What changed in this filing

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Item 1. Financial Statements

2020-07-23 compared with 2020-05-14 · 501 added, 296 removed, 356 unchanged (69% of the section changed)

3 unchanged sentences

Accounts Receivable,

Total Current

Current Assets

Other Assets:

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Deferred Revenue

Total Current

TOTAL LIABILITIES

Commitments & Contingencies

Current Liabilities

Long-Term Liabilities:

Deferred Payroll Tax Liability

Total Long-Term

Stockholders’

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Additional Paid-In

Total Stockholders’

TOTAL LIABILITIES

AND STOCKHOLDERS’

(29,595,944 )

(26,095,594 )

Stockholders’

LIABILITIES AND STOCKHOLDERS’

accompanying notes to condensed financial statements.

1 unchanged sentence

COST OF REVENUE

GROSS PROFIT (LOSS)

OPERATING EXPENSES:

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Operating Expenses

Total Operating Expenses

LOSS FROM OPERATIONS

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State Incentives

Exchange Rate Loss

Exchange Rate Gain

Interest Expense

Loss on Dissolution

of Joint Venture

Other Income (Expense)

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$ (2,493,223 )

$ (3,077,603 )

Preferred Dividends

Applicable to Common Stockholders

Net Loss Applicable

to Common Stockholders

$ (1,601,518 )

$ (1,593,491 )

$ (3,500,350 )

$ (3,077,603 )

Net Loss per Common

Share - Basic and Diluted

Share –

Basic and Diluted

Weighted Average

Number of Shares Outstanding - Basic and Diluted

Number of Shares Outstanding –

Basic and Diluted

accompanying notes to condensed financial statements.

Statements of Cash Flows

OPERATING ACTIVITIES

$ (2,493,223 )

18 unchanged sentences

Purchase of Intangible Assets

Payment Received

from Notes Receivable

Payment Received from Notes Receivable

of Joint Venture

CASH USED IN INVESTING ACTIVITIES

5 unchanged sentences

Proceeds from Exercise of Warrants

Payroll Taxes under the CARES Act

CASH PROVIDED BY FINANCING ACTIVITIES

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and financing activities disclosure:

Issued for Cashless Exchange of UPOs

Dividend and Common Stock Issued for Preferred Dividends

of Common Shares for Conversion of Preferred Shares and Preferred Dividends

Issuance of Securities

Disclosure of cash

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of Stockholders’

The Quarters Ended March 31, 2020 and March 31, 2019

Preferred Stock

December 31, 2019

the Three and Six Months Ended June 30, 2020 and 2019

the Three Months Ended June 30, 2020 and June 30, 2019

Balances, March 31, 2020

$ (27,994,426 )

Shares Sold in Private Offering

Stock Dividends

Shares issued for Conversion of Preferred Shares

Shares issued for Exercise of Preferred Warrants

Issued for Third Party Services

Options Awarded to Employees

of Fractional Shares from Reverse Split

March 31, 2020

Common Shares Sold in Public Offering

Preferred Stock Dividends

Common Shares issued for Conversion

of Preferred Shares

Preferred Shares issued for Exercise

of Preferred Warrants

Securities Issued for Third Party

Stock Options Awarded to Employees

Common Shares Awarded to Employees

Offering Costs

Balances, June 30, 2020

$ (29,595,944 )

Balances, March 31, 2019

$ (21,258,857 )

Shares Sold in Private Placement

Shares Issued for Services

Stock Options

Awarded to Employees

Balances, June 30, 2019

$ (22,852,348 )

the Six Months Ended June 30, 2020 and June 30, 2019

Balances, December 31, 2019

$ (26,095,594 )

Sold in Public Offering

Shares issued for Exercise

Issued for Cashless Exchange of UPO's

Issued for Services

Options Awarded to Employees

March 31, 2019

Common Shares Sold in Public Offering

Preferred Shares Sold in Private

Preferred Stock Dividends

Common Shares issued for Conversion

of Preferred Shares

Preferred Shares issued for Exercise

of Preferred Warrants

Securities Issued for Third Party

Stock Options Awarded to Employees

Common Shares Awarded to Employees

Offering Costs

Fractional Shares from Reverse Split

Balances, June 30, 2020

$ (29,595,944 )

Balances, December 31, 2018

$ (19,774,745 )

Shares Sold in Public Offering

Shares Sold in Private Placement

Shares issued for Exercise of Warrants

Shares Issued for Cashless Exchange

of UPO’s

Shares Issued for Services

Stock Options

Awarded to Employees

Balances, June 30, 2019

$ (22,852,348 )

accompanying notes to condensed financial statements.

19 unchanged sentences

include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash

flows at March 31, 2020 and 2019 and for the periods then ended have been made.

flows at June 30, 2020 and 2019 and for the periods then ended have been made.

Certain information and footnote disclosures normally

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The results of operations for the periods ended

March 31, 2020 and 2019 are not necessarily indicative of the operating results for the full year.

June 30, 2020 and 2019 are not necessarily indicative of the operating results for the full year.

Reclassification

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in the current-period financial statements.

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.

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.”

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options and preferred shares were excluded due to the anti-dilutive effect they would have on the computation.

At March 31, 2020

At June 30, 2020

and 2019, the Company had the following common shares underlying these instruments:

Months Ended March 31,

Stock Warrants

Underlying Common Shares

Months Ended June 30,

Preferred Stock Warrants

Stock Options

Preferred Stock

Convertible Note

Total Underlying

Common Shares

following data shows the amounts used in computing loss per share and the effect on income and the weighted average number of

shares of dilutive potential common stock for the periods ended March 31, 2020 and 2019:

Months Ended March 31

Loss per Common Share - Basic and Diluted

from continuing

stockholders (numerator)

shares of dilutive potential common stock for the periods ended June 30, 2020 and 2019:

Months Ended June 30

Net Loss per Common Share

- Basic and Diluted

Loss from continuing

Operations available

to Common stockholders (numerator)

$ (1,601,518 )

$ (1,593,491 )

average number of common shares Outstanding used in loss per share during the Period (denominator)

Enacted Accounting Standards - The FASB established the Accounting Standards Codification (“Codification”

or “ASC”)

as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation

of financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”).

Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) issued under authority of federal

securities laws are also sources of GAAP for SEC registrants.

$ (3,077,603 )

Weighted average

number of common shares Outstanding used in loss per share during the Period (denominator)

Enacted Accounting Standards - The FASB established the ASC as the source of authoritative accounting principles recognized

by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with GAAP.

and interpretive releases of the Securities and Exchange Commission (“SEC”) issued under authority of federal securities

laws are also sources of GAAP for SEC registrants.

Estimates - The preparation of financial statements in conformity with generally accepted accounting principles in the United

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and stock equivalents granted as offering costs, and allowance for bad debts and inventory obsolescence.

March 31, 2020 and December 31, 2019, the Company’s inventory was comprised of:

June 30, 2020 and December 31, 2019, the Company’s inventory was comprised of:

3 - Notes Payable

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interest of $1,458 and a late fee penalty of $5,000.

Paycheck Protection Plan Loan

April 14, 2020, the Company was granted a loan from BOKF, NA dba Bank of Oklahoma in the aggregate amount of $361,700, pursuant

to the Paycheck Protection Program (the “

) under Division A, Title I of the Coronavirus

Aid, Relief and Economic Security Act (the “

CARES Act ”

) , which was enacted March 27, 2020.

the terms of the PPP, PPP loans and accrued interest are forgivable after twenty-four weeks as long as the borrower uses the loan

proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels.

of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the forgiveness period.

of June 30, 2020, the Company has used

the entire loan proceeds to fund its payroll expenses.

As a result, the Company believes that it has met the PPP eligibility criteria

for forgiveness and has concluded that the loan represents, in substance, a government grant that is expected to be forgiven.

As such, in accordance with IAS 20 “Accounting for Government Grants and Disclosure of Government Assistance”, the

Company has recognized the entire loan amount as Other Income at June 30, 2020.

Company does not anticipate taking any action that would cause any portion of the loan to be ineligible for forgiveness.

to the extent that any amount is deemed unforgivable, such amount is payable over two to five years at an interest rate of 1%,

with a deferral of payments for the first six months.

5 - Stockholders’

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to 8,000,000.

At our annual shareholders’

meeting held on June 15, 2020, our authorized shares of common stock were increased

from 8,000,000 to 12,000,000.

April 6, 2020, the Company closed a public offering of equity securities in which it issued 493,027 shares of common stock and

pre-funded warrants to purchase up to 22,438 shares of the Company’s common stock.

The Company also issued Series A Warrants

to purchase an aggregate of 515,465 shares of the Company’s common stock pursuant to a private placement.

In connection

with this offering, the Company issued Dawson James Securities, Inc., its Placement Agent, a warrant to purchase an aggregate

of 41,237 shares of the Company’s Common Stock (which amount is based on the number of Common Shares and shares underlying

the Pre-Funded Warrants) at an exercise price of $3.64 per share.

Net proceeds to the Company after deducting offering expenses

were approximately $1,230,000.

the second quarter of 2020, the Company issued 1,280,360 shares of common stock in exchange for the conversion of 1,684 shares

of Series D Convertible Preferred stock, and 323,624 shares of common stock as in-kind payment of preferred stock dividends.

April 2020, the Company granted 11,517 shares of common stock to employees under the 2013 Equity Incentive Plan.

Such shares will

vest on December 31, 2020 as long as the grantee is employed by the Company on that date.

the first quarter of 2020, the Company issued 321,517 shares of common stock in exchange for the conversion of 1,107 shares of

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firm engaged by the Company, as partial compensation for services to be rendered.

January 2019, the Company issued 20,000 shares of common stock to directors valued at $15.00 per share, or $300,000, with such

shares vesting ratably over four quarterly installments, subject in each case to such director’s continuing service

as a director.

January 2019, the Company issued a total of 200,000 shares of common stock to directors valued at $1.50 per share, or $300,000,

with such shares to vest ratably over four quarterly instalments, subject in each case to such director’s continuing

service as a director.

in January 2019, the Company issued 88,431 shares of common stock upon the cashless exercise of Unit Purchase Options issued in

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an exercise price of $1.08 resulting in gross cash proceeds of $75,848.

March 2019, the Company issued 150 shares of common stock valued at $20.00 per share to the Company’s Vice President of

Business Development in connection with his achievement of performance milestones, with such shares vesting immediately.

March 2019, the Company issued 1,500 shares of common stock to the Company’s Vice President of Business Development in connection

with his achievement of performance milestones, with such shares vesting immediately.

in March 2019, the Company closed a public offering of equity securities in which it issued 1,400,800 shares of common stock and

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placement agent commissions and other offering expenses payable by the Company.

May 2019, the Company closed a private placement of equity securities in which it issued 400,000 shares of common stock and warrants

to purchase a total of 220,000 shares of common stock resulting in net proceeds of approximately $515,000, after deducting placement

agent commissions and other offering expenses payable by the Company.

Company is authorized to issue 10,000,000 shares of preferred stock, $0.001 par value.

333 and 0 shares of preferred stock were

issued and outstanding at March 31, 2020 and 2019, respectively.

issued and outstanding at June 30, 2020 and 2019, respectively.

January 2020, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain institutional investors

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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 initially is $10.00 (subject to adjustment for stock splits, dividends, recapitalizations

the conversion price then in effect, which is $2.50 (subject to adjustment for stock splits, dividends, recapitalizations

and similar events and full ratchet price protection).

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Shares being redeemed

March 31, 2020 there were 1,045 shares of Series D Convertible Preferred stock outstanding, which if converted at the Alternate

Conversion Price of $2.36 as of March 31, 2020, including the make-whole dividends, would have resulted in the issuance

of 562,762 shares of common stock.

June 30, 2020 there were 0 shares of Series D Convertible Preferred stock outstanding.

with the Institutional Private Placement, the Company entered into a Securities Purchase Agreement (the “SPA”) with

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“Series E Preferred Stock”).

Dividends accrue at a dividend rate of 9% per annum and, on a monthly basis, shall

be payable in kind by the increase of the Stated Value of the Series E Preferred Shares by said amount.

The Series E Preferred

Stock is initially convertible into 48,544 shares of Common Stock,

March 31, 2020, all of the issued Series E Convertible Preferred Stock was outstanding, which if converted as of March 31, 2020,

Dividends accrue at a dividend rate of 9% per annum and, on a monthly basis, shall be

payable in kind by the increase of the Stated Value of the Series E Preferred Shares by said amount.

The Series E Preferred Stock

is initially convertible into 48,544 shares of Common Stock.

June 30, 2020, all of the issued Series E Convertible Preferred Stock were outstanding, which if converted as of June 30,

2020, including the make-whole dividends, would have resulted in the issuance of 61,651 shares of common stock.

July 2019, at the Annual Meeting of Stockholders of the Company, the Company’s stockholders approved an amendment to the

2013 Plan to increase the number of shares of the Company’s common stock reserved for issuance under the 2013 Plan by 750,000

previous years and in the six months ended June 30, 2020, the Company issued to various employees, directors, and contractors

shares of the Company’s common stock, subject to restrictions, pursuant to the 2013 Equity Incentive Plan (the “2013

Plan”).

Such shares are valued at the fair value at the date of issue.

The fair value is expensed as compensation

over the vesting period and recorded as an increase to stockholders’

During the six months ended June 30, 2020 and

June 30, 2019, $7,870 and $153,000, respectively, of the unvested compensation cost related to these issues was recognized.

June 30, 2020, there was $15,740 of unrecognized deferred compensation expense to be recognized over the remainder of the

June 15, 2020, at the Annual Meeting of Stockholders of the Company, the Company’s stockholders approved an amendment to

the 2013 Plan to increase the number of shares of the Company’s common stock reserved for issuance under the 2013 Plan by

650,000 shares of our common stock to a total of 890,000 shares.

August 2019, the Company terminated its 2011 Equity Incentive Plan.

of March 31, 2020, an aggregate of 29,486 shares of common stock were reserved for issuance under the 2013 Plan.

the three months ended March 31, 2020, the Company granted an option to purchase 8,100 shares of common stock to Iron Dome Ventures,

LLC as partial compensation for investor relations services to be rendered.

The option vests equally over nine months beginning

February 2020.

the three months ended March 31, 2019, the Company granted options to purchase a total of 20,996 shares of common stock

to 18 employees with vesting periods ranging from immediately upon issuance to 4 years beginning January 2019.

of June 30, 2020, an aggregate of 436,720 shares of common stock were reserved for issuance under the 2013 Plan.

the six months ended June 30, 2020, the Company granted options to purchase a total of 335,183 shares of common stock to

19 employees and 4 consultants with vesting periods ranging from immediately upon issuance to 3 years beginning

June 15, 2020.

the six months ended June 30, 2019, the Company granted options to purchase a total of 286,925 shares of common stock to 18

employees and 1 consultant with vesting periods ranging from immediately upon issuance to 4 years beginning January

Company generally grants stock options to employees and directors at exercise prices equal to the fair market value of the Company’s

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the fair value of the stock options over the requisite service period for each stock option award.

share-based compensation expense included in the statements of operations for the three months ended March 31, 2020 and

2019 is $154,170 and $254,206, of which $154,170 and $176,206 is related to stock options, respectively.

share-based compensation expense included in the statements of operations for the six months ended June 30, 2020 and 2019 is $424,989

and $474,566 of which $417,119 and $321,149 is related to stock options, respectively.

fair value of share-based awards was estimated using the Black-Scholes model with the following weighted-average assumptions for

the three months ended March 31, 2020 and 2019:

interest rate

the six months ended June 30, 2020 and 2019:

Dividend yield

Risk-free interest rate

Expected volatility

113.8-117.2 %

life (in years)

activity for the three months ended March 31, 2020 and the year ended December 31, 2019 was as follows:

Average Exercise Price ($)

Average Remaining Contractual Life (Yrs.)

Intrinsic Value ($)

outstanding at December 31, 2018

105.2-106.1 %

Expected life (in years)

activity for the six months ended June 30, 2020 and the year ended December 31, 2019 was as follows:

Options outstanding at December 31, 2018

Options outstanding at December

Options outstanding June 30, 2020

Options expected to vest in the future

as of June 30, 2020

Options exercisable at June 30,

Options vested,

exercisable, and options expected to vest at June 30, 2020

aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price

of our common stock for those awards that have an exercise price currently below the $2.67 closing price of our common

stock on June 30, 2020.

324,833 of the 2020 option grants have an exercise price currently below $2.67.

June 30, 2020, there was $1,088,934 of unrecognized share-based compensation expense related to unvested share options

with a weighted average remaining recognition period of 3.13 years.

Appreciation Rights

June 23, 2020, the board of directors (the “Board”) of the Company adopted the Sigma Labs, Inc.

2020 Stock Appreciation

Rights Plan (the “Plan”).

The purposes of the Plan are to:

(i) enable the Company to attract and retain the types

of employees, consultants and directors (collectively, “Service Providers”) who will contribute to the Company’s

long range success;

(ii) provide incentives that align the interests of Service Providers with those of the shareholders of the

and (iii) promote the success of the Company’s business.

The Plan provides for incentive awards that are only made

in the form of stock appreciation rights payable in cash (“SARs”).

No shares of common stock were reserved in connection

with the adoption of the Plan since no shares will be issued pursuant to the Plan.

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 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 medium of payment and vesting provisions, and

to specify the provisions of the SAR Agreement relating to such grant.

June 23, 2020, the Company granted, pursuant to the Plan, (i) 60,094 SARs to its President and Chief Executive Officer, (ii) 12,019

SARs to its Vice President of Business Development, (iii) 24,038 SARs to its Chief Technology Officer, and (iv) 18,028 SARs to

its Chief Financial Officer.

The exercise price of each such SAR is $2.63, which was the closing price of the Company’s

common stock on the date of grant.

Such SARs expire on the fifth anniversary of the grant date and may be settled only in cash.

Additionally, each such SAR will vest and become exercisable in three equal (as closely as possible) installments on each of the

first, second and third anniversaries of the grant date, subject, in each case, to the applicable SAR holder being in the continuous

employ of the Company on the applicable vesting date, and, in the event of a Change in Control (as defined in the Plan), will

become immediately vested and exercisable as long as the applicable holder is in the Company’s employ immediately prior

to the Change in Control, and will otherwise be on such other terms set forth in the form of Stock Appreciation Rights Agreement.

Company recognizes compensation expense and a corresponding liability for the fair value of the SARs over the requisite service

period for each SAR award.

The SAR’s are revalued at each reporting date in accordance with ASC 718 “Compensation-Stock

Compensation”, and any changes in fair value are reflected in income as of the applicable reporting date.

fair value of SAR awards was estimated using the Black-Scholes model with the following weighted-average assumptions for the six

months ended June 30, 2020:

Dividend yield

Risk-free interest rate

Expected volatility

Expected life (in years)

activity for the six months ended June 30, 2020 was as follows:

outstanding at December 31, 2019

outstanding March 31, 2020

expected to vest in the future as of March 31, 2020

exercisable at March 31, 2020

vested, exercisable, and options expected to vest at March 31, 2020

SARs outstanding

June 30, 2020

SARs expected to

vest in the future as of June 30, 2020

SARs exercisable

at June 30, 2020

vested, exercisable, and options expected to vest at June 30, 2020

aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price

of our common stock for those awards that have an exercise price currently below the $2.67 closing price of our common stock on

March 31, 2020.

All of the 2020 option grants have an exercise price currently below $2.76.

March 31, 2020, there was $659,679 of unrecognized share-based compensation expense related to unvested share options with a weighted

average remaining recognition period of 4.64 years.

activity for the three months ended March 31, 2020 and 2019 was as follows:

Average Exercise Price ($)

Average Remaining Contractual Life (Yrs.)

June 30, 2020.

All of the 2020 SARs grants have an exercise price currently below $2.67.

June 30, 2020, there was $236,419 of unrecognized share-based compensation expense related to unvested SARs with a weighted average

remaining recognition period of 2.98 years.

activity for the six months ended June 30, 2020 and 2019 was as follows:

outstanding at December 31, 2018

outstanding at March 31, 2019

outstanding at June 30, 2019

outstanding at December 31, 2019

outstanding at March 31, 2020

outstanding at June 30, 2020

connection with its January 2020 private placement, the Company issued 6,156 warrants to purchase its Series D Preferred Stock

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Pursuant to the terms of the Securities Purchase Agreement, the Company forced the exercise of 512 warrants on March 27,

As of March 31, 2020, there were 5,644 Preferred Warrants outstanding, which if exercised would result in the issuance of

5,644 shares of Series D Convertible Preferred Stock.

The Series D Convertible Preferred stock, including make-whole dividends,

was convertible into 2,996,713 shares of common stock on March 31, 2020.

During the second quarter, an additional 1,684 warrants were exercised, resulting in the issuance of 1,603,984

shares of common stock.

As of June 30, 2020, there were 3,960 Preferred Warrants outstanding, which if exercised would result

in the issuance of 3,960 shares of Series D Convertible Preferred Stock.

The Series D Convertible Preferred stock, including make-whole

dividends, was convertible into 2,147,277 shares of common stock on June 30, 2020.

6 - Subsequent Events

April 6, 2020, the Company closed a public offering of equity securities in which it issued 493,027 shares of common stock and

pre-funded warrants to purchase up to 22,438 shares of the Company’s common stock.

The Company also issued Series

A Warrants to purchase an aggregate of 515,465 shares of the Company’s common stock pursuant to a private placement.

connection with this offering, the Company issued Dawson James Securities, Inc., its Placement Agent, a warrant to purchase an

aggregate of 41,237 shares of the Company’s Common Stock (which amount is based on the number of Common Shares and shares

underlying the Pre-Funded Warrants) at an exercise price of $3.64 per share.

Net proceeds to the Company after deducting offering

expenses were approximately $1,230,000.

April 10, 2020, the Company granted employees an aggregate of 13,605 shares of its common stock.

The shares vest on December 31,

2020, as long as the individual remains an employee of the Company on that date.

April 14, 2020, the Company was granted a loan from BOKF, NA dba Bank of Oklahoma in the aggregate amount of $361,700, pursuant

to the Paycheck Protection Program (the “

) under Division A, Title I of the Coronavirus

Aid, Relief and Economic Security Act (the “

CARES Act ”

) , which was enacted March 27, 2020.

the terms of the PPP, PPP loans and accrued interest are forgivable after eight weeks as

long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains

its payroll levels.

The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during

the eight-week period.

The Company intends to use the loan proceeds for purposes consistent with the PPP, and anticipates

that a majority of the loan amount will be forgiven, but no assurance can be given that the Company will not take actions that

could cause the Company to be ineligible for forgiveness of a greater portion of the loan.

unforgiven portion of the loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first

April, the Company issued 762,964 shares of Common Stock from conversions of our Series D Convertible Preferred stock

April 30, 2020, Mark K.

Ruport was appointed as

President, Chief Executive Officer and principal executive officer of the Company.

Ruport will no longer serve as Executive

Chairman but will remain a director on the Board of Directors of the Company.

In connection with this appointment, John Rice

resigned from his positions as President, Chief Executive Officer, and principal executive officer of the Company.

remain a director on the Board of Directors and will continue to serve as Chairman of the Board.

May 1, 2020, we entered into a consulting agreement with Mr.

Rice, pursuant to which Mr.

Rice was engaged to provide, among other

services to be determined by the Company, advice regarding the structure of certain financial and other strategic transactions

involving the Company, on an as-needed basis.

Pursuant to the consulting agreement, on May 1, 2020 (the “Grant Date”),

the Company granted Mr.

Rice under our 2013 Equity Incentive Plan a five-year stock option to purchase up to 16,044 shares of

common stock of the Company, which option has an exercise price equal to the closing price of the Company’s common stock

on the Grant Date and is fully vested as of the Grant Date.

Stock options that have been previously granted to Mr.

Rice that are

described in the Company’s filings with the Securities Exchange Commission will continue to remain outstanding in accordance

with the terms of the applicable stock option agreements and will expire 90 days after the later of the date that Mr.

no longer a director of the Company or the consulting agreement is terminated.

Company performed an evaluation of subsequent events through the date of filing of these condensed financial statements with the

There were no material subsequent events which affected, or could affect, the amounts or disclosures in the condensed financial

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

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year ended December 31, 2019 and elsewhere in this report.

were incorporated as Messidor Limited in Nevada on December 23, 1985 and changed our name to Framewaves Inc.

27, 2010, we changed our name from Framewaves Inc.

to Sigma Labs, Inc.

We commenced our current business operations in 2010.

principal executive offices are located at 3900 Paseo del Sol, Santa Fe, New Mexico 87507, and our telephone number is (505) 438-2576.

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2020, we reported several events, including the following (in reverse chronological order):

July 15, 2020, we signed a global agreement with a major printer manufacturer headquartered in Europe who will designate their

printers as PrintRite3D Ready, allowing us to leverage their sales force of over 800 people who will actively promote our technology

as their preferred monitoring solution.

May 4, 2020, we announced that effective April 30, 2020, we appointed Mark K.

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PrintRite3D®

and have further agreed to enter into a binding joint sales agreement to begin beta customer commercialization of the integrated

PrintRite3D®

technology and have further agreed to enter into a binding joint sales agreement to begin beta customer commercialization of the

integrated PrintRite3D®

and Materialise Control Platform (MCP) product.

The MCP is an embedded hardware and software solution that

addresses the growing need for broader and more straightforward control over the additive manufacturing process by giving full

control to the end-user.

The companies have achieved the integration and are now positioned to offer a unique product solution

for retrofit of existing machines, OEM machine integration and closed loop control.

March 3, 2020, we announced that we were awarded a contract to implement our PrintRite3D Real-Time Melt Pool Analytics

technology at Northwestern University.

In collaboration with two university research centers

at Northwestern University, Northwestern Initiative on Manufacturing Science and Innovation (NIMSI) and Center for Hierarchical

Materials Design (CHiMaD), Sigma Labs will integrate the PrintRite3D system to a DMG Mori LASERTEC12 Selective Laser Melting machine.

Researchers at NIMSI have developed computer-integrated systems for innovative manufacturing processes, including subtractive,

deformation-based and additive processes.

The MCP is an embedded hardware and software solution

that addresses the growing need for broader and more straightforward control over the additive manufacturing process by giving

full control to the end-user.

The companies are near completion of the integration and are now positioned to offer a unique

product solution for retrofit of existing machines, OEM machine integration and closed loop control.

March 3, 2020, we announced that we were awarded a contract to implement our PrintRite3D Real-Time Melt Pool Analytics technology

at Northwestern University.

In collaboration with two university research centers at Northwestern

University, Northwestern Initiative on Manufacturing Science and Innovation (NIMSI) and Center for Hierarchical Materials Design

(CHiMaD), Sigma Labs will integrate the PrintRite3D system to a DMG Mori LASERTEC12 Selective Laser Melting machine.

at NIMSI have developed computer-integrated systems for innovative manufacturing processes, including subtractive, deformation-based

and additive processes.

Labs and Northwestern will collaborate to further validate the performance and capabilities Sigma’s technology to identify

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additive manufacturing systems.

February 26, 2020, we announced that we were awarded a contract with the Mississippi State University Center for Advanced

Vehicular Systems (CAVS), a world-class interdisciplinary research center that uses state-of-the-art technology to address

engineering challenges facing U.S.

mobility industries The Mississippi State University Center for Advanced Vehicular Systems

will install PrinteRite3D on a Renishaw AM400 machine, a new OEM platform for Sigma Labs, further proving out PrintRite3D’s

platform interoperability potential to an increasingly large machine base.

Per the terms of the agreement, in addition to any

research or commercial applications of PrintRite3D®, CAVS has agreed to serve as a real-world test bed for new product improvements

that Sigma will roll out over time.

January 27, 2020, we entered into a securities purchase agreement with certain institutional

investors for the purchase of shares of newly created series of the Company’s preferred stock, warrants to purchase the

Company’s common stock and warrants to purchase such preferred stock for total gross cash proceeds to the Company of $1.6

Additionally, the Company’s largest shareholder and certain of its directors have entered into a securities

purchase agreement with the Company for the purchase of shares of another new series of the Company’s preferred stock and

warrants to purchase the Company’s common stock for total gross cash proceeds to the Company of $500,000.

February 26, 2020, we announced that we were awarded a contract with the Mississippi State University Center for Advanced Vehicular

Systems (CAVS), a world-class interdisciplinary research center that uses state-of-the-art technology to address engineering challenges

mobility industries The Mississippi State University Center for Advanced Vehicular Systems will install PrinteRite3D

on a Renishaw AM400 machine, a new OEM platform for Sigma Labs, further proving out PrintRite3D’s platform interoperability

potential to an increasingly large machine base.

Per the terms of the agreement, in addition to any research or commercial applications

of PrintRite3D®, CAVS has agreed to serve as a real-world test bed for new product improvements that Sigma will roll out over

January 28, 2020, pursuant to a securities purchase agreement with certain

institutional investors, the investors purchased shares of a newly created series of the Company’s preferred

stock, warrants to purchase the Company’s common stock and warrants to purchase such preferred stock for total gross cash

proceeds to the Company of $1.6 million.

Additionally, on January 28, 2020, pursuant to a securities purchase agreement,

the Company’s largest shareholder and certain of its directors purchased shares of another new series of the Company’s

preferred stock and warrants to purchase the Company’s common stock for total gross cash proceeds to the Company of $500,000.

Accounting Policies

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of Operations

Months Ended June 30, 2020 and June 30, 2019

expect to generate revenue primarily by selling and licensing our IPQA technologies, selling technical support services, contract

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to move from AM metal prototyping to production.

the three months ended March 31, 2020, we recognized revenue of $221,730, as compared to $64,450 in revenue recognized during

the three months ended June 30, 2020, we recognized revenue of $167,688, as compared to $33,582 in revenue recognized during

the same period in 2019, an increase of $134,106.

The increase is primarily due to PrintRite3D®

unit sales to two research

universities, as well as revenue recognized under the legacy Rapid Test and Evaluation (“RTE”) program during the

Cost of Revenue for the three months ended March 31, 2020 and 2019 was $244,703 and $96,555, respectively, an increase of $148,148.

The increased cost is primarily attributable to the ongoing support of legacy RTE programs, including equipment upgrades and additional

travel and labor costs.

The increase is primarily due to a PrintRite3D®

as well as revenue recognized under the legacy Rapid Test and Evaluation (“RTE”) program and an in-house RTE during

Cost of Revenue for the three months ended June 30, 2020 and 2019 was $57,684 and $60,625, respectively, a decrease

The decrease is primarily attributable to the reclassification of $43,510 of costs to inventory,

partially offset by the cost of the PrintRite3D®

unit sale during the quarter, as well as the ongoing support of legacy

RTE programs, including equipment upgrades and additional labor costs.

Sigma’s

total operating expenses for the three months ended March 31, 2020 were $1,559,642 as compared to $1,507,098 for the same period

in 2019, an increase of $52,544.

and Benefits costs were $652,197 for the three months ended March 31, 2020 compared to $512,560 for the same period in

total operating expenses for the three months ended June 30, 2020 were $1,526,554 as compared to $1,569,064 for the same

period in 2019, a decrease of $42,510.

and benefits costs were $605,295 for the three months ended June 30, 2020 compared to $581,356 for the same period in 2019,

an increase of $23,939.

This 27% cost increase correlates to an increase of four full-time equivalent employees between

This 4.1% cost increase correlates to an increase in executive management salary

during a now completed transition period, employee salary increases that were effective in the second half of 2019, and an employee

who was a consultant during the same period in 2019, partially offset by a decrease in average employee headcount of three between

the two periods.

Compensation was $154,171 for the three months ended March 31, 2020 compared to $254,206 for the same period in 2019, a

$100,035, or 39%, decrease.

This decrease is a result of zero stock options granted to employees in the first quarter,

as well as zero shares of common stock granted to our directors through March 31, 2020.

and Development expenditures of $53,689 were incurred during the three months ended March 31, 2020 compared to $145,272

compensation was $270,818 for the three months ended June 30, 2020 compared to $220,360 for the same period in 2019, a

$50,458, or 22.9% increase, primarily due to additional options granted to employees during the quarter, as well

as stock grants to employees related to the 15% salary deferral in place between May 1, 2020 and September 30, 2020.

and development expenditures of $111,647 were incurred during the three months ended June 30, 2020 compared to $118,845

in the same period of 2019, a $7,198 decrease.

The decrease is due to substantially completed product development compared to the

same period in 2019, as well as reduced spending to conserve cash.

& Public Relations expenses of $238,268 were incurred during the three months ended March 31, 2020, as compared to $157,789

The decrease is due to substantially completed product development compared

to the same period in 2019, as well as reduced spending to conserve cash, partially offset by a write-off of $20,600 in obsolete

inventory and $18,101 in parts and materials used in testing.

& Public Relations expenses of $171,287 were incurred during the three months ended June 30, 2020, as compared to $157,318

incurred during the same period in 2019.

The increase of $80,479 is primarily due to expenses incurred in connection with the

March 27, 2020 Special Meeting of Shareholders, as well as increased advertising campaigns.

& Professional fees incurred in the three months ended March 31, 2020 were $211,509 compared to $184,570 incurred during the

same period in 2019, an increase of $26,939.

This increase is primarily a result of legal expenses incurred in connection with

our January 2020 private offering and our February 27, 2020 reverse stock split.

Operating expenses were $84,049 for the three months ended March 31, 2020, as compared to $38,209 for the same period in

The increase is primarily due to an increase in our Directors and Officers insurance policy premium for 2020.

the three months ended March 31, 2020, our net other income & expense was a net expense of $971 compared to net other income

of $55,091 in 2019.

The 2019 net positive contribution results primarily from the receipt of a $51,877 New Mexico state job incentive

The increase of $13,969 is primarily due to $33,306 in expenses incurred

in connection with an Investor Relations consultant, and $6,700 due to the SOLVE, advertising campaign, partially offset

by a reduction in trade show expenses.

& Professional fees incurred in the three months ended June 30, 2020 were $219,007 compared to $218,919 incurred

during the same period in 2019.

Expenses incurred during the quarter include costs incurred in connection with the Paycheck

Protection Plan loan, Nasdaq compliance, our April financing and our Annual Shareholders Meeting, offset by lower recruiting expenses

of $63,154 as there were no new employee hires during the quarter.

expenses incurred during the three months ended June 30, 2020 were $78,843 compared to $184,068 incurred during the same

period in 2019, a decrease of $105,225, or 57.2%.

The decrease is primarily due to decreased travel costs of $118,084

as a result of the COVID-19 pandemic, partially offset by $12,900 of amortization expense related to our membership in the United

Kingdom’s National Centre for Additive Manufacturing.

and Amortization expense for the three months ended June 30, 2020 was $17,970, compared to $49,203 for the same period in 2019.

The primary reason for the decrease is that our 3D metal printer was fully depreciated in November of 2019.

Operating Expenses were $51,687 for the three months ended June 30, 2020, compared to $36,994 incurred during the same period

The increase is primarily due to higher insurance premiums in 2020, in particular, our Director’s & Officers

insurance policy.

the three months ended June 30, 2020, our net other income & expense was net income of $506,912 compared to net other

income of $2,616 in 2019.

The 2020 net positive contribution is primarily from $151,657 in New Mexico state job

incentive credits, and $361,700 from the recognition of our PPP loan as a government grant.

The grant was recognized during

the quarter as the related payroll costs were incurred, and the Company has complied with all conditions attached to the grant.

Sigma’s

net loss applicable to common stockholders for the three months ended March 31, 2020 totaled $1,898,832 as compared to $1,484,112

net loss applicable to common stockholders for the three months ended June 30, 2020 totaled $1,601,518 as compared to $1,593,491

for the same period of 2019, a $8,027 increase.

The first quarter 2020 net operating loss contributed $43,412 to the loss increase,

the reduction in other income contributed $56,062, and preferred dividends contributed $315,247.

The second quarter 2020 preferred dividends contributed $691,880

to the loss increase, offset by a decrease in the net operating loss for the quarter of $179,557, and an increase in other

income of $504,294.

Months Ended June 30, 2020 and 2019

the six months ended June 30, 2020, we recognized revenue of $389,418 compared to $98,032 during the same period of 2019.

The primary contributors to the $291,386 increase were an increase in PrintRite3D®

unit sales contributing $181,387,

and RTE revenue of $102,064.

cost of revenue for the six months ended June 30, 2020 was $302,387 compared to $157,180 during the same period in 2019.

The increase of $145,207 is primarily due to the cost associated with our increase in PrintRite3D®

unit sales, as

well as the ongoing support of legacy RTE programs, including equipment upgrades and additional labor costs.

Sigma’s

total operating expenses for the six months ended June 30, 2020 were $3,086,195 compared to $3,076,162 for the same period

in 2019, a $10,033 increase.

costs for the six months ended June 30, 2019 were $1,257,492 compared to $1,093,916 for the same period in 2019, an

increase of $163,576.

The increase is primarily due to higher average employee headcount during the first quarter of 2020, plus

additional executive management salaries of $51,667 during the now completed transition, an employee who was a consultant during

the same period in 2019, employee salary increases became effective in the second half of 2019, and $6,907 of expense related

to the Stock Appreciation Rights plan.

compensation for the six months ended June 30, 2020 was $424,989 compared to $474,566 for the same period in 2019, a $49,577

decrease, primarily due to zero stock-based compensation issued to our directors to-date in 2020.

the six months ended June 30, 2020, Sigma incurred research and development expenditures of $165,335 compared to $264,117

in the same period of 2019.

The $98,782 decrease in these expenditures during the first six months of 2020 is a

result of the substantially completed product development compared to the same period in 2019, as well as reduced spending to

conserve cash.

and Public Relations expenses incurred in the six months ended June 30, 2020 were $409,555, compared to $315,107 during the same

period in 2019.

The $94,448 increase in the six-month comparative expenditures results primarily from expenses incurred in connection

with the March 27, 2020 Special Meeting of Shareholders, as well as $33,306 in expenses incurred in connection with an Investor

Relations consultant, and $6,700 due to the SOLVE advertising campaign.

and Professional fees incurred in the six months ended June 30, 2020 were $430,515, compared to $403,489 incurred during the same

period in 2019, an increase of $27,026, or 6.7%.

Legal fees increased by $117,276 due to our January financing and April financings,

the February 2020 reverse stock split, the March 2020 Special Shareholders Meeting, and various Nasdaq-related compliance issues,

partially offset by reduced recruiting expenses of $63,185 and lower consulting and IT support expenses of $30,352.

the six months ended June 30, 2020, Sigma’s office expenses were $226,590 compared to $350,178 in the same period of 2019.

The $123,588 decrease in these expenditures primarily resulted from $162,332 in reduced travel to the COVID-19 pandemic, $34,280

in reduced office supplies and computer hardware expenses, partially offset by $26,000 of amortization expense related to our

membership in the United Kingdom’s National Centre for Additive Manufacturing, and amortization of our annual Nasdaq membership

fee of $28,248.

and Amortization expense for the six months ended June 30, 2020 was $35,983, compared to $97,586 for the same period in 2019.

The primary reason for the decrease is that our 3D metal printer was fully depreciated in November of 2019.

the six months ended June 30, 2020, our net other income & expense was net income of $505,941, as compared to net income

of $57,707 during the same period in 2019.

The increase is primarily a result of increased New Mexico state job incentive credits

of $99,780 plus $361,700 from the recognition of our PPP loan as a government grant.

The grant was recognized during the quarter

as the related payroll costs were incurred, and the Company has complied with all conditions attached to the grant.

Sigma’s

net loss applicable to common shareholders for the six months ended June 30, 2020 totaled $3,500,350 as compared to $3,077,603

for the same period in 2019, a $422,747 increase.

Contributing to this increase were preferred dividends of $1,007,127,

partially offset by a decrease in our net operating loss of $136,146 and an increase in other net income of $448,234.

financed our operations during the three and six months ended June 30, 2020 and 2019 primarily from revenue generated

from PrintRite3D®

system sales and engineering consulting services we provided to third parties during these periods and through

sales of our common and preferred stock.

We expect that our revenue will increase in future periods as we seek to further commercialize

and expand our market presence for our PrintRite3D®-related technologies and obtain new contract manufacturing orders in connection

with our EOS M290.

and Capital Resources

of March 31, 2020, we had $631,018 in cash and working capital of $649,695, as compared with $86,919 in cash and a working

capital deficit of $98,315 as of December 31, 2019.

of June 30, 2020, we had $2,445,766 in cash and working capital of $2,768,591, as compared with $86,919 in cash

and a working capital deficit of $98,315 as of December 31, 2019.

major sources of funding have been proceeds from public and private offerings of our equity securities (both common stock and

preferred stock), and from warrant exercises.

On April 6, 2020, the Company closed an offering of equity securities resulting

in net proceeds of approximately $1,230,000.

On April 14, 2020 we were granted a loan from BOKF, NA dba Bank of Oklahoma in the

aggregate amount of $361,700, pursuant to the Paycheck Protection Program (the “

) under Division

A, Title I of the Coronavirus Aid, Relief and Economic Security Act (the “

April 14, 2020 we were granted a loan from BOKF, NA dba Bank of Oklahoma in the aggregate amount of $361,700, pursuant to the

Paycheck Protection Program (the “

) under Division A, Title I of the Coronavirus

Aid, Relief and Economic Security Act (the “

CARES Act ”

) , which was enacted March 27, 2020.

Under the terms of the PPP, PPP

loans and accrued interest are forgivable after eight weeks as long as the borrower uses the loan proceeds for eligible purposes,

including payroll, benefits, rent and utilities, and maintains its payroll levels.

The amount of loan forgiveness will be reduced

if the borrower terminates employees or reduces salaries during the eight-week period.

The Company intends to use

the loan proceeds for purposes consistent with the PPP, and anticipates that a majority of the loan amount will be forgiven, but

no assurance can be given that the Company will not take actions that could cause the Company to be ineligible for forgiveness

of a greater portion of the loan.

The unforgiven portion of the loan is payable over

two years at an interest rate of 1%, with a deferral of payments for the first six months.

the terms of the PPP, PPP loans and accrued interest are forgivable after twenty-four

weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities,

and maintains its payroll levels.

The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces

salaries during the eight-week period.

As of June 30, 2020, the Company has used the entirety of the loan proceeds

for purposes consistent with the PPP and has not taken any actions that it believes will reduce the amount eligible for forgiveness.

As such, the Company believes that the entire amount of the loan will be forgiven.

However, to the extent any portion of the loan

is determined to be ineligible for forgiveness, such unforgiven portion of the loan is

payable over 2-5 years at an interest rate of 1%, with a deferral of payments for the first six months.

April 6, 2020, the Company closed an offering of equity securities in which the Company sold and issued to certain institutional

investors (a) 493,027 shares of the Company’s common stock (the “Common Shares”) and pre-funded warrants (the

“Pre-funded Warrants”) to purchase up to 22,438 shares of the Company’s common stock, and (b) Series A Warrants

(the “Private Warrants”) to purchase an aggregate of 515,465 shares of the Company’s common stock pursuant to

a private placement resulting in net proceeds of approximately $1,230,000.

If all of the Private Warrants are exercised by the

holders thereof, the potential gross cash proceeds to us will be $1,288,663.

January 2020, we completed two private placements consisting of shares of our newly created Series D and Series E Preferred Stock,

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exercise of a portion of the warrants to purchase our Series D Preferred Stock which resulted in net cash proceeds to the Company

Additionally, on April 20, 2020, 200 preferred warrants were exercised by an institutional investor, resulting in

net proceeds to the Company of $179,400.

If all of the remaining warrants to purchase shares of Series D Preferred Stock and Common

Stock are exercised by the holders thereof, the potential gross cash proceeds to us will be $7,476,747.

Depending on the

amount, if anything, we receive from such exercises and the timing thereof, and the amount of revenues we are able to generate,

Additionally, during the second quarter of 2020, 1,684 preferred warrants were exercised by institutional

investors, resulting in net proceeds to the Company of $1,510,548.

If all of the remaining warrants to purchase

shares of Series D Preferred Stock and Common Stock are exercised by the holders thereof, the potential gross cash proceeds to

us will be $5,810,000.

on the amount, if anything, we receive from such exercises and the timing thereof, and the amount of revenues we are able to generate,

we may need to raise additional amounts to fund our operations, maintain compliance with the NASDAQ listing requirements and implement

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(“COVID-19”) may have on the availability and type of financing.

To the extent that funds are not available

to us, we may be required to delay, limit or terminate our business operations and lose our NASDAQ listing.

2020, we expect to sustain our operations and our commercialization and marketing efforts without material increase in our cash

We expect that enhancements of our IPQA®-enabled PrintRite3D®

technology that were developed in fiscal 2018

and 2019 and brought to market tests and evaluations, commencing in January 2019 and then enhanced with version 5.0 in May 2019

will enable us to commercialize this technology into the AM metal market in 2020.

To the extent that funds are not available to us,

we may be required to delay, limit or terminate our business operations and lose our NASDAQ listing.

the second quarter of 2020 progressed, the Company continued to be adversely affected by the COVID-19 global economic slowdown,

which has resulted in lower revenue than anticipated.

Several customers have delayed purchase orders, and although they have not

been cancelled, the timing of when they might be received is uncertain.

Two key industries with which we do business, aerospace

and oil and gas, have experienced a reduction in the global demand for their products due to the pandemic.

We have also experienced

delays in purchase orders from universities and research institutes.

As a result of the decrease in the demand for our products

from customers and potential customers in these and other industries, the Company expects to generate less revenue in the short-term.

It is impossible to know at this time how long companies will

limit capital expenditures and if the industries that have been most negatively affected will resume normal purchasing.

due to the need to have more flexibility in supply chains with the ability to respond quickly to shortages in parts or products,

many predict that the crisis will accelerate the adoption of 3D printing, which would be a positive trend for the Company.

offset the effects of decreased short-term revenue, the Company has taken several steps to reduce cash outflows.

Effective May

1, 2020, the Company implemented a firm-wide salary deferral program, whereby 15% of all employees’

salaries will be deferred

through September 30, 2020.

The Company currently expects to repay such deferrals in October 2020.

The Company has also deferred

directors’

cash compensation for the first six months of 2020 to the end of the year.

Our limited ability to travel to customers’

onsite locations to install or upgrade our products has not only lowered our travel expenditures, but has required us to start

using newer technologies to instruct users to do certain maintenance tasks, resulting in increasing our overall efficiency.

have also reduced our expenditures for conferences and trade shows and eliminated certain marketing expenses.

the remainder of 2020, we therefore expect to sustain our operations and our commercialization and marketing efforts without material

increase in our cash burn rate.

We expect that continued enhancements of our IPQA®-enabled PrintRite3D®

technology, including

the June 2020 release of version 6.0, will further enable us to commercialize this technology into the AM metal market in 2020.

To support the commercialization of our PrintRite3D®

technology, we plan to continue funding our development activities and operating expenses by licensing our PrintRite3D®

and supporting field services, as applicable, and providing PrintRite3D®-enabled engineering consulting services concerning

our areas of expertise (materials and manufacturing quality assurance and process control technologies) and through the use of

proceeds from sales of our securities.

due to the effect of COVID-19 on its business, one of our customers notified the Company in late March 2020 that it would not

be moving forward with two purchase orders, which has resulted in decreased revenue for the Company.

In addition, two key industries

with which we do business are the aerospace and the oil and gas industries.

The COVID-19 pandemic and its impact on the worldwide

economy and global demand for aerospace-related products and oil and gas have adversely affected such industries.

Due to the downturn,

the demand for our products from customers and potential customers in these industries has decreased, which will result in the

Company generating less revenue in the short-term.

It is impossible to know at this time how long companies will limit capital

expenditures and if the industries that have been most negatively affected will resume normal purchasing.

However, due to the

need to have more flexibility in supply chains with the ability to respond quickly to shortages in parts or products, many predict

that the crisis will accelerate the adoption of 3D printing, which would be a positive trend for the Company.

Additionally, the

Company is adjusting to travel restrictions and not being able to be onsite to install or upgrade our products and has started

to use newer technologies to instruct users to do certain maintenance tasks.

This has resulted in lowering our travel expenses

and increasing our overall efficiency.

technology, we plan to continue funding our development activities and

operating expenses by licensing our PrintRite3D®

systems and supporting field services, as applicable, and providing PrintRite3D®-enabled

engineering consulting services concerning our areas of expertise (materials and manufacturing quality assurance and process control

technologies) and through the use of proceeds from sales of our securities.

Cash Used in Operating Activities

cash used in operating activities during the three months ended March 31, 2020 increased to $1,525,696 from $1,066,769 during

the same period in 2019, a $458,927 increase.

Increased net loss contributed $99,473 toward this use of cash, a decrease

in accounts payable and accrued expenses contributed $402,229 and a decrease in deferred revenue contributed $75,155 These

increases in cash usage were partially offset by a decrease in inventory purchases of $149,700.

cash used in operating activities during the six months ended June 30, 2020 decreased to $2,435,387 from $2,737,650 during the

same period in 2019, a $302,263 decrease.

Decreased net loss contributed $584,380 toward this reduced use of cash, and decreased

inventory purchases contributed $343,418.

Partially offsetting these decreases were decreases in accounts payable and accrued

expenses of $326,997, a decrease in deferred revenue of $67,135, and an increase in accounts receivable of $231,683.

Cash Used/Provided by Investing Activities

cash used by investing activities during the three months ended March 31, 2020 was $50,529, which compares to $60,829 of cash

used by investing activities during the same period of 2019, a decrease of $10,300.

cash used by investing activities during the six months ended June 30, 2020 was $98,710, which compares to $115,920 of

cash used by investing activities during the same period of 2019, a decrease of $17,210.

This is primarily attributable

to lower patent costs and reduced purchases of furniture and equipment.

Cash Used/Provided by Financing Activities

provided by financing activities during the three months ended March 31, 2020 increased to $2,120,324 from $1,755,178 during the

same period in 2019 due to the receipt of $2,599,200 of proceeds less $428,876 of offering costs, in connection with our

January 2020 private offering and related forced exercise of Preferred Warrants.

Partially offsetting these cash receipts was

the payment of the remaining outstanding principal balance on our convertible note payable of $50,000.

Cash provided by

financing activities during the same period in 2019 resulted from the receipt of $1,961,220 in proceeds less $281,890 of offering

costs in connection with our March 2019 public offering, and $75,848 in proceeds from the exercise of warrants to purchase common

stock in January and February of 2019.

provided by financing activities during the six months ended June 30, 2020 increased to $4,892,944 from $2,270,178 during

the same period in 2019 due to the receipt of $5,741,100 of proceeds less $820,228 of offering costs, in connection

with our January 2020 and April 2020 private and public offerings and exercise of Preferred Warrants.

of payroll taxes pursuant to the CARES Act provided an additional $22,072 in funds.

Partially offsetting these cash receipts

was the payment of the remaining outstanding principal balance on our convertible note payable of $50,000.

Cash provided by financing

activities during the same period in 2019 resulted from the receipt of $2,521,220 in proceeds less $326,890 of offering

costs in connection with our March 2019 and May 2019 offerings, and $75,848 in proceeds from the exercise of warrants to

purchase common stock in January and February of 2019.

ability to continue to fund our liquidity and working capital needs will be dependent upon the success of our efforts to generate

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funding when needed, we may be forced to delay, scale back or eliminate all or a portion of our commercialization efforts and

have no credit lines as of May 14, 2020, nor have we ever had a credit line since our inception.

have no credit lines as of July 23, 2020, nor have we ever had a credit line since our inception.

and changing prices have had no effect on our continuing operations over our two most recent fiscal years.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements