months after the end
of the period during which the exercise of the Option would be in violation of such registration or other securities law requirements.
6.10
Disability of Optionholder. Unless otherwise
provided in an Award Agreement, in the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s
Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option
as of the date of termination), but only within such period of time ending on the earlier of (a) the date 12 months following such termination
or (b) the expiration of the term of the Option as set forth in the Award Agreement. If, after termination, the Optionholder does not
exercise his or her Option within the time specified herein or in the Award Agreement, the Option shall terminate.
6.11
Death of Optionholder. Unless otherwise provided
in an Award Agreement, in the event an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death,
then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the
Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated
to exercise the Option upon the Optionholder’s death, but only within the period ending on the earlier of (a) the date 12 months
following the date of death or (b) the expiration of the term of such Option as set forth in the Award Agreement. If, after the Optionholder’s
death, the Option is not exercised within the time specified herein or in the Award Agreement, the Option shall terminate.
6.12
Incentive Stock Option $100,000 Limitation. To
the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and its Affiliates)
exceeds $100,000, the Options or portions thereof which exceed such limit (according to the order in which they were granted) shall be
treated as Non-qualified Stock Options.
7.
Stock Appreciation Rights. Each Stock Appreciation Right granted
under the Plan shall be evidenced by an Award Agreement. Each Stock Appreciation Right so granted shall be subject to the conditions
set forth in this Section 7, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award
Agreement. Stock Appreciation Rights may be granted alone (“Free Standing Rights”) or in tandem with an Option granted
under the Plan (“Related Rights”).
7.1
Grant Requirements for Related Rights. Any Related
Right that relates to a Non-qualified Stock Option may be granted at the same time the Option is granted or at any time thereafter but
before the exercise or expiration of the Option. Any Related Right that relates to an Incentive Stock Option must be granted at the same
time the Incentive Stock Option is granted.
7.2
Term. The term of a Stock Appreciation Right granted under
the Plan shall be determined by the Committee; provided, however, no Stock Appreciation Right shall be exercisable later than
the tenth anniversary of the Grant Date.
7.3
Vesting. Each Stock Appreciation Right may, but need not, vest
and therefore become exercisable in periodic installments that may, but need not, be equal. The Stock Appreciation Right may be subject
to such other terms and conditions on the time or times when it may be exercised as the Committee may deem appropriate. The vesting provisions
of individual Stock Appreciation Rights may vary. No Stock Appreciation Right may be exercised for a fraction of a share of Common Stock.
The Committee may, but shall not be required to, provide for an acceleration of vesting and exercisability in the terms of any Stock
Appreciation Right upon the occurrence of a specified event.
7.4
Exercise and Payment. Upon exercise of a Stock Appreciation
Right, the holder shall be entitled to receive from the Company an amount equal to the number of shares of Common Stock subject to the
Stock Appreciation Right that is being exercised multiplied by the excess of (i) the Fair Market Value of a share of Common Stock on
the date the Award is exercised, over (ii) the exercise price specified in the Stock Appreciation Right or related Option. Payment with
respect to the exercise of a Stock Appreciation Right shall be made on the date of exercise. Payment shall be made in the form of shares
of Common Stock (with or without restrictions as to substantial risk of forfeiture and transferability, as determined by the Committee
in its sole discretion), cash or a combination thereof, as determined by the Committee.
7.5
Exercise Price. The exercise price of a Free Standing Right
shall be determined by the Committee, but shall not be less than 100% of the Fair Market Value of one share of Common Stock on the Grant
Date of such Stock Appreciation Right. A Related Right granted simultaneously with or subsequent to the grant of an Option and in conjunction
therewith or in the alternative thereto shall have the same exercise price as the related Option, shall be transferable only upon the
same terms and conditions as the related Option, and shall be exercisable only to the same extent as the related Option; provided,
however, that a Stock Appreciation Right, by its terms, shall be exercisable only when the Fair Market Value per share of Common
Stock subject to the Stock Appreciation Right and related Option exceeds the exercise price per share thereof and no Stock Appreciation
Rights may be granted in tandem with an Option unless the Committee determines that the requirements of Section 7.1 are satisfied.
7.6
Reduction in the Underlying Option Shares. Upon any exercise
of a Related Right, the number of shares of Common Stock for which any related Option shall be exercisable shall be reduced by the number
of shares for which the Stock Appreciation Right has been exercised. The number of shares of Common Stock for which a Related Right shall
be exercisable shall be reduced upon any exercise of any related Option by the number of shares of Common Stock for which such Option
has been exercised.
8.
Restricted Awards. A Restricted Award is an Award of
actual shares of Common Stock (“Restricted Stock”) or hypothetical Common Stock units (“Restricted Stock
Units”) having a value equal to the Fair Market Value of an identical number of shares of Common Stock, which may, but need
not, provide that such Restricted Award may not be sold, assigned, transferred or otherwise disposed of, pledged or hypothecated as collateral
for a loan or as security for the performance of any obligation or for any other purpose for such period (the “Restricted Period”)
as the Committee shall determine. Each Restricted Award granted under the Plan shall be evidenced by an Award Agreement. Each Restricted
Award so granted shall be subject to the conditions set forth in this Section 8, and to such other conditions not inconsistent with the
Plan as may be reflected in the applicable Award Agreement.
8.1
Restricted Stock and Restricted Stock Units.
(a)
Each Participant granted Restricted Stock shall execute and deliver to the Company an Award Agreement with respect to the Restricted
Stock setting forth the restrictions and other terms and conditions applicable to such Restricted Stock. If the Committee determines
that the Restricted Stock shall be held by the Company or in escrow rather than delivered to the Participant pending the release of the
applicable restrictions, the Committee may require the Participant to additionally execute and deliver to the Company (A) an escrow agreement
satisfactory to the Committee, if applicable and (B) the appropriate blank stock power with respect to the Restricted Stock covered by
such agreement. If a Participant fails to execute an agreement evidencing an Award of Restricted Stock and, if applicable, an escrow
agreement and stock power, the Award shall be null and void. Subject to the restrictions set forth in the Award, the Participant generally
shall have the rights and privileges of a shareholder as to such Restricted Stock, including the right to vote such Restricted Stock
and the right to receive dividends; provided that, any cash dividends and stock dividends with respect to the Restricted Stock
shall be withheld by the Company for the Participant’s account, and interest may be credited on the amount of the
cash dividends withheld at a rate and subject to such terms as determined by the Committee. The cash dividends or stock dividends so
withheld by the Committee and attributable to any particular share of Restricted Stock (and earnings thereon, if applicable) shall be
distributed to the Participant in cash or, at the discretion of the Committee, in shares of Common Stock having a Fair Market Value equal
to the amount of such dividends, if applicable, upon the release of restrictions on such share and, if such share is forfeited, the Participant
shall have no right to such dividends.
(b)
The terms and conditions of a grant of Restricted Stock Units shall be reflected in an Award Agreement. No shares of Common Stock shall
be issued at the time a Restricted Stock Unit is granted, and the Company will not be required to set aside funds for the payment of
any such Award. A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder. The Committee
may also grant Restricted Stock Units with a deferral feature, whereby settlement is deferred beyond the vesting date until the occurrence
of a future payment date or event set forth in an Award Agreement (“Deferred Stock Units”).
8.2
Restrictions.
(a)
Restricted Stock awarded to a Participant shall be subject to the following restrictions until the expiration of the Restricted Period,
and to such other terms and conditions as may be set forth in the applicable Award Agreement: (A) if an escrow arrangement is used, the
Participant shall not be entitled to delivery of the stock certificate; (B) the shares shall be subject to the restrictions on transferability
set forth in the Award Agreement; (C) the shares shall be subject to forfeiture to the extent provided in the applicable Award Agreement;
and (D) to the extent such shares are forfeited, the stock certificates shall be returned to the Company, and all rights of the Participant
to such shares and as a shareholder with respect to such shares shall terminate without further obligation on the part of the Company.
(b)
Restricted Stock Units and Deferred Stock Units awarded to any Participant shall be subject to (A) forfeiture until the expiration of
the Restricted Period, and satisfaction of any applicable Performance Goals during such period, to the extent provided in the applicable
Award Agreement, and to the extent such Restricted Stock Units or Deferred Stock Units are forfeited, all rights of the Participant to
such Restricted Stock Units or Deferred Stock Units shall terminate without further obligation on the part of the Company and (B) such
other terms and conditions as may be set forth in the applicable Award Agreement.
(c)
The Committee shall have the authority to remove any or all of the restrictions on the Restricted Stock, Restricted Stock Units and Deferred
Stock Units whenever it may determine that, by reason of changes in Applicable Laws or other changes in circumstances arising after the
date the Restricted Stock or Restricted Stock Units or Deferred Stock Units are granted, such action is appropriate.
8.3
Restricted Period.
With
respect to Restricted Awards, the Restricted Period shall commence on the Grant Date and end at the time or times set forth on a schedule
established by the Committee in the applicable Award Agreement.
No
Restricted Award may be granted or settled for a fraction of a share of Common Stock. The Committee may, but shall not be required to,
provide for an acceleration of vesting in the terms of any Award Agreement upon the occurrence of a specified event.
8.4
Delivery of Restricted Stock and Settlement of Restricted Stock Units.
Upon the expiration of the Restricted Period with respect to any shares of Restricted Stock, the restrictions set forth in
Section 8.2 and the applicable Award Agreement shall be of no further force or effect with respect to such shares, except as set forth
in the applicable Award Agreement. If an escrow arrangement is used, upon such expiration, the Company shall deliver to the Participant,
or his or her beneficiary, without charge, the stock certificate evidencing the shares of Restricted Stock which have not then been forfeited
and with respect to which the Restricted Period has expired (to the nearest full share) and any cash dividends or stock dividends credited
to the Participant’s account with respect to such Restricted Stock and the interest thereon, if any. Upon the expiration of the
Restricted Period with respect to any outstanding Restricted Stock Units, or at the expiration of the deferral period with respect to
any outstanding Deferred Stock Units, the Company shall deliver to the Participant, or his or her beneficiary, without charge, one share
of Common Stock for each such outstanding vested Restricted Stock Unit or Deferred Stock Unit (“Vested Unit”); provided,
however, that, if explicitly provided in the applicable Award Agreement, the Committee may, in its sole discretion, elect to pay
cash or part cash and part Common Stock in lieu of delivering only shares of Common Stock for Vested Units. If a cash payment is made
in lieu of delivering shares of Common Stock, the amount of such payment shall be equal to the Fair Market Value of the Common Stock
as of the date on which the Restricted Period lapsed in the case of Restricted Stock Units, or the delivery date in the case of Deferred
Stock Units, with respect to each Vested Unit.
8.5
Stock Restrictions. Each certificate representing Restricted
Stock awarded under the Plan shall bear a legend in such form as the Company deems appropriate.
9.
Performance Share Awards. Each Performance Share Award granted
under the Plan shall be evidenced by an Award Agreement. Each Performance Share Award so granted shall be subject to the conditions set
forth in this Section 9, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement.
The Committee shall have the discretion to determine: (i) the number of shares of Common Stock or stock-denominated units subject to
a Performance Share Award granted to any Participant; (ii) the Performance Period applicable to any Award; (iii) the conditions that
must be satisfied for a Participant to earn an Award; and (iv) the other terms, conditions and restrictions of the Award.
9.1
Earning Performance Share Awards. The number of Performance
Shares earned by a Participant will depend on the extent to which the performance goals established by the Committee are attained within
the applicable Performance Period, as determined by the Committee.
10.
Other Equity-Based Awards and Cash Awards. The
Committee may grant Other Equity-Based Awards, either alone or in tandem with other Awards, in such amounts and subject to such conditions
as the Committee shall determine in its sole discretion. Each Equity-Based Award shall be evidenced by an Award Agreement and shall be
subject to such conditions, not inconsistent with the Plan, as may be reflected in the applicable Award Agreement. The Committee may
grant Cash Awards in such amounts and subject to such Performance Goals, other vesting conditions, and such other terms as the Committee
determines in its discretion. Cash Awards shall be evidenced in such form as the Committee may determine.
11.
Securities Law Compliance. Each Award Agreement shall provide
that no shares of Common Stock shall be purchased or sold thereunder unless and until (a) any then applicable requirements of state or
federal laws and regulatory agencies have been fully complied with to the satisfaction of the Company and its counsel and (b) if required
to do so by the Company, the Participant has executed and delivered to the Company a letter of investment intent in such form and containing
such provisions as the Committee may require. The Company shall use reasonable efforts to seek to obtain from each regulatory commission
or agency having jurisdiction over the Plan such authority as may be required to grant Awards and to issue and sell shares of Common
Stock upon exercise of the Awards; provided, however, that this undertaking shall not require the Company to register under the
Securities Act the Plan, any Award or any Common Stock issued or issuable pursuant to any such Award. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue
and sell Common Stock upon exercise of such Awards unless and until such authority is obtained.
12.
Use of Proceeds from Stock. Proceeds from the
sale of Common Stock pursuant to Awards, or upon exercise thereof, shall constitute general funds of the Company.
13.
Miscellaneous.
13.1
Acceleration of Exercisability and Vesting. The Committee shall
have the power to accelerate the time at which an Award may first be exercised or the time during which an Award or any part thereof
will vest in accordance with the Plan, notwithstanding the provisions in the Award stating the time at which it may first be exercised
or the time during which it will vest.
13.2
Shareholder Rights. Except as provided in the
Plan or an Award Agreement, no Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect
to, any shares of Common Stock subject to such Award unless and until such Participant has satisfied all requirements for exercise of
the Award pursuant to its terms and no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities
or other property) or distributions of other rights for which the record date is prior to the date such Common Stock certificate is issued,
except as provided in Section 14 hereof.
13.3
No Employment or Other Service Rights. Nothing
in the Plan or any instrument executed or Award granted pursuant thereto shall confer upon any Participant any right to continue to serve
the Company or an Affiliate in the capacity in effect at the time the Award was granted or shall affect the right of the Company or an
Affiliate to terminate (a) the employment of an Employee with or without notice and with or without Cause or (b) the service of a Director
pursuant to the By-laws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the
Company or the Affiliate is incorporated, as the case may be.
13.4
Transfer; Approved Leave of Absence. For purposes
of the Plan, no termination of employment by an Employee shall be deemed to result from either (a) a transfer of employment to the Company
from an Affiliate or from the Company to an Affiliate, or from one Affiliate to another, or (b) an approved leave of absence for military
service or sickness, or for any other purpose approved by the Company, if the Employee’s right to reemployment is guaranteed either
by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Committee otherwise so provides
in writing, in either case, except to the extent inconsistent with Section 409A of the Code if the applicable Award is subject thereto.
13.5
Withholding Obligations. To the extent provided
by the terms of an Award Agreement and subject to the discretion of the Committee, the Participant may satisfy any federal, state or
local tax withholding obligation relating to the exercise or acquisition of Common Stock under an Award by any of the following means
(in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination
of such means: (a) tendering a cash payment; (b) authorizing the Company to withhold shares of Common Stock from the shares of Common
Stock otherwise issuable to the Participant as a result of the exercise or acquisition of Common Stock under the Award, provided,
however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by
law; (c) delivering to the Company previously owned and unencumbered shares of Common Stock of the Company; a program established with
a broker; or in any other manner of legal withholding that may be acceptable to the Committee.
14.
Adjustments Upon Changes in Stock. In the event
of changes in the outstanding Common Stock or in the capital structure of the Company by reason of any stock or extraordinary cash dividend,
stock split, reverse stock split, an extraordinary corporate transaction such as any recapitalization, reorganization, merger, consolidation,
combination, exchange, or other relevant change in capitalization occurring after the Grant Date of any Award, Awards granted under the
Plan and any Award Agreements, the exercise price of Options and Stock Appreciation Rights, the Performance Goals to which Performance
Share Awards and Cash Awards are subject, the maximum number of shares of Common Stock subject to all Awards stated in Section 4 will
be equitably adjusted or substituted, as to the number, price or kind of a share of Common Stock or other consideration subject to such
Awards to the extent necessary to preserve the economic intent of such Award. In the case of adjustments made pursuant to this Section
14, unless the Committee specifically determines that such adjustment is in the best interests of the Company or its Affiliates, the
Committee shall, in the case of Incentive Stock Options, ensure that any adjustments under this Section 14 will not constitute a modification,
extension or renewal of the Incentive Stock Options within the meaning of Section 424(h)(3) of the Code and in the case of Non-qualified
Stock Options, ensure that any adjustments under this Section 14 will not constitute a modification of such Non-qualified Stock Options
within the meaning of Section 409A of the Code. Any adjustments made under this Section 14 shall be made in a manner which does not adversely
affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act. The Company shall give each Participant notice of an adjustment
hereunder and, upon notice, such adjustment shall be conclusive and binding for all purposes.
15.
Effect of Change in Control.
15.1
Unless otherwise provided in an Award Agreement, notwithstanding any provision of the Plan to the contrary:
(a)
In the event of a Change in Control, all outstanding Options and Stock Appreciation Rights shall become immediately exercisable with
respect to 100% of the shares subject to such Options or Stock Appreciation Rights, and/or the Restricted Period shall expire immediately
with respect to 100% of the outstanding shares of Restricted Stock or Restricted Stock Units.
(b)
With respect to Performance Share Awards and Cash Awards, in the event of a Change in Control, all Performance Goals or other vesting
criteria will be deemed achieved at 100% of target levels and all other terms and conditions will be deemed met.
To
the extent practicable, any actions taken by the Committee under the immediately preceding clauses (a) and (b) shall occur in a manner
and at a time which allows affected Participants the ability to participate in the Change in Control with respect to the shares of Common
Stock subject to their Awards.
15.2
In addition, in the event of a Change in Control, the Committee may in its discretion and upon at least 10 days’ advance notice
to the affected persons, cancel any outstanding Awards and pay to the holders thereof, in cash or stock, or any combination thereof,
the value of such Awards based upon the price per share of Common Stock received or to be received by other shareholders of the Company
in the event. In the case of any Option or Stock Appreciation Right with an exercise price (or SAR Exercise Price in the case of a Stock
Appreciation Right) that equals or exceeds the price paid for a share of Common Stock in connection with the Change in Control, the Committee
may cancel the Option or Stock Appreciation Right without the payment of consideration therefor.
15.3
The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger,
consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to all or substantially
all of the assets and business of the Company and its Affiliates, taken as a whole.
16.
Amendment of the Plan and Awards.
16.1
Amendment of Plan. The Board at any time, and
from time to time, may amend or terminate the Plan. However, except as provided in Section 14 relating to adjustments upon changes in
Common Stock and Section 16.3, no amendment shall be effective unless approved by the shareholders of the Company to the extent shareholder
approval is necessary to satisfy any Applicable Laws. At the time of an amendment, the Board shall determine, upon advice from counsel,
whether such amendment will be contingent on shareholder approval.
16.2
Shareholder Approval. The Board may, in its sole
discretion, submit any other amendment to the Plan for shareholder approval.
16.3
Contemplated Amendments. It is expressly contemplated
that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible Employees, Consultants and
Directors with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options or to the nonqualified deferred compensation provisions of Section 409A of the Code and/or to bring
the Plan and/or Awards granted under it into compliance therewith.
16.4
No Impairment of Rights. Rights under any Award
granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (a) the Company requests the consent of
the Participant and (b) the Participant consents in writing.
16.5
Amendment of Awards. The Committee at any time,
and from time to time, may amend the terms of any one or more Awards; provided, however, that the Committee may not affect any
amendment which would otherwise constitute an impairment of the rights under any Award unless (a) the Company requests the consent of
the Participant and (b) the Participant consents in writing.
17.
General Provisions.
17.1
Forfeiture Events. The Committee may specify
in an Award Agreement that the Participant’s rights, payments and benefits with respect to an Award shall be subject to reduction,
cancellation, forfeiture or recoupment upon the occurrence of certain events, in addition to applicable vesting conditions of an Award.
Such events may include, without limitation, breach of non-competition, non-solicitation, confidentiality, or other restrictive covenants
that are contained in the Award Agreement or otherwise applicable to the Participant, a termination of the Participant’s Continuous
Service for Cause, or other conduct by the Participant that is detrimental to the business or reputation of the Company and/or its Affiliates.
17.2
Clawback. Notwithstanding any other provisions
in this Plan, the Company may cancel any Award, require reimbursement of any Award by a Participant, and effect any other right of recoupment
of equity or other compensation provided under the Plan in accordance with any Company policies that may be adopted and/or modified from
time to time (“Clawback Policy”). In addition, a Participant may be required to repay the Company previously paid
compensation, whether provided pursuant to the Plan or an Award Agreement, in accordance with the Clawback Policy. By accepting an Award,
the Participant is agreeing to be bound by the Clawback Policy, as in effect or as may be adopted and/or modified from time to time by
the Company in its discretion (including, without limitation, to comply with applicable law or stock exchange listing requirements).
17.3
Other Compensation Arrangements. Nothing contained
in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to shareholder approval if
such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.
17.4
Sub-Plans. The Committee may from time to time
establish sub-plans under the Plan for purposes of satisfying securities, tax or other laws of various jurisdictions in which the Company
intends to grant Awards. Any sub-plans shall contain such limitations and other terms and conditions as the Committee determines are
necessary or desirable. All sub-plans shall be deemed a part of the Plan, but each sub-plan shall apply only to the Participants in the
jurisdiction for which the sub-plan was designed.
17.5
Unfunded Plan. The Plan shall be unfunded. Neither
the Company, the Board nor the Committee shall be required to establish any special or separate fund or to segregate any assets to assure
the performance of its obligations under the Plan.
17.6
Recapitalizations. Each Award Agreement shall
contain provisions required to reflect the provisions of Section 14.
17.7
Delivery. Upon exercise of a right granted under
this Plan, the Company shall issue Common Stock or pay any amounts due within a reasonable period of time thereafter. Subject to any
statutory or regulatory obligations the Company may otherwise have, for purposes of this Plan, 30 days shall be considered a reasonable
period of time.
17.8
No Fractional Shares. No fractional shares of
Common Stock shall be issued or delivered pursuant to the Plan. The Committee shall determine whether cash, additional Awards or other
securities or property shall be issued or paid in lieu of fractional shares of Common Stock or whether any fractional shares should be
rounded, forfeited or otherwise eliminated.
17.9
Other Provisions. The Award Agreements authorized
under the Plan may contain such other provisions not inconsistent with this Plan, including, without limitation, restrictions upon the
exercise of Awards, as the Committee may deem advisable.
17.10
Section 409A. The Plan is intended to comply
with Section 409A of the Code to the extent subject thereto, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted
and administered to be in compliance therewith. Any payments described in the Plan that are due within the “short-term deferral
period” as defined in Section 409A of the Code shall not be treated as deferred compensation unless Applicable Laws require otherwise.
Notwithstanding anything to the contrary in the Plan, to the extent required to avoid accelerated taxation and tax penalties under Section
409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan during the
six (6) month period immediately following the Participant’s termination of Continuous Service shall instead be paid on the first
payroll date after the six-month anniversary of the Participant’s separation from service (or the Participant’s death, if
earlier). Notwithstanding the foregoing, neither the Company nor the Committee shall have any obligation to take any action to prevent
the assessment of any additional tax or penalty on any Participant under Section 409A of the Code and neither the Company nor the Committee
will have any liability to any Participant for such tax or penalty.
17.11
Disqualifying Dispositions. Any Participant who
shall make a “disposition” (as defined in Section 424 of the Code) of all or any portion of shares of Common Stock acquired
upon exercise of an Incentive Stock Option within two years from the Grant Date of such Incentive Stock Option or within one year after
the issuance of the shares of Common Stock acquired upon exercise of such Incentive Stock Option (a “Disqualifying Disposition”)
shall be required to immediately advise the Company in writing as to the occurrence of the sale and the price realized upon the sale
of such shares of Common Stock.
17.12
Section 16. It is the intent of the Company that
the Plan satisfy, and be interpreted in a manner that satisfies, the applicable requirements of Rule 16b-3 as promulgated under Section
16 of the Exchange Act so that Participants will be entitled to the benefit of Rule 16b-3, or any other rule promulgated under Section
16 of the Exchange Act, and will not be subject to short-swing liability under Section 16 of the Exchange Act. Accordingly, if the operation
of any provision of the Plan would conflict with the intent expressed in this Section 17.12, such provision to the extent possible shall
be interpreted and/or deemed amended so as to avoid such conflict.
17.13
Beneficiary Designation. Each Participant under
the Plan may from time to time name any beneficiary or beneficiaries by whom any right under the Plan is to be exercised in case of such
Participant’s death. Each designation will revoke all prior designations by the same Participant, shall be in a form reasonably
prescribed by the Committee and shall be effective only when filed by the Participant in writing with the Company during the Participant’s
lifetime.
17.14
Expenses. The costs of administering the Plan
shall be paid by the Company.
17.15
Severability. If any of the provisions of the
Plan or any Award Agreement is held to be invalid, illegal or unenforceable, whether in whole or in part, such provision shall be deemed
modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability and the remaining provisions shall
not be affected thereby.
17.16
Plan Headings. The headings in the Plan are for
purposes of convenience only and are not intended to define or limit the construction of the provisions hereof.
17.17
Non-Uniform Treatment. The Committee’s
determinations under the Plan need not be uniform and may be made by it selectively among persons who are eligible to receive, or actually
receive, Awards. Without limiting the generality of the foregoing, the Committee shall be entitled to make non-uniform and selective
determinations, amendments and adjustments, and to enter into non-uniform and selective Award Agreements.
18.
Effective Date of Plan. The Plan shall become
effective as of the Effective Date, but no Award shall be exercised (or, in the case of a stock Award, shall be granted) unless and until
the Plan has been approved by the shareholders of the Company, which approval shall be within twelve (12) months after the date the Plan
is adopted by the Board.
19.
Termination or Suspension of the Plan. The Plan
shall terminate automatically ten (10) years from the date of its adoption by the Board. No Award shall be granted pursuant to the Plan
after such date, but Awards theretofore granted may extend beyond that date. The Board may suspend or terminate the Plan at any earlier
date pursuant to Section 16.1 hereof. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.
20.
Choice of Law. The law of the State of Nevada
shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such state’s
conflict of law rules.
As
adopted by the Board of Directors of Sigma Additive Solutions, Inc. on November 19, 2023.
As
approved by the shareholders of Sigma Additive Solutions, Inc. [DATE].
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