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Item 1. Financial Statements

2023-05-15 compared with 2022-11-14 · 251 added, 318 removed, 257 unchanged (69% of the section changed)

1 unchanged sentence

Additive Solutions, Inc.

(formerly Sigma Labs, Inc.)

Balance Sheets

September 30, 2022

March 31, 2023

December 31, 2022

14 unchanged sentences

TOTAL LIABILITIES

Commitments & Contingencies

Stockholders’ Equity

1 unchanged sentence

10,000,000 shares authorized;

465 shares issued and outstanding

316 and 465 shares issued and outstanding, respectively

Common Stock, $ 0.001 par value;

24,000,000 shares authorized;

10,498,802 shares issued and outstanding

10,772,713 and 10,498,802 shares issued and outstanding, respectively

Additional Paid-In Capital

6 unchanged sentences

Additive Solutions, Inc.

(formerly Sigma Labs, Inc.)

Statements of Operations

Three Months Ended

September 30,

Nine Months Ended

September 30,

COST OF REVENUE

13 unchanged sentences

( 2,283,945 )

( 6,804,209 )

( 6,083,912 )

OTHER INCOME (EXPENSE)

3 unchanged sentences

Interest Expense

Total Other Income (Expense)

Total Other Income

LOSS BEFORE PROVISION FOR INCOME TAXES

1 unchanged sentence

( 2,207,395 )

( 6,746,873 )

( 4,987,185 )

Provision for income Taxes

1 unchanged sentence

$ ( 2,207,395 )

$ ( 6,746,873 )

$ ( 4,987,185 )

Preferred Dividends

2 unchanged sentences

$ ( 2,221,615 )

$ ( 6,789,533 )

$ ( 5,076,532 )

Net Loss per Common Share – Basic and Diluted

2 unchanged sentences

Additive Solutions, Inc.

(formerly Sigma Labs, Inc.)

of Stockholders’ Equity

the Three Months Ended September 30, 2022 and September 30, 2021

the Three Months Ended March 31, 2023, and March 31, 2022

Shares Outstanding

7 unchanged sentences

Shares Outstanding

Accumulated Deficit

Balances, June 30, 2022

$ ( 45,076,185 )

( 2,292,308 )

Preferred Stock Dividends

Stock Options Issued for Third Party Services

Stock Options Awarded to Directors for Services

Stock Options Awarded to Employees

Balances, September 30, 2022

$ ( 47,382,713 )

Preferred Stock

Shares Outstanding

Preferred Stock

Shares Outstanding

Accumulated Deficit

Balances, June 30, 2021

$ ( 35,676,342 )

Preferred Stock Dividends

Shares Securities Issued to Directors for Services

Securities Issued for Third Party Services

Stock Awarded to Employees

( 2,490,978 )

Balances, September 30, 2021

$ ( 38,181,540 )

accompanying notes to condensed financial statements.

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

Preferred Stock

Shares Outstanding

Preferred Stock

Shares Outstanding

Paid-in Capital

Accumulated Deficit

4 unchanged sentences

Preferred Stock Dividends

Common Shares Issued for Conversion of Preferred Stock

Common Warrant Issued for Conversion of Preferred Stock

Stock Options Issued to Directors for Services

Stock Options Issued for Third Party Services

Stock Options Awarded to Directors for Services

Stock Options Awarded to Employees

Balances, September 30, 2022

Stock Options Issued to Employees

Balances, March 31, 2023

( 51,205,495 )

3 unchanged sentences

Shares Outstanding

Paid-in Capital

Accumulated Deficit

1 unchanged sentence

$ ( 40,593,180 )

Common Shares Sold in Public Offerings

Extinguishment of Derivative Liability

( 2,207,395 )

1 unchanged sentence

Preferred Stock Dividends

Common Shares Issued Upon Conversion of Preferred Shares

Common Shares issued for Exercise of Common Warrants

Stock Options Awarded to Directors

Securities Issued for Third Party Services

Stock Options Awarded to Employees

Offering Costs

( 1,600,967 )

( 4,987,185 )

Balances, September 30, 2021

Stock Options Issued to Directors for Services

Stock Options Issued for Third Party Services

Stock Options Issued to Employees

Balances, March 31, 2022

( 42,814,795 )

1 unchanged sentence

Additive Solutions, Inc.

(formerly Sigma Labs, Inc.)

Statements of Cash Flows

September 30, 2022

September 30, 2021

Nine Months Ended

September 30, 2022

September 30, 2021

March 31, 2023

March 31, 2022

Three Months Ended

March 31, 2023

March 31, 2022

OPERATING ACTIVITIES

4 unchanged sentences

Depreciation and Amortization

Gain on Derivative Liability

( 1,092,441 )

Stock-Based Compensation - Employees

1 unchanged sentence

Stock-Based Compensation - Directors

Stock-Based Compensation

Change in Assets and Liabilities:

12 unchanged sentences

FINANCING ACTIVITIES

Gross Proceeds from Public and Private Issuances of Securities

Less Offering Costs

( 1,600,967 )

Proceeds from Exercise of Warrants

NET CASH PROVIDED BY FINANCING ACTIVITIES

1 unchanged sentence

( 1,357,227 )

( 2,169,118 )

CASH AT BEGINNING OF PERIOD

2 unchanged sentences

Noncash Investing and Financing Activities Disclosure:

Issuance of Common Shares for Preferred Dividends

Preferred Stock Dividends

Conversion of Preferred Shares to Common Shares

Other Noncash Operating Activities Disclosure:

2 unchanged sentences

accompanying notes to condensed financial statements.

SIGMA ADDITIVE SOLUTIONS,

(FORMERLY SIGMA LABS, INC.)

ADDITIVE SOLUTIONS, INC.

TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

1 - Summary of Significant Accounting Policies

of Business -Sigma Additive Solutions, Inc.

(formerly Sigma Labs, Inc.), a Nevada corporation (“Company,” “Sigma,”

“we,” “us” and “our”), was founded by a group of scientists, engineers and businessmen to

develop and commercialize novel and unique manufacturing and materials technologies.

Sigma believes that some of these technologies

will fundamentally redefine conventional quality assurance and process control practices by embedding them into the manufacturing

processes in real time, enabling process intervention and ultimately leading to closed loop process control.

The Company anticipates

that its core technologies will allow its customers to combine advanced manufacturing quality assurance and process control

protocols with novel materials to achieve breakthrough product potential in many industries, including aerospace, defense, oil and

gas, bio-medical, and power generation.

of Business - Sigma Additive Solutions, Inc., a Nevada corporation (“Company,” “Sigma,” “we,”

“us” and “our”), was founded by a group of scientists, engineers and businessmen to develop and commercialize

novel and unique manufacturing and materials technologies.

Sigma believes that some of these technologies will fundamentally redefine

conventional quality assurance and process control practices by embedding them into the manufacturing processes in real time, enabling

process intervention and ultimately leading to closed loop process control.

The Company anticipates that its core technologies will allow

its customers to combine advanced manufacturing quality assurance and process control protocols with novel materials to achieve breakthrough

product potential in many industries, including aerospace, defense, oil and gas, bio-medical, and power generation.

of Presentation - The accompanying financial statements have been prepared by the Company in accordance with Generally Accepted Accounting

1 unchanged sentence

In the opinion of management, all adjustments (which include only normal

recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at September 30, 2022

and 2021 and for the periods then ended have been made.

recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at March 31, 2023 and

2022 and for the periods then ended have been made.

Certain information and footnote disclosures normally included in financial statements

2 unchanged sentences

conjunction with the December 31, 2022 audited financial statements and notes thereto included in the Company’s Annual Report on

The results of operations for the period ended September 30, 2022 are not necessarily indicative of the operating results

for the full year.

Reclassification

- Certain amounts in prior-period financial statements have been reclassified for comparative purposes to conform to presentation

in the current-period financial statements.

The results of operations for the period ended March 31, 2023 are not necessarily indicative of the operating results for

the full year.

Concern – The Company has sustained losses and had negative cash flows from operating activities since its inception.

in 2017, the company committed itself to a focused initiative to transition its product and culture from research and development into

an enterprise with a commercial industrial product and a business-oriented operation culture.

Company currently has sufficient cash and working capital to fund operations through June 2023 and will require additional funding in

the public or private markets in the near-term to be able to continue operations.

The Company currently has no understanding or agreement

to obtain such funding, and there is no assurance that we will be successful in obtaining additional funding.

If we fail to obtain sufficient

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

As a result, there is substantial doubt about our ability to continue as a going concern.

Value of Financial Instruments - The carrying amounts reported in the balance sheets for the cash and cash equivalents, receivables,

1 unchanged sentence

the short period of time between the origination of such instruments and their expected realization and their current market rate of

Company does not use derivative instruments for hedging of market risk or for trading or speculative purposes.

On March 26, 2021, the

Company issued warrants to purchase an aggregate of 2,190,000 shares of common stock in a private placement concurrently with a registered

direct offering of our common stock The warrants became exercisable on May 24, 2021 , the date the Company obtained stockholder approval

to increase its authorized common shares from 12,000,000 to 24,000,000 , and will expire on May 24, 2023 .

to ASC 815.40.25.10, such warrants were accounted for as a derivative liability because the Company did not have sufficient authorized

and unissued shares of common stock available to settle the warrants at the issue date.

On May 24, 2021, upon receiving stockholder approval

to increase its authorized common shares, the Company reclassified the warrant liability to equity pursuant to ASC 815.40.35.8.

the nine months ended September 30, 2021, the Company recorded a gain of $ 1,092,441 due to the change in the fair value of the derivative

liability as measured on a recurring basis.

Company does not use derivative instruments for hedging market risk or for trading or speculative purposes.

Per Share – The computation of loss per share is based on the weighted average number of shares outstanding during the period

2 unchanged sentences

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

At September 30, 2022 and 2021,

the Company had the following common shares underlying these instruments:

Schedule of Antidilutive Securities Excluded

At March 31, 2023 and 2022, the

Company had the following common shares underlying these instruments:

Schedule of Anti-dilutive Securities Excluded

from Computation of Earnings Per Share

September 30,

Stock Options

2 unchanged sentences

following table shows the amounts used in computing loss per share and the effect on net loss and the weighted average number of shares

of dilutive potential common stock for the periods ended September 30, 2022 and 2021:

of dilutive potential common stock for the periods ended March 31, 2023 and 2022:

Schedule of Computing Loss Per Share

Three Months Ended September 30

Nine Months Ended September 30

Three Months Ended March 31

Net Loss per Common Share - Basic and Diluted

2 unchanged sentences

$ ( 2,221,615 )

$ ( 6,789,533 )

$ ( 5,076,532 )

Weighted Average Number of Common Shares Outstanding Used in Loss Per Share During the Period (denominator)

7 unchanged sentences

obsolescence.

Recognition – The Company’s revenue is derived primarily from sales of our software and related hardware

suite under perpetual licenses and from providing engineering services under contracts.

The Company recognizes revenue in accordance

with ASC Topic No.

- The Company leases office space from third parties.

The Company determines if a contract is a lease at inception.

A contract contains

a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

The lease term begins on the commencement date, which is the date the Company takes possession of the asset and may include options to

extend or terminate the lease when it is reasonably certain that the option will be exercised.

Leases are classified as operating or

finance leases based on factors such as the lease term, lease payments, and the economic life, fair value and estimated residual value

of the asset.

Where leases include an option to purchase the leased asset at the end of the lease term, this is assessed as a part of

the Company’s lease classification determination.

The Company has short-term leases only, cancelable upon 45 days’ notice,

and with remaining lease terms of less than one year.

Therefore, the Company has elected the short-term lease recognition exemption for

all leases, whereby leases are not recorded on the Company’s balance sheet and lease payments are recognized as lease expense on

a straight-line basis over the lease term.

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

are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The Company periodically evaluates the recoverability of its long-lived assets based on estimated future cash flows and the estimated

liquidation value of such long-lived assets and provides for impairment if such undiscounted cash flows are insufficient to recover the

carrying amount of the long-lived assets.

If impairment exists, an adjustment is made to write the asset down to its fair value, and

a loss is recorded as the difference between the carrying value and fair value.

Fair values are determined based on quoted market values,

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

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

value or estimated net realizable value.

No patents were written off in the first quarter of 2023 or in fiscal 2022.

Utility patents

are amortized over a 17-year period.

Patents which are pending are not amortized.

Recognition – The Company’s revenue is derived primarily from sales of our software and related hardware suite under

perpetual licenses and from providing engineering services under contracts.

The Company recognizes revenue in accordance with ASC Topic

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2014-09, Revenue from Contracts with Customers .

ASU 2014-09 is a comprehensive revenue recognition standard that superseded

nearly all existing revenue recognition guidance under prior U.S.

GAAP and replaced it with a principles-based approach for

determining revenue recognition.

The core principle of the standard is the recognition of revenue upon the transfer of promised

goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange

for those goods or services.

In general, we determine revenue recognition by:

(1) identifying the contract, or contracts, with our

(2) identifying the performance obligations in the contract;

2014-09, Revenue

from Contracts with Customers .

ASU 2014-09 is a comprehensive revenue recognition standard that superseded nearly all existing revenue

recognition guidance under prior U.S.

GAAP and replaced it with a principles-based approach for determining revenue recognition.

core principle of the standard is the recognition of revenue upon the transfer of promised goods or services to customers in an amount

that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

In general, we determine

revenue recognition by:

(1) identifying the contract, or contracts, with our customer;

(2) identifying the performance obligations in

the contract;

(3) determining the transaction price;

(4) allocating the

transaction price to performance obligations in the contract;

and (5) recognizing revenue when, or as, we satisfy performance

obligations by transferring the promised goods or services.

January 2022, the Company began offering a subscription option to its customers, pursuant to which it leases its PrintRite3D platform

for terms between 12 and 36 months and provide technical support and maintenance for the term of the arrangement, as well as installation

and training.

The Company has determined these are leases because they relate to discrete pieces of equipment to which customers have

the right to substantially all the economic benefit from and exclusive right to use during the term of the arrangement.

are classified as operating leases and the Company retains title to the underlying equipment.

(4) allocating the transaction price to performance obligations in the contract;

and (5) recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.

January 2022, the Company began offering a subscription option to its customers, pursuant to which it leases its PrintRite3D

platform for terms of between 12 and 36 months and provide technical support and maintenance for the term of the arrangement, as

well as installation and training.

The Company has determined these are leases because they relate to discrete pieces of equipment

to which customers have the right to substantially all the economic benefit and exclusive right to use during the term of the

These leases are classified as operating leases and the Company retains title to the underlying equipment.

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

before the end of the lease term.

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

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

30 days written notice.

4 unchanged sentences

are two non-lease components in the arrangement that consist of technical support and maintenance, and installation and training,

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 component does 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 equipment based on

its useful life, and the ability to refurbish and sell the equipment, as well as the Company’s ability to componentize the hardware

and utilize subassemblies in other products.

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

respectively.

The Company has elected single component practical expedient accounting to combine the technical support and

maintenance with the lease as they have the same pattern of transfer.

The installation and training component does not have the same

pattern of transfer;

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

The consideration has

been allocated on a relative fair value basis of the underlying lease and non-lease components.

The Company has estimated the

residual value of the leased equipment based on its useful life, and the ability to refurbish and sell the equipment, as well as the

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

from these operating leases for the three months ended March 31, 2023 was $ 17,006 .

Lease Payments Receivable

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

lease payments receivable for the succeeding years ending December 31 are as follows:

Schedule of Minimum

2 unchanged sentences

2023 (remaining)

2025 and thereafter

Underlying Operating Leases:

under operating leases as of September 30, 2022 were comprised of the following:

under operating leases as of March 31, 2023 was comprised of the following:

Schedule of Assets underlying Operating Leases

September 30,

March 31, 2023

PrintRite 3D Hardware

1 unchanged sentence

Net Book Value

Company is depreciating the underlying equipment over its useful life of

7 years, but certain subassemblies and components may have a longer economic life.

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

longer economic life.

2 – Inventory

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

March 31, 2023 and December 31, 2022, the Company’s inventory was comprised of the following:

Schedule of Inventory

September 30,

March 31, 2023

December 31, 2022

Raw Materials

4 unchanged sentences

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

Company capitalizes costs incurred in connection with acquiring its patents.

These costs include registration, documentation, and legal

fees associated with the application.

Costs incurred with patents that have been previously granted are expensed as incurred.

patent applications are not amortized until a patent has been granted.

2 unchanged sentences

If a patent application is denied, then the costs will be expensed at that time.

2022, $ 126,231 of costs related to patents issued to us during 2022 were reclassified from provisional patent application to patents and began to be amortized as of the date of issue.

following is a summary of definite-life intangible assets less accumulated amortization as of September 30, 2022 and December 31, 2021,

respectively:

the three months ended March 31, 2023, $ 5,130 of costs related to patents issued to us during 2023 were reclassified from provisional

patent application to patents and began to be amortized as of the date of issue.

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

Summary of Definite-life Intangible Assets and Accumulated Amortization

September 30,

Provisional Patent Applications

1 unchanged sentence

Net Intangible Assets

expense on intangible assets was $ 17,010 and $ 22,998 for the nine months ended September 30, 2022 and 2021, respectively.

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

expense on intangible assets was $ 7,418 and $ 4,978 for the three months ended March 31, 2023 and 2022, respectively.

estimated aggregate amortization expense for years ending December 31 is as follows:

Schedule of Aggregate Amortization Expense

2023 (Remaining)

asset and amortization expense

4 – Deferral of Social Security Tax Payments

to sections 2302(a)(1) and (a)(2) of the CARES Act, the Company has elected to defer payments of its share of Social Security tax due

during the “payroll tax deferral period.” The payroll tax deferral period began on March 27, 2020 and ended on December 31,

At September 30, 2022, the total remaining amount of the deferral was $ 37,728 .

Per the terms of the deferral program, such amount

is due by December 31, 2022 , without interest.

Intangible asset and

amortization expense

4 - Stockholders’ Equity

May 24, 2021, at a Special Stockholders Meeting, our stockholders approved an increase in the authorized shares of common stock from

12,000,000 to 24,000,000 .

January 2021, the Company closed a public offering of its securities in which it issued 1,711,783 shares of common stock at a price of

$ 3.00 per share, resulting in net proceeds of approximately $ 4,532,445 after deducting underwriting commissions and other offering expenses

payable by the Company.

Pursuant to the Underwriting Agreement, the Company also issued to the Underwriter and its designees warrants

to purchase 136,943 shares of common stock.

Such warrants have a term of five years and an exercise price of $ 3.75 per share.

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

March 2021, the Company issued 119,000 shares of common stock in exchange for the conversion of 250 shares of Series D Convertible Preferred

Stock, including 19,000 shares of common stock as in-kind payment of preferred stock dividends.

Also in March 2021, the company issued

191,204 shares of common stock pursuant to the exercise of warrants issued in our April 2020 offering, and 21,591 shares of common stock

issued pursuant to the cashless exercise of placement agent warrants.

March 2021, the Company closed a public offering in which it issued 2,190,000 shares of common stock at a price of $ 4.445 per share,

resulting in net proceeds to the Company of approximately $ 8,736,487 after deducting placement agent commissions and other offering costs

payable by the Company.

Pursuant to the Purchase Agreement, the purchasers severally agreed to vote the shares of common stock purchased

under the Purchase Agreement in favor of any resolution presented to the stockholders of the Company for the purpose of obtaining approval

of an increase in the authorized shares of the Company’s Common Stock from 12,000,000 to 24,000,000 shares (“Stockholder

In a concurrent private placement under the Purchase Agreement, the Company issued to the purchasers warrants (“Warrants”)

to purchase an aggregate of 2,190,000 shares of Common Stock at an exercise price of $ 4.32 per share.

Each Warrant became exercisable

commencing May 24, 2021 , the date the Company obtained Stockholder Approval, and will expire two years after the initial exercise date.

The Company also issued to designees of the Placement Agent warrants to purchase up to 175,200 shares of Common Stock (the “Placement

Agent Warrants”) constituting 8 % of the aggregate number of shares of Common Stock sold in the public offering.

The Placement Agent

Warrants have substantially the same terms as the Warrants, except that the Placement Agent Warrants have an exercise price equal to

125 % of the offering price per share (or $ 5.55625 per share).

Upon any exercise of the Warrants for cash, we have also agreed to pay

the Placement Agent warrants to purchase 8 % of the number of shares of our Common Stock issued upon such exercise.

March 2021, Company issued 1,500 shares of common stock valued at $ 4.99 per share to an investor relations firm previously engaged by

the Company as partial compensation for services rendered.

Company is authorized to issue 10,000,000 shares of preferred stock, $ 0.001 par value, of which 465 shares were issued and outstanding

at September 30, 2022 and December 31, 2021.

the first quarter of 2023, the Company issued 227,587

shares of common stock in exchange for the conversion of 132

shares of Series D Convertible Preferred Stock, and 43,241

shares of common stock as in-kind payment of dividends thereon.

in the first quarter of 2023, the Company issued 2,428

shares of common stock in exchange for the conversion of 17

shares of Series E Convertible Preferred Stock, and 655

shares of common stock as in-kind payment of dividends thereon.

Company is authorized to issue 10,000,000

shares of preferred stock, $ 0.001

par value per share, of which 316

shares were issued and outstanding at March 31, 2023 and December 31, 2022.

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

10 unchanged sentences

issued or sold, shares of Common Stock for a consideration per share less than a price equal to the conversion price then in effect).

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

equal to the lower of the applicable conversion price then in effect, and the greater of (x) $1.80 and (y) 85% of the average volume

weighted average price (“VWAP”) of the Common Stock for a five-trading day period prior to such conversion.

Upon the occurrence

of certain triggering events, described in the Certificate of Designations, including, but not limited to payment defaults, breaches

of transaction documents, failure to maintain listing on the Nasdaq Capital Market, and other defaults set forth therein, the Series

D Preferred Shares would become subject to redemption, at the option of a holder, at a 125% premium to the underlying value of the Series

D Preferred Stock being redeemed .

September 30, 2022, there were 132 shares of Series D Preferred Stock outstanding, which if converted as of September 30, 2022, including

the make-whole dividends, would result in the issuance of 87,267 shares of common stock.

January 27, 2023, the holder of the remaining 132 outstanding shares of Series D Preferred Stock elected to convert such shares in their

entirety, which resulted in the issuance of 270,828 shares of common stock.

March 31, 2023, there were no shares of Series D Preferred Stock outstanding.

with the Institutional Private Placement, the Company entered into a Securities Purchase Agreement pursuant to which the Company issued

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for stock splits, dividends, recapitalizations and similar events).

September 30, 2022, 333 shares of Series E Preferred Stock were outstanding, which if converted as of September 30, 2022, including the

make-whole dividends, would result in the issuance of 61,651 shares of common stock.

of September 30, 2022, an aggregate of 450,617 shares of common stock were reserved for future issuance under the Company’s 2013

Equity Incentive Plan.

March 2022, the Company granted options to its non-employee directors to purchase up to an aggregate of 56,000 shares of common stock

at a strike price of $ 2.50 .

As of September 30, 2022, 75 % of such grants were fully vested and exercisable, and the remaining 25 % will

vest on December 31, 2022 subject to the directors remaining in our service through such date.

the nine months ended September 30, 2022, the Company granted twelve employees options to purchase up to an aggregate of 228,973 shares

of common stock in connection with their employment.

The options have a strike price of $ 2.50 with vesting periods ranging from immediately

upon issuance to three years beginning July 1, 2022, provided that the employees remain employed by the Company on such dates.

the Company granted its President and CEO options to purchase up to 135,000 shares of common stock in connection with his employment.

The options have a strike price of $ 2.50 and will vest in equal monthly installments over 36 months beginning March 2022, provided that

the President and CEO remains employed by the Company on such dates.

during the nine months ended September 30, 2022, the Company granted two consultants options to purchase up to an aggregate of 14,000

shares of common stock for services to be rendered.

The options have a strike price of $ 2.50 and are fully vested.

Company generally grants stock options to employees and directors at exercise

prices equal to the fair market value of the Company’s stock on the grant date, The exercise prices will not be less than 100% of

the fair market value of a share on the date of grant of the option.

Stock options are typically granted throughout the year and

generally vest over a period from one to three years of service and expire five years from the grant date, unless otherwise specified.

The Company recognizes compensation expense for the fair value of the stock options over the requisite service period for each stock option award.

stock-based compensation expense included in the statements of operations for the nine months ended September 30, 2022 and 2021 was $ 613,833

January 23, 2023, the holder of 17 shares of Series E Preferred Stock elected to convert such shares in their entirety, which resulted

in the issuance of 3,083 shares of common stock.

March 31, 2023, 316 shares of Series E Preferred Stock were outstanding, which if converted as of March 31, 2023, including the make-whole

dividends, would result in the issuance of 58,568 shares of common stock.

Company’s 2013 Equity Incentive Plan expired on March 15, 2023.

As such, there were no shares of common stock reserved for future

issuance thereunder as of March 31, 2023.

January 26, 2023, the Company granted options to its non-employee directors to purchase up to an aggregate of 52,380

shares of common stock at an exercise price of $ 0.58 .

As of March 31, 2023, 25 %

of such grants were fully vested and exercisable, and the remaining 75 %

will vest in equal quarterly installments over the remaining three quarters of 2023, subject to the directors remaining in our

service through such dates.

January 26, 2023, the Company granted 19 employees options to purchase up to an aggregate of 381,285

shares of common stock in connection with their employment.

The options have an exercise price of $ 0.58

and vested as to 50 %

on the date of the grant, and will vest as to the remaining 50 %

in equal monthly installments over the subsequent 23 months, provided that the employees remain employed by the Company through such

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

Company’s common stock on the grant date, but not less than 100% of the fair market value.

Stock options are typically granted throughout the year and generally vest over a period from

one to three years of service and expire five years from the grant date, unless otherwise specified.

The Company recognizes

compensation expense for the fair value of the stock options over the vesting period for each stock option

stock-based compensation expense included in the statements of operations for the three months ended March 31, 2023 and 2022 was $ 224,850

and $ 170,976 respectively, all of which is related to stock options.

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

nine months ended September 30, 2022 and 2021:

three months ended March 31, 2023 and 2022:

Schedule of Share Based Payments Award Stock

Options Valuation Assumptions

interest rate

Dividend yield

Risk-free interest rate

0.95 - 1.65 %

life (in years)

activity for the nine months ended September 30, 2022 and the year ended December 31, 2021 was as follows:

Schedule of Stock Option Activity

Expected volatility

106.4 - 110.0 %

Expected life (in years)

activity for the three months ended March 31, 2023 and the year ended December 31, 2022 was as follows:

of Share Based Compensation Stock Option Activity

Options outstanding at December 31, 2021

2 unchanged sentences

Forfeited or cancelled

Options outstanding September 30, 2022

Options expected to vest in the future as of September 30, 2022

Options exercisable at September 30, 2022

Options vested, exercisable, and options expected to vest at September 30, 2022

Options outstanding March 31, 2023

Options expected to vest in the future as of March 31, 2023

Options exercisable at March 31, 2023

Options vested, exercisable, and options expected to vest at March 31, 2023

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

our common stock for those awards that have an exercise price below the market price of our common stock.

30, 2022, no option had an exercise price below the $ 0.815

closing price of our common stock as reported on The Nasdaq Capital Market.

September 30, 2022, there was $ 908,588 of unrecognized stock-based compensation expense related to unvested stock options with a weighted

At March 31, 2023, no option

had an exercise price below the $ 0.44 closing price of our common stock as reported on The Nasdaq Capital Market.

March 31, 2023, there was $ 581,865 of unrecognized stock-based compensation expense related to unvested stock options with a weighted

average remaining recognition period of 1.59 years.

Appreciation Rights

June 23, 2020, the board of directors (the “Board”) of the Company adopted the 2020 Stock

Appreciation Rights Plan (the “Plan”).

June 23, 2020, the board of directors (the “Board”) of the Company adopted the 2020 Stock Appreciation Rights Plan (the “Plan”).

The purposes of the Plan are to:

(i) enable the Company to attract and retain the

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

long-range success;

(ii) provide incentives that align the interests of Service Providers with those of the stockholders of the Company;

(i) enable the Company to attract and retain the types of employees, consultants, and directors (collectively,

“Service Providers”) who will contribute to the Company’s long-range success;

(ii) provide incentives that align the

interests of Service Providers with those of the stockholders of the Company;

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

The Plan provides for incentive awards only in the form of stock appreciation

rights payable in cash (“SARs”) and no shares of common stock are reserved or will be issued pursuant to the Plan.

The Plan provides for incentive awards only in the form of stock appreciation rights payable in cash (“SARs”) and no shares

of common stock are reserved or will be issued pursuant to the Plan.

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.

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 vesting provisions, and to specify the provisions of the SAR Agreement relating to such grant.

the nine months ended September 30, 2022, the Company granted a total of 404,975 SARs to fifteen employees at exercise prices ranging

from $ 1.30 to $ 2.50 with vesting periods ranging from immediately upon issuance to three years, beginning January 3, 2022, provided that

the employees remain employed by the Company on such dates.

The SARs expire on the fifth anniversary of the grant date.

during the nine months ended September 30, 2022, the Company granted 406,887 SARs to our President and Chief Executive Officer at exercise

prices ranging from $ 1.30 to $ 2.50 .

Of the SARs, 30,000 will vest equally over 36 months beginning March 2022, 194,940 will vest over

36 months beginning July 1, 2022, and 181,947 will vest on March 15, 2025, in each case provided that the President and Chief Executive

Officer remains an employee of the Company on such dates.

The SARs will expire on the fifth anniversary of each of the grant dates.

March 31, 2022, the Company granted 3,000 SARs to a consultant as partial compensation for services pursuant to a consulting agreement

at an exercise price of $ 2.50 .

The SARs expire on the fifth anniversary of the grant date and are fully vested and exercisable.

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

A SAR is the right to receive an amount equal to the Spread with respect to a share of the

Company’s common stock (“Share”) upon the exercise of the SAR.

The “Spread” is the difference between

the exercise price per share specified in a SAR agreement on the date of grant and the fair market value per share on the date of

exercise of the SAR.

The exercise price per share will not be less than 100% of the fair market value of a share of common stock on

the date of grant of the SAR.

The administrator of the Plan will have the authority to, among other things, prescribe the terms and

conditions of each SAR, including, without limitation, the exercise price and vesting provisions, and to specify the provisions of

the SAR Agreement relating to such grant.

Company did not grant any SAR’s during the three months ended March 31, 2023.

Company recognizes compensation expense and a corresponding liability for the fair value of the SARs over the vesting period

for each SAR award.

1 unchanged sentence

and any changes in fair value are reflected in the Statement of Operations 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 nine months

ended September 30, 2022 and the year ended December 31, 2021:

Schedule of Share Based Payments Award Stock

Options Valuation Assumptions

interest rate

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

months ended March 31, 2023 and March 31, 2022:

of Share Based Payments Award Stock Options Valuation Assumptions

Dividend yield

Risk-free interest rate

0.82 - 1.65 %

life (in years)

activity for the nine months ended September 30, 2022 and the year ended December 31, 2021 was as follows:

Schedule of Stock Option Activity

Expected volatility

108.4 - 119.0 %

Expected life (in years)

activity for the three months ended March 31, 2023 and the year ended December 31, 2022 was as follows:

of Stock Option Activity

SARs outstanding at December 31, 2021

2 unchanged sentences

Forfeited or cancelled

SARs outstanding September 30, 2022

SARs expected to vest in the future as of September 30, 2022

SARs exercisable at September 30, 2022

SARs vested, exercisable, and SARs expected to vest at September 30, 2022

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

of our common stock for those awards that have an exercise price below the market price of our common stock.

At September 30,

2022, no SAR had an exercise price below the $ 0.815

closing price of our common stock as reported on The Nasdaq Capital Market .

September 30, 2022, there was $ 1,128,615 of unrecognized stock-based compensation expense related to unvested SARs with a weighted average

SARs outstanding March 31, 2023

SARs expected to vest in the future as of March 31, 2023

SARs exercisable at March 31, 2023

SARs vested, exercisable, and SARs expected to vest at March 31, 2023

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

our common stock for those awards that have an exercise price below the market price of our common stock.

At March 31, 2023, no SAR had

an exercise price below the $ 0.44 closing price of our common stock as reported on The Nasdaq Capital Market.

March 31, 2023, there was $ 665,799 of unrecognized stock-based compensation expense related to unvested SARs with a weighted average

remaining recognition period of 1.95 years.

activity for the nine months ended September 30, 2022 and the year ended December 31, 2021 was as follows:

Schedule of Warranty Activity

activity for the three months ended March 31, 2023 and the year ended December 31, 2022 was as follows:

of Warranty Activity

Warrants outstanding at December 31, 2021

2 unchanged sentences

Forfeited or cancelled

Warrants outstanding at September 30, 2022

Warrants outstanding at March 31, 2023

5 - Subsequent Events

October 14, 2022, the Company received notice from The Nasdaq Stock Market (“Nasdaq”) that the closing bid price for our

common stock had been below $ 1.00 per share for 30 consecutive business days, and that the Company therefore is not in compliance with

the minimum bid price requirement for continued inclusion on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2).

indicates that the Company has 180 calendar days, or until April 12, 2023, to regain compliance with this requirement.

The Company may also be eligible for an additional 180 calendar days to regain compliance.

Company believes that it will regain compliance with the $ 1.00

minimum bid price requirement.

April 13, 2023, The Nasdaq Stock Market (“Nasdaq”) notified us that although the Company’s common stock had not regained

compliance with the minimum $1.00 bid price per share requirement for continued inclusion on The Nasdaq Capital Market under Nasdaq Listing

Rule 5550(a)(2), the Nasdaq Staff has granted us an additional 180 calendar days, or until October 9, 2023, to regain compliance

based on our meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements

for initial listing on The Nasdaq Capital Market, with the exception of the bid price requirement, and our intention

to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.

According to Nasdaq’s

notice, if at any time during this additional time period the closing bid price of our common stock is at least $1 per share for a minimum

of 10 consecutive business days, the Staff will provide written confirmation of compliance and this matter will be closed.

we choose to implement a reverse stock split, it must be completed no later than ten business days prior to October 9, 2023 to regain

If it appears to Nasdaq that we will not be able to cure the deficiency, or if we are otherwise not eligible, Nasdaq will

notify us that our common stock will be subject to delisting.

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