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~~June 30, ~~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 NASDAQ Stock 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~~August 11,~~, 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	1617

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	2324

ITEM 4. CONTROLS AND PROCEDURES	2324

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS	2325

ITEM 1A. RISK FACTORS	2325

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.	2326

ITEM 3. DEFAULTS UPON SENIOR SECURITIES	2326

ITEM 4. MINE SAFETY DISCLOSURES	2326

ITEM 5. OTHER INFORMATION	2326

ITEM 6. EXHIBITS	2426

SIGNATURES	2527

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

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

Condensed Balance Sheets

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

ASSETS
Current Assets:
Cash	$	4,800,680		$	11,447,047		$	368,443		$	2,845,931
Accounts Receivable, net		367,770			412,192			45,454			371,620
Inventory		967,432			710,080			940,034			950,943
Prepaid Assets		177,724			114,278			137,105			105,226
Total Current Assets		6,313,606			12,683,597			1,491,036			4,273,720

Other Assets:
Property and Equipment, net		244,838			232,282			227,787			304,903
Intangible Assets, net		1,084,205			925,111			1,215,411			1,125,285
Total Other Assets		1,329,043			1,157,393			1,443,198			1,430,188

TOTAL ASSETS	$	7,642,649		$	13,840,990		$	2,934,234		$	5,703,908

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:
Accounts Payable	$	403,547		$	206,442		$	300,562		$	277,492
Deferred Revenue		129,689			148,855			127,188			120,073
Accrued Expenses		287,645			625,942			115,195			231,633
Total Current Liabilities		820,881			981,239			542,945			629,198

TOTAL LIABILITIES		820,881			981,239			542,945			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			54,904,792			54,406,694
Accumulated Deficit		(47,382,713	)		(40,593,180	)		(52,524,277	)		(49,342,484	)
Total Stockholders’ Equity		6,821,768			12,859,751			2,391,289			5,074,710

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	7,642,649		$	13,840,990		$	2,934,234		$	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
	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021			2023			2022			2023			2022

REVENUES	$	188,245		$	700,237		$	476,749		$	1,302,525		$	97,043		$	236,660		$	227,202		$	288,504

COST OF REVENUE		79,713			164,766			312,879			409,493			36,491			193,075			100,155			233,166

GROSS PROFIT		108,532			535,471			163,870			893,032			60,552			43,585			127,047			55,338

OPERATING EXPENSES:
Salaries & Benefits		1,227,805			1,222,760			3,704,633			3,055,279			554,182			1,184,818			1,485,764			2,476,828
Stock-Based Compensation		275,418			659,512			613,833			893,431			138,489			167,439			363,339			338,415
Operations and R&D Costs		152,245			131,772			442,548			608,812			105,259			146,885			231,971			290,303
Investor, Public Relations and Marketing		46,832			119,622			293,458			342,725			57,824			152,300			112,768			246,626
Organization Costs		140,522			342,112			260,088			578,256			38,240			60,817			89,438			119,566
Legal & Professional Service Fees		252,886			261,075			608,830			681,941			152,025			144,528			336,276			355,944
Office Expenses		183,608			172,238			692,640			472,335			94,190			303,600			248,689			509,032
Depreciation & Amortization		26,857			27,689			88,302			76,502			21,470			29,861			49,597			61,445
Other Operating Expenses		86,783			90,108			263,747			267,663			202,892			89,177			294,873			176,964
Total Operating Expenses		2,392,956			3,026,888			6,968,079			6,976,944			1,364,571			2,279,425			3,212,715			4,575,123

LOSS FROM OPERATIONS		(2,284,424	)		(2,491,417	)		(6,804,209	)		(6,083,912	)		(1,304,019	)		(2,235,840	)		(3,085,668	)		(4,519,785	)

OTHER INCOME (EXPENSE)
Interest Income		278			2,981			3,025			10,053			9			1,176			17			2,747
State Incentives		-			-			76,628			-			-			-			-			76,628
Exchange Rate Loss		(6,184	)		(490	)		(16,950	)		(333	)
Exchange Rate Gain (Loss)														(849	)		(10,436	)		(3,352	)		(10,766	)
Interest Expense		(1,978	)		(2,052	)		(5,367	)		(5,434	)		(3,235	)		(2,070	)		(6,471	)		(3,389	)
Other Income		-			-			-			1,092,441			-			-			35,680			-
Total Other Income (Expense)		(7,884	)		439			57,336			1,096,727			(4,075	)		(11,330	)		25,874			65,220

LOSS BEFORE PROVISION FOR INCOME TAXES		(2,292,308	)		(2,490,978	)		(6,746,873	)		(4,987,185	)		(1,308,094	)		(2,247,170	)		(3,059,794	)		(4,454,565	)

Provision for income Taxes		-			-			-			-			-			-			-			-

Net Loss	$	(2,292,308	)	$	(2,490,978	)	$	(6,746,873	)	$	(4,987,185	)	$	(1,308,094	)	$	(2,247,170	)	$	(3,059,794	)	$	(4,454,565	)

Preferred Dividends		(14,220	)		(14,220	)		(42,660	)		(89,347	)		(10,688	)		(14,220	)		(22,435	)		(28,440	)

Net Loss Applicable to Common Stockholders	$	(2,306,528	)	$	(2,505,198	)	$	(6,789,533	)	$	(5,076,532	)	$	(1,318,782	)	$	(2,261,390	)	$	(3,082,229	)	$	(4,483,005	)

Net Loss per Common Share – Basic and Diluted	$	(0.22	)	$	(0.24	)	$	(0.65	)	$	(0.53	)	$	(0.12	)	$	(0.22	)	$	(0.29	)	$	(0.43	)
Net Loss per Common Share – Basic													$	(0.12	)	$	(0.22	)	$	(0.29	)	$	(0.43	)

Weighted Average Number of Shares Outstanding – Basic and Diluted		10,498,802			10,494,560			10,498,802			9,602,666			10,772,713			10,498,802			10,731,922			10,498,802
Weighted Average Number of Shares Outstanding – Basic														10,772,713			10,498,802			10,731,922			10,498,802

See accompanying notes to condensed financial statements.

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

Statement of Stockholders’ Equity

For the Three Months and Six Months Ended June 30, 2023 and June 30, 2022

(Unaudited)

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

Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in Capital Accumulated Deficit Total
Preferred Stock Common Stock Additional
Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in
Capital Accumulated Deficit Total
Balances, June 30, 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


	Preferred Stock				Common Stock				Additional
	Shares Outstanding		Preferred Stock		Shares Outstanding		Common Stock		Paid-in Capital		Accumulated Deficit			Total
Balances, March 31, 2023		316		1		10,772,713		10,773		54,749,821		(51,205,495	)		3,555,100
Net Loss		-		-		-		-		-		(1,308,094	)		(1,308,094	)
Preferred Stock Dividends		-		-		-		-		10,688		(10,688	)		-
Stock Options Issued to Directors for Services		-		-		-		-		5,794		-			5,794
Stock Options Issued to Employees		-		-		-		-		138,489		-			138,489

Balances, June 30, 2023		316		1		10,772,713		10,773		54,904,792		(52,524,277	)		2,391,289

Preferred Stock Common Stock Additional
Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in
Capital Accumulated Deficit Total
Balances, 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, March 31, 2022		465	$	1		10,498,802	$	10,499	$	53,661,061	$	(42,814,795	)	$	10,856,766
Net Loss		-		-		-		-		-		(2,247,170	)		(2,247,170	)
Preferred Stock Dividends		-		-		-		-		14,220		(14,220	)		-
Stock Options Issued for Third Party Services		-		-		-		-		11,777		-			11,777
Stock Options Awarded to Directors for Services		-		-		-		-		21,721		-			21,721
Stock Options Awarded to Employees		-		-		-		-		167,439		-			167,439

Balances, June 30, 2022		465	$	1		10,498,802	$	10,499	$	53,876,218	$	(45,076,185	)	$	8,810,533

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

For the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~September~~June 30, ~~2021~~2022

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, 2022		465		$	1		10,498,802	$	10,499	$	54,406,694		$	(49,342,484	)	$	5,074,710
Net Loss		-			-		-		-		-			(3,059,794	)		(3,059,794	)
Preferred Stock Dividends		-			-		43,896		44		22,391			(22,435	)		-
Common Shares Issued for Conversion of Preferred Stock		(149	)		-		230,015		230		(230	)		-			-
Common Warrant Issued for Conversion of Preferred Stock		-			-		-		-		99,564			(99,564	)		-
Stock Options Issued to Directors for Services		-			-		-		-		13,523			-			13,523
Stock Options Issued for Third Party Services		-			-		-		-		(489	)		-			(489	)
Stock Options Issued to Employees		-			-		-		-		363,339			-			363,339

Balances, June 30, 2023		316			1		10,772,713		10,773		54,904,792			(52,524,277	)		2,391,289

Preferred Stock Common Stock Additional
Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in
Capital Accumulated Deficit Total
Balances, December 31, 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

	Preferred Stock				Common Stock				Additional
	Shares Outstanding		Preferred Stock		Shares Outstanding		Common Stock		Paid-in Capital		Accumulated Deficit			Total
Balances, December 31, 2021		465	$	1		10,498,802	$	10,499	$	53,442,431	$	(40,593,180	)	$	12,859,751
Balances		465	$	1		10,498,802	$	10,499	$	53,442,431	$	(40,593,180	)	$	12,859,751
Net Loss		-		-		-		-		-		(4,454,565	)		(4,454,565	)
Preferred Stock Dividends		-		-		-		-		28,440		(28,440	)		-
Stock Options Issued for Third Party Services		-		-		-		-		23,490		-			23,490
Stock Options Awarded to Directors for Services		-		-		-		-		43,442		-			43,442
Stock Options Awarded to Employees		-		-		-		-		338,415		-			338,415

Balances, June 30, 2022		465	$	1		10,498,802	$	10,499	$	53,876,218	$	(45,076,185	)	$	8,810,533
Balances		465	$	1		10,498,802	$	10,499	$	53,876,218	$	(45,076,185	)	$	8,810,533

See accompanying notes to condensed financial statements.

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

Condensed Statements of Cash Flows

(Unaudited)

	September 30, 2022			September 30, 2021
	Nine Months Ended						Six Months Ended
	September 30, 2022			September 30, 2021			June 30, 2023			June 30, 2022
OPERATING ACTIVITIES
Net Loss	$	(6,746,873	)	$	(4,987,185	)	$	(3,059,794	)	$	(4,454,565	)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Adjustments to reconcile Net Loss to Net Cash used in operating activities:
Noncash Expenses:
Depreciation and Amortization		88,302			76,502			49,597			61,445
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:
Stock Based Compensation - Employees								363,339			338,415
Stock Based Compensation - Third Party Services								(489	)		23,490
Stock Based Compensation - Directors								13,523			43,442
Stock Based Compensation								13,523			43,442
Change in assets and liabilities:
Accounts Receivable		44,422			(335,178	)		326,166			120,434
Inventory		(257,352	)		(196,896	)		10,909			(73,586	)
Prepaid Assets		(63,446	)		(13,940	)		(31,879	)		(17,197	)
Accounts Payable		197,105			94,220			23,070			33,958
Deferred Revenue		(19,166	)		7,523			7,115			(18,151	)
Accrued Expenses		(338,297	)		233,985			(116,438	)		(372,188	)
NET CASH USED IN OPERATING ACTIVITIES		(6,386,415	)		(4,786,590	)		(2,414,881	)		(4,314,503	)

INVESTING ACTIVITIES
Purchase of Property and Equipment		(83,848	)		(116,631	)		42,516			(83,848	)
Purchase of Intangible Assets		(176,104	)		(138,141	)		(105,123	)		(115,197	)
NET CASH USED IN INVESTING ACTIVITIES		(259,952	)		(254,772	)		(62,607	)		(199,045	)

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			(2,477,488	)		(4,513,548	)

CASH AT BEGINNING OF PERIOD		11,447,047			3,700,814			2,845,931			11,447,047

CASH AT END OF PERIOD	$	4,800,680		$	13,064,394		$	368,443		$	6,933,499

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:
Noncash investing and financing activities disclosure:
Preferred Stock Dividends							$	22,435		$	28,440
Conversion of Preferred Shares to Common Shares							$	188,830		$	-
Other noncash operating activities disclosure:
Issuance of Securities for Services							$	13,034		$	66,932
Disclosure of cash paid for:
Interest	$	5,367		$	5,434		$	6,471		$	3,389
Income Taxes	$	-		$	-		$	-		$	-

See accompanying notes to condensed financial statements.

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

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

~~September~~June 30, ~~2022~~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~~Company’s core technologies ~~will~~are designed to allow its customers to combine advanced manufacturing quality assurance and process control protocols with novel materials to achieve breakthrough product potential in many industries, including aerospace, defense, oil and gas, bio-medical, and power generation.

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

~~Reclassification~~Going Concern ~~- Certain amounts in prior-period financial statements have been reclassified for comparative purposes to conform to presentation~~– The Company has sustained losses and had negative cash flows from operating activities since its inception.

As reported in the ~~current-period financial statements.~~Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 20, 2023, the Company estimates that it has sufficient cash and working capital to fund its scaled-back operations as described below through August 2023 only. Since June 30, 2023, the Company has reduced its employee headcount to five, discontinued all product development activities and ceased to pursue new customers while continuing to consider a possible reverse merger, sale of the company or all or a portion of its assets, and other alternatives. Except for possible sales of shares of our common stock under the At-The-Market Issuance Sales Agreement described in Note 5- Subsequent Events, we have no agreement or arrangement to obtain any financing. There is no assurance that we will be able to enter into a definitive agreement with respect to a possible transaction or sell the Company or any of its assets or, if so, when or on what terms. If we fail to complete the sale of the Company or its assets or shares of common stock or obtain additional financing, we will be forced to resort to the dissolution and liquidation or bankruptcy of the Company. For these reasons, there is substantial doubt about our ability to continue as a going concern.

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

The Company does not use derivative instruments for hedging 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~~June 30, ~~2022~~2023 and ~~2021,~~2022, 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


	June 30,
	2023		2022
Warrants		2,902,089		3,825,781
Stock Options		1,897,659		1,528,637
Preferred Stock		60,332		148,918
Total Underlying Common Shares		4,860,080		5,503,336

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

Schedule of Computing Loss Per Share

	2022			2021			2022			2021
	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended June 30						Six Months Ended June 30
	2022			2021			2022			2021			2023			2022			2023			2022

Net Loss per Common Share - Basic and Diluted	$	(0.22	)	$	(0.24	)	$	(0.65	)	$	(0.53	)	$	(0.12	)	$	(0.22	)	$	(0.29	)	$	(0.43	)
Net Loss per Common Share - Basic													$	(0.12	)	$	(0.22	)	$	(0.29	)	$	(0.43	)
Loss Applicable to Common Stockholders (numerator)	$	(2,306,528	)	$	(2,505,198	)	$	(6,789,533	)	$	(5,076,532	)	$	(1,318,782	)	$	(2,261,390	)	$	(3,082,229	)	$	(4,483,005	)

Weighted Average Number of Common Shares Outstanding Used in Loss Per Share During the Period (denominator)		10,498,802			10,494,560			10,498,802			9,602,666			10,772,713			10,498,802			10,731,922			10,498,802

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

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

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

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

In January 2022, the Company began offering a subscription option to its customers pursuant to which it leases its PrintRite3D platform for terms of between 12 and 36 months and provide technical support and maintenance for the term of the arrangement, as well as installation and training. The Company has determined these are leases because they relate to discrete pieces of equipment to which customers have the right to substantially all the economic benefit ~~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~~six months ended ~~September~~June 30, ~~2022~~2023 was $~~2,834~~11,337 and $~~17,006~~28,343.

Accounts Receivable and Allowance for Doubtful Accounts - Trade accounts receivable are carried at original invoice amount less an estimated allowance for doubtful accounts. We determine the allowance for doubtful accounts by identifying potential troubled accounts and by using historical experience and future expectations applied to an aging of accounts. Trade accounts receivable are written off when deemed uncollectible. Recoveries of trade accounts receivable previously written off are recorded as income when received. As of June 30, 2023 and June 30, 2022, the Company has established an allowance for doubtful accounts of $115,600 and $0, respectively.

910

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)			$	17,006
2024		-		8,503
2025 and thereafter		-
2025				-
2026				-
Thereafter				-
Total	$	17,006	$	25,509

Equipment Underlying Operating Leases:

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

Schedule of Assets underlying Operating Leases

	September 30, 2022		June 30, 2023
PrintRite 3D Hardware	$	38,949
PrintRite3D Hardware			$	77,208
Accumulated Depreciation		4,173		(12,445	)
Net Book Value	$	34,776	$	64,763

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

NOTE 2 – Inventory

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

Schedule of Inventory

	September 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Raw Materials	$	264,558	$	202,015	$	257,714	$	294,194
Work in Process		420,420		224,079		165,777		140,723
Finished Goods		282,454		283,986		516,543		516,026
Total Inventory	$	967,432	$	710,080	$	940,034	$	950,943

NOTE 3 – Intangible Assets

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

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

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

During ~~2022,~~the six months ended June 30, 2023, $~~126,231~~ 27,571of costs related to patents issued ~~to us~~ during ~~2022~~the quarter 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~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively:

Summary of Definite-life Intangible Assets and Accumulated Amortization

	September 30, 2022			December 31, 2021			June 30, 2023			December 31, 2022
Provisional Patent Applications	$	725,164		$	675,291		$	752,802		$	675,251
Patents		426,601			300,370			552,321			524,750
Less: Accumulated Amortization		(67,560	)		(50,550	)		(89,712	)		(74,716	)

Net Intangible Assets	$	1,084,205		$	925,111		$	1,215,411		$	1,125,285

Amortization expense on intangible assets was $~~17,010~~14,996 and $~~22,998~~10,993 for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, 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)	$	15,596
2024		31,192
2025		31,192
2026		31,192
Thereafter		353,437

Intangible asset and amortization expense	$	462,609

NOTE 54 - Stockholders’ Equity

Common Stock

~~On May 24, 2021, at a Special Stockholders Meeting, our stockholders approved an increase in~~In the ~~authorized~~second quarter of 2023, the Company did not issue any shares of common ~~stock from~~ ~~12,000,000~~ to ~~24,000,000~~.stock.

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~~June 30, ~~2022~~2023 and December 31, ~~2021.~~2022, respectively.

In January 2020, the Company entered into a Securities Purchase Agreement with certain institutional investors (the “Institutional Private Placement”), pursuant to which the Company issued and sold 1,640 shares of the Company’s newly created Series D Convertible Preferred Stock (the “Series D Preferred Stock”) at an initial stated value of $1,000per 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, which resulted in the issuance of 270,828. shares of common stock.

At ~~September~~June 30, ~~2022,~~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, which resulted in the issuance of 3,083 shares of common stock.

At ~~September~~June 30, ~~2022,~~2023, ~~333~~316 shares of Series E Preferred Stock were outstanding, which ~~if converted as of September 30, 2022, including the make-whole dividends, would result in the issuance of~~were convertible into ~~61,651~~60,332 shares of common ~~stock.~~stock, including in-kind dividends thereon.

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 June 30, 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~~June 30, ~~2022,~~2023, ~~75%~~50% of such grants were fully vested and exercisable, and the remaining ~~25%~~50% will vest ~~on December 31, 2022~~in equal quarterly installments over the remaining two 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~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 was $~~613,833~~363,339 and $~~893,431~~338,415 respectively, all of which is related to stock options.

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

Schedule of Share Based Payments Award Stock Options Valuation Assumptions

	2022			2021			2023			2022
Dividend yield		0.00	%		0.00	%		0.00	%		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	%		100.23-100.25	%		106.4-110.0	%
Expected life (in years)		5			5			5			5

Option activity for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~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 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 -
Granted 433,973 2.50 4.64 -
Exercised - - - -
Forfeited or cancelled (44,913 ) 4.21 - -
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			Weighted Average Exercise Price ($)		Weighted Average Remaining Contractual Life (Yrs.)		Aggregate Intrinsic Value ($)

Options outstanding at December 31, 2021		1,395,882			4.24		3.89		-
Granted		487,473			2.50		4.43		-
Exercised		-			-		-		-
Forfeited or cancelled		(84,302	)		4.39		-		-
Options outstanding at December 31, 2022		1,799,053			3.76		3.30		-
Granted		433,665			0.58		4.58		-
Exercised		-			-		-		-
Forfeited or cancelled		(335,059	)		3.60		-		-
Options outstanding at June 30, 2023		1,897,659			3.07		3.21		-
Options expected to vest in the future as of June 30, 2023		409,974			1.93		4.03		-
Options exercisable at June 30, 2023		1,487,685			3.38		2.98		-
Options vested, exercisable, and options expected to vest at June 30, 2023		1,897,659			3.07		3.21		-

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the market price of our common stock for those awards that have an exercise price below the market price of our common stock. At ~~September~~June 30, ~~2022,~~2023, no option had an exercise price below the $~~0.815~~ 0.35closing price of our common stock as reported on The Nasdaq Capital Market.

At ~~September~~June 30, ~~2022,~~2023, there was $~~908,588~~387,351 of unrecognized stock-based compensation expense related to unvested stock options with a weighted average remaining recognition period of ~~2.0~~1.42 years.

Stock Appreciation Rights

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

~~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~~six months ended ~~September~~June 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~~six months ended ~~September~~June 30, ~~2022~~2023 and the year ended December 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		-		0.82-2.79	%
Expected volatility		-		108.0-119.0	%
Expected life (in years)		-		5

SARs activity for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~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			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		-		370,624			3.15		4.24		-
Granted		814,862		1.81		4.73		-		814,862			1.81		4.48		-
Exercised		-		-		-		-		-			-		-		-
Forfeited or cancelled		-		-		-		-		(27,699	)		2.91		-		-
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		-
SARs outstanding at December 31, 2022										1,157,787			2.21		4.11		-
Granted										-			-		-		-
Exercised										-			-		-		-
Forfeited or cancelled										(328,822	)		2.10		-		-
SARs outstanding June 30, 2023										828,965			2.26		3.63		-
SARs expected to vest in the future as of June 30, 2023										530,678			2.02		3.85		-
SARs exercisable at June 30, 2023										298,287			2.68		3.24		-
SARs vested, and exercisable, and SARs expected to vest at June 30, 2023										828,965			2.26		3.63		-

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the market price of our common stock for those awards that have an exercise price below the market price of our common stock. At ~~September~~June 30, ~~2022,~~2023, no SAR had an exercise price below the $~~0.815~~0.35 closing price of our common stock as reported on The Nasdaq Capital ~~Market~~Market..

At ~~September~~June 30, ~~2022,~~2023, there was $~~1,128,615~~474,228 of unrecognized stock-based compensation expense related to unvested SARs with a weighted average remaining recognition period of ~~2.38~~1.75 years.

Warrants

Warrant activity for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~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		2.62
Exercised									-			-		-
Forfeited or cancelled									(2,412,086	)		4.54		-
Warrants outstanding at June 30, 2023									2,902,089			2.08		2.34

NOTE 65 - Subsequent Events

~~On October 14, 2022,~~In July 2023, the Company ~~received notice~~realized gross proceeds of approximately $135,000 from ~~The Nasdaq Stock Market (“Nasdaq”~~the sale of equipment.

On July 14, 2023, the employment of Stephan Kuehr, General Manager of European Operations, terminated.

On August 14, 2023, the Company entered into an At-the-Market Issuance Sales Agreement (the “Sales Agreement”) ~~that~~with Lake Street Capital Markets, LLC, or Lake Street, pursuant to which the ~~closing bid price for~~Company may issue and sell from time to time through Lake Street, as sales agent, shares of our common stock ~~had been below~~having an aggregate offering price of up to $~~1.00~~ 1,500,000~~per share for 30 consecutive business days,~~ (the “Offering”). The Offering is being made pursuant to a prospectus supplement filed with the Securities and ~~that~~Exchange Commission in connection with the Offering under its Registration Statement on Form S-3 (File No. 333-257054), which became effective on June 29, 2021, and the base prospectus contained therein.

Upon delivery of a placement notice, and subject to the terms and conditions of the Sales Agreement, Lake Street as sales agent may sell shares of common stock by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended. The sales agent is not required to purchase any shares of common stock from the Company ~~therefore is not~~or sell any specific number or dollar amount of common stock but will use its commercially reasonable efforts consistent with its normal trading and sales practices as our agent to sell shares of common stock in ~~compliance with~~ the minimum bid price requirement for continued inclusion on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2). The notice indicates that the Company has 180 calendar days, or until April 12, 2023, to regain compliance with this requirement. The Company may also be eligible for an additional 180 calendar days to regain compliance.Offering as instructed by us.

The Company ~~believes that it will regain compliance with~~or Lake Street may suspend or terminate the $~~1.00~~ ~~minimum bid price requirement.~~Offering upon notice to the other and subject to other conditions.

The Company has agreed to pay Lake Street a commission of 3.0% of gross proceeds from the Offering and to reimburse Lake Street for certain expenses. The Company has also agreed to afford Lake Street customary indemnification and contribution rights.

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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~~a possible strategic transaction, dissolution and ~~commercialization of our technology, any projections of revenues~~liquidation or ~~statements regarding our anticipated revenues or other financial items, any statements~~bankruptcy 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.Company. 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.

1617

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. As of June 30, 2023 and June 30, 2022, the Company has established an allowance for doubtful accounts of $115,600 and $0, respectively.

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

Sigma Additive Solutions, Inc. (“Sigma,” “we,” “us,” “our” and the “Company”) was founded by a group of scientists, engineers and businesspeople to develop and commercialize novel and unique manufacturing and materials technologies. The Company anticipated that its core technologies would 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.

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,~~In 2022, has been a year 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 hardware providers, such as our recently announced relationship with a laser scanner provider.

We began offering our current PrintRite3D integrated hardware and software solution on a subscription basis, ~~in 2022. Among other things, at present the change~~which 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~~was 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. ~~Our ability to generate revenues~~

On March 1, 2023, we announced that we had retained Lake Street Capital Markets as our financial advisor in ~~the future will depend on our ability to further commercialize and increase market presence of our traditional PrintRite3D® technology, along~~connection 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 ourconsideration of a range of strategic alternatives, including a possible strategic investment, acquisition, merger, 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.~~combination, or similar transaction.

In ~~connection~~our Current Report on Form 8-K filed with ~~this shift,~~the SEC on July 20, 2023, we reported that we had received four written, non-binding proposals to purchase assets or acquire the company in a merger or reverse merger and were in talks regarding the respective proposals, as well as possible alternative transactions with other parties that expressed interest in a possible transaction as we worked to formally close our strategic transaction process. We also reported that we had reduced our employee headcount invia furloughs and layoffs to five employees, including our President and Chief Executive Officer and Chief Financial Officer and two key employees considered important to a possible sale of the ~~third quarter by~~company or all or a ~~net~~portion of ~~five employees. With a further reduction~~its assets and support of ~~two employees in October,~~current customers, and had discontinued 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~~product development activities and ceased to ~~hire one or two~~pursue new ~~employees to fill open positions in the near-term, we expect our headcount will be stable for the next twelve to eighteen months.~~customers. See “Liquidity and Capital Resources,” below.

~~As part~~Since the filing of ~~our vision to build~~ the ~~future of connected digital quality,~~Current Report, we have ~~undertaken an initiative~~received additional written, non-binding proposals as well as revised previous proposals 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 years, Sigma has invested its resources to solve the problem of in-process AM quality: melt pool analytics for the “part”. This remained a retrofit lab solution until the last eight months. 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.

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 allows for common growth, vision, and fundingpurchase certain assets of the Company or acquire the Company in a merger or reverse merger. Although we have not yet entered into any definitive agreements, we are continuing to ~~achieve its mission, but also provides an opportunity~~work towards such definitive agreements with interested parties. See “Risk Factors,” below for ~~other strategic relationships, including potential acquisitions that can further accelerate the execution~~a discussion of ~~our digital quality vision.~~certain risks and uncertainties regarding a possible transaction.

Results of Operations

Three Months Ended ~~September~~June 30, ~~2022~~2023 and ~~September~~June 30, ~~2021~~2022

During the three months ended ~~September~~June 30, ~~2022,~~2023, we recognized revenue of ~~$188,245,~~$97,043, as compared to ~~$700,237~~$ 236,660 in the same period in ~~2021,~~2022, a decrease of ~~$511,992,~~$139,617, or ~~72.7%~~59%. The decrease was ~~primarily~~ due to ~~lower PrintRite3D® unit~~decreased PrintRite3D sales of ~~$511,870, the shift to subscription-based sales, and a decrease in contract additive manufacturing revenue of $11,190, partially offset by an increase in~~$111,200, decreased annual maintenance contract ~~renewals in the third quarter~~revenue of ~~2022~~$7,739, decreased RTE revenue of ~~$11,068,~~$5,300 and decreased on-site development and support of 44,044 as compared to the ~~third~~second quarter of ~~2021.~~2022. Partially offsetting the decreases were increases in PrintRite3D lease revenue of $3,166 and in PrintRite3D consulting services of $25,500.

Our cost of revenue for the three months ended ~~September~~June 30, ~~2022~~2023 was ~~$79,713,~~$36,491, as compared to ~~$164,766~~$193,075 for the same period in ~~2021,~~2022, a decrease of ~~$85,053,~~$156,584, or ~~51.6%~~81%. The decrease e was primarily attributable to ~~lower~~fewer unit sales and installations in the ~~quarter.~~second quarter of 2023 as compared to the second quarter of 2022.

Our total operating expenses for the three months ended ~~September~~June 30, ~~2022~~2023 were ~~$2,392,596,~~$1,364,571, as compared to ~~$3,026,888~~$2,279,425 for the same period in ~~2021, an~~2022, a decrease of ~~$633,932,~~$914,854, or ~~20.9%~~40%. The decrease was primarily attributable to a decrease in ~~stock-based compensation expense~~salaries and benefits of ~~$384,093,~~$630,636, a decrease in investor, public relations, and marketing expense of ~~$72,790,~~$94,475, and a decrease in ~~organization costs~~office expense of ~~$201,590~~$209,410 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~~$554,182 for the three months ended ~~September~~June 30, ~~2022,~~2023, as compared to ~~$1,222,760~~$ 1,184,818 for the same period in ~~2021, an increase~~2022, a decrease of ~~$5,045,~~$630,636, or ~~0.4%~~53%. The ~~increase~~decrease was comprised of: (a) ~~$100,125~~decreased salaries of ~~salary increases for existing employees~~$499,473 attributable to furloughed and ~~two new hires;~~terminated employees; (b) ~~an increase in severance costs~~a decrease commission and bonus expense of ~~$88,379; and (d) increased~~$93,664 due to the reversal of 2022 year-end bonuses; (c) decreased taxes and benefits of ~~$18,737.~~$75,835; and (d) decreased severance expense of $2,035. Offsetting these ~~increases~~decreases was ~~a decrease~~an increase in ~~SAR expense~~stock appreciation rights of ~~$196,766 resulting from the September 30, 2022 revaluation due to the decrease in our stock price, and a decrease in employee commissions and bonuses of $5,429.~~$40,371.

Stock-based compensation was ~~$275,418~~$138,489 for the three months ended ~~September~~June 30, ~~2022,~~2023, as compared to ~~$659,512~~$167,439 for the same period in ~~2021,~~2022, a decrease of ~~$384,094,~~$28,950, or ~~58.2%~~17%. This decrease was primarily a result of ~~the expense related to~~forfeiture of options ~~awarded to new employees and annual option grants awarded to other employees in the third quarter of 2021.~~from former employees.

We incurred operations and research and development costs of ~~$152,245~~$105,259 during the three months ended ~~September~~June 30, ~~2022,~~2023, as compared to ~~$131,772~~$146,885 in the same period in 2022, a decrease of ~~2021, an increase of $20,473,~~$41,626, or ~~15.5%~~28%. The ~~increase~~decrease was ~~primarily~~ due to ~~an increase in research and development expenses of $27,430, partially offset by~~ a decrease in operations costs of ~~$6,614. The increase~~$14,755, and a decrease in research and development expenses was attributable to an increase in consulting expenses of $14,930 in connection with ongoing PrintRite3D software 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.~~$26,871. The decrease in operations costs related to ~~charges~~fewer parts and material purchases in the ~~third~~second quarter of ~~2021 for inventory obsolescence~~2023. The decrease in research and ~~purchases~~development costs was primarily due to suspending consulting work with a third-party software vendor in connection with the development of ~~parts and materials.~~our software-only product suite.

We incurred investor, public relations, and marketing costs of ~~$46,832~~$57,824 during the three months ended ~~September~~June 30, ~~2022,~~2023, as compared to ~~$119,622~~$152,300 during the same period in ~~2021.~~2022. The decrease of ~~$72,790,~~$94,476, or ~~60.9%~~62%, 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~~$35,212, a decrease in attendance at tradeshows and conferences of $48,094 due to ~~decreased consulting fees~~fewer employees, and ~~revaluation~~a decrease in marketing costs of ~~outstanding SARs held by consultants.~~$11,170.

We incurred organization costs of ~~$140,522~~$38,240 during the three months ended ~~September~~June 30, ~~2022,~~2023, as compared to ~~$342,112~~$60,817 during the same period in ~~2021.~~2022. The decrease of ~~$201,590,~~$22,577, or ~~58.9%~~37%, was primarily attributable to a decrease in non-employee director compensation of ~~$234,154 as compared~~$15,926 primarily due to fewer stock options ~~grants~~granted in ~~the same period~~2023 and a decrease in ~~2021, partially offset by an increase in directors cash compensation. Offsetting this decrease was an increase due to a timing difference~~shareholder services of ~~$33,909 resulting from expense recognized in the second quarter of 2021 as our annual stockholders meeting was held earlier in 2021 than in 2022.~~$5,966.

Legal and professional fees incurred in the three months ended ~~September~~June 30, ~~2022~~2023 were ~~$252,886,~~$152,025, as compared to ~~$261,075~~$144,528 incurred during the same period in ~~2021, a decrease~~2022, an increase of ~~$8,189,~~$7,497, or ~~3.1%~~5%. This ~~decrease~~increase was a result of legal fees of $64,410 due to employment related matters, and legal and financial advisors engaged to assist in Sigma’s evaluation of a corporate transaction. Partially offsetting the increase was a decrease in consulting expenses from 2022 of $48,929 which were related to a manufacturing consultant, technical accounting support, HR consultant, and advisor to the Board of Directors, a decrease in accounting expenses of ~~$18,118,~~$3,555 and a decrease in ~~consulting expenses~~IT service fees of ~~$46,147 primarily due~~$4,429 related to ~~stock option grant and the reclassification of a consulting expense to research and development in 2021. Partially offsetting these decreases was an increase in recruiting expenses of $17,444 for~~ new ~~hires, an increase in legal expenses of $39,487 as a result of a timing difference in the move of our annual stockholders meeting from the second quarter in 2021 to the third quarter~~employee setup fees in 2022.

Office expenses for the three months ended ~~September~~June 30, ~~2022~~2023, were ~~$183,608~~$94,190 as compared to ~~$172,238~~$303,600 for the same period in ~~2021, an increase~~2022, a decrease of ~~$11,370,~~$209,410, or ~~6.6%~~69%. 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~~$151,630; (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~~$4,503; (c) decreased dues & subscriptions of ~~$6,514 for new customer relationship management, product lifecycle management,~~$8,990; (d) decreased payroll services expense of $7,223; (e) decreased rent and ~~project management software. Partially offsetting these increases was: (a) a decrease in postage~~utilities of $11,534; and ~~shipping of $8,093; (b) a decrease in office supplies of $2,645; and (c) and a decrease in~~(f) decreased training and education expense of ~~$5,368.~~$27,705. These decreases were the result of a reduction in the number of employees and no company-wide conference being held in 2023. Partially offsetting these decreases was an increase in postage and shipping expenses of $2,175 due to shipment of a PrintRite3D system to one of our partners in Europe.

Depreciation and amortization expense for the three months ended ~~September~~June 30, ~~2022 totaled $26,857,~~2023 was $21,470, as compared to ~~$27,689~~$29,861 for the same period in ~~2021, an increase~~2022, a decrease of ~~$832,~~$8,391, or ~~7.2%~~28%. 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~~$202,892 for the three months ended ~~September~~June 30, ~~2022,~~2023, as compared to ~~$90,108~~$89,177 for the same period in ~~2021.~~2022. The ~~$3,326 decrease~~$113,715 increase was primarily due to ~~credit card transaction fees~~bad debt expense of $115,600 related to a customer receivable for which collectability is in ~~September 2021, as compared to none in the third quarter of 2022, partially offset by an increase in insurance premiums.~~doubt.

In the three months ended ~~September~~June 30, ~~2022,~~2023, we realized net other ~~expenses~~expense of ~~$7,884,~~$4,075, as compared to net other ~~income~~expense of ~~$439~~$11,330 in ~~2021.~~the same period in 2022. The ~~increase~~decrease in net other ~~expenses~~expense of ~~$8,323,~~$7,255, was primarily due to alower foreign ~~currency~~ exchange ~~loss~~rate losses in ~~2022~~2023.

Preferred dividends for the three months ended June 30, 2023 were $10,668, as compared to $14,220 for the same period in 2022. The decrease was due to ~~the strengthening~~fewer outstanding shares of ~~the US dollar against the Euro.~~preferred stock as a result of conversions to common shares.

Our net loss applicable to common stockholders for the three months ended ~~September~~June 30, ~~2022~~2023, was ~~$2,306,528,~~$1,318,782 as compared to ~~$2,505,198~~$2,261,390 for the same period ~~of 2021,~~in 2022, a decrease of ~~$198,670,~~$942,608, or ~~7.9%~~42%. The decrease was primarily due to the decrease in the loss from operations of ~~$206,993, partially offset by an increase~~$931,821, a decrease in ~~net~~preferred dividends of $3,533, and a decrease in total other ~~expense~~expenses of ~~$8,323.~~$7,255.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~September~~June 30, ~~2021~~2022

During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, we recognized revenue of ~~$476,749,~~$227,202, as compared to ~~$1,302,525~~$ 288,504 in the same period in ~~2021,~~2022, a decrease of ~~$825,776,~~$61,302, or ~~63.4%~~21%. The decrease was ~~primarily~~ due to ~~a decrease in~~decreased PrintRite3D sales of ~~our PrintRite3D® units of $919,355,~~$49,701, 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.~~$5,829, and decreased on-site development and support of $56,043 as compared to the second quarter of 2022. Partially offsetting the decreases were an increase in PrintRite3D lease revenue of $14,171, an increase in PrintRite3D consulting services of $25,500, and an increase in RTE revenue of $10,600.

Our cost of revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was ~~$312,879,~~$100,155, as compared to ~~$409,493~~$ 233,166 for the same period in ~~2021,~~2022, a decrease of ~~$96,614,~~$133,011, or ~~23.6%~~57%. The decrease was primarily attributable to fewer unit sales and installations in ~~2022 partially offset by increased travel costs incurred related~~the second quarter of 2023 as compared to ~~installations from 2021 sales.~~the second quarter of 2022.

Our total operating expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 were ~~$6,968,079,~~$3,212,715, as compared to ~~$6,976,944~~$4,575,123 for the same period in ~~2021, an~~2022, a decrease of ~~$8,865.~~$1,362,408, or 30%. The decrease was primarily attributable to a decrease in ~~stock-based compensation for employees, executives,~~salaries and ~~board members,~~benefits of $991,064, a decrease in ~~operating~~investor, public relations, and ~~R&D costs, partially offset by increases~~marketing expense of $133,857, and a decrease in ~~salary~~office expense of $260,343 primarily attributable to reduced headcount and ~~benefits, office expenses due to a company-wide global conference held in May of 2022, and increased~~ travel ~~in 2022~~ as further described below.

Salary and benefits costs were ~~$3,704,633~~$1,485,764 for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, as compared to ~~$3,055,279~~$ 2,476,828 for the same period in ~~2021, an increase~~2022, a decrease of ~~$649,354,~~$991,064, or ~~21.3%~~40%. The ~~increase~~decrease was comprised of: (a) ~~$617,977 in employee salary increases~~decreased salaries of $812,160 attributable to furloughed and ~~average full-time employee headcount increasing by five;~~terminated employees; (b) a ~~$115,768 increase in severance~~decrease commission and bonus expense of $75,958 due to the ~~termination~~reversal of ~~employment of six employees; and~~2022 year-end bonuses; (c) ~~increased~~decreased taxes and benefits of ~~$206,257.~~$126,325; (d) decreased stock appreciation rights expense of $22,331 due to quarterly revaluation at March and June 2023. Partially offsetting these ~~increases~~decreases was ~~a decrease~~an increase in ~~commissions~~severance expense of ~~$38,682 due to fewer unit sales and a decrease in SARs of $251,965 due to revaluations resulting from a decrease in our stock price.~~$45,710.

Stock-based compensation was ~~$613,833~~$363,339 for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, as compared to ~~$893,431~~$338,415 for the same period in ~~2021,~~2022, a decrease of ~~$279,597~~$24,924, or ~~31.3%~~7%. This decrease was primarily ~~due to the expense related to~~a result of forfeiture of options ~~granted to new employees and annual option grants awarded to other employees in the third quarter of 2021.~~from former employees.

We incurred operations and research and development costs of ~~$442,548~~$231,971 during the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, as compared to ~~$608,812~~$290,303 in the same period ~~of 2021,~~in 2022, a decrease of ~~$166,266,~~$58,332, or ~~27.3%~~20%. The decrease was ~~primarily~~ due to a decrease in operations costs of ~~$133,827~~$56,840, and a decrease in research and development costs of ~~$32,439.~~$1,492. 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 incosts related to fewer parts and material purchases ~~of $77,374~~ in the ~~first nine months~~second quarter of ~~2022; and (d) a decrease in purchase of lab supplies of $2,212.~~2023. The decrease in research and development costs was primarily due to ~~expenses associated~~suspending consulting work with a ~~simulation project in 2021 of $95,461, partially offset by an increase in consulting costs of $43,022~~third-party software vendor in connection with ~~ongoing PrintRite3D software~~the development ~~and $20,000 for research on laser application~~ of ~~PrintRite3D for a new OEM.~~our software-only product suite.

We incurred investor, public relations, and marketing ~~expenses~~costs of ~~$293,458~~$112,768 during the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, as compared to ~~$342,725~~$246,626 during the same period in ~~2021.~~2022. The decrease of ~~$49,267,~~$133,856, or ~~14.4%~~54%, was primarily due to a decrease in investor relations consulting costs of ~~$62,741 resulting from~~$70,212, 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.~~tradeshows and conferences of $50,978 due to fewer employees, and a decrease in marketing costs of $12,666.

We incurred organization costs of ~~$260,088~~$89,438 during the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, as compared to ~~$578,256~~$119,566 during the same period in ~~2021.~~2022. The decrease of ~~$318,268,~~$30,128, or ~~55%,~~25% 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~~non-employee director compensation of ~~$43,304,~~$29,920 primarily due to ~~expenses incurred~~fewer stock options granted in ~~2021~~2023 and a decrease in ~~connection with a special stockholders meeting.~~shareholder services of $872.

Legal and professional fees incurred in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 were ~~$608,830,~~$336,276, as compared to ~~$681,941~~$355,944 incurred during the same period in ~~2021,~~2022, a decrease of ~~$73,111,~~$19,668, or ~~10.7%~~6%. This decrease was ~~primarily~~ a result of a decrease in ~~legal~~consulting expenses from 2022 of ~~$21,403 due to one less stockholder meeting and fewer regulatory filings, a decrease in recruiting expenses of $73,223~~$174,434 which were related to ~~new hires in 2021,~~a manufacturing consultant, technical accounting support, HR consultant, and an advisor to the Board of Directors, and a decrease in IT service fees of $7,158 related to new employee setup fees in 2022. Partially offsetting these decreases were an increase in legal fees of $155,875 due to employment related matters and legal and financial advisors engaged to assist in Sigma’s evaluation of strategic corporate transactions, and an increase 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.$6,049.

Office expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023, were ~~$692,640,~~$248,689 as compared to ~~$472,335~~$509,032 for the same period in ~~2021, an increase~~2022, a decrease of ~~$220,305,~~$260,343, or ~~46.6%~~51%. The ~~increase~~decrease resulted primarily from:(a) decreased 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~~$176,243; (b) decreased office supply expenses of ~~2022;~~$20,156; (c) ~~an increase in payroll service fees of $12,867 related to new hires; (d)~~decreased 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$12,680; (d) decreased payroll services expense of ~~$9,262.~~$4,102; (e) decreased rent and utilities of $13,607; and (f) decreased training and education expense of $32,570. These decreases were all the result of a reduction in the number of employees and no company-wide conference being held in 2023.

Depreciation and amortization expense for the ~~nine~~six months ended ~~September~~June 30, ~~2022 totaled $88,302~~2023 was $49,597, as compared to ~~$76,502~~$61,445 for the same period in ~~2021, an increase~~2022, a decrease of ~~$11,800,~~$11,848, or ~~15.4%~~19%. The ~~increase~~decrease was primarily ~~due to depreciation expense on~~the result of the increased life expectancy of our leased and consigned PrintRite3D ~~units leased under our subscription-based program.~~systems.

Other operating expenses were ~~$263,747~~$294,873 for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, as compared to ~~$267,663~~$176,964 for the same period in ~~2021,~~2022. The $117,909 increase was primarily due to bad debt expense of $115,600 related to a ~~decrease of $3,916. The decrease was due to: (a) a decrease~~customer receivable for which collectability is 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.doubt.

In the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, we realized net other income of ~~$57,336,~~$25,874, as compared to net other income of ~~$1,096,727~~$65,220 in ~~2021.~~the same period in 2022. The decrease in net other income of ~~$1,039,391, or 94.8%,~~$39,346, was primarily due to ~~a gain~~the New Mexico High Wage Tax credit 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~~$76,628 received in 2022, partially offset by a write-off of accounts payable 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~~unclaimed customer deposit in the first quarter of 2023.

Preferred dividends for the six months ended June 30, 2023 were $22,435, as compared to $28,440 for the same period in 2022. The decrease was due to fewer outstanding shares of preferred stock as a result of conversions to common shares.

Our net loss applicable to common stockholders for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023, was ~~$6,789,533,~~$3,082,229 as compared to ~~$5,076,532~~$4,483,005 for the same period in 2022, a decrease of ~~2021, a $1,713,001 increase.~~$1,400,776, or 31%. The ~~increase~~decrease was primarily due to ~~an increased~~the decrease in the loss from operations of ~~$720,297~~$1,434,117, and a decrease in ~~other income~~preferred dividends of ~~$1,039,391,~~$6,005, partially offset by a decrease in ~~preferred dividends~~total other income of ~~$46,687.~~$39,346.

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~~June 30, ~~2022,~~2023, we had ~~$4,800,680~~$368,443 in cash and working capital of ~~$5,492,725,~~$948,091, 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~~As we reported in our Current Report on Form 8-K filed with the Securities and ~~private offerings of our equity securities and from warrant exercises.~~

~~On March 26, 2021,~~Exchange Commission on July 20, 2023, 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~~estimates that it has sufficient cash and working capital to fund its scaled-back operations as described below through August 2023 only. Since June 30, 2023, the Company ~~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~~has reduced its employee headcount 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 to fund our anticipated operating costs and capital expenditure requirements through at least the first quarter of 2023. The Company is currently engaged in identifying sources of financing either in the form of equity or debt or a combination thereof. No assurance can be given as to the availability of such financing, or, if available, that such financing would be on terms acceptable to the Company.

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.~~

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 ourfive, discontinued all product 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~~ceased to pursue new customers. We continue to explore a possible reverse merger, sale of the ~~COVID-19 epidemic, in particular the shortage~~Company or all or a portion of ~~certain components of our PrintRite3D systems,~~its assets, and other alternatives. There is ~~highly uncertain and~~ no assurance, ~~can~~however, that we will be ~~given that our business and results~~able to enter into a definitive agreement with respect to a possible transaction or sell the company or any of ~~operations will not be materially and adversely affected. It is also uncertain as~~its assets or, if so, when or on what terms. If we fail to ~~whether any further disruption~~complete the sale of the ~~financial markets, which may reduce~~Company or its assets or other strategic transaction in the immediate future, we will be forced to resort to the dissolution and liquidation or bankruptcy of the Company. For these reasons, there is substantial doubt about our ability to 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~~continue as 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.~~going concern.

Net Cash Used in Operating Activities

Net cash used in operating activities during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was ~~$6,386,415~~$2,414,881 as compared to ~~$4,786,590~~$4,314,503 during the same period in ~~2021, an increase~~2022, a decrease of ~~$1,599,825,~~$1,899,622, or ~~33%~~44.0%. ~~Contributing to this increase~~

During the six months ended June 30, 2023, the net cash used in operating activities was ~~an increase in~~the result of a net loss ~~adjusted for~~of $3,059,794 before preferred dividends, partially offset by changes in working capital of $218,943, and non-cash expenses of ~~$1,373,377,~~$425,970 related to depreciation and amortization of $49,597 and stock-based compensation of $376,373. Changes in working capital were driven by a decrease in accounts ~~payable and accrued expenses~~receivable of ~~$469,397,~~$326,166, a decrease in inventory of $10,909, an increase in ~~inventory purchases~~accounts payable of ~~$60,456, an increase in prepaid expenses of $49,506,~~$23,070, and an increase in deferred revenue of ~~$26,689. Partially offsetting these increases~~$7,115, partially offset by an increase in prepaid expenses of $31,879 and a decrease in accrued expenses of 116,438, primarily as a result of the reversal of bonus expense accrued in 2022. The decrease in accounts receivable was a result of cash collections from 2022 sales and the establishment of an allowance for doubtful accounts of $115,600, 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 six months ended June 30, 2022, the net cash used in operating activities was the result of a net loss of $4,454,565 before preferred dividends and the use of cash for working capital of $327,730, partially offset non-cash expenses of $466,792 related to depreciation and amortization of $61,445 and stock-based compensation of $405,347. Changes in working capital were driven by an increase in inventory of $73,586, an increase in prepaid expenses of $17,197, a decrease in deferred revenue of $18,151, and a decrease in accrued expenses of $372,188 partially offset by a decrease in accounts receivable of ~~$379,600.~~$120,434 and an increase in accounts payable of $33,958. The decrease in accrued expenses was largely driven by the payment of incentive bonuses, and the decrease in accounts receivable was a result of cash collections from 2021 sales. 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~~six months ended ~~September~~June 30, ~~2022~~2023 was ~~$259,952,~~$62,607, which compares to ~~$254,772~~$199,045 of cash used in investing activities during the same period of ~~2021, an increase~~2022, a decrease of ~~$5,180,~~$136,438, or 2%68.6%. The ~~increase~~decrease resulted from ~~an increase~~a decrease in patent costs of ~~$37,963, partially offset by~~$10,074 and a decrease in purchases of property, plant and equipment of ~~$32,783~~$126,364 during the first ~~nine~~six 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~~six months ended ~~September~~June 30, ~~2022. Cash provided by financing activities during the nine months ended September~~2023 or June 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.2022.

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. On August 14, 2023, the Company entered into an At-the-Market Issuance Sales Agreement (the “Sales Agreement”) with Lake Street Capital Markets, LLC, or Lake Street, pursuant to which the Company may issue and sell from time to time through Lake Street, as sales agent, shares of our common stock having an aggregate offering price of up to $1,500,000 (the “Offering”). 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.~~from this Sales Agreement.

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~~six months ended ~~September~~June 30, ~~2022~~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:

We have ceased all but essential business and operations while we pursue a possible strategic transaction.

We recently reduced our employee headcount via furloughs and layoffs to five employees, including our President and Chief Executive Officer and Chief Financial Officer and two key employees considered important to a possible sale of the company or all or a portion of its assets and support of current customers. We also have discontinued all product development activities and ceased to pursue new customers. As of July 31, 2023, we had cash on hand of approximately $365,489 including $135,000 of proceeds from the recent sale of equipment, which we believe will be sufficient to support our current customers and pay employee costs and other anticipated expenses through August 31, 2023. In the meantime, we continue to explore a possible reverse merger, sale of the company or all or a portion of its assets, and other alternatives.

There is no assurance that we will be able to enter into a definitive agreement with respect to a possible transaction or sell the company or any of its assets or, if so, on what terms, or avoid our dissolution and liquidation or bankruptcy.

We have received several written, non-binding proposals to purchase selected assets of the company or acquire the company in a merger or reverse merger and are in talks regarding the respective proposals. As of this date, we have not entered into a definitive agreement regarding a possible transaction and there is no assurance, that we will be able to enter into a definitive agreement with respect to a possible transaction or sell the company or any of its assets or, if so, when, or on what terms, or avoid our dissolution and liquidation or bankruptcy.

If we are unable to sell the company or its assets through one or more transactions, we will require additional financing to continue our operations, and there is substantial doubt regarding our ability to continue as a going concern.

We believe our cash on hand of approximately $365,489, including $135,000 of proceeds from the recent sale of equipment, and anticipated revenues, each as of July 31, 2023, are sufficient to fund our remaining anticipated operating costs and capital expenditure requirements only through August 31, 2023. If we are unable to sell the company or its assets through one or more transactions, we will need to raise additional financing to fund our operations, maintain compliance with NASDAQ listing requirements and continue our business operations. Except for the sales agreement with the sales agent in connection with our At-the Market offering, we have no current understanding or arrangement to obtain any additional financing. In light of the foregoing, there is substantial doubt our ability to continue as a going concern and the report of our registered independent public accounting firm on our financial statements as of and for the year ended December 31, 2022 contains a going concern qualification.

We may be unable to protect our intellectual property rights.

Our success depends in part on the ability to protect our intellectual property and proprietary technology, and the enforcement of intellectual property rights is subject to considerable uncertainty and can be expensive and time-consuming. For example, we recently notified two companies that we believe their respective products use our patented technology and offered to discuss their licensing of our technology. We have received no constructive response to our offer, however, and no decision has been made with respect to any further action to address these matters.

There is no assurance that we will satisfy NASDAQ’s continued listing requirements, and our common stock could be delisted.

On October 14, 2022, NASDAQ notified us that the closing bid price for our common stock had been below $1.00 per share for 30 consecutive business days, and that the Company therefore is not in compliance with the minimum bid price requirement for continued inclusion on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2). The notice indicated that the Company has 180 calendar days, or until April 12, 2023, to regain compliance with this requirement.

Although our common stock had not regained compliance with the minimum $1.00 bid price per share requirement, on April 13, 2023, NASDAQ notified us that it had granted us an additional 180 days, or until October 9, 2023, to regain compliance with Nasdaq Listing Rule 550(a)(2), based on our meeting the continued listing requirements for market value of publicly held shares and all other applicable requirements for initial listing on NASDAQ, with the exception of the bid price requirement, and our written notice of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. According to NASDAQ’s notice, if at any time during this additional time period the closing bid price of shares of our common stock is at least $1.00 for a minimum of 10 consecutive business days, NASDAQ will provide written confirmation of compliance with its listing requirements, and this matter will be 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 timely regain compliance with NASDAQ’s listing requirements. If it appears to NASDAQ that we will not be able to cure our non-compliance with its listing standards, or if we are otherwise not eligible for listing on NASDAQ, NASDAQ will notify us that our common stock will be subject to delisting.

Our stockholders’ equity as of June 30, 2023 was below NASDAQ’s $2.5 million minimum stockholders’ equity continued listing standard, and we anticipate receiving notice from NASDAQ to the effect that we will have 45 days to submit a plan for regaining compliance with this continued listing standard. If we are able to submit a plan acceptable to NASDAQ, we expect to be granted additional time to regain compliance with the minimum stockholders’ equity requirement for continued listing.

If we fail to satisfy NASDAQ requirements for continued listing, NASDAQ could provide notice that shares of our common stock will become subject to delisting. In such an event, NASDAQ rules would permit us to appeal the decision to reject our proposed compliance plan or any delisting determination to a NASDAQ Hearings Panel. If our securities are de-listed from NASDAQ, our stockholders could incur material, adverse consequences such as difficulty selling their shares of our common stock and reduced market prices for their shares. De-listing is also likely to have a material, adverse effect on our ability to sell and issue shares of our common stock in order to fund our operations, if any.

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~~Form of ~~Amendment to Amended~~Indemnification Agreement with directors and ~~Restated Articles~~officers of ~~Incorporation, as amended (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed August 12, 2022, and incorporated herein by reference).~~

~~10.1~~	Sigma Additive Solutions, Inc. ~~2013 Equity Incentive Plan, as Amended (filed as~~(formerly Sigma Labs, Inc.) (incorporated by reference to Exhibit ~~99.1~~10.12 to ~~the Company’s Form S-8~~ Registration Statement on Form S-1 (File. No. 333-212735) filed on ~~October 19, 2022, and incorporated herein by reference).~~July 28, 2016.*

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~~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.

2426

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

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

2527

	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