UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30,~~March 31, ~~2022~~2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-38015

SIGMA ADDITIVE SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

nevada

27-1865814

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

3900 Paseo del Sol

Santa Fe, NM 87507

(Address of principal executive offices)

(505) 438-2576

(Registrant’s telephone number, including area code)

~~SIGMA LABS, INC.~~

~~(Former name, former address and former fiscal year, if changed since last report)~~

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading symbol		Name of each exchange on which registered
Common Stock, par value $0.001 per share		SASI		The NASDAQStock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated Filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of ~~November 11~~May 12, ~~2022,~~ 2023, the issuer had ~~10,498,802~~10,772,713 shares of common stock outstanding.

SIGMA ADDITIVE SOLUTIONS, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS	3

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	16

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	23

ITEM 4. CONTROLS AND PROCEDURES	23

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS	2324

ITEM 1A. RISK FACTORS	2324

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.	2324

ITEM 3. DEFAULTS UPON SENIOR SECURITIES	2324

ITEM 4. MINE SAFETY DISCLOSURES	2324

ITEM 5. OTHER INFORMATION	2324

ITEM 6. EXHIBITS	24

SIGNATURES	25

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Sigma Additive Solutions, Inc. ~~(formerly Sigma Labs, Inc.)~~

Condensed Balance Sheets

	September 30, 2022 (Unaudited)			December 31, 2021			March 31, 2023 (Unaudited)			December 31, 2022

ASSETS
Current Assets:
Cash	$	4,800,680		$	11,447,047		$	1,488,704		$	2,845,931
Accounts Receivable, net		367,770			412,192			210,449			371,620
Inventory		967,432			710,080			944,402			950,943
Prepaid Assets		177,724			114,278			235,003			105,226
Total Current Assets		6,313,606			12,683,597			2,878,558			4,273,720

Other Assets:
Property and Equipment, net		244,838			232,282			284,193			304,903
Intangible Assets, net		1,084,205			925,111			1,165,558			1,125,285
Total Other Assets		1,329,043			1,157,393			1,449,751			1,430,188

TOTAL ASSETS	$	7,642,649		$	13,840,990		$	4,328,309		$	5,703,908

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:
Accounts Payable	$	403,547		$	206,442		$	400,640		$	277,492
Deferred Revenue		129,689			148,855			153,443			120,073
Accrued Expenses		287,645			625,942			219,126			231,633
Total Current Liabilities		820,881			981,239			773,209			629,198

TOTAL LIABILITIES		820,881			981,239			773,209			629,198

Commitments & Contingencies								-			-

Stockholders’ Equity
Preferred Stock, $0.001 par value; 10,000,000 shares authorized; 465 shares issued and outstanding		1			1
Common Stock, $0.001 par value; 24,000,000 shares authorized; 10,498,802 shares issued and outstanding		10,499			10,499
Preferred Stock, $0.001 par value; 10,000,000 shares authorized; 316 and 465 shares issued and outstanding, respectively								1			1
Common Stock, $0.001 par value; 24,000,000 shares authorized; 10,772,713 and 10,498,802 shares issued and outstanding, respectively								10,773			10,499
Additional Paid-In Capital		54,193,981			53,442,431			54,749,821			54,406,694
Accumulated Deficit		(47,382,713	)		(40,593,180	)		(51,205,495	)		(49,342,484	)
Total Stockholders’ Equity		6,821,768			12,859,751			3,555,100			5,074,710

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	7,642,649		$	13,840,990		$	4,328,309		$	5,703,908

See accompanying notes to condensed financial statements.

Sigma Additive Solutions, Inc. ~~(formerly Sigma Labs, Inc.)~~

Condensed Statements of Operations

(Unaudited)

	2022			2021			2022			2021			2023			2022
	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2022			2021			2022			2021			2023			2022

REVENUES	$	188,245		$	700,237		$	476,749		$	1,302,525		$	130,159		$	51,844

COST OF REVENUE		79,713			164,766			312,879			409,493			63,664			40,091

GROSS PROFIT		108,532			535,471			163,870			893,032			66,495			11,753

OPERATING EXPENSES:
Salaries & Benefits		1,227,805			1,222,760			3,704,633			3,055,279			931,583			1,292,010
Stock-Based Compensation		275,418			659,512			613,833			893,431			224,850			170,976
Operations and R&D Costs		152,245			131,772			442,548			608,812			126,712			143,418
Investor, Public Relations and Marketing		46,832			119,622			293,458			342,725			54,944			94,326
Organization Costs		140,522			342,112			260,088			578,256			51,198			58,749
Legal & Professional Service Fees		252,886			261,075			608,830			681,941			184,251			211,416
Office Expenses		183,608			172,238			692,640			472,335			154,499			205,432
Depreciation & Amortization		26,857			27,689			88,302			76,502			28,127			31,584
Other Operating Expenses		86,783			90,108			263,747			267,663			91,980			87,787
Total Operating Expenses		2,392,956			3,026,888			6,968,079			6,976,944			1,848,144			2,295,698

LOSS FROM OPERATIONS		(2,284,424	)		(2,491,417	)		(6,804,209	)		(6,083,912	)		(1,781,649	)		(2,283,945	)

OTHER INCOME (EXPENSE)
Interest Income		278			2,981			3,025			10,053			8			1,571
State Incentives		-			-			76,628			-			-			76,628
Exchange Rate Loss		(6,184	)		(490	)		(16,950	)		(333	)		(2,503	)		(330	)
Interest Expense		(1,978	)		(2,052	)		(5,367	)		(5,434	)		(3,235	)		(1,319	)
Other Income		-			-			-			1,092,441			35,680			-
Total Other Income (Expense)		(7,884	)		439			57,336			1,096,727
Total Other Income														29,950			76,550

LOSS BEFORE PROVISION FOR INCOME TAXES		(2,292,308	)		(2,490,978	)		(6,746,873	)		(4,987,185	)		(1,751,699	)		(2,207,395	)

Provision for income Taxes		-			-			-			-			-			-

Net Loss	$	(2,292,308	)	$	(2,490,978	)	$	(6,746,873	)	$	(4,987,185	)	$	(1,751,699	)	$	(2,207,395	)

Preferred Dividends		(14,220	)		(14,220	)		(42,660	)		(89,347	)		(11,748	)		(14,220	)

Net Loss Applicable to Common Stockholders	$	(2,306,528	)	$	(2,505,198	)	$	(6,789,533	)	$	(5,076,532	)	$	(1,763,447	)	$	(2,221,615	)

Net Loss per Common Share – Basic and Diluted	$	(0.22	)	$	(0.24	)	$	(0.65	)	$	(0.53	)	$	(0.17	)	$	(0.21	)

Weighted Average Number of Shares Outstanding – Basic and Diluted		10,498,802			10,494,560			10,498,802			9,602,666			10,690,677			10,498,802

See accompanying notes to condensed financial statements.

Sigma Additive Solutions, Inc. ~~(formerly Sigma Labs, Inc.)~~

Statement of Stockholders’ Equity

(Unaudited)

For the Three Months Ended ~~September 30,~~March 31, 2023, and March 31, 2022 ~~and September 30, 2021~~

Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in Capital Accumulated Deficit Total
Preferred Stock Common Stock Additional
Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in
Capital Accumulated Deficit Total
Balances, June 30, 2022 465 $ 1 10,498,802 $ 10,499 $ 53,876,218 $ (45,076,185 ) $ 8,810,533
Net Loss - - - - - (2,292,308 ) (2,292,308 )
Preferred Stock Dividends - - - - 14,220 (14,220 ) -
Stock Options Issued for Third Party Services - - - - 973 - 973
Stock Options Awarded to Directors for Services - - - - 27,152 - 27,152
Stock Options Awarded to Employees - - - - 275,418 - 275,418

Balances, September 30, 2022 465 $ 1 10,498,802 $ 10,499 $ 54,193,981 $ (47,382,713 ) $ 6,821,768

	Shares Outstanding			Preferred Stock		Shares Outstanding		Common Stock		Paid-in Capital			Accumulated Deficit			Total
	Preferred Stock					Common Stock				Additional
	Shares Outstanding			Preferred Stock		Shares Outstanding		Common Stock		Paid-in Capital			Accumulated Deficit			Total
Balances, December 31, 2022		465		$	1		10,498,802	$	10,499	$	54,406,694		$	(49,342,484	)	$	5,074,710
Net Loss		-			-		-		-		-			(1,751,699	)		(1,751,699	)
Preferred Stock Dividends		-			-		43,896		44		11,704			(11,748	)		-
Common Shares Issued for Conversion of Preferred Stock		(149	)		-		230,015		230		(230	)		-			-
Common Warrant Issued for Conversion of Preferred Stock		-			-		-		-		99,564			(99,564	)
Stock Options Issued to Directors for Services		-			-		-		-		7,728			-			7,728
Stock Options Issued for Third Party Services		-			-		-		-		(489	)		-			(489	)
Stock Options Issued to Employees		-			-		-		-		224,850			-			224,850

Balances, March 31, 2023		316			1		10,772,713		10,773		54,749,821			(51,205,495	)		3,555,100

Preferred Stock Common Stock Additional
Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in
Capital Accumulated Deficit Total
Balances, June 30, 2021 465 $ 1 10,493,598 $ 10,494 $ 52,058,003 $ (35,676,342 ) $ 16,392,156
Preferred Stock Dividends - - - - 14,220 (14,220 ) -
Shares Securities Issued to Directors for Services - - - - 282,306 - 282,306
Securities Issued for Third Party Services - - - - 72,872 - 72,872
Stock Awarded to Employees - - 5,204 5 659,507 - 659,512
Net Loss - - - - - (2,490,978 ) (2,490,978 )
Balances, September 30, 2021 465 $ 1 10,498,802 $ 10,499 $ 53,086,908 $ (38,181,540 ) $ 14,915,868

	Preferred Stock				Common Stock				Additional
	Shares Outstanding		Preferred Stock		Shares Outstanding		Common Stock		Paid-in Capital		Accumulated Deficit			Total
Balances, December 31, 2021		465	$	1		10,498,802	$	10,499	$	53,442,431	$	(40,593,180	)	$	12,859,751
Net Loss		-		-		-		-		-		(2,207,395	)		(2,207,395	)
Preferred Stock Dividends		-		-		-		-		14,220		(14,220	)		-
Stock Options Issued to Directors for Services		-		-		-		-		21,721		-			21,721
Stock Options Issued for Third Party Services		-		-		-		-		11,713		-			11,713
Stock Options Issued to Employees		-		-		-		-		170,976		-			170,976

Balances, March 31, 2022		465		1		10,498,802		10,499		53,661,061		(42,814,795	)		10,856,766

See accompanying notes to condensed financial statements.

Sigma Additive Solutions, Inc.

~~For the Nine Months Ended September 30, 2022 and September 30, 2021~~Condensed Statements of Cash Flows

(Unaudited)

Preferred Stock Common Stock Additional
Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in
Capital Accumulated Deficit Total
Balances, December 31, 2021 465 $ 1 10,498,802 $ 10,499 $ 53,442,431 $ (40,593,180 ) $ 12,859,751
Net Loss - - - - - (6,746,873 ) (6,746,873 )
Preferred Stock Dividends - - - - 42,660 (42,660 ) -
Stock Options Issued for Third Party Services - - - - 24,463 - 24,463
Stock Options Awarded to Directors for Services - - - - 70,594 - 70,594
Stock Options Awarded to Employees - - - - 613,833 - 613,833

Balances, September 30, 2022 465 $ 1 10,498,802 $ 10,499 $ 54,193,981 $ (47,382,713 ) $ 6,821,768

Preferred Stock Common Stock Additional
Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in
Capital Accumulated Deficit Total
Balances, December 31, 2020 715 $ 1 5,995,320 $ 5,995 $ 38,262,744 $ (33,105,008 ) $ 5,163,732
Common Shares Sold in Public Offerings - - 3,901,783 3,902 14,865,997 - 14,869,899
Extinguishment of Derivative Liability - - - - (1,092,441 ) - (1,092,441 )
Preferred Stock Dividends - - 19,000 19 89,328 (89,347 ) -
Common Shares Issued Upon Conversion of Preferred Shares (250 ) - 100,000 100 (100 ) - -
Common Shares issued for Exercise of Common Warrants - - 475,995 476 1,135,534 - 1,136,010
Stock Options Awarded to Directors - - - - 404,580 - 404,580
Securities Issued for Third Party Services - - 1,500 2 128,807 - 128,809
Stock Options Awarded to Employees - - 5,204 5 893,426 - 893,431
Offering Costs - - - - (1,600,967 ) - (1,600,967 )
Net Loss - - - - - (4,987,185 ) (4,987,185 )
Balances, September 30, 2021 465 $ 1 10,498,802 $ 10,499 $ 53,086,908 $ (38,181,540 ) $ 14,915,868

	March 31, 2023			March 31, 2022
	Three Months Ended
	March 31, 2023			March 31, 2022
OPERATING ACTIVITIES
Net Loss	$	(1,751,699	)	$	(2,207,395	)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Noncash Expenses:
Depreciation and Amortization		28,127			31,584
Stock-Based Compensation - Employees		224,850			170,976
Stock-Based Compensation - Third Party Services		(489	)		11,713
Stock-Based Compensation - Directors		7,728			21,721
Stock-Based Compensation		-			-
Change in Assets and Liabilities:
Accounts Receivable		161,171			151,170
Inventory		6,541			(72,019	)
Prepaid Assets		(129,777	)		(50,996	)
Accounts Payable		123,148			114,105
Deferred Revenue		33,370			11,421
Accrued Expenses		(12,507	)		(209,299	)
NET CASH USED IN OPERATING ACTIVITIES		(1,309,537	)		(2,027,019	)

INVESTING ACTIVITIES
Purchase of Property and Equipment		-			(83,248	)
Purchase of Intangible Assets		(47,690	)		(58,851	)
NET CASH USED IN INVESTING ACTIVITIES		(47,690	)		(142,099	)

FINANCING ACTIVITIES
NET CASH PROVIDED BY FINANCING ACTIVITIES		-			-

NET CHANGE IN CASH FOR PERIOD		(1,357,227	)		(2,169,118	)

CASH AT BEGINNING OF PERIOD		2,845,931			11,447,047

CASH AT END OF PERIOD	$	1,488,704		$	9,277,929

Supplemental Disclosures:
Noncash Investing and Financing Activities Disclosure:
Preferred Stock Dividends	$	11,748		$	14,220
Conversion of Preferred Shares to Common Shares		188,830			-
Other Noncash Operating Activities Disclosure:
Issuance of Securities for services	$	7,239		$	33,434
Disclosure of Cash Paid for:
Interest	$	3,235		$	1,319
Income Taxes	$	-		$	-

See accompanying notes to condensed financial statements.

~~Sigma Additive Solutions, Inc. (formerly Sigma Labs, Inc.)~~

~~Condensed Statements of Cash Flows~~

~~(Unaudited)~~

September 30, 2022 September 30, 2021
Nine Months Ended
September 30, 2022 September 30, 2021
OPERATING ACTIVITIES
Net Loss $ (6,746,873 ) $ (4,987,185 )
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Noncash Expenses:
Depreciation and Amortization 88,302 76,502
Gain on Derivative Liability - (1,092,441 )
Stock-Based Compensation - Employees 613,833 893,431
Stock-Based Compensation - Third Party Services 24,463 128,809
Stock-Based Compensation - Directors 70,594 404,580
Change in Assets and Liabilities:
Accounts Receivable 44,422 (335,178 )
Inventory (257,352 ) (196,896 )
Prepaid Assets (63,446 ) (13,940 )
Accounts Payable 197,105 94,220
Deferred Revenue (19,166 ) 7,523
Accrued Expenses (338,297 ) 233,985
NET CASH USED IN OPERATING ACTIVITIES (6,386,415 ) (4,786,590 )

INVESTING ACTIVITIES
Purchase of Property and Equipment (83,848 ) (116,631 )
Purchase of Intangible Assets (176,104 ) (138,141 )
NET CASH USED IN INVESTING ACTIVITIES (259,952 ) (254,772 )

FINANCING ACTIVITIES
Gross Proceeds from Public and Private Issuances of Securities - 14,869,899
Less Offering Costs - (1,600,967 )
Proceeds from Exercise of Warrants - 1,136,010
NET CASH PROVIDED BY FINANCING ACTIVITIES - 14,404,942

NET CHANGE IN CASH FOR PERIOD (6,646,367 ) 9,363,580

CASH AT BEGINNING OF PERIOD 11,447,047 3,700,814

CASH AT END OF PERIOD $ 4,800,680 $ 13,064,394

Supplemental Disclosures:
Noncash Investing and Financing Activities Disclosure:
Issuance of Common Shares for Preferred Dividends $ - $ 89,347
Other Noncash Operating Activities Disclosure:
Issuance of Securities for services $ 95,057 $ 533,387
Disclosure of Cash Paid for:
Interest $ 5,367 $ 5,434
Income Taxes $ - $ -

~~See accompanying notes to condensed financial statements.~~

SIGMA ADDITIVE SOLUTIONS, INC. ~~(FORMERLY SIGMA LABS, INC.)~~

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

~~September 30, 2022~~March 31, 2023

NOTE 1 - Summary of Significant Accounting Policies

Nature of Business ~~-Sigma~~- Sigma Additive Solutions, Inc. ~~(formerly Sigma Labs, Inc.)~~, a Nevada corporation (“Company,” “Sigma,” “we,” “us” and “our”), was founded by a group of scientists, engineers and businessmen to develop and commercialize novel and unique manufacturing and materials technologies. Sigma believes that some of these technologies will fundamentally redefine conventional quality assurance and process control practices by embedding them into the manufacturing processes in real time, enabling process intervention and ultimately leading to closed loop process control. The Company anticipates that its core technologies will allow its customers to combine advanced manufacturing quality assurance and process control protocols with novel materials to achieve breakthrough product potential in many industries, including aerospace, defense, oil and gas, bio-medical, and power generation.

Basis of Presentation - The accompanying financial statements have been prepared by the Company in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States of America. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ and for the periods then ended have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The Company suggests these condensed financial statements be read in conjunction with the December 31, ~~2021~~2022 audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K. The results of operations for the period ended ~~September 30, 2022~~March 31, 2023 are not necessarily indicative of the operating results for the full year.

~~Reclassification~~Going Concern ~~- Certain amounts~~– The Company has sustained losses and had negative cash flows from operating activities since its inception. Commencing in ~~prior-period financial statements have been reclassified for comparative purposes~~2017, the company committed itself to ~~conform~~a focused initiative to ~~presentation~~transition its product and culture from research and development into an enterprise with a commercial industrial product and a business-oriented operation culture.

The Company currently has sufficient cash and working capital to fund operations through June 2023 and will require additional funding in the ~~current-period financial statements.~~public or private markets in the near-term to be able to continue operations. The Company currently has no understanding or agreement to obtain such funding, and there is no assurance that we will be successful in obtaining additional funding. If we fail to obtain sufficient funding when needed, we will be forced to delay, scale back or eliminate all or a portion of our commercialization efforts and operations. As a result, there is substantial doubt about our ability to continue as a going concern.

Fair Value of Financial Instruments - The carrying amounts reported in the balance sheets for the cash and cash equivalents, receivables, accounts payable, and accrued liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.

The Company does not use derivative instruments for hedging of market risk or for trading or speculative purposes. ~~On March 26, 2021, the Company issued warrants to purchase an aggregate of~~ ~~2,190,000~~ ~~shares of common stock in a private placement concurrently with a registered direct offering of our common stock The warrants became exercisable on~~ ~~May 24, 2021, the date the Company obtained stockholder approval to increase its authorized common shares from~~ ~~12,000,000~~ to ~~24,000,000, and will expire on~~ ~~May 24, 2023~~.

Pursuant to ASC 815.40.25.10, such warrants were accounted for as a derivative liability because the Company did not have sufficient authorized and unissued shares of common stock available to settle the warrants at the issue date. On May 24, 2021, upon receiving stockholder approval to increase its authorized common shares, the Company reclassified the warrant liability to equity pursuant to ASC 815.40.35.8.

~~For the nine months ended September 30, 2021, the Company recorded a gain of $1,092,441~~ ~~due to the change in the fair value of the derivative liability as measured on a recurring basis.~~

Loss Per Share – The computation of loss per share is based on the weighted average number of shares outstanding during the period in accordance with ASC Topic No. 260, “Earnings Per Share.” Shares underlying the Company’s outstanding warrants, options and preferred stock were excluded due to the anti-dilutive effect they would have on the computation. At ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Company had the following common shares underlying these instruments:

Schedule of ~~Antidilutive~~Anti-dilutive Securities Excluded from Computation of Earnings Per Share

September 30,
2022 2021
Warrants 3,825,781 3,987,931
Stock Options 1,784,942 1,400,407
Preferred Stock 148,918 124,483
Total Underlying Common Shares 5,759,641 5,512,821

	2023		2022
	March 31,
	2023		2022
Warrants		5,314,175		3,825,781
Stock Options		2,062,659		1,547,797
Preferred Stock		58,568		148,918
Total Underlying Common Shares		7,435,402		5,522,496

The following table shows the amounts used in computing loss per share and the effect on net loss and the weighted average number of shares of dilutive potential common stock for the periods ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:

Schedule of Computing Loss Per Share

	2022			2021			2022			2021			2023			2022
	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended March 31
	2022			2021			2022			2021			2023			2022

Net Loss per Common Share - Basic and Diluted	$	(0.22	)	$	(0.24	)	$	(0.65	)	$	(0.53	)	$	(0.17	)	$	(0.21	)
Loss Applicable to Common Stockholders (numerator)	$	(2,306,528	)	$	(2,505,198	)	$	(6,789,533	)	$	(5,076,532	)	$	(1,763,447	)	$	(2,221,615	)

Weighted Average Number of Common Shares Outstanding Used in Loss Per Share During the Period (denominator)		10,498,802			10,494,560			10,498,802			9,602,666			10,690,677			10,498,802

Accounting Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimated by management. Significant accounting estimates that may materially change in the near future are impairment of long-lived assets, values of stock compensation awards and stock equivalents granted as offering costs, and allowance for bad debts and inventory obsolescence.

Leases- The Company leases office space from third parties. The Company determines if a contract is a lease at inception. A contract contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The lease term begins on the commencement date, which is the date the Company takes possession of the asset and may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Leases are classified as operating or finance leases based on factors such as the lease term, lease payments, and the economic life, fair value and estimated residual value of the asset. Where leases include an option to purchase the leased asset at the end of the lease term, this is assessed as a part of the Company’s lease classification determination. The Company has short-term leases only, cancelable upon 45 days’ notice, and with remaining lease terms of less than one year. Therefore, the Company has elected the short-term lease recognition exemption for all leases, whereby leases are not recorded on the Company’s balance sheet and lease payments are recognized as lease expense on a straight-line basis over the lease term.

Long-Lived and Intangible Assets – Long-lived assets and certain identifiable definite life intangibles to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company periodically evaluates the recoverability of its long-lived assets based on estimated future cash flows and the estimated liquidation value of such long-lived assets and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the long-lived assets. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value. No patents were written off in the first quarter of 2023 or in fiscal 2022. Utility patents are amortized over a 17-year period. Patents which are pending are not amortized.

Revenue Recognition – The Company’s revenue is derived primarily from sales of our software and related hardware suite under perpetual licenses and from providing engineering services under contracts. The Company recognizes revenue in accordance with ASC Topic No. 606. In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that superseded nearly all existing revenue recognition guidance under prior U.S. GAAP and replaced it with a principles-based approach for determining revenue recognition. The core principle of the standard is the recognition of revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In general, we determine revenue recognition by: (1) identifying the contract, or contracts, with our customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to performance obligations in the contract; and (5) recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.

In January 2022, the Company began offering a subscription option to its customers, pursuant to which it leases its PrintRite3D platform for terms of between 12 and 36 months and provide technical support and maintenance for the term of the arrangement, as well as installation and training. The Company has determined these are leases because they relate to discrete pieces of equipment to which customers have the right to substantially all the economic benefit ~~from~~ and exclusive right to use during the term of the arrangement. These leases are classified as operating leases and the Company retains title to the underlying equipment.

The leases may be renewed for successive one-year terms unless notice is given by either party of its intent not to renew at least 30 days before the end of the lease term. For leases with 36-month terms, the lessee may terminate the agreement after the first 18 months ~~with 30-days~~upon at least 30 days written notice. Some, but not all, of the leases permit lessees to purchase the equipment at any time at an amount that approximates fair value and are not reasonably certain to be exercised at the inception of the lease. There are no anticipated variable lease payments at the inception of the lease.

There are two non-lease components in the arrangement that consist of technical support and maintenance, and installation and ~~training.~~training, respectively. The Company has elected ~~the~~ single component practical expedient accounting to combine the technical support and maintenance with the lease as they have the same pattern of transfer. The installation and training component does not have the same pattern of transfer; therefore, this component is not eligible for ~~the~~ single component practical ~~expedient.~~expedient accounting. The consideration has been allocated on a relative fair value basis of the underlying lease and non-lease components. The Company has estimated the residual value of the leased equipment based on its useful life, and the ability to refurbish and sell the equipment, as well as the Company’s ability to componentize the hardware and utilize subassemblies in other products.

Revenue from these operating leases for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 was $~~2,834~~ ~~and $~~17,006~~, respectively.~~.

Minimum Lease Payments Receivable

Minimum lease payments receivable for ~~each of~~ the succeeding years ending December 31 are as follows:

Schedule of Minimum Lease Payments Receivable

Year ending December 31,	Amount		Amount
2022 (remaining)	$	8,503
2023	$	8,503
2023 (remaining)			$	28,343
2024		-		8,503
2025 and thereafter		-
2025				-
2026				-
Thereafter				-
Total	$	17,006	$	36,846

Equipment Underlying Operating Leases:

Equipment under operating leases as of ~~September 30, 2022 were~~March 31, 2023 was comprised of the following:

Schedule of Assets underlying Operating Leases

	September 30, 2022		March 31, 2023
PrintRite 3D Hardware	$	38,949	$	77,208
Accumulated Depreciation		4,173		(9,688	)
Net Book Value	$	34,776	$	67,520

The Company is depreciating the underlying equipment over its useful life of 7 years, but certain subassemblies and components may have a longer economic life.

NOTE 2 – Inventory

At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company’s inventory was comprised of the following:

Schedule of Inventory

	September 30, 2022		December 31, 2021		March 31, 2023		December 31, 2022
Raw Materials	$	264,558	$	202,015	$	303,219	$	294,194
Work in Process		420,420		224,079		212,649		140,723
Finished Goods		282,454		283,986		428,534		516,026
Total Inventory	$	967,432	$	710,080	$	944,402	$	950,943

NOTE 3 – Intangible Assets

The Company’s intangible assets consist of patents and patent applications.

The Company capitalizes costs incurred in connection with acquiring its patents. These costs include registration, documentation, and legal fees associated with the application. Costs incurred with patents that have been previously granted are expensed as incurred.

Provisional patent applications are not amortized until a patent has been granted. Once a patent is granted, the Company will amortize the related costs over the estimated useful life of the patent. If a patent application is denied, then the costs will be expensed at that time.

During ~~2022,~~the three months ended March 31, 2023, $~~126,231~~ 5,130of costs related to patents issued to us during ~~2022~~2023 were reclassified from provisional patent application to patents and began to be amortized as of the date of issue.

The following is a summary of definite-life intangible assets less accumulated amortization as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively:

Summary of Definite-life Intangible Assets and Accumulated Amortization

	September 30, 2022			December 31, 2021			March 31, 2023			December 31, 2022
Provisional Patent Applications	$	725,164		$	675,291		$	717,812		$	675,251
Patents		426,601			300,370			529,880			524,750
Less: Accumulated Amortization		(67,560	)		(50,550	)		(82,134	)		(74,716	)

Net Intangible Assets	$	1,084,205		$	925,111		$	1,165,558		$	1,125,285

Amortization expense on intangible assets was $~~17,010~~7,418 and $~~22,998~~4,978 for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

The estimated aggregate amortization expense for ~~each of the following~~ years ending December 31 is as follows:

Schedule of Aggregate Amortization Expense

2022 (Remaining) $ 6,153
2023 24,610
2024 24,610
2025 24,610
Thereafter 279,058

Intangible asset and amortization expense $ 359,041

~~NOTE 4 –~~ ~~Deferral of Social Security Tax Payments~~

Pursuant to sections 2302(a)(1) and (a)(2) of the CARES Act, the Company has elected to defer payments of its share of Social Security tax due during the “payroll tax deferral period.” The payroll tax deferral period began on March 27, 2020 and ended on December 31, 2020. At September 30, 2022, the total remaining amount of the deferral was $~~37,728. Per the terms of the deferral program, such amount is due by~~ ~~December 31, 2022, without interest.~~


2023 (Remaining)	$	22,404
2024		29,872
2025		29,872
2026		29,872
Thereafter		335,726

Intangible asset and amortization expense	$	447,746

NOTE 54 - Stockholders’ Equity

Common Stock

~~On May 24, 2021, at a Special Stockholders Meeting, our stockholders approved an increase in the authorized shares of common stock from~~ ~~12,000,000~~ to ~~24,000,000~~.

In ~~January 2021,~~ the ~~Company closed a public offering~~first quarter of ~~its securities in which it issued~~ ~~1,711,783~~ ~~shares of common stock at a price of $3.00~~ ~~per share, resulting in net proceeds of approximately $4,532,445~~ after deducting underwriting commissions and other offering expenses payable by the Company. Pursuant to the Underwriting Agreement, the Company also issued to the Underwriter and its designees warrants to purchase ~~136,943~~ ~~shares of common stock. Such warrants have a term of~~ ~~five years~~ ~~and an exercise price of $3.75~~ ~~per share.~~

~~In February 2021,~~2023, the Company issued ~~263,200~~ ~~shares of common stock pursuant to the exercise of warrants issued in our January 2020 private placement.~~

~~In March 2021, the Company issued~~ ~~119,000~~227,587 shares of common stock in exchange for the conversion of ~~250~~132 shares of Series D Convertible Preferred Stock, ~~including~~and ~~19,000~~43,241 shares of common stock as in-kind payment of ~~preferred stock dividends.~~ dividends thereon.

Also in ~~March 2021,~~ the ~~company~~first quarter of 2023, the Company issued ~~191,204~~2,428 shares of common stock ~~pursuant to~~in exchange for the ~~exercise~~conversion of ~~warrants issued in our April 2020 offering,~~17 shares of Series E Convertible Preferred Stock, and ~~21,591~~655 shares of common stock ~~issued pursuant to the cashless exercise~~as in-kind payment of ~~placement agent warrants.~~

~~In March 2021, the Company closed a public offering in which it issued~~ ~~2,190,000~~ ~~shares of common stock at a price of $4.445~~ ~~per share, resulting in net proceeds to the Company of approximately $8,736,487~~ after deducting placement agent commissions and other offering costs payable by the Company. Pursuant to the Purchase Agreement, the purchasers severally agreed to vote the shares of common stock purchased under the Purchase Agreement in favor of any resolution presented to the stockholders of the Company for the purpose of obtaining approval of an increase in the authorized shares of the Company’s Common Stock from ~~12,000,000~~ to ~~24,000,000~~ ~~shares (“Stockholder Approval”). In a concurrent private placement under the Purchase Agreement, the Company issued to the purchasers warrants (“Warrants”) to purchase an aggregate of~~ ~~2,190,000~~ ~~shares of Common Stock at an exercise price of $4.32~~ ~~per share. Each Warrant became exercisable commencing~~ ~~May 24, 2021, the date the Company obtained Stockholder Approval, and will expire two years after the initial exercise date. The Company also issued to designees of the Placement Agent warrants to purchase up to~~ ~~175,200~~ ~~shares of Common Stock (the “Placement Agent Warrants”) constituting~~ 8% of the aggregate number of shares of Common Stock sold in the public offering. The Placement Agent Warrants have substantially the same terms as the Warrants, except that the Placement Agent Warrants have an exercise price equal to ~~125% of the offering price per share (or $5.55625~~ ~~per share). Upon any exercise of the Warrants for cash, we have also agreed to pay the Placement Agent warrants to purchase~~ 8~~% of the number of shares of our Common Stock issued upon such exercise.~~

~~In March 2021, Company issued~~ ~~1,500~~ ~~shares of common stock valued at $4.99~~ ~~per share to an investor relations firm previously engaged by the Company as partial compensation for services rendered.~~dividends thereon.

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock, $0.001 par value per share, of which316 and 465 shares were issued and outstanding at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

In January 2020, the Company entered into a Securities Purchase Agreement with certain institutional investors (the “Institutional Private Placement”), pursuant to which the Company issued and sold 1,640 shares of the Company’s newly created Series D Convertible Preferred Stock (the “Series D Preferred Stock”) at an initial stated value of $1,000per share. Dividends accrue at a rate of 9%9% per annum (subject to increase upon the occurrence (and during the continuance) of certain triggering events described therein) and are payable monthly in kind by the increase of the stated value of the Series D Preferred Shares by said amount. The holders of the Series D Preferred Shares have the right at any time to convert all or a portion of the Series D Preferred Shares (including, without limitation, accrued and unpaid dividends and make-whole dividends through the third anniversary of the closing date) into shares of the Company’s Common Stock at the conversion price then in effect, which is $~~2.50~~0.58 (subject to adjustment for stock splits, dividends, recapitalizations and similar events and full ratchet price protection in the event the Company issues or sells, or is deemed to have issued or sold, shares of Common Stock for a consideration per share less than a price equal to the conversion price then in effect).

~~Alternatively, a holder may at any time convert all, or any part, of its Series D Preferred Shares at an alternative conversion price equal to~~

On January 27, 2023, the ~~lower~~holder of the ~~applicable conversion price then in effect, and the greater~~remaining 132 outstanding shares of (x) $1.80 and (y) 85% of the average volume weighted average price (“VWAP”) of the Common Stock for a five-trading day period prior to such conversion. Upon the occurrence of certain triggering events, described in the Certificate of Designations, including, but not limited to payment defaults, breaches of transaction documents, failure to maintain listing on the Nasdaq Capital Market, and other defaults set forth therein, the Series D Preferred Shares would become subject to redemption, at the option of a holder, at a 125% premium to the underlying value of the Series D Preferred Stock ~~being redeemed~~elected to convert such shares in their entirety, which resulted in the issuance of 270,828. shares of common stock.

At ~~September 30, 2022,~~March 31, 2023, there were ~~132~~no shares of Series D Preferred Stock ~~outstanding, which if converted as of September 30, 2022, including the make-whole dividends, would result in the issuance of~~ ~~87,267~~ ~~shares of common stock.~~outstanding.

Concurrent with the Institutional Private Placement, the Company entered into a Securities Purchase Agreement pursuant to which the Company issued and sold to certain of its directors and the Company’s then largest stockholder 333 shares of the Company’s newly created Series E Convertible Preferred Stock (the “Series E Preferred Stock”) at an initial stated value of $1,000 per share. Dividends accrue at a dividend rate of 9%9% per annum and are payable monthly in kind by the increase of the stated value of the Series E Preferred Stock by said amount. The Series E Preferred Stock is initially convertible into 48,544 shares of common stock (subject to adjustment for stock splits, dividends, recapitalizations and similar events).

On January 23, 2023, the holder of 17 shares of Series E Preferred Stock elected to convert such shares in their entirety, which resulted in the issuance of 3,083 shares of common stock.

At ~~September 30, 2022,~~March 31, 2023, ~~333~~316 shares of Series E Preferred Stock were outstanding, which if converted as of ~~September 30, 2022,~~March 31, 2023, including the make-whole dividends, would result in the issuance of ~~61,651~~58,568 shares of common stock.

Stock Options

The Company’s 2013 Equity Incentive Plan expired on March 15, 2023. As ~~of September 30, 2022, an aggregate of~~such, there were ~~450,617~~no shares of common stock ~~were~~ reserved for future issuance ~~under the Company’s 2013 Equity Incentive Plan.~~thereunder as of March 31, 2023.

~~In March 2022,~~On January 26, 2023, the Company granted options to its non-employee directors to purchase up to an aggregate of ~~56,000~~52,380 shares of common stock at ~~a strike~~an exercise price of $~~2.50~~0.58. As of ~~September 30, 2022,~~March 31, 2023, ~~75%~~25% of such grants were fully vested and exercisable, and the remaining ~~25%~~75% will vest ~~on December 31, 2022~~in equal quarterly installments over the remaining three quarters of 2023, subject to the directors remaining in our service through such ~~date.~~dates.

~~During the nine months ended September 30, 2022,~~On January 26, 2023, the Company granted ~~twelve~~19 employees options to purchase up to an aggregate of ~~228,973~~381,285 shares of common stock in connection with their employment. The options have ~~a strike~~an exercise price of $~~2.50~~0.58 ~~with vesting periods ranging from immediately upon issuance~~and vested as to ~~three years beginning July 1, 2022,~~50% on the date of the grant, and will vest as to the remaining 50% in equal monthly installments over the subsequent 23 months, provided that the employees remain employed by the Company onthrough such dates. ~~In addition, the Company granted its President and CEO options to purchase up to~~ ~~135,000~~ ~~shares of common stock in connection with his employment. The options have a strike price of $2.50~~ ~~and will vest in equal monthly installments over 36 months beginning March 2022, provided that the President and CEO remains employed by the Company on such dates.~~

~~Also, during the nine months ended September 30, 2022, the Company granted two consultants options to purchase up to an aggregate of~~ ~~14,000~~ ~~shares of common stock for services to be rendered. The options have a strike price of $2.50~~ ~~and are fully vested.~~

The Company generally grants stock options to employees and directors at exercise prices equal to the fair market value of the Company’s common stock on the grant date, ~~The exercise prices will~~but not be less than 100% of the fair market ~~value of a share on the date of grant of the option.~~value. Stock options are typically granted throughout the year and generally vest over a period from one to three years of service and expire five years from the grant date, unless otherwise specified. The Company recognizes compensation expense for the fair value of the stock options over the ~~requisite service~~vesting period for each stock option award.

Total stock-based compensation expense included in the statements of operations for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ was $~~613,833~~224,850 and $~~893,431~~170,976 respectively, all of which is related to stock options.

The fair value of stock-based awards was estimated using the Black-Scholes model with the following weighted average assumptions for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:

Schedule of Share Based Payments Award Stock Options Valuation Assumptions

	2022			2021			2023			2022
Dividend yield		0.00	%		0.00	%		0.0	%		0.00	%
Risk-free interest rate		0.95 -3.23	%		0.19 - 0.70	%		4.05	%		0.95-1.65	%
Expected volatility		106.40 -109.97	%		116.8-123.8	%		100.2	%		106.4-110.0	%
Expected life (in years)		5			5			5			5

Option activity for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and the year ended December 31, ~~2021~~2022 was as follows:

Schedule of Share Based Compensation Stock Option Activity

	Options			Weighted Average Exercise Price ($)		Weighted Average Remaining Contractual Life (Yrs.)		Aggregate Intrinsic Value ($)		Options			Weighted Average Exercise Price ($)		Weighted Average Remaining Contractual Life (Yrs.)		Aggregate Intrinsic Value ($)

Options outstanding at December 31, 2020		713,010			5.15		4.40		477,802
Granted		698,831			3.29		4.39		46,800
Exercised		(5,204	)		2.50		-		-
Forfeited or cancelled		(10,755	)		3.49		-		-
Options outstanding at December 31, 2021		1,395,882			4.24		3.89		-		1,395,882			4.24		3.89		-
Granted		433,973			2.50		4.64		-		487,473			2.50		4.43		-
Exercised		-			-		-		-		-			-		-		-
Forfeited or cancelled		(44,913	)		4.21		-		-		(84,302	)		4.39		-		-
Options outstanding September 30, 2022		1,784,942			3.82		3.50		-
Options expected to vest in the future as of September 30, 2022		534,242			2.91		4.08		-
Options exercisable at September 30, 2022		1,250,700			4.21		3.25		-
Options vested, exercisable, and options expected to vest at September 30, 2022		1,784,942			3.82		3.50		-
Options outstanding at December 31, 2022											1,799,053			3.76		3.30		-
Granted											433,665			0.58		4.83		-
Exercised											-			-		-		-
Forfeited or cancelled											(170,059	)		3.04		-		-
Options outstanding March 31, 2023											2,062,659			3.15		3.41		-
Options expected to vest in the future as of March 31, 2023											555,378			1.99		4.16		-
Options exercisable at March 31, 2023											1,507,281			3.58		3.14		-
Options vested, exercisable, and options expected to vest at March 31, 2023											2,062,659			3.15		3.41		-

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the market price of our common stock for those awards that have an exercise price below the market price of our common stock. At ~~September 30, 2022,~~March 31, 2023, no option had an exercise price below the $~~0.815~~ 0.44closing price of our common stock as reported on The Nasdaq Capital Market.

At ~~September 30, 2022,~~March 31, 2023, there was $~~908,588~~581,865 of unrecognized stock-based compensation expense related to unvested stock options with a weighted average remaining recognition period of ~~2.0~~1.59 years.

Stock Appreciation Rights

On June 23, 2020, the board of directors (the “Board”) of the Company adopted the 2020 Stock Appreciation Rights Plan (the “Plan”). The purposes of the Plan are to: (i) enable the Company to attract and retain the types of employees, consultants, and directors (collectively, “Service Providers”) who will contribute to the Company’s long-range success; (ii) provide incentives that align the interests of Service Providers with those of the stockholders of the Company; and (iii) promote the success of the Company’s business. The Plan provides for incentive awards only in the form of stock appreciation rights payable in cash (“SARs”) and no shares of common stock are reserved or will be issued pursuant to the Plan.

SARs may be granted to any Service Provider. A SAR is the right to receive an amount equal to the Spread with respect to a share of the Company’s common stock (“Share”) upon the exercise of the SAR. The “Spread” is the difference between the exercise price per share specified in a SAR agreement on the date of grant and the fair market value per share on the date of exercise of the SAR. The exercise price per share will not be less than 100% of the fair market value of a share of common stock on the date of grant of the SAR. The administrator of the Plan will have the authority to, among other things, prescribe the terms and conditions of each SAR, including, without limitation, the exercise price and vesting provisions, and to specify the provisions of the SAR Agreement relating to such grant.

~~During~~The Company did not grant any SAR’s during the ~~nine~~three months ended ~~September 30, 2022, the Company granted a total of~~ ~~404,975~~ ~~SARs to fifteen employees at exercise prices ranging from $1.30~~ ~~to $2.50~~ with vesting periods ranging from immediately upon issuance to three years, beginning January 3, 2022, provided that the employees remain employed by the Company on such dates. The SARs expire on the fifth anniversary of the grant date.

~~Also, during the nine months ended September 30, 2022, the Company granted~~ ~~406,887~~ ~~SARs to our President and Chief Executive Officer at exercise prices ranging from $1.30~~ ~~to $2.50. Of the SARs,~~ ~~30,000~~ ~~will vest equally over 36 months beginning March 2022,~~ ~~194,940~~ ~~will vest over 36 months beginning July 1, 2022, and~~ ~~181,947~~will vest on March 15, 2025, in each case provided that the President and Chief Executive Officer remains an employee of the Company on such dates. The SARs will expire on the fifth anniversary of each of the grant dates.

On March 31, ~~2022, the Company granted~~ ~~3,000~~ ~~SARs to a consultant as partial compensation for services pursuant to a consulting agreement at an exercise price of $2.50. The SARs expire on the fifth anniversary of the grant date and are fully vested and exercisable.~~2023.

The Company recognizes compensation expense and a corresponding liability for the fair value of the SARs over the ~~requisite service~~vesting period for each SAR award. The SARs are revalued at each reporting date in accordance with ASC 718 “Compensation-Stock ~~Compensation”,~~Compensation,” and any changes in fair value are reflected in the Statement of Operations as of the applicable reporting date.

The fair value of SAR awards was estimated using the Black-Scholes model with the following ~~weighted-average~~weighted average assumptions for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~the year ended December~~March 31, ~~2021:~~2022:

Schedule of Share Based Payments Award Stock Options Valuation Assumptions

2022 2021
Dividend yield 0.00 % 0.00 %
Risk-free interest rate 0.82-2.79 % 0.39-0.40 %
Expected volatility 108.38-119.02 % 123.0 %
Expected life (in years) 5 5

	2023		2022
Dividend yield		-		0.00	%
Risk-free interest rate		-		0.82-1.65	%
Expected volatility		-		108.4-119.0	%
Expected life (in years)		-		5

SARs activity for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and the year ended December 31, ~~2021~~2022 was as follows:

Schedule of Stock Option Activity

	Options			Weighted Average Exercise Price ($)		Weighted Average Remaining Contractual Life (Yrs.)		Aggregate Intrinsic Value ($)

SARs outstanding at December 31, 2021		370,624			3.15		4.24		-
Granted		814,862			1.81		4.48		-
Exercised		-			-		-		-
Forfeited or cancelled		(27,699	)		2.91		-		-
SARs outstanding at December 31, 2022		1,157,787			2.21		4.11		-
Granted		-			-		-		-
Exercised		-			-		-		-
Forfeited or cancelled		(166,156	)		20.9		-		-
SARs outstanding March 31, 2023		991,631			2.23		3.86		-
SARs expected to vest in the future as of March 31, 2023		688,864			2.01		4.02		-
SARs exercisable at March 31, 2023		302,767			2.75		3.49		-
SARs vested, exercisable, and SARs expected to vest at March 31, 2023		991,631			2.23		3.86		-

Options Weighted
Average
Exercise
Price ($) Weighted
Average
Remaining
Contractual
Life (Yrs.) Aggregate
Intrinsic
Value ($)
-
SARs outstanding at December 31, 2020 127,679 2.61 4.52 97,919
Granted 242,945 3.43 4.61 -
Exercised - - - -
Forfeited or cancelled - - - -
SARs outstanding at December 31, 2021 370,624 3.15 4.24 -
Granted 814,862 1.81 4.73 -
Exercised - - - -
Forfeited or cancelled - - - -
SARs outstanding September 30, 2022 1,185,486 2.23 4.34 -
SARs expected to vest in the future as of September 30, 2022 897,970 2.05 4.50 -
SARs exercisable at September 30, 2022 287,516 2.80 3.84 -
SARs vested, exercisable, and SARs expected to vest at September 30, 2022 1,185,486 2.23 4.34 -

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the market price of our common stock for those awards that have an exercise price below the market price of our common stock. At ~~September 30, 2022,~~March 31, 2023, no SAR had an exercise price below the $~~0.815~~0.44 closing price of our common stock as reported on The Nasdaq Capital ~~Market~~Market..

At ~~September 30, 2022,~~March 31, 2023, there was $~~1,128,615~~665,799 of unrecognized stock-based compensation expense related to unvested SARs with a weighted average remaining recognition period of ~~2.38~~1.95 years.

Warrants

Warrant activity for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and the year ended December 31, ~~2021~~2022 was as follows:

Schedule of Warranty Activity

	Warrants			Weighted Average Exercise Price ($)		Weighted Average Remaining Contractual Life (Yrs.)		Warrants			Weighted Average Exercise Price ($)		Weighted Average Remaining Contractual Life (Yrs.)
Warrants outstanding at December 31, 2020		1,881,429			7.57		4.16
Granted		2,602,143			4.36		1.63
Exercised		(495,641	)		2.59		-
Forfeited or cancelled		-			-		-
Warrants outstanding at December 31, 2021		3,987,931			6.10		2.10		3,987,931			6.10		2.10
Granted		-			-		-		-			-		-
Exercised		-			-		-		-			-		-
Forfeited or cancelled		(162,150	)		40.00		-		(164,652	)		-		-
Warrants outstanding at September 30, 2022		3,825,781			4.66		2.10
Warrants outstanding at December 31, 2022									3,823,279			4.66		1.19
Granted									1,490,896			0.58		2.87
Exercised									-			-		-
Forfeited or cancelled									-			-		-
Warrants outstanding at March 31, 2023									5,314,175			3.19		1.48

NOTE 65 - Subsequent Events

On ~~October 14, 2022, the Company received notice from~~April 13, 2023, The Nasdaq Stock Market (“Nasdaq”) notified us that although the ~~closing bid price for our~~Company’s common stock had ~~been below $1.00~~ ~~per share for 30 consecutive business days, and that the Company therefore is~~ not inregained compliance with the minimum $1.00 bid price per share requirement for continued inclusion on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2)~~. The notice indicates that~~, the ~~Company~~Nasdaq Staff has granted us an additional 180 calendar days, or until ~~April 12,~~October 9, 2023, to regain compliance based on our meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on The Nasdaq Capital Market, with the exception of the bid price requirement, and our intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. According to Nasdaq’s notice, if at any time during this ~~requirement. The Company may also~~additional time period the closing bid price of our common stock is at least $1 per share for a minimum of 10 consecutive business days, the Staff will provide written confirmation of compliance and this matter will be ~~eligible for an additional 180 calendar~~closed. If we choose to implement a reverse stock split, it must be completed no later than ten business days prior to October 9, 2023 to regain compliance.

~~The Company believes~~ If it appears to Nasdaq that itwe will ~~regain compliance with~~not be able to cure the $~~1.00~~ ~~minimum bid price requirement.~~deficiency, or if we are otherwise not eligible, Nasdaq will notify us that our common stock will be subject to delisting.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward-looking statements

This Quarterly Report contains “Forward-Looking Statements.” All statements other than statements of historical fact are “Forward-Looking Statements” including but not limited to, statements regarding our expectations about development and commercialization of our technology, any projections of revenues or statements regarding our anticipated revenues or other financial items, any statements of the plans and objectives of management for future operations, any statements concerning proposed new products or services, any statements regarding future economic conditions or performance, and any statements of assumptions underlying any of the foregoing. All Forward-Looking Statements included in this Quarterly Report are made as of the date hereof and are based on information available to us as of such date. We assume no obligation to update any Forward-Looking Statement. In some cases, Forward-Looking Statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “potential,” or “continue,” or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the Forward-Looking Statements contained herein are reasonable, there can be no assurance that such expectations or any of the Forward-Looking Statements will prove to be correct, and actual results could differ materially from those projected or assumed in the Forward-Looking Statements. Future financial condition and results of operations, as well as any Forward-Looking Statements are subject to inherent risks and uncertainties, including factors referred to in our press releases and reports filed with the Securities and Exchange Commission (“SEC”). All subsequent Forward-Looking Statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Additional factors that may have a direct bearing on our operating results are described under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 and elsewhere in this Quarterly Report.

Corporation Information

We were incorporated as Messidor Limited in Nevada on December 23, 1985 and changed our name to Framewaves Inc. in 2001. On September 27, 2010, we changed our name to Sigma Labs, Inc. We commenced our current business operations in 2010. On May 17, 2022, we began doing business as Sigma Additive Solutions, and on August 9, 2022 changed our name to Sigma Additive Solutions, Inc.

Our principal executive offices are located at 3900 Paseo del Sol, Santa Fe, New Mexico 87507, and our telephone number is (505) 438-2576. Our website address is www.sigmaadditive.com. The Company’s annual reports, quarterly reports, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”), and other information related to the Company, are available, free of charge, on our website. The Company’s website and the information contained therein, or connected thereto, are not and are not intended to be incorporated into this Quarterly Report.

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, values of stock compensation awards and stock equivalents granted as offering costs, and allowance for bad debts and inventory obsolescence. Such critical accounting policies, including the assumptions and judgments underlying them, are disclosed in Note 1 of the Notes to Financial Statements included in this Quarterly Report. However, we do not believe that there are any alternative methods of accounting for our operations that would have a material effect on our financial statements.

The critical accounting policies and estimates addressed below reflect our most significant judgements and estimates used in the preparation of our financial ~~statements~~statements.

Revenue Recognition – The Company’s revenue is derived primarily from sales of our software and related hardware suite under perpetual licenses and from providing engineering services under contracts. The Company recognizes revenue in accordance with ASC Topic No. 606. In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that superseded nearly all existing revenue recognition guidance under prior GAAP and replaced it with a principles-based approach for determining revenue recognition. The core principle of the standard is the recognition of revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In general, we determine revenue recognition by: (1) identifying the contract, or contracts, with our customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to performance obligations in the contract; and (5) recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.

In January 2022, the Company began offering a subscription option to its customers, pursuant to which it leases its PrintRite3D platform for terms between 12 and 36 months and provide technical support and maintenance for the term of the arrangement, as well as installation and training. The Company has determined these are leases because they relate to discrete pieces of equipment to which customers have the right to substantially all the economic benefit and exclusive right to use during the term of the arrangement. These leases are classified as operating leases and the Company retains title to the underlying equipment.

The leases may be renewed for successive one-year terms unless notice is given by either party of its intent not to renew at least 30 days before the end of the lease term. For leases with 36-month terms, the lessee may terminate the agreement after the first 18 months ~~with 30-days~~upon at least 30 days written notice. Some, but not all, of the leases permit lessees to purchase the asset at any time at an amount that approximates fair value and are not reasonably certain to be exercised at the inception of the lease. There are no anticipated variable lease payments at the inception of the lease.

There are two non-lease components in the arrangement that consist of technical support and maintenance, and installation and training. The Company has elected ~~the~~ single component practical expedient accounting to combine the technical support and maintenance with the lease as they have the same pattern of transfer. The installation and training component does not have the same pattern of transfer; therefore, this component is not eligible for ~~the~~ single component practical ~~expedient.~~expedient accounting. The lease consideration is allocated on a relative fair value basis of the underlying lease and non-lease components. The Company has estimated the residual value of the leased equipment based on its useful life, and the ability to refurbish and sell the equipment, as well as the Company’s ability to componentize the hardware and utilize subassemblies in other products.

The Company is depreciating assets over their useful life of 7 years, but certain subassemblies and components may have a longer economic life.

Accounts Receivable and Allowance for Doubtful Accounts - Trade accounts receivable are carried at original invoice amount less an ~~estimate made~~estimated allowance for doubtful accounts. We determine the allowance for doubtful accounts by identifying potential troubled accounts and by using historical experience and future expectations applied to an aging of accounts. Trade accounts receivable are written off when deemed uncollectible. Recoveries of trade accounts receivable previously written off are recorded as income when received.

Inventory Valuation - Inventories consist of raw materials used in the production of customized parts, work-in-process and finished goods components which will be sold to customers. Inventories are valued at the lower of cost or net realizable value, using the first-in, first-out (FIFO) method. Charges for obsolete inventory are based on identification of specific items resulting from regular, on ongoing reviews of our inventory.

Long-Lived and Intangible Assets – Long-lived assets and certain identifiable definite life intangibles to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company ~~continuously~~periodically evaluates the recoverability of its long-lived assets based on estimated future cash flows and the estimated liquidation value of such long-lived assets and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the long-lived assets. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows or internal or external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value. Utility patents are amortized over a 17-year period. Patents which are pending are not amortized.

Stock-Based Compensation – We measure the compensation costs of stock-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the vesting period ~~during which recipients are required to provide services.~~of the stock-based compensation. Stock-based compensation arrangements may include stock options, grants of shares of common stock with and without restrictions, performance-based awards, and stock appreciation ~~rights.~~rights, or SARs. Compensation cost is measured on the date of grant at its fair value.

Equity instruments issued to non-employees are recorded on the basis of the grant date fair value of the instruments. In general, the measurement date is either (a) when a performance commitment, as defined, is reached or (b) the earlier of the date that (i) the non-employee performance requirement is complete or (ii) the instruments ~~are vested.~~vest. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant.

The fair value of common stock grants is based upon the closing price of our common stock as reported on The Nasdaq Capital Market on the date of the grant. The grant date fair value of stock options and SARs is calculated using the Black Scholes valuation model, and requires estimates of several inputs to the model, including risk-free interest rates, dividends, and expected volatility of our stock price.

Business Overview

Historically, we have generated revenues through sales, and more recently, subscription-based licensing of our PrintRite3D® technology to customers that seek to improve their manufacturing production processes, and through ongoing annual software upgrades and maintenance fees. However, 2022 ~~has been~~began a ~~year~~period of significant change for our business, from our symbolic name change to the execution of a new approach to the market. We have a mission to accelerate the adoption of additive manufacturing by setting the industry standard for quality, and we have charted our path to deliver the first holistic digital quality experience for the additive industry with the following objectives:

	●	Simplifying the quality experience from up to twelve disparate software licenses and multiple manual spreadsheets, to a single user experience that is holistic and integrated with production workflow.
	●	Building strategic partnerships, expanding our partner ecosystem, and best ensuring success of existing customers as they move into production.
	●	Offering products that are easier to use and less expensive, both for initial purchases and as expansion opportunities.
	●	Attracting a strategic corporate investment partner with clear product, customer, and financial synergies.

A holistic digital quality experience connects in-process data upstream to CAD/CAM through the downstream inspection and material data. This digital quality journey begins by creating a new qualification framework for in-process data. The path to qualified parts and continued production relies on more than just melt pool monitoring; it also covers machine health, process health, and part health. Our customers require specific data for qualification and certification of parts and need a holistic approach to production quality, and further, require a way to simplify quality from 8-12 disparate software licenses and several manual spreadsheets, to one user experience that is integrated into their production workflow.

In order to expand the number of OEMs distributing our technology, we launched a three-tiered OEM program directed to: (1) new OEMs without their own quality assurance or monitoring solution; (2) established OEMs with a quality monitoring offering, but who have customers with multiple printers from multiple OEMs and want a single third party quality and analytics solution with consistent quality metrics across printers, processes and materials; and (3) OEMs building open application programming interfaces, or APIs, to integrate components of Sigma’s proprietary technology with their current offerings. We are now working with OEMs on their next generation printers to offer a software-only solution that will utilize the printer’s computing infrastructure and dramatically reduce the overall cost of its technology, enabling the opportunity to move towards a software only embedded solution on every printer sold by partner OEMs. To further augment this initiative, we have also begun integrating with ~~industry wide~~industry-wide hardware providers, such as our ~~recently announced relationship~~relationships with a laser scanner ~~provider.~~providers.

We began offering our current PrintRite3D integrated hardware and software solution on a subscription basis in 2022. Among other things, at present the change reduced the initial upfront cost to a new user from over $100,000 to approximately $3,000-$5,000 per month. The combination of subscription pricing and the new software-only products that can be embedded into OEM and software partner offerings are intended to make our technology more affordable to acquire and easier to bundle, distribute and support in an effort to become the industry standard.

The shift in our business model has adversely affected our revenues and near-term revenue growth as we increased our focus on building strategic partnerships, expanding our partner ecosystem, and ensuring the success of our existing customers as they move into production. In 2022, we relied primarily on retrofit work while the software only products were still under development. Our cash and working capital permitting, we expect that the percentage of the Company’s revenue coming from OEMs will increase in 2023, especially with the availability of a software-only product as we work to integrate into existing hardware, such as laser scanner technology and OEM’s upstream designs for next generation systems. Our ability to generate revenues in the future will depend on our ability to raise capital needed and further commercialize and increase market presence of our traditional PrintRite3D® technology, along with our new software-only offerings that start to link industry quality together. Additionally, it will depend on whether key prospective customers continue to move from additive manufacturing prototyping to production, which our products are intended to accelerate. ~~However, we believe these changes to our business model will contribute to faster adoption of our product by end users and will result in more predictable and profitable revenues over the longer term.~~

In connection with this shift, we reduced our headcount in the third quarter by a net of five employees. With a further reduction of two employees in October, our full-time headcount now stands at twenty-five, a net reduction of ten employees from our peak of thirty-five in April of this year. Though we plan to hire one or two new employees to fill open positions in the near-term, we expect our headcount will be stable for the next twelve to eighteen months.

As part of our vision to build the future of connected digital quality, we have undertaken an initiative to attract a strategic corporate investment partner with clear product, customer, and financial synergies to Sigma. This work is focused on identified companies that connect to our long-term quality vision. This strategic investment initiative is focused on synergies and potential product integration to accelerate market visibility and customer adoption.

Over the past ~~ten~~twelve years, Sigma has invested its resources to solve the problem of in-process AM quality: melt pool analytics for the “part”~~. This remained~~, which originated as a retrofit lab ~~solution until the last eight months.~~solution. Our prior product offering met the needs of materials scientists, but overlooked the production needs of shop floor technicians, process engineers, and operations teams. The addition of our “machine” and “process” software products for additive manufacturing will provide a holistic in-process quality base for us to connect to the broader digital quality ecosystem.

As part of our vision to build the future of connected digital quality and enhance shareholder value, we have undertaken an initiative to evaluate a range of strategic alternatives, including possible strategic investment, acquisition, merger, business combination, or similar transaction with clear product, customer, and financial synergies to Sigma. This work is focused on identified companies that connect to our long-term quality vision. This strategic initiative is focused on synergies and potential product integration to accelerate market visibility and customer adoption. To execute Sigma’s vision and realize our potential, we will need to raise additional capital, or execute a strategic transaction, which may include a possible strategic investment, acquisition, merger, business combination, or similar transaction. If we fail to obtain sufficient funding when needed, we may be forced to delay, scale back or eliminate all or a portion of our commercialization efforts and operations.

We believe the industry is evolving. Application Programming Interfaces, or APIs, are opening up as some of our relationships with OEMs have become public. There is also a trend toward consolidation in additive manufacturing as companies align for profitability. Sigma has made demonstrable progress in 2022 connecting to other products in the AM digital quality stream, and a connection to a strategic partner paired with near term execution can augment our ability to scale, support the market, and create value. Further, alignment with a strategic ~~partner~~investor or acquirer allows for common growth, vision, and funding of the Company to achieve its mission, but also provides an opportunity for other strategic relationships, including potential acquisitions that can further accelerate the execution of our digital quality vision.

To facilitate our ability to execute our strategic initiatives on the product, pricing, and partner fronts, we have taken several steps to conserve our cash by reducing our operating expenses. Compensation and benefits are our single largest expense, comprising approximately 50% of our total operating expenses for the three months ended March 31, 2023. We reduced our total full-time headcount by a net of eight employees in 2022 and experienced a further reduction of six employees in the first quarter of 2023 as a result of furloughs and departures from the Company. As of March 31, 2023, our full-time employee headcount was 19. In addition to headcount reductions, we have reduced our spend on advertising, marketing and investor relations, consultants, and employee travel. We continue to evaluate our expenses and will consider further reductions as appropriate. Lastly, Sigma has developed a deep patent portfolio which we believe is widely applicable to the 3D printing industry. We have recently begun exploring an intellectual property licensing program, which we believe may facilitate a strategic transaction.

Results of Operations

Three Months Ended ~~September 30,~~March 31, 2023 and March 31, 2022 ~~and September 30, 2021~~

During the three months ended ~~September 30, 2022,~~March 31, 2023, we recognized revenue of ~~$188,245,~~$130,159, as compared to ~~$700,237~~$51,844 in the same period in ~~2021, a decrease~~2022, an increase of ~~$511,992,~~$78,315, or ~~72.7%~~151%. The ~~decrease~~increase was primarily due to ~~lower PrintRite3D® unit~~increased PrintRite3D sales of ~~$511,870, the shift to~~$61,499, increased subscription-based ~~sales, and a decrease in contract additive manufacturing~~ revenue of ~~$11,190, partially offset by an increase in~~$26,906, and increased annual maintenance contract ~~renewals in the third quarter~~revenue of ~~2022 of $11,068,~~$1,910, as compared to the ~~third~~first quarter of ~~2021.~~2022. Partially offsetting the increases was a decrease in on-site development and support revenue of $12,000.

Our cost of revenue for the three months ended ~~September 30, 2022~~March 31, 2023 was ~~$79,713,~~$63,664, as compared to ~~$164,766~~$40,091 for the same period in ~~2021, a decrease~~2022, an increase of ~~$85,053,~~$$23,573, or ~~51.6%~~59%. The ~~decrease~~increase was primarily attributable to ~~lower~~higher unit sales in the ~~quarter.~~first quarter of 2023 as compared to the first quarter of 2022.

Our total operating expenses for the three months ended ~~September 30, 2022~~March 31, 2023 were ~~$2,392,596,~~$1,848,144, as compared to ~~$3,026,888~~$2,295,698 for the same period in ~~2021, an~~2022, a decrease of ~~$633,932,~~$447,554, or ~~20.9%~~20%. The decrease was primarily attributable to a decrease in ~~stock-based compensation expense~~salaries and benefits of ~~$384,093,~~$360,427, a decrease in investor, public relations, and marketing expense of ~~$72,790,~~$39,382, and a decrease in ~~organization costs~~office expense of ~~$201,590~~$50,933 primarily attributable to ~~a timing difference in stock option grants~~reduced headcount and travel as further ~~explained~~described below.

Salary and benefits costs were ~~$1,227,805~~$931,583 for the three months ended ~~September 30, 2022,~~March 31, 2023, as compared to ~~$1,222,760~~$1,292,010 for the same period in ~~2021, an increase~~2022, a decrease of ~~$5,045,~~$360,427, or ~~0.4%~~28%. The ~~increase~~decrease was comprised of: (a) ~~$100,125~~decreased salaries of ~~salary increases for existing~~$312,687 due to four furloughed employees and two ~~new hires;~~terminated employees; (b) ~~an increase~~a decrease in ~~severance costs~~stock appreciation rights of ~~$88,379;~~$62,703 due to the revaluation as of March 31, 2023; and ~~(d) increased~~(c) decreased taxes and benefits of ~~$18,737.~~$50,488. Offsetting these decreases were increases ~~was a decrease~~ in ~~SAR~~commission and bonus expense of ~~$196,766 resulting from the September 30, 2022 revaluation due to the decrease in our stock price,~~$17,706 and ~~a decrease in employee commissions and bonuses~~severance costs of ~~$5,429.~~$47,745.

Stock-based compensation was ~~$275,418~~$244,850 for the three months ended ~~September 30, 2022,~~March 31, 2023, as compared to ~~$659,512~~$170,976 for the same period in ~~2021, a decrease~~2022, an increase of ~~$384,094,~~$53,874, or ~~58.2%~~32%. This ~~decrease~~increase was primarily a result of ~~the expense related to options awarded to new employees and annual~~ option grants ~~awarded to other employees~~ in the ~~third~~first quarter of ~~2021.~~2023.

We incurred operations and research and development costs of ~~$152,245~~$126,712 during the three months ended ~~September 30, 2022,~~March 31, 2023, as compared to ~~$131,772~~$143,418 in the same period in 2022, a decrease of ~~2021,~~$16,706, or 12%. The decrease was primarily due to a decrease in operations costs of $42,085, partially offset by an increase in research and development costs of ~~$20,473, or 15.5%.~~$25,379. The decrease in operations costs related to fewer parts and material purchases in the first quarter of 2023. The increase in research and development costs was primarily due to an increase in ~~research and development expenses of $27,430, partially offset by~~consulting costs for our work with a ~~decrease in operations costs of $6,614. The increase in research and development expenses was attributable to an increase in consulting expenses of $14,930~~third-party software vendor in connection with ~~ongoing PrintRite3D software~~the development ~~and research on the laser application~~ of PrintRite3D for a new OEM of $20,000, partially offset by costs of $7,500 incurred in the third quarter of 2021 related to a simulation project. The decrease in operations costs related to charges in the third quarter of 2021 for inventory obsolescence and purchases of parts and materials.our software-only product suite.

We incurred investor, public relations, and marketing costs of ~~$46,832~~$54,944 during the three months ended ~~September 30, 2022,~~March 31, 2023, as compared to ~~$119,622~~$94,326 during the same period in ~~2021.~~2022. The decrease of ~~$72,790,~~$39,382, or ~~60.9%~~42%, was primarily due to a decrease in ~~tradeshow expenses of $38,136 as a result of a timing difference of a rescheduled trade show from the second to the third quarter in 2021 due to COVID. , and a decrease in~~ investor relations consulting costs of ~~$33,207~~$35,000, a decrease in attendance at tradeshows and conferences of $2,885 due to ~~decreased consulting fees~~fewer employees, and ~~revaluation~~a decrease in marketing costs of ~~outstanding SARs held by consultants.~~$1,497.

We incurred organization costs of ~~$140,522~~$51,198 during the three months ended ~~September 30, 2022,~~March 31, 2023, as compared to ~~$342,112~~$58,749 during the same period in ~~2021.~~2022. The decrease of ~~$201,590,~~$7,551, or ~~58.9%~~13% was primarily attributable to a decrease in non-employee director compensation of ~~$234,154 as compared~~$14,388 primarily due to fewer stock options ~~grants~~granted in ~~the same period in 2021, partially offset by an increase in directors cash compensation.~~2023. Offsetting this decrease was an increase in shareholder services of $6,837 due to ~~a timing difference~~transfer agent fees for conversion of ~~$33,909 resulting from expense recognized~~preferred stock to common stock in January of 2023, and an increase in costs related to the ~~second quarter~~filing of ~~2021 as~~ our annual ~~stockholders meeting was held earlier in 2021 than in 2022.~~Form 10-K.

Legal and professional fees incurred in the three months ended ~~September 30, 2022~~March 31, 2023 were ~~$252,886,~~$184,251, as compared to ~~$261,075~~$211,416 incurred during the same period in ~~2021,~~2022, a decrease of ~~$8,189,~~$27,165, or ~~3.1%~~13%. This decrease was a result of a decrease in consulting expenses from 2022 of $125,504 which were related to a manufacturing consultant, technical accounting ~~expenses~~support, HR consultant, and advisor to the Board of ~~$18,118, and~~Directors, as well as a decrease in ~~consulting expenses~~IT service fees of ~~$46,147 primarily due~~$2,729 related to ~~stock option grant and the reclassification of a consulting expense to research and development~~new employee setup fees in ~~2021.~~2022. Partially offsetting these decreases was an increase in ~~recruiting expenses~~legal fees of ~~$17,444 for new hires,~~$91,464 due to employment related matters, a potential financing and warrant restructuring, and executive compensation agreements, and an increase in ~~legal~~accounting expenses of ~~$39,487 as a result of a timing difference in the move of~~$9,604 due to increased rates for our annual ~~stockholders meeting from the second quarter in 2021 to the third quarter in 2022.~~audit.

Office expenses for the three months ended ~~September 30, 2022~~March 31, 2023, were ~~$183,608~~$154,499 as compared to ~~$172,238~~$205,432 for the same period in ~~2021, an increase~~2022, a decrease of ~~$11,370,~~$50,933, or ~~6.6%~~25%. The ~~increase~~decrease resulted primarily from: (a) ~~an increase in~~decreased travel and entertainment expenses of ~~$17,825 as compared to the same period in 2021 as a result~~$24,612; (b) decreased office supply expenses of ~~COVID-19 related travel restrictions; (b) an increase in payroll service fees of $4,486 related to annual price increases; and~~$15,654; (c) decreased dues & subscriptions of ~~$6,514 for new customer relationship management, product lifecycle management, and project management software. Partially offsetting these increases was: (a) a decrease in~~$3,690; (d) decreased postage and shipping of ~~$8,093; (b) a decrease in office supplies~~$2,868; (e) decreased rent and utilities of ~~$2,645;~~$2,073; and ~~(c) and a decrease in~~(f) decreased training and education expense of ~~$5,368.~~$5,006, all due to a reduction in the number of employees. Partially offsetting these decreases was an increase in payroll services expense of $3,120 due to the early termination of the contract with our UK payroll company.

Depreciation and amortization expense for the three months ended ~~September 30, 2022 totaled $26,857,~~March 31, 2023 was $28,127, as compared to ~~$27,689~~$31,584 for the same period in ~~2021, an increase~~2022, a decrease of ~~$832,~~$3,457, or ~~7.2%~~11%. The ~~increase~~decrease was primarily the result of ~~depreciation expense associated with~~the increased life expectancy of our leased and consigned PrintRite3D ~~units sold under our subscription-based pricing program.~~systems.

Other operating expenses were ~~$86,783~~$91,980 for the three months ended ~~September 30, 2022,~~March 31, 2023, as compared to ~~$90,108~~ $ 87,787 for the same period in ~~2021.~~2022. The ~~$3,326 decrease~~$4,193 increase was primarily due to ~~credit card transaction fees~~a FINRA filing fee in ~~September 2021, as compared to none in the third quarter of 2022, partially offset by an increase in insurance premiums.~~2023.

In the three months ended ~~September 30, 2022,~~March 31, 2023, we realized net other ~~expenses~~income of ~~$7,884,~~$29,950, as compared to net other income of ~~$439~~ $ 76,550 in ~~2021.~~the same period in 2022. The ~~increase~~decrease in net other ~~expenses~~income of ~~$8,323,~~$46,600, was primarily due to ~~a foreign currency exchange loss~~the New Mexico High Wage Tax credit of $76,628 received in 2022, partially offset by a write-off of accounts payable due to an unclaimed customer deposit in the first quarter of 2023.

Preferred dividends for the three months ended March 31, 2023 were 11,748, as compared to $14,220 for the same period in 2022. The decrease was due to the ~~strengthening~~conversion of 149 shares preferred stock to common stock in the ~~US dollar against the Euro.~~first quarter of 2023.

Our net loss applicable to common stockholders for the three months ended ~~September 30, 2022~~March 31, 2023, was ~~$2,306,528,~~$1,763,447, as compared to ~~$2,505,198~~ $ 2,221,615 for the same period ~~of 2021,~~in 2022, a decrease of ~~$198,670,~~$458,168, or ~~7.9%~~21%. The decrease was primarily due to the decrease in the loss from operations of ~~$206,993, partially offset by an increase in net other expense of $8,323.~~

~~Nine Months Ended September 30, 2022 and September 30, 2021~~

During the nine months ended September 30, 2022, we recognized revenue of $476,749, as compared to $1,302,525 in the same period in 2021, a decrease of $825,776, or 63.4%. The decrease was primarily due to a decrease in sales of our PrintRite3D® units of $919,355, decreased revenues from our legacy Rapid Test and Evaluation (“RTE”) program of $4,100, and decreased contract additive manufacturing revenue of $11,189 in 2022. Partially offsetting these decreases was an increase in revenues of $17,006 from our subscription-based pricing program, on-site installation and support revenue of $49,068, an increase in consulting service revenue of $4,500, and an increase in annual maintenance contract revenue of $38,295.

Our cost of revenue for the nine months ended September 30, 2022 was $312,879, as compared to $409,493 for the same period in 2021, a decrease of $96,614, or 23.6%. The decrease was primarily attributable to fewer unit sales in 2022 partially offset by increased travel costs incurred related to installations from 2021 sales.

Our operating expenses for the nine months ended September 30, 2022 were $6,968,079, as compared to $6,976,944 for the same period in 2021, an decrease of $8,865. The decrease was primarily attributable to a decrease in stock-based compensation for employees, executives, and board members, a decrease in operating and R&D costs, partially offset by increases in salary and benefits, office expenses due to a company-wide global conference held in May of 2022, and increased travel in 2022 as described below.

Salary and benefits costs were $3,704,633 for the nine months ended September 30, 2022, as compared to $3,055,279 for the same period in 2021, an increase of $649,354, or 21.3%. The increase was comprised of: (a) $617,977 in employee salary increases and average full-time employee headcount increasing by five; (b) a $115,768 increase in severance due to the termination of employment of six employees; and (c) increased taxes and benefits of $206,257. Partially offsetting these increases was a decrease in commissions of $38,682 due to fewer unit sales$502,296 and a decrease in ~~SARs~~preferred dividends of ~~$251,965 due to revaluations resulting from a decrease in our stock price.~~

Stock-based compensation was $613,833 for the nine months ended September 30, 2022, as compared to $893,431 for the same period in 2021, a decrease of $279,597 or 31.3%. This decrease was primarily due to the expense related to options granted to new employees and annual option grants awarded to other employees in the third quarter of 2021.

We incurred operations and research and development costs of $442,548 during the nine months ended September 30, 2022, as compared to $608,812 in the same period of 2021, a decrease of $166,266, or 27.3%. The decrease was primarily due to a decrease in operations costs of $133,827 and a decrease in research and development costs of $32,439. The decrease in operations expense was due to: (a) charges we incurred in 2021 of $41,964 for inventory obsolescence, including $14,471 for metal powder write-offs; (b) equipment upgrades in 2021 in both our manufacturing facility and our 3D metal printer totaling $12,277; (c) a decrease in parts and material purchases of $77,374 in the first nine months of 2022; and (d) a decrease in purchase of lab supplies of $2,212. The decrease in research and development costs was due to expenses associated with a simulation project in 2021 of $95,461, partially offset by an increase in consulting costs of $43,022 in connection with ongoing PrintRite3D software development and $20,000 for research on laser application of PrintRite3D for a new OEM.

We incurred investor, public relations, and marketing expenses of $293,458 during the nine months ended September 30, 2022, as compared to $342,725 during the same period in 2021. The decrease of $49,267, or 14.4%, was primarily due to a decrease in investor relations consulting costs of $62,741 resulting from a revaluation of SARs at June 30 and September 30, 2022, and lower advertising expenses of $9,524. Partially offsetting this decrease was an increase in tradeshow expenses of $22,998 as compared to 2021, when COVID-19 travel restrictions precluded attendance at such events.

We incurred organization costs of $260,088 during the nine months ended September 30, 2022, as compared to $578,256 during the same period in 2021. The decrease of $318,268, or 55%, was primarily attributable to decreases in: (a) non-employee director fees of $274,865, mostly as a result of a decrease in stock options issued; and (b) stockholder services of $43,304, primarily due to expenses incurred in 2021 in connection with a special stockholders meeting.

Legal and professional fees incurred in the nine months ended September 30, 2022 were $608,830, as compared to $681,941 during the same period in 2021, a decrease of $73,111, or 10.7%. This decrease was primarily a result of a decrease in legal expenses of $21,403 due to one less stockholder meeting and fewer regulatory filings, a decrease in recruiting expenses of $73,223 related to new hires in 2021, and a decrease in accounting fees of $9,817 due to fulltime hire of temporary accounting support. These decreases were partially offset by an increase in consulting expenses of $30,530 attributable to the engagement of technical consulting support in connection with our subscription-based pricing model, external human resources consulting, and hire of an inventory management consultant.

Office expenses for the nine months ended September 30, 2022 were $692,640, as compared to $472,335 for the same period in 2021, an increase of $220,305, or 46.6%. The increase resulted primarily from: (a) travel and entertainment of $113,616 related to increased travel as compared to 2021 as a result of COVID-19 related travel restrictions; (b) expenses of $109,435 related to a Company-wide, global conference held in May of 2022; (c) an increase in payroll service fees of $12,867 related to new hires; (d) dues & subscriptions of $21,715 for new customer relationship management, product lifecycle management, and project management software; and (e) an increase in utilities expenses of $1,755. Partially offsetting these increases was a decrease in postage and shipping of $28,783 and a decrease in office supply expense of $9,262.

Depreciation and amortization expense for the nine months ended September 30, 2022 totaled $88,302 as compared to $76,502 for the same period in 2021, an increase of $11,800, or 15.4%. The increase was primarily due to depreciation expense on PrintRite3D units leased under our subscription-based program.

Other operating expenses were $263,747 for the nine months ended September 30, 2022, as compared to $267,663 for the same period in 2021, a decrease of $3,916. The decrease was due to: (a) a decrease in SEC filing fees of $6,102; (b) a decrease in licensing fees of $2,166; and (c) a decrease in bank fees, primarily credit card transaction fees of $7,413. These decreases were partially offset by an increase in insurance policy premiums for 2022 of $11,765.

In the nine months ended September 30, 2022, we realized net other income of $57,336, as compared to net other income of $1,096,727 in 2021. The decrease of $1,039,391, or 94.8%, was primarily due to a gain of $1,092,441 from the 2021 revaluation of the derivative liability related to our private placement of warrants in the second quarter of 2021, a foreign currency exchange loss of $16,950 in 2022 due to the strengthening of the US dollar against the Euro, and a decrease in interest income of $7,028. Partially offsetting these decreases was an increase of $76,628 in New Mexico state incentives in the first quarter of 2022.

Our net loss applicable to common stockholders for the nine months ended September 30, 2022 was $6,789,533, as compared to $5,076,532 for the same period of 2021, a $1,713,001 increase. The increase was due to an increased loss from operations of $720,297 and a decrease in other income of $1,039,391,$2,472, partially offset by a decrease in ~~preferred dividends~~total other income of ~~$46,687.~~$46,600.

Liquidity and Capital Resources

Due to uncertainties regarding our ability to meet our current and future operating and capital expenses, there is substantial doubt about our ability to continue as a going concern for 12 months from the date of the filing of this Quarterly Report,

As of ~~September 30, 2022,~~March 31, 2023, we had ~~$4,800,680~~$1,488,704 in cash and working capital of ~~$5,492,725,~~$2,105,349, as compared with ~~$11,447,047~~ $2,845,931 in cash and working capital of ~~$11,702,358~~$3,644,522 as of December 31, ~~2021.~~2022.

Our major sources of funding have been proceeds from public and private offerings of our equity securities and from warrant exercises.

~~On March 26, 2021, the Company closed a public offering of 2,190,000 shares of common stock at a price of $4.445 per share, resulting in net proceeds~~ We will need to the Company of approximately $8,736,487 after deducting placement agent commissions and other offering costs payable by the Company. In a concurrent private placement, the Company issued to the purchasers warrants to purchase an aggregate of 2,190,000 shares of common stock at an exercise price of $4.32 per share. Each warrant became exercisable on May 24, 2021, and will expire two years after the initial exercise date.

On January 12, 2021, the Company closed a public offering of 1,711,783 shares of common stock at a price of $3.00 per share, resulting in net proceeds of approximately $4,532,445 after deducting commissions and other offering expenses payable by the Company.

~~During the first quarter of 2021, the Company received cash proceeds of $1,136,010 from warrant exercises.~~

~~We believe that our existing cash on hand, together with expected revenue, will be sufficient~~raise additional amounts to fund our ~~anticipated operating costs~~operations, maintain compliance with the Nasdaq listing requirements and ~~capital expenditure requirements through at least~~implement our business plan. We currently have no arrangement to obtain any additional financing, and there is no assurance as to the ~~first quarter~~amount and availability of ~~2023. The Company is currently engaged in identifying sources of~~any required future financing ~~either~~or the terms thereof. Any such financing, if in the form of equity, ormay be highly dilutive to our existing stockholders and may otherwise include onerous terms. If in the form of debt, ~~or a combination thereof. No assurance can be given as to the availability of~~ such financing may include covenants and repayment obligations which may be difficult to meet and that could adversely affect our business and operations. To the extent that funds are not available to us, we may be required to delay, limit, or ~~if available, that such financing would be on terms acceptable to the Company.~~terminate our business and operations and lose our Nasdaq listing.

We have taken several steps to conserve our cash, including furloughing non-essential employees, reducing or eliminating certain marketing and advertising programs, limiting employee travel, and reducing investor relations expenses and certain consulting expenses. Our existing cash on hand and anticipated revenues are sufficient to fund our remaining anticipated operating costs only through June 2023. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our capital resources sooner than we expect, or extend such resources longer than we expect.

Because of the numerous risks and uncertainties associated with the research, development, and commercialization of our products, we are unable to estimate the exact amount of our working capital requirements. Our future capital requirements will depend on many factors, including:

	●	~~Revenue from the sales of our existing and future products;~~
	●	~~Costs associated with the expansion of our business and operations;~~
	●	The cost of expending, maintaining, and enforcing our intellectual property portfolio, including filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights; ~~and~~
	●	The effect of competing technological and market ~~developments.~~developments;
	●	The revenue from the sales of our existing and future products; and
	●	The cost of operating as a public company.

During the remainder of 2022, we expect to sustain our operations and our commercialization and marketing efforts with our cash reserves and revenues generated from sales of our PrintRite3D® technology. To support the commercialization of our PrintRite3D® technology, we plan to continue funding our development activities and operating expenses by licensing our PrintRite3D® systems and supporting field services, as applicable, and providing PrintRite3D®-enabled engineering consulting services concerning our areas of expertise (materials and manufacturing quality assurance and process control technologies).

The ongoing impact of the COVID-19 epidemic, in particular the shortage of certain components of our PrintRite3D systems, is highly uncertain and no assurance can be given that our business and results of operations will not be materially and adversely affected. It is also uncertain as to whether any further disruption of the financial markets, which may reduce our ability to access capital on favorable terms or at all. However, due to the need to have more flexibility in supply chains with the ability to respond quickly to shortages in parts or products, we believe that the crisis will eventually accelerate the adoption of 3D printing, which may benefit the Company.

The effects of a US or global recession, while difficult to predict, could result in some customers delaying orders or not proceeding with planned orders for our PrintRite3D systems.

Net Cash Used in Operating Activities

Net cash used in operating activities during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 was ~~$6,386,415~~$1,309,537 as compared to ~~$4,786,590~~ $ 2,027,019 during the same period in ~~2021, an increase~~2022, a decrease of ~~$1,599,825,~~$717,482, or ~~33%~~35.4%. ~~Contributing~~

During the three months ended March 31, 2023, the net cash used in operating activities was the result of a net loss of $1,751,699 before preferred dividends, partially offset by changes in working capital of $181,946, and non-cash expenses of $260,216 related to ~~this increase was~~depreciation and amortization of $28,127 and stock-based compensation of $232,089. Changes in working capital were driven by a decrease in accounts receivable of $161,171, a decrease in inventory of $6,541, an increase in accounts payable and accrued expenses of $110,641, and an increase in deferred revenue of $33,370, partially offset by an increase in prepaid expenses of $129,777. The decrease in accounts receivable was a result of cash collections from 2022 sales, and the increase in prepaid expenses was due to deposits paid for a third-party software developer, legal and accounting advisors, and a tradeshow.

During the three months ended March 31, 2022, the net cash used in operating activities was the result of a net loss ~~adjusted~~of $2,207,395 before preferred dividends and the use of cash for working capital of $55,618, partially offset non-cash expenses of ~~$1,373,377,~~$235,994 related to depreciation and amortization of $31,584 and stock-based compensation of $204,410. Changes in working capital were driven by a decrease in accounts payable and accrued expenses of ~~$469,397, an increase~~$95,194, and increases in inventory ~~purchases of $60,456, an increase in~~and prepaid expenses of ~~$49,506,~~$72,019 and $50,996 respectively, partially offset by a decrease in accounts receivable of $151,170 and an increase in deferred revenue of ~~$26,689. Partially offsetting these increases was a~~$11,421. The decrease in accounts ~~receivable~~payable and accrued expenses was largely driven by the payment of ~~$379,600.~~incentive bonuses, and the increases in inventory and prepaid expenses resulted from the stocking of long lead-time parts for planned production and payment of our annual Nasdaq listing fee, respectively.

Net Cash Used in Investing Activities

Net cash used in investing activities during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 was ~~$259,952,~~$47,690, which compares to ~~$254,772~~$142,099 of cash used in investing activities during the same period of ~~2021, an increase~~2022, a decrease of ~~$5,180,~~$94,409, or 2%66.4%. The ~~increase~~decrease resulted from ~~an increase~~a decrease in patent costs of ~~$37,963, partially offset by~~$11,161 and a decrease in purchases of property, plant and equipment of ~~$32,783~~$83,248 during the first ~~nine~~three months of ~~2022.~~2023.

Net Cash Provided by Financing Activities

The Company did not raise any capital nor were there any warrant exercises during the ~~nine~~three months ended ~~September 30,~~March 31, 2023 or March 31, 2022. Cash provided by financing activities during the nine months ended September 30, 2021 totaled $14,404,942 due to the receipt of the net proceeds of $13,268,932 from our January and March 2021 public and private offerings and the exercise of outstanding warrants which provided an additional $1,136,010 in cash proceeds.

Our ability to continue to fund our working capital needs will be dependent upon the success of our efforts to generate revenues from existing and future PrintRite3D contracts, follow-on contracts resulting from successful engagements, possible strategic partnerships, and by obtaining additional capital from the sale of securities or by borrowing funds from lenders to fulfill our business plans. If we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. There is no assurance that we will be successful in obtaining additional funding. The Company is unable to predict the effect a global recession or geopolitical events, including the on-going conflict in Ukraine, may have on its access to the financing markets. If we fail to obtain sufficient funding when needed, we may be forced to delay, scale back or eliminate all or a portion of our commercialization efforts and operations.

We have no lines of credit or other financing arrangements.

Inflation, changing prices and rising interest rates have had no material effect on our continuing operations over our two most recent fiscal years. However, continued unfavorable trends may affect the prices we pay for materials and other goods and services necessary to our business, thus increasing our use of cash.

We have no off-balance sheet arrangements as defined in Item 303(a) of Regulation S-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of disclosure controls and procedures and changes in internal controls over financial reporting.

Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), defines the term “disclosure controls and procedures” as those controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Based upon an evaluation of the effectiveness of our disclosure controls and procedures performed by our management, with the participation of our President and Chief Executive Officer, and our ~~Principal~~Chief Financial Officer and ~~Accounting Officer,~~Treasurer, as of the end of the period covered by this quarterly report, our management concluded that our disclosure controls and procedures are effective at a reasonable assurance level in ensuring that information required to be disclosed by us in our reports is recorded, processed, summarized and reported within the required time periods. No change in our ~~internal~~“internal control over financial ~~reporting~~reporting” (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 that ~~has~~ materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Not applicable.

ITEM 1A. RISK FACTORS.

You should consider the “Risk Factors” included under Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 filed with the SEC on March ~~24, 2022.~~30, 2023, as well as the following updated Risk Factor:

As of March 31, 2023, we had $1,488,704 in cash and working capital of $2,105,349. Our existing cash on hand and anticipated revenues are sufficient to fund our remaining anticipated operating costs only through June 2023. We will need to raise additional financing to fund our operations, maintain compliance with the NASDAQ listing requirements and implement our business plan. There is no assurance as to the amount and availability of any required future financing or the terms thereof. Such financing, if in the form of equity, may be highly dilutive to our existing stockholders and may otherwise include onerous terms. If in the form of debt, such financing may include covenants and repayment obligations which may be difficult to meet and that could adversely affect our business operations. We have no current understanding or arrangement to obtain any additional financing. To the extent that funds are not available to us, we may be required to delay, limit, or terminate our business operations and may lose our Nasdaq listing.

In light of the foregoing, there is substantial doubt about our ability to continue as a going concern for 12 months from the date of the filing of this Quarterly Report,

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None

ITEM 6. EXHIBITS.

~~3.1~~10.1		~~Certificate~~Retention Bonus and Change in Control Agreement, dated as of ~~Amendment~~January 23, 2023, between Sigma Additive Solutions, Inc. and Jacob Brunsberg (incorporated by reference to ~~Amended and Restated Articles of Incorporation, as amended (filed as~~ Exhibit ~~3.1~~10.30 to the Company’s ~~Current~~Annual Report on Form ~~8-K~~10-K filed ~~August 12, 2022, and incorporated herein by reference).~~on March 30, 2023.)*

~~10.1~~10.2		Retention Bonus and Change in Control Agreement, dated as of January 23, 2023, between Sigma Additive Solutions, Inc. ~~2013 Equity Incentive Plan, as Amended (filed as~~and Frank Orzechowski (incorporated by reference to Exhibit ~~99.1~~10.31 to the Company’s Annual Report on Form ~~S-8 Registration Statement,~~10-K filed on ~~October 19, 2022, and incorporated herein by reference).~~March 30, 2023.)*

31.1		Rule 13a-14(a) Certification of Principal Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**

31.2		Rule 13a-14(a) Certification of Principal Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**

32.1		Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.***

101.INS		Inline XBRL Instance Document.
101.SCH		Inline XBRL Schema Document.
101.CAL		Inline XBRL Calculation Linkbase Document.
101.DEF		Inline XBRL Definition Linkbase Document.
101.LAB		Inline XBRL Labels Linkbase Document.
101.PRE		Inline XBRL Presentation Linkbase Document.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Indicates a management contract or compensatory plan or arrangement.

** Filed herewith.

*** Furnished herewith and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SIGMA ADDITIVE SOLUTIONS, INC.

~~November 14, 2022~~May 15, 2023	By:	/s/ Jacob Brunsberg
		Jacob Brunsberg
		President and Chief Executive Officer (Principal Executive Officer)

~~November 14, 2022~~May 15, 2023	By:	/s/ Frank Orzechowski
		Frank Orzechowski
		Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

	September 30, 2022			September 30, 2021
	Nine Months Ended
	September 30, 2022			September 30, 2021
OPERATING ACTIVITIES
Net Loss	$	(6,746,873	)	$	(4,987,185	)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Noncash Expenses:
Depreciation and Amortization		88,302			76,502
Gain on Derivative Liability		-			(1,092,441	)
Stock-Based Compensation - Employees		613,833			893,431
Stock-Based Compensation - Third Party Services		24,463			128,809
Stock-Based Compensation - Directors		70,594			404,580
Change in Assets and Liabilities:
Accounts Receivable		44,422			(335,178	)
Inventory		(257,352	)		(196,896	)
Prepaid Assets		(63,446	)		(13,940	)
Accounts Payable		197,105			94,220
Deferred Revenue		(19,166	)		7,523
Accrued Expenses		(338,297	)		233,985
NET CASH USED IN OPERATING ACTIVITIES		(6,386,415	)		(4,786,590	)

INVESTING ACTIVITIES
Purchase of Property and Equipment		(83,848	)		(116,631	)
Purchase of Intangible Assets		(176,104	)		(138,141	)
NET CASH USED IN INVESTING ACTIVITIES		(259,952	)		(254,772	)

FINANCING ACTIVITIES
Gross Proceeds from Public and Private Issuances of Securities		-			14,869,899
Less Offering Costs		-			(1,600,967	)
Proceeds from Exercise of Warrants		-			1,136,010
NET CASH PROVIDED BY FINANCING ACTIVITIES		-			14,404,942

NET CHANGE IN CASH FOR PERIOD		(6,646,367	)		9,363,580

CASH AT BEGINNING OF PERIOD		11,447,047			3,700,814

CASH AT END OF PERIOD	$	4,800,680		$	13,064,394

Supplemental Disclosures:
Noncash Investing and Financing Activities Disclosure:
Issuance of Common Shares for Preferred Dividends	$	-		$	89,347
Other Noncash Operating Activities Disclosure:
Issuance of Securities for services	$	95,057		$	533,387
Disclosure of Cash Paid for:
Interest	$	5,367		$	5,434
Income Taxes	$	-		$	-

	September 30,
	2022		2021
Warrants		3,825,781		3,987,931
Stock Options		1,784,942		1,400,407
Preferred Stock		148,918		124,483
Total Underlying Common Shares		5,759,641		5,512,821


2022 (Remaining)	$	6,153
2023		24,610
2024		24,610
2025		24,610
Thereafter		279,058

Intangible asset and amortization expense	$	359,041