What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-05 compared with 2022-04-26 · 287 added, 164 removed, 133 unchanged (77% of the section changed)

7 unchanged sentences

the foregoing.

All Forward-Looking Statements included in this document are made as of the date hereof and are based on information available

to us as of such date.

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 any other

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”).

3 unchanged sentences

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 and elsewhere in this Quarterly Report.

Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 and elsewhere in our Form 10-Q for the quarterly

period ended March 31, 2022 and in this Quarterly Report.

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

2 unchanged sentences

We commenced our current business operations in 2010.

On May 17, 2022, we began doing business

as Sigma Additive Solutions.

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.sigmalabsinc.com .

Our website address is www.sigmaadditive.com .

The Company’s annual reports, quarterly reports, current reports on Form 8-K

32 unchanged sentences

the promised goods or services.

In January 2022, the Company began offering a subscription

option to its customers, pursuant to which it enters into agreements to lease 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 that 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.

agreements may be renewed for successive one-year terms unless notice is given by either party of its intent not to renew at least 30

days before the end of the lease term.

For leases with 36-month terms, the lessee may terminate the agreement after the first 18

months with 30-days written notice.

Some, but not all, of the arrangements provide for a lessee to purchase the asset at a stated

amount that approximates fair value and are not reasonably certain to be exercised at the inception of the arrangement.

no anticipated variable lease payments at the inception of the arrangement.

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 to combine the technical support and maintenance with the lease as they have the same pattern of transfer.

The installation

and training do not have the same pattern of transfer;

therefore, this component is not eligible for the single component practical expedient.

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 assets based on the life of the underlying assets, the ability to refurbish and sell the assets,

as well as the Company’s ability to componentize the hardware and utilize subassemblies in other products.

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

Receivable and Allowance for Doubtful Accounts - Trade accounts receivable are carried at original invoice amount less an estimate

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Inventories are valued at the lower of cost or net realizable value, using the first-in, first-out (FIFO)

Charges for obsolete inventory are based on specific identification of inventory items resulting from regular, on ongoing reviews

of our build of materials.

Charges for obsolete inventory are based on identification of specific items resulting from regular, on ongoing reviews of our

and Intangible Assets – Long-lived assets and certain identifiable definite life intangibles to be held and used by the Company

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Fair values are determined based on quoted market values,

discounted cash flows or internal and external appraisals, as applicable.

discounted cash flows or internal or external appraisals, as applicable.

Assets to be disposed of are carried at the lower of carrying

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Patents which are pending are not amortized.

Based Compensation – We measure the compensation costs of share-based compensation arrangements based on the grant-date fair

Based Compensation – We measure the compensation costs of stock-based compensation arrangements based on the grant-date fair

value and recognize the costs in the financial statements over the period during which employees are required to provide services.

based compensation arrangements may include stock options, grants of shares of common stock with and without restrictions, performance-based

awards, stock appreciation rights and employee stock purchase plans.

awards, and stock appreciation rights.

Compensation cost is measured on the date of grant at its fair value.

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of Operations

generate revenues through hardware and software licensing of our PrintRite3D® technology to customers that seek to improve their

manufacturing production processes, and through ongoing annual software upgrades and maintenance fees.

Additionally, we generate revenues

from our contract manufacturing activities in metal additive manufacturing, or AM.

Our ability to generate revenues in the future will

depend on our ability to further commercialize and increase market presence of our PrintRite3D® technologies, and it will depend

on whether key prospective customers continue to move from AM metal prototyping to production.

In January 2022, we announced

the foundational elements of a three-year plan that we believe will increase the Company’s ability to achieve its mission of setting

the quality standard for additive manufacturing.

The combined strategies are geared at making our technology more consumable in terms

of ease of use and cost by end users, both for initial purchases and expansion opportunities, making it easier for original equipment

manufacturers (“OEMs”) to embed our technology and generate attractive revenue streams for the OEM, and finally increasing

the Company’s gross margins by moving towards a software-only solution.

To lower the barrier for

initial users and for expansion opportunities within end users with a large number of printers, we began offering our current

PrintRite3D integrated hardware and software solution on a subscription basis.

The impact of the change will currently reduce the

initial upfront cost to a new user from over $100,000 to approximately $3,000-$4,000 per month.

In addition, we believe the

subscription model will smooth out the Company’s revenue and cash receipts while making them more predictable.

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 3rd party quality and analytics solution with consistent quality metrics across printers, processes and materials;

and (3) OEMs building open APIs to integrate components of Sigma’s proprietary technology with their current offerings.

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.

The combination of subscription

pricing and the software-only embedded OEM offerings are intended to make our technology more affordable to acquire and easier for OEM’s

to bundle, distribute and support in an effort to become the industry standard.

The shift in our business model has had an impact

on our near-term revenue growth as we increase our focus on building strategic partnerships, expanding our partner ecosystem, and ensuring

the success of our existing customers as they move into production.

However, we believe these changes will contribute to faster adoption

of our product by end users and will result in more predictable and profitable revenues over the longer term.

the three months ended March 31, 2022, we recognized revenue of $51,844, as compared to $458,140 in revenue recognized during the same

period in 2021, a decrease of $406,296, or 89%.

The decrease is primarily due to decreased PrintRite3D® unit sales of $416,500 in

the first quarter of 2022, partially offset by an increase in revenues of $13,425 from our subscription based pricing program.

cost of revenue for the three months ended March 31, 2022 was $40,091, as compared to $128,331 for the same period in 2021, a decrease

Months Ended June 30, 2022 and June 30, 2021

generate revenues through perpetual and 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.

Our ability to generate

revenues in the future will depend on our ability to further commercialize and increase market presence of our PrintRite3D® technologies,

and it will depend on whether key prospective customers continue to move from AM metal prototyping to production.

January 2022, we announced the foundational elements of a three-year plan that we believe will increase the Company’s ability to

achieve its mission of setting the quality standard for AM.

The combined strategies are geared at making our technology more consumable

in terms of ease of use and cost by end users, both for initial purchases and expansion opportunities, making it easier for original

equipment manufacturers (“OEMs”) to embed our technology and generate attractive revenue streams for the OEM, and finally

increasing the Company’s gross margins by moving towards a software-only solution.

lower the barrier for initial users and for expansion opportunities within end users with a large number of printers, we began offering

our current PrintRite3D integrated hardware and software solution on a subscription basis.

The impact of the change will currently reduce

the initial upfront cost to a new user from over $100,000 to approximately $3,000-$4,000 per month.

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 3rd 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.

combination of subscription pricing and the software-only embedded OEM offerings are intended to make our technology more affordable

to acquire and easier for OEMs to bundle, distribute and support in an effort to become the industry standard.

shift in our business model has adversely affected our near-term revenue growth as we increase our focus on building strategic partnerships,

expanding our partner ecosystem, and ensuring the success of our existing customers as they move into production.

However, we believe

these changes will contribute to faster adoption of our product by end users and will result in more predictable and profitable revenues

over the longer term.

the three months ended June 30, 2022, we recognized revenue of $236,660, as compared to $144,148 in the same period in 2021, an increase

of $92,512, or 64.2%.

The decrease was primarily attributable to fewer unit sales in 2022.

total operating expenses for the three months ended March 31, 2022 were $2,295,698, as compared to $1,781,404 for the same period in

The increase was primarily due to increased PrintRite3D® unit sales, revenue recognized from installations related

to previous year sales, and an increase in annual maintenance contract renewals in the second quarter of 2022, as compared to the second

quarter of 2021.

cost of revenue for the three months ended June 30, 2022 was $193,075, as compared to $116,397 for the same period in 2021, an

increase of $76,678, or 65.9%.

The increase was primarily attributable to increased unit sales in 2022, and increased travel,

installation, and support costs related to the previous year sales.

total operating expenses for the three months ended June 30, 2022 were $2,279,425, as compared to $2,168,651 for the same period in 2021,

an increase of $110,774, or 5.1%.

The increase was primarily attributable to an increase in salary and benefit costs, as described

below, related to the hiring of additional employees in an effort to expand the commercialization of our products.

and benefits costs were $1,292,010 for the three months ended March 31, 2022, as compared to $847,171 for the same period in 2021, an

The increase was primarily attributable to an increase in salary and benefit costs, as described below,

related to the hiring of additional employees in an effort to expand the commercialization of our products, and an increase in office

expense due to a company-wide global conference held in the second quarter.

and benefits costs were $1,184,818 for the three months ended June 30, 2022, as compared to $985,348 for the same period in 2021, an

increase of $199,470, or 20.2%.

The increase was comprised of:

(a) $266,711 related to the hire of additional employees;

(b) $84,677 related

to salary increases for existing employees;

and (d) increased taxes and benefits

Partially offsetting these increases was a decrease in commissions of $42,654 due to fewer unit sales.

compensation was $170,976 for the three months ended March 31, 2022, as compared to $117,477 for the same period in 2021, an increase

(a) $166,469 of salary increases for existing employees and two new hires;

(b) an increase in commissions of $9,402 due to increased sales;

and (d) increased taxes

and benefits of $88,906.

Partially offsetting these increases was a decrease in stock appreciation rights of $92,697 resulting from the

June 30, 2022 revaluation.

compensation was $167,439 for the three months ended June 30, 2022, as compared to $116,441 for the same period in 2021, an increase

of $50,998, or 43.8%.

This increase is primarily a result of stock options granted to new employees of $3,267 and increased stock option

grants to existing employees and executive management of $12,748 and $37,484, respectively, in the three months ended March 31,

and research & development expenses of $143,418 were incurred during the three months ended March 31, 2022, as compared to $196,340

This increase was primarily a result of the expense related to options awarded to new employees and the expense

for annual option grants awarded to employees in the third quarter of 2021.

and research and development expenses of $146,885 were incurred during the three months ended June 30, 2022, as compared to $280,700

in the same period of 2021, a decrease of $133,815, or 47.7%.

The decrease was primarily due to a decrease in operations costs of $61,148

as we incurred charges in the first quarter of 2021 of $52,987 for inventory obsolescence, including $14,471 for metal powder write-offs,

field service expenses of $5,220, as well as equipment upgrades in both our manufacturing facility and our 3D metal printers totaling

Partially offsetting these decreases was an increase in purchases of lab supplies of $11,565, and increased research & development

costs of $6,268 due to an increase in consulting costs of $21,043 in connection with ongoing PrintRite3D software development, partially

offset by a decrease in expenses associated with a first quarter 2021 simulation project of $14,775.

public relations, and marketing expenses of $94,326 were incurred during the three months ended March 31, 2022, as compared to $108,341

and a decrease in research and development expenses of $72,667.

The decrease in operations costs related to charges in the second quarter

of 2021 for inventory obsolescence and purchases of lab supplies.

The decrease in research and development expenses was attributable

to second quarter 2021 simulation project expenses of $73,188, and expenses of $11,750 related to the ongoing research and development

efforts for parts upgrades with no such projects in 2022.

Partially offsetting these costs was an increase in consulting expenses of

$12,271 in the second quarter of 2022 in connection with ongoing PrintRite3D software development.

public relations, and marketing expenses of $152,300 were incurred during the three months ended June 30, 2022, as compared to $114,762

during the same period in 2021.

The decrease of $14,015, or 13%, was primarily due to a decrease in investor relations consulting costs

of $23,473 due to issuance of fewer stock appreciation rights and options issued in 2022 and lower advertising expenses of $3,984, partially

offset by an increase in tradeshow expenses of $13,442 as a result of increased attendance due to reduced COVID travel restrictions in

costs incurred in the three months ended March 31, 2022 were $58,749, as compared to $77,616 during the same period in 2021.

of $18,867, or 24% was primarily due to a decrease in non-employee director stock-based compensation of $39,750, partially offset by

an increase in such directors’ cash compensation of $20,695.

& professional fees incurred in the three months ended March 31, 2022 were $211,416, as compared to $176,847 incurred during the

same period in 2021, an increase of $34,569, or 20%.

This increase was primarily a result of an increase in consulting expenses

of $82,175 due to the engagement of technical consulting support of $28,590 in connection with our new subscription-based pricing model,

$3,500 in external human resources consulting, $17,800 for manufacturing support, and $32,285 related to consulting services for corporate

matters, and an increase in audit fees of $9,936.

These increases were partially offset by a decrease in legal expenses of $28,590 and

a decrease in recruiting expenses of $26,667 related to new hires in 2021.

expenses for the three months ended March 31, 2022 were $205,432, as compared to $148,225 for the same period in 2021, an increase of

$57,207, or 39%.

The increases resulted primarily from:

(a) travel and entertainment of $53,542 as compared to virtually no travel during

the same period in 2021 as a result of COVID 19 travel restrictions;

(b) an increase in payroll service fees of $2,247 related to new

and (c) dues & subscriptions of $12,910 for new customer relationship management, product lifecycle management, and project

management software.

Partially offsetting these increases was a decrease in postage and shipping of $6,388, and a decrease in office

supply expense of $7,377.

and amortization expense for the three months ended March 31, 2022 totaled 31,584 as compared to $23,031 for the same period in 2021,

The increase of $37,538, or 32.7%, was primarily due to an increase in tradeshow expenses of $47,691 as

a result of increased attendance following the lifting of COVID-19 related travel restrictions in 2022.

Partially offsetting these increases

were a decrease in investor relations consulting costs of $6,060 due to revaluation of stock appreciation rights held by consultants

and lower advertising expenses of $4,093.

costs incurred in the three months ended June 30, 2022 were $60,817, as compared to $158,529 during the same period in 2021.

decrease of $97,712, or 61.6% was primarily attributable to a decrease in shareholder services of $77,400 due to $58,780 of expenses

incurred in connection with a special shareholders meeting held in May of 2021, a decrease due to a timing difference of $18,620 resulting from expense recognized in the second quarter of 2021 as our annual shareholders meeting was held earlier in 2021 versus 2022, a decrease in processing of regulatory

filings of $1,231, and a decrease in non-employee director compensation of $19,081.

and professional fees incurred in the three months ended June 30, 2022 were $144,528, as compared to $244,019 incurred during the

same period in 2021, a decrease of $99,491, or 40.8%.

This decrease was primarily a result of a decrease in recruiting expenses of

$64,000 due to fewer new hires in 2022 as compared to 2021, a decrease in legal expenses of $32,300 as a result of one less

shareholders meeting in 2022 and fewer regulatory filings, a decrease in consulting expenses of $2,682, and a decrease in accounting

fees of $1,635.

Partially offsetting these decreases was an increase in IT expenses of $1,126.

expenses for the three months ended June 30, 2022 were $303,600 as compared to $151,871 for the same period in 2021, an increase of $151,729,

The increase resulted primarily from:

(a) an increase in travel and entertainment expenses of $48,496 as compared to the same

period in 2021 as a result of COVID-19 related travel restrictions;

(b) expenses of $106,413 related to a Company-wide, global conference

held in May of 2022;

& subscriptions of $2,189 for new customer relationship management, product lifecycle management, and project management software;

and (e) an increase in rent and utilities expense of $2,041.

Partially offsetting these increases was a decrease in postage and shipping

and amortization expense for the three months ended June 30, 2022 totaled $29,861 as compared to $25,783 for the same period in 2021,

an increase of $4,078, or 15.8%.

The increase is primarily the result of two PrintRite3D units on out new leasing program.

operating expenses were $87,787 for the three months ended March 31, 2022, as compared to $86,356 for the same period in 2021.

was primarily due to an increase in our insurance policy premiums for 2022 of $1,701, partially offset by lower bank service fees during

the three months ended March 31, 2022, we realized net other income of $76,550, as compared to net other income of $800,936 in 2021.

The decrease of $724,386, or 90% was primarily due to an unrealized gain of $802,285 from the March 31, 2021 revaluation of the derivative

liability resulting from our private placement of warrants to purchase 2,190,000 shares of common stock in the first quarter of 2021,

partially offset by $76,628 received in New Mexico state incentives in the first quarter of 2022.

net loss applicable to common stockholders for the three months ended March 31, 2022 was $2,221,615, as compared to $711,567 for the

The increase was primarily the result of PrintRite3D units sold under our subscription-based pricing

operating expenses were $89,177 for the three months ended June 30, 2022, as compared to $91,198 for the same period in 2021.

was primarily due to SEC filing fees related to various registration statements filed in June 2021, as compared to none in the second

quarter of 2022.

the three months ended June 30, 2022, we realized net other expenses of $11,330, as compared to net other income of $295,353 in 2021.

The decrease of $306,683, or 103.8% was primarily due to an unrealized gain of $290,150 from the 2021 revaluation of the derivative liability

resulting from our private placement of warrants to purchase 2,190,000 shares of common stock in the second quarter of 2021,a decrease

in interest income in 2022, and a foreign currency exchange loss of $10,436 in 2022 due to the strengthening of the US dollar against

net loss applicable to common stockholders for the three months ended June 30, 2022 was $2,261,390, as compared to $1,859,767 for the

same period of 2021, a $401,623 increase.

The increase was primarily due to the increased loss from operations of $832,350 and the

decrease in other income of $724,386.

The increase was primarily due to the decrease in other income of $306,683 and increased loss

from operations of $94,940.

Months Ended June 30, 2022 and June 30, 2021

the six months ended June 30, 2022, we recognized revenue of $288,504, as compared to $602,288 in the same period in 2021, a decrease

of $313,784, or 52.1%.

The decrease was primarily due to a decrease in perpetual license sales of our PrintRite3D® units of $401,750,

and decreased revenues from our legacy Rapid Test and Evaluation (“RTE”) program of $20,000 in 2022.

Partially offsetting

these decreases was an increase in revenues of $14,171 from our subscription-based pricing program, on-site installation and support

revenue of $62,068, an increase in consulting service revenue of $4,500, and an increase in annual maintenance contract revenue of $27,227.

cost of revenue for the six months ended June 30, 2022 was $233,166, as compared to $244,728 for the same period in 2021, a decrease

of $11,562, or 4.7%.

The decrease was primarily attributable to fewer unit sales in 2022 partially offset by increased travel costs

incurred related to installations from 2021 sales.

operating expenses for the six months ended June 30, 2022 were $4,575,123, as compared to $3,950,057 for the same period in 2021, an

increase of $625,066, or 15.8%.

The increase was primarily attributable to an increase in salary and benefit costs, as described below,

related to the hiring of additional employees in an effort to expand the commercialization of our products.

and benefits costs were $2,476,828 for the six months ended June 30, 2022, as compared to $1,832,519 for the same period in 2021, an

increase of $644,309, or 35.2%.

The increase was comprised of:

(a) $517,852 in employee salary increases and average full-time employee

headcount increasing by two;

(b) a $27,390 increase in severance;

and (c) increased taxes and benefits of $187,529.

Partially offsetting

these increases was a decrease in commissions of $33,263 due to fewer unit sales and a decrease in stock appreciation rights of $55,199

due to the June 30, 2022 revaluation.

compensation was $338,415 for the six months ended June 30, 2022, as compared to $233,919 for the same period in 2021, an increase of

$104,496, or 44.7%.

This increase was primarily due to the expense related to options granted to new employees, the expense of annual

option grants awarded to employees in the third quarter of 2021, and the expense related to the vesting of options granted to our Chief

Executive Officer in February, 2022.

and research & development expenses of $290,303 were incurred during the six months ended June 30, 2022, as compared to $477,040

in the same period of 2021, a decrease of $186,737, or 39.1%.

The decrease was primarily due to a decrease in operations costs of $126,868

and a decrease in research and development costs of $59,869.

The decrease in operations expense was due to:

(1) charges we incurred in

2021 of $45,996 for inventory obsolescence, including $14,471 for metal powder write-offs;

(2) equipment upgrades in both our manufacturing

facility and our 3D metal printers totaling $12,277;

and (3) a decrease in parts and material purchases of $62,063.

Partially offsetting

these decreases was an increase in purchases of lab supplies of $7,939.

The decrease in research and development costs is due to expenses

associated with a simulation project in 2021 of $87,964, partially offset by an increase in consulting costs of $28,095 in connection

with ongoing PrintRite3D software development.

public relations, and marketing expenses of $246,626 were incurred during the six months ended June 30, 2022, as compared to $223,103

during the same period in 2021.

The increase of $23,523, or 10.5%, was primarily due to an increase in tradeshow expenses of $61,134 as

compared to 2021, when COVID-19 travel restrictions precluded attendance at such events.

Partially offsetting this increase was a decrease

in investor relations consulting costs of $29,534 due to a revaluation of stock appreciation rights at June 30, 2022, and lower advertising

expenses of $8,077.

costs incurred in the six months ended June 30, 2022 were $119,566, as compared to $236,145 during the same period in 2021.

of $116,579, or 49.4%, was primarily attributable to a decrease in shareholder services of $77,748 due to expenses of $58,780 incurred

in connection with a special shareholders’ meeting held in 2021, a timing difference of $18,620 in expenses related to our regular

annual shareholders’ meeting and a decrease in non-employee director compensation of $38,831.

and professional fees incurred in the six months ended June 30, 2022 were $355,944, as compared to $420,866 incurred during the same

period in 2021, a decrease of $64,922, or 15.4%.

This decrease was primarily a result of a decrease in legal expenses of $60,890 due to

one less shareholders meeting and fewer regulatory filings, and a decrease in recruiting expenses of $90,667 related to new hires in 2021.

These decreases were partially offset by an increase in consulting expenses of $34,625 attributable to the engagement of technical consulting

support in connection with our new subscription-based pricing model, $3,500 in external human resources consulting, and $40,209

related to consulting services for corporate matters, and an increase in audit fees of $8,301.

expenses for the six months ended June 30, 2022 were $509,032, as compared to $300,096 for the same period in 2021, an increase of $208,936,

The increase resulted primarily from:

(a) travel and entertainment of $102,957 as compared to significantly less travel in

2021 as a result of COVID-19 related travel restrictions;

(b) expenses of $106,413 related to a Company-wide, global conference held

in May of 2022;

(d) dues & subscriptions of $15,098 for new

customer relationship management, product lifecycle management, and project management software;

and (e) an increase in utilities expenses

Partially offsetting these increases was a decrease in postage and shipping of $20,690, and a decrease in office supply expense

and amortization expense for the six months ended June 30, 2022 totaled $61,445 as compared to $48,814 for the same period in 2021, an

increase of $12,631, or 25.9%.

The increase was primarily the result sales of PrintRite3D units under our new subscription-based pricing

operating expenses were $176,964 for the six months ended June 30, 2022, as compared to $177,554 for the same period in 2021.

was primarily due to decrease in SEC filing fees of $5,850 and a decrease in licensing fees of $2,166, partially offset by an increase

in our insurance policy premiums for 2022 of $7,639.

the six months ended June 30, 2022, we realized net other income of $65,220, as compared to net other income of $1,096,290 in 2021.

decrease of $1,031,070, or 94.1%, was primarily due to a gain of $1,092,441 from the 2021 revaluation of the derivative liability resulting

from our private placement of warrants to purchase 2,190,000 shares of common stock in the second quarter of 2021, a foreign currency

exchange loss of $10,436 in 2022 due to the strengthening of the US dollar against the Euro, and a decrease in interest income of $4,326,

partially offset by $76,628 in New Mexico state incentives in the first quarter of 2022.

net loss applicable to common stockholders for the six months ended June 30, 2022 was $4,483,005, as compared to $2,571,334 for the same

period of 2021, a $1,911,671 increase.

The increase was primarily due to the increased loss from operations of $927,288 and the decrease

in other income of $1,031,070.

These increases were partially offset by a decrease in preferred dividends of $46,687.

and Capital Resources

of March 31, 2022, we had $9,277,929 in cash and working capital of $9,588,858, as compared with $11,447,047 in cash and working capital

of June 30, 2022, we had $6,933,499 in cash and working capital of $7,515,540, as compared with $11,447,047 in cash and working capital

of $11,702,358 as of December 31, 2021.

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.

March 26, 2021, the Company closed a public offering of its securities in which it issued 2,190,000 shares of common stock at a price

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

March 26, 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 to purchase an aggregate of 2,190,000 shares of common stock at an exercise price of $4.32 per share.

became exercisable on May 24, 2021, which was the date the Company obtained Stockholder Approval, and will expire two years after the

initial exercise date.

January 12, 2021, the Company closed a public offering of common stock 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 commissions and other offering expenses payable

by the Company.

the first quarter of 2021, the Company received net cash proceeds of $1,136,010 from the exercise of outstanding warrants.

believe that our existing cash on hand will be sufficient to fund our anticipated operating costs and capital expenditure requirements

through at least the first quarter of 2023.

We have based this estimate on assumptions that may prove to be wrong, and we could exhaust

our capital resources sooner than we expect.

In a concurrent private placement under the Purchase Agreement, the Company issued to

the purchasers warrants to purchase an aggregate of 2,190,000 shares of common stock at an exercise price of $4.32 per share.

became exercisable on May 24, 2021, and will expire two years after the initial exercise date.

January 12, 2021, the Company closed a public offering 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 commissions and other offering expenses payable by the Company.

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

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 12 months from the filing of this Quarterly Report.

We have based this

estimate on assumptions that may prove to be wrong, and we may need to raise additional financing to fund our operations.

of the numerous risks and uncertainties associated with the research, development, and commercialization of our products, we are unable

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of expertise (materials and manufacturing quality assurance and process control technologies).

worldwide COVID-19 pandemic caused a reduction, and in some cases a freeze, in capital spending within the Company’s targeted

The future impact of the ongoing epidemic, including the emergence of variations of the virus, is highly uncertain so

that no assurance can be given that our business and results of operations will not be materially and adversely affected.

uncertain as to any further disruption of the financial markets, which may reduce our ability to access capital on favorable terms

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.

worldwide COVID-19 pandemic caused a reduction, and in some cases a freeze, in capital spending within the Company’s targeted industries.

The future impact of the ongoing epidemic, including the emergence of variations of the virus, is highly uncertain and no assurance can

be given that our business and results of operations will not be materially and adversely affected.

It is also uncertain as to any further

disruption of the financial markets, which may reduce our ability to access capital on favorable terms or at all.

However, due to the

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

the crisis will eventually accelerate the adoption of 3D printing, which may benefit the Company.

The effects of a U.S.

or global recession, while difficult to predict,

could result in some customers delaying orders or not proceeding with planned orders for our PrintRite3D systems.

Cash Used in Operating Activities

cash used in operating activities during the three months ended March 31, 2022 increased to $2,027,019 from $1,240,586 during the same

period in 2021, a $786,433, or 63% increase.

Contributing to this increase was an increase in net loss of $1,566,736 and decreases in

accounts payable and accrued expenses of $265,467, prepaid assets of $6,278, and total stock-based compensation of $5,519.

offsetting these increases in cash usage were a decrease in the gain on derivative liability of $802,285, a decrease in accounts receivable

of $207,658, a decrease in inventory purchases of $16,110, and increases in deferred revenue and depreciation and amortization expense

of $12,961 and $8,553, respectively.

cash used in operating activities during the six months ended June 30, 2022 increased to $4,314,503 from $ 3,266,620

during the same period in 2021, a $1,047,883, or 32.1% increase.

Contributing to this increase was an increase in net loss, adjusted

for non-cash expenses of $860,068, and decreases in accounts payable and accrued expenses of $510,530, and an increase in deferred revenue

Partially offsetting these increases in cash usage were, a decrease in accounts receivable of $178,322, a decrease in inventory

purchases of $113,762, and a decrease in prepaid expenses of $34,394.

Cash Used in Investing Activities

cash used by investing activities during the three months ended March 31, 2022 was $142,099, which compares to $21,969 of cash used by

investing activities during the same period of 2021, an increase of $120,130.

The increase resulted from leased PrintRite3D units reclassified

as property, plant and equipment, and increased patent costs during the first quarter of 2022.

cash used by investing activities during the six months ended June 30, 2022 was $199,045, which compares to $ 108,021

of cash used by investing activities during the same period of 2021, an increase of $91,024, or 84.3%.

The increase resulted from

leased PrintRite3D units reclassified as property, plant and equipment, and increased patent costs during the first six months of 2022.

Cash Provided by Financing Activities

Company did not raise any capital nor were there any warrant exercises during the three months ended March 31, 2022.

Cash provided by

financing activities during the three months ended March 31, 2021 totaled $14,404,942 due to the receipt of $14,869,899 of proceeds less

$1,600,967 of offering costs in connection with our January and March 2021 public and private offerings.

The exercise of outstanding

warrants during the three months ended March 31, 2021 provided an additional $1,136,010 in cash proceeds.

Company did not raise any capital nor were there any warrant exercises during the six months ended June 30, 2022.

Cash provided by financing

activities during the six months ended June 30, 2021 totaled $14,404,942 due to the receipt of the net proceeds of our January and March 2021 public and private offerings.

The exercise of outstanding warrants during

the six months ended June 30, 2021 provided an additional $1,136,010 in cash proceeds.

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

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the 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.

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.

have no lines of credit or other financing arrangements.

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

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.

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

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What changed 10-Q

Item 2. Management’s Discussion and Analysis