What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-15 compared with 2022-11-14 · 265 added, 361 removed, 129 unchanged (83% of the section changed)

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Accounting Policies and Estimates

preparation of financial statements in conformity with accounting principles generally accepted in the United States

(“GAAP”) requires management to make estimates and assumptions that affect the reported assets, liabilities, sales and

expenses in the accompanying financial statements.

Critical accounting policies are those that require the most subjective and

complex judgments, often employing the use of estimates about the effect of matters that are inherently uncertain.

By their nature,

changes in these assumptions and estimates could significantly affect our financial position or results of operations.

accounting estimates that may materially change in the near future are revenue recognition, impairment of long-lived assets, values

of stock compensation awards and stock equivalents granted as offering costs, and allowance for bad debts and inventory

obsolescence.

Such critical accounting policies, including the assumptions and judgments underlying them, are disclosed in Note 1 of

the Notes to Financial Statements included in this Quarterly Report.

However, we do not believe that there are any alternative

methods of accounting for our operations that would have a material effect on our financial statements.

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

requires management to make estimates and assumptions that affect the reported assets, liabilities, sales and expenses in the accompanying

financial statements.

Critical accounting policies are those that require the most subjective and complex judgments, often employing

the use of estimates about the effect of matters that are inherently uncertain.

By their nature, changes in these assumptions and estimates

could significantly affect our financial position or results of operations.

Significant accounting estimates that may materially change

in the near future are revenue recognition, impairment of long-lived assets, values of stock compensation awards and stock equivalents

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

Such critical accounting policies, including the assumptions

and judgments underlying them, are disclosed in Note 1 of the Notes to Financial Statements included in this Quarterly Report.

we do not believe that there are any alternative methods of accounting for our operations that would have a material effect on our financial

critical accounting policies and estimates addressed below reflect our most significant judgements and estimates used in the preparation

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perpetual licenses and from providing engineering services under contracts.

The Company recognizes revenue in accordance with ASC

The Company recognizes revenue in accordance with ASC Topic

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

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from Contracts with Customers .

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

revenue recognition guidance under prior GAAP and replaced it with a principles-based approach for determining revenue

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

In general, we determine revenue recognition by:

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

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

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;

identifying the performance obligations in the contract;

(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.

(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

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the right to substantially all the economic benefit 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.

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.

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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 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 the single component practical expedient.

The lease consideration is allocated

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

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

The lease consideration is allocated on a

relative fair value basis of the underlying lease and non-lease components.

The Company has estimated the residual value of the

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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

made for doubtful accounts.

Receivable and Allowance for Doubtful Accounts - Trade accounts receivable are carried at original invoice amount less an estimated allowance for doubtful accounts.

We determine the allowance for doubtful accounts by identifying potential troubled accounts and by using

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

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

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

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Patents which are pending are not amortized.

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

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

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

awards, and stock appreciation rights.

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

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

value and recognize the costs in the financial statements over the vesting period of the stock-based compensation.

Stock-based compensation arrangements may include stock options, grants of shares of

common stock with and without restrictions, performance-based awards, and stock appreciation rights, or SARs.

Compensation cost is measured

on the date of grant at its fair value.

instruments issued to non-employees are recorded on the basis of the grant date fair value of the instruments.

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date is either (a) when a performance commitment, as defined, is reached or (b) the earlier of the date that (i) the non-employee performance

requirement is complete or (ii) the instruments are vested.

requirement is complete or (ii) the instruments vest.

The measured value related to the instruments is recognized over a period

based on the facts and circumstances of each particular grant.

fair value of common stock grants is based upon the closing price of our

common stock as reported on The Nasdaq Capital Market on the date of the grant.

The grant date fair value of stock options and SARs is

calculated using the Black Scholes valuation model, and requires estimates of several inputs to the model, including risk-free interest

rates, dividends, and expected volatility of our stock price.

fair value of common stock grants is based upon the closing price of our common stock as reported on The Nasdaq Capital Market on the

date of the grant.

The grant date fair value of stock options and SARs is calculated using the Black Scholes valuation model, and requires

estimates of several inputs to the model, including risk-free interest rates, dividends, and expected volatility of our stock price.

Historically,

we have generated revenues through sales, and more recently, subscription-based licensing of our PrintRite3D® technology to

customers that seek to improve their manufacturing production processes, and through ongoing annual software upgrades and

maintenance fees.

However, 2022 has been a year of significant change for our business, from our symbolic name change to the

execution of a new approach to the market.

We have a mission to accelerate the adoption of additive manufacturing by setting the

industry standard for quality, and we have charted our path to deliver the first holistic digital

quality experience for the additive industry with the following objectives:

● Simplifying

the quality experience from up to twelve disparate software licenses and multiple manual

spreadsheets, to a single user experience that is holistic and integrated with production

strategic partnerships, expanding our partner ecosystem, and best ensuring success of existing

customers as they move into production.

products that are easier to use and less expensive, both for initial purchases and as expansion

opportunities.

we have generated revenues through sales, and more recently, subscription-based licensing of our PrintRite3D® technology to customers

that seek to improve their manufacturing production processes, and through ongoing annual software upgrades and maintenance fees.

2022 began a period of significant change for our business, from our symbolic name change to the execution of a new approach to the market.

We have a mission to accelerate the adoption of additive manufacturing by setting the industry standard for quality, and we have charted

our path to deliver the first holistic digital quality experience for the additive industry with the following objectives:

the quality experience from up to twelve disparate software licenses and multiple manual spreadsheets, to a single user experience

that is holistic and integrated with production workflow.

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

products that are easier to use and less expensive, both for initial purchases and as expansion opportunities.

a strategic corporate investment partner with clear product, customer, and financial synergies.

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it also covers machine health, process health, and part health .

Our customers require specific data for qualification

and certification of parts and need a holistic approach to production quality, and further, require a way to simplify quality from 8-12

disparate software licenses and several manual spreadsheets, to one user experience that is integrated into their production workflow.

Our customers require specific data for qualification and certification of parts and need a holistic approach to production quality,

and further, require a way to simplify quality from 8-12 disparate software licenses and several manual spreadsheets, to one user experience

that is integrated into their production workflow.

order to expand the number of OEMs distributing our technology, we launched a three-tiered OEM program directed to:

without their own quality assurance or monitoring solution;

(2) established OEMs with a quality monitoring offering, but who have

customers with multiple printers from multiple OEMs and want a single third party quality and analytics solution with consistent

quality metrics across printers, processes and materials;

and (3) OEMs building open application programming interfaces, or APIs, to

integrate components of Sigma’s proprietary technology with their current offerings.

We are now working with OEMs on their

next generation printers to offer a software-only solution that will utilize the printer’s computing infrastructure and

dramatically reduce the overall cost of its technology, enabling the opportunity to move towards a software only embedded solution

on every printer sold by partner OEMs.

To further augment this initiative, we have also begun integrating with industry wide

hardware providers, such as our recently announced relationship with a laser scanner provider.

We began offering our current PrintRite3D integrated hardware and software

solution on a subscription basis in 2022.

Among other things, at present the change reduced the initial upfront cost to a new user from

over $100,000 to approximately $3,000-$5,000 per month.

combination of subscription pricing and the new software-only products that can be embedded into OEM and software partner offerings

are intended to make our technology more affordable to acquire and easier to bundle, distribute and support in an effort to

become the industry standard.

shift in our business model has adversely affected our revenues and near-term

revenue growth as we increased our focus on building strategic partnerships, expanding our partner ecosystem, and ensuring the success

of our existing customers as they move into production.

Our ability to generate revenues in the future will depend on our ability to further

commercialize and increase market presence of our traditional PrintRite3D® technology, along with our new software-only offerings

that start to link industry quality together.

Additionally, it will depend on whether key prospective customers continue to move from

additive manufacturing prototyping to production, which our products are intended to accelerate.

However, we believe these changes

to our business model will contribute to faster adoption of our product by end users and will result in more predictable and profitable

revenues over the longer term.

In connection with this shift, we reduced our headcount in the third quarter

by a net of five employees.

With a further reduction of two employees in October, our full-time headcount now stands at twenty-five, a

net reduction of ten employees from our peak of thirty-five in April of this year.

Though we plan to hire one or two new employees to

fill open positions in the near-term, we expect our headcount will be stable for the next twelve to eighteen months.

As part of our vision to build the future of connected digital quality,

we have undertaken an initiative to attract a strategic corporate investment partner with clear product, customer, and financial synergies

This work is focused on identified companies that connect to our long-term quality vision.

This strategic investment initiative

is focused on synergies and potential product integration to accelerate market visibility and customer adoption.

the past ten years, Sigma has invested its resources to solve the problem of in-process AM quality:

(1) new OEMs without

their own quality assurance or monitoring solution;

(2) established OEMs with a quality monitoring offering, but who have customers with

multiple printers from multiple OEMs and want a single third party quality and analytics solution with consistent quality metrics across

printers, processes and materials;

and (3) OEMs building open application programming interfaces, or APIs, to integrate components of

Sigma’s proprietary technology with their current offerings.

We are now working with OEMs on their next generation printers to

offer a software-only solution that will utilize the printer’s computing infrastructure and dramatically reduce the overall cost

of its technology, enabling the opportunity to move towards a software only embedded solution on every printer sold by partner OEMs.

To further augment this initiative, we have also begun integrating with industry-wide hardware providers, such as our relationships with

laser scanner providers.

began offering our current PrintRite3D integrated hardware and software solution on a subscription basis in 2022.

Among other things,

at present the change reduced the initial upfront cost to a new user from over $100,000 to approximately $3,000-$5,000 per month.

combination of subscription pricing and the new software-only products that can be embedded into OEM and software partner offerings are

intended to make our technology more affordable to acquire and easier to bundle, distribute and support in an effort to become the industry

shift in our business model has adversely affected our revenues and near-term revenue growth as we increased our focus on building

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

In 2022, we relied primarily on retrofit work while the software only products were still under development.

Our cash and working capital permitting, we expect

that the percentage of the Company’s revenue coming from OEMs will increase in 2023, especially with the

availability of a software-only product as we work to integrate into existing hardware, such as laser scanner technology and

OEM’s upstream designs for next generation systems.

Our ability to generate revenues in the future will depend on our ability

to raise capital needed and further commercialize and increase market presence of our traditional PrintRite3D® technology, along

with our new software-only offerings that start to link industry quality together.

Additionally, it will depend on whether key

prospective customers continue to move from additive manufacturing prototyping to production, which our products are intended to

the past twelve years, Sigma has invested its resources to solve the problem of in-process AM quality:

melt pool analytics for the “part”,

This remained a retrofit lab solution until the last eight months.

Our prior product offering met the needs of materials scientists, but

overlooked the production needs of shop floor technicians, process engineers, and operations teams.

The addition of our “machine”

and “process” software products for additive manufacturing will provide a holistic in-process quality base for us to connect

to the broader digital quality ecosystem.

which originated as a retrofit lab solution.

Our prior product offering met the needs of materials scientists, but overlooked the production

needs of shop floor technicians, process engineers, and operations teams.

The addition of our “machine” and “process”

software products for additive manufacturing will provide a holistic in-process quality base for us to connect to the broader digital

quality ecosystem.

part of our vision to build the future of connected digital quality and enhance shareholder value, we have undertaken an initiative to

evaluate a range of strategic alternatives, including possible strategic investment, acquisition, merger, business combination, or similar

transaction with clear product, customer, and financial synergies to Sigma.

This work is focused on identified companies that connect

to our long-term quality vision.

This strategic initiative is focused on synergies and potential product integration to accelerate market

visibility and customer adoption.

To execute Sigma’s vision and realize our potential, we will need to raise additional capital,

or execute a strategic transaction, which may include a possible strategic investment, acquisition, merger, business combination, or

similar transaction.

If we fail to obtain sufficient funding when needed, we may be forced to delay, scale back or eliminate all

or a portion of our commercialization efforts and operations.

believe the industry is evolving.

Application Programming Interfaces, or APIs, are opening up, as some of our relationships with

OEMs have become public.

Application Programming Interfaces, or APIs, are opening up as some of our relationships with OEMs

have become public.

There is also a trend toward consolidation in additive manufacturing as companies align for profitability.

Sigma has made demonstrable progress in 2022 connecting to other products in the AM digital quality stream, and a connection to a strategic

has made demonstrable progress in 2022 connecting to other products in the AM digital quality stream, and a connection to a strategic

partner paired with near term execution can augment our ability to scale, support the market, and create value.

Further, alignment with

a strategic partner allows for common growth, vision, and funding of the Company to achieve its mission, but also provides an opportunity

for other strategic relationships, including potential acquisitions that can further accelerate the execution of our digital quality

a strategic investor or acquirer allows for common growth, vision, and funding of the Company to achieve its mission, but also provides

an opportunity for other strategic relationships, including potential acquisitions that can further accelerate the execution of our digital

quality vision.

facilitate our ability to execute our strategic initiatives on the product, pricing, and partner fronts, we have taken several steps

to conserve our cash by reducing our operating expenses.

Compensation and benefits are our single largest expense, comprising approximately

50% of our total operating expenses for the three months ended March 31, 2023.

We reduced our total full-time headcount by a net of eight

employees in 2022 and experienced a further reduction of six employees in the first quarter of 2023 as a result of furloughs and departures

from the Company.

As of March 31, 2023, our full-time employee headcount was 19.

In addition to headcount reductions, we have reduced

our spend on advertising, marketing and investor relations, consultants, and employee travel.

We continue to evaluate our expenses and

will consider further reductions as appropriate.

Lastly, Sigma has developed a deep patent portfolio which we believe is widely applicable

to the 3D printing industry.

We have recently begun exploring an intellectual property licensing program, which we believe may facilitate

a strategic transaction.

of Operations

Months Ended September 30, 2022 and September 30, 2021

the three months ended September 30, 2022, we recognized revenue of $188,245, as compared to $700,237 in the same period in 2021, a

decrease of $511,992, or 72.7%.

The decrease was primarily due to lower PrintRite3D® unit sales of $511,870, the shift to

subscription-based sales, and a decrease in contract additive manufacturing revenue of $11,190, partially offset by an increase in

annual maintenance contract renewals in the third quarter of 2022 of $11,068, as compared to the third quarter of 2021.

cost of revenue for the three months ended September 30, 2022 was $79,713, as compared to $164,766 for the same period in 2021, a decrease

Months Ended March 31, 2023 and March 31, 2022

the three months ended March 31, 2023, we recognized revenue of $130,159, as compared to $51,844 in the same period in 2022, an increase

of $78,315, or 151%.

The decrease was primarily attributable to lower unit sales in the quarter.

total operating expenses for the three months ended September 30, 2022 were $2,392,596, as compared to $3,026,888 for the same period

in 2021, an decrease of $633,932, or 20.9%.

The decrease was primarily attributable to a decrease in stock-based compensation expense

of $384,093, a decrease in investor, public relations and marketing expense of $72,790, and a decrease in organization costs of $201,590

primarily attributable to a timing difference in stock option grants as further

explained below.

and benefits costs were $1,227,805 for the three months ended September

30, 2022, as compared to $1,222,760 for the same period in 2021, an increase of $5,045, or 0.4%.

The increase was comprised of:

of salary increases for existing employees and two new hires;

(b) an increase in severance costs of $88,379;

and (d) increased taxes and

benefits of $18,737.

Offsetting these increases was a decrease in SAR expense of $196,766 resulting from the September 30, 2022 revaluation

due to the decrease in our stock price, and a decrease in employee commissions and bonuses of $5,429.

Stock-based compensation was $275,418 for the three months ended September 30, 2022, as compared to $659,512 for the same period in 2021,

a decrease of $384,094, or 58.2%.

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

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

We incurred operations and research and development costs of $152,245 during

the three months ended September 30, 2022, as compared to $131,772 in the same period of 2021, an increase of $20,473, or 15.5%.

was primarily due to an increase in research and development expenses of $27,430, partially offset by a decrease in operations costs of

The increase in research and development expenses was attributable to an increase in consulting expenses of $14,930 in connection with ongoing PrintRite3D software development and research on the laser application of PrintRite3D for a

new OEM of $20,000, partially offset by costs of $7,500 incurred in the third quarter of 2021 related to a simulation project.

in operations costs related to charges in the third quarter of 2021 for inventory obsolescence and purchases of parts and materials.

We incurred investor, public relations, and marketing costs of $46,832

during the three months ended September 30, 2022, as compared to $119,622

during the same period in 2021.

The decrease of $72,790, or 60.9%, was primarily due to a decrease in tradeshow expenses of $38,136 as

a result of a timing difference of a rescheduled trade show from the second to the third quarter in 2021 due to COVID.

, and a decrease

in investor relations consulting costs of $33,207 due to decreased consulting fees and revaluation of outstanding SARs held

by consultants.

We incurred organization costs of $140,522 during the three months ended

September 30, 2022, as compared to $342,112 during the same period in 2021.

decrease of $201,590, or 58.9% was primarily attributable to a decrease in non-employee director compensation of $234,154 as compared

to stock options grants in the same period in 2021, partially offset by an increase in directors cash compensation.

Offsetting this decrease was an increase due to a timing difference of $33,909 resulting from expense recognized in the second quarter

of 2021 as our annual stockholders meeting was held earlier in 2021 than in 2022.

and professional fees incurred in the three months ended September 30, 2022 were $252,886, as compared to $261,075 incurred during the

same period in 2021, a decrease of $8,189, or 3.1%.

This decrease was a result of a decrease in accounting expenses of $18,118, and a

decrease in consulting expenses of $46,147 primarily due to stock option grant and the reclassification of a consulting expense to research

and development in 2021.

Partially offsetting these decreases was an increase in recruiting expenses of $17,444 for new hires, an increase

in legal expenses of $39,487 as a result of a timing difference in the move of our annual stockholders meeting from the second

quarter in 2021 to the third quarter in 2022.

expenses for the three months ended September 30, 2022 were $183,608 as compared to $172,238 for the same period in 2021, an increase

The increase was primarily due to increased PrintRite3D sales of $61,499, increased subscription-based revenue of

$26,906, and increased annual maintenance contract revenue of $1,910, as compared to the first quarter of 2022.

Partially offsetting

the increases was a decrease in on-site development and support revenue of $12,000.

cost of revenue for the three months ended March 31, 2023 was $63,664, as compared to $40,091 for the same period in 2022, an increase

of $$23,573, or 59%.

The increase resulted primarily from:

(a) an increase in travel and entertainment expenses of $17,825 as compared

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

(b) an increase in payroll service fees of $4,486 related

to annual price increases;

and (c) dues & subscriptions of $6,514 for new customer relationship management, product lifecycle management,

and project management software.

Partially offsetting these increases was:

(a) a decrease in postage and shipping of $8,093;

(b) a decrease

in office supplies of $2,645;

and (c) and a decrease in training and education expense of $5,368.

and amortization expense for the three months ended September 30, 2022 totaled $26,857, as compared to $27,689 for the same period in

2021, an increase of $832, or 7.2%.

The increase was primarily the result of depreciation expense associated with PrintRite3D units sold

under our subscription-based pricing program.

operating expenses were $86,783 for the three months ended September 30, 2022, as compared to $90,108 for the same period in 2021.

$3,326 decrease was primarily due to credit card transaction fees in September 2021, as compared to none in the third quarter of 2022,

partially offset by an increase in insurance premiums.

the three months ended September 30, 2022, we realized net other expenses of $7,884, as compared to net other income of $439 in 2021.

The increase in net other expenses of $8,323, was primarily due to a foreign currency exchange loss in 2022 due to the strengthening

of the US dollar against the Euro.

net loss applicable to common stockholders for the three months ended September

30, 2022 was $2,306,528, as compared to $2,505,198 for the same period of 2021, a decrease of $198,670, or 7.9%.

The decrease was primarily

due to the decrease in the loss from operations of $206,993, partially offset by an increase in net other expense of $8,323.

Months Ended September 30, 2022 and September 30, 2021

the nine months ended September 30, 2022, we recognized revenue of $476,749, as compared to $1,302,525 in the same period in 2021, a

The increase was primarily attributable to higher unit sales in the first quarter of 2023 as compared to the first

quarter of 2022.

total operating expenses for the three months ended March 31, 2023 were $1,848,144, as compared to $2,295,698 for the same period in

2022, a decrease of $447,554, or 20%.

The decrease was primarily attributable to a decrease in salaries and benefits of $360,427, a

decrease in investor, public relations, and marketing expense of $39,382, and a decrease in office expense of $50,933 primarily attributable

to reduced headcount and travel as further described below.

and benefits costs were $931,583 for the three months ended March 31, 2023, as compared to $1,292,010 for the same period in 2022, a

decrease of $360,427, or 28%.

The decrease was primarily due to a decrease in sales of our PrintRite3D® units

of $919,355, decreased revenues from our legacy Rapid Test and Evaluation (“RTE”) program of $4,100, and decreased contract

additive manufacturing revenue of $11,189 in 2022.

Partially offsetting these decreases was an increase in revenues of $17,006 from our

subscription-based pricing program, on-site installation and support revenue of $49,068, an increase in consulting service revenue of

$4,500, and an increase in annual maintenance contract revenue of $38,295.

cost of revenue for the nine months ended September 30, 2022 was $312,879, as compared to $409,493 for the same period in 2021, a decrease

The decrease was comprised of:

(a) decreased salaries of $312,687 due to four furloughed employees and

two terminated employees;

(b) a decrease in stock appreciation rights of $62,703 due to the revaluation as of March 31, 2023;

Offsetting these decreases were increases in commission and bonus expense of $17,706

and severance costs of $47,745.

compensation was $244,850 for the three months ended March 31, 2023, as compared to $170,976 for the same period in 2022, an increase

of $53,874, or 32%.

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 nine months ended September 30, 2022 were $6,968,079, as compared to $6,976,944 for the same period in 2021,

an decrease of $8,865.

The decrease was primarily attributable to a decrease in stock-based compensation for employees, executives, and

board members, a decrease in operating and R&D costs, partially offset by increases in salary and benefits, office expenses due to a company-wide global conference held in May of 2022, and increased travel in 2022 as described below.

and benefits costs were $3,704,633 for the nine months ended September 30, 2022, as compared to $3,055,279 for the same period in 2021,

an increase of $649,354, or 21.3%.

The increase was comprised of:

(a) $617,977 in employee salary increases and average full-time employee

headcount increasing by five;

(b) a $115,768 increase in severance due to the termination of employment of six employees;

and (c) increased

taxes and benefits of $206,257.

Partially offsetting these increases was a decrease in commissions of $38,682 due to fewer unit sales

and a decrease in SARs of $251,965 due to revaluations resulting from a decrease in our stock price.

Stock-based compensation was $613,833 for the nine months ended September 30, 2022, as compared to $893,431 for the same period in 2021, a

decrease of $279,597 or 31.3%.

This decrease was primarily due to the expense related to options granted to new employees and annual

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

We incurred operations and research and development costs of $442,548 during the nine months ended September 30, 2022, as compared to $608,812

in the same period of 2021, a decrease of $166,266, or 27.3%.

The decrease was primarily due to a decrease in operations costs of $133,827

and a decrease in research and development costs of $32,439.

The decrease in operations expense was due to:

(a) charges we incurred in

2021 of $41,964 for inventory obsolescence, including $14,471 for metal powder write-offs;

(b) equipment upgrades in 2021 in both our

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

nine months of 2022;

and (d) a decrease in purchase of lab supplies of $2,212.

The decrease in research and development costs was due

to expenses associated with a simulation project in 2021 of $95,461, partially offset by an increase in consulting costs of $43,022 in

connection with ongoing PrintRite3D software development and $20,000 for research on laser application of PrintRite3D for a new OEM.

We incurred investor, public relations, and marketing expenses of $293,458

during the nine months ended September 30, 2022, as compared to $342,725

This increase was primarily a result of option grants in the first quarter of 2023.

incurred operations and research and development costs of $126,712 during the three months ended March 31, 2023, as compared to

$143,418 in the same period in 2022, a decrease of $16,706, or 12%.

The decrease was primarily due to a decrease in operations costs

of $42,085, partially offset by an increase in research and development costs of $25,379.

The decrease in operations costs related

to fewer parts and material purchases in the first quarter of 2023.

The increase in research and development costs was primarily due

to an increase in consulting costs for our work with a third-party software vendor in connection with the development of our

software-only product suite.

incurred investor, public relations, and marketing costs of $54,944 during the three months ended March 31, 2023, as compared to

$94,326 during the same period in 2022.

The decrease of $49,267, or 14.4%, was primarily due to a decrease in investor relations consulting costs

of $62,741 resulting from a revaluation of SARs at June 30 and September 30, 2022, and lower advertising expenses of $9,524.

Partially offsetting this decrease was an increase in tradeshow expenses of $22,998 as compared to 2021, when COVID-19 travel restrictions

precluded attendance at such events.

We incurred organization costs of $260,088 during the nine months ended

September 30, 2022, as compared to $578,256 during the same period in 2021.

The decrease of $318,268, or 55%, was primarily attributable

to decreases in:

(a) non-employee director fees of $274,865, mostly as a result of a decrease in stock options issued;

and (b) stockholder

services of $43,304, primarily due to expenses incurred in 2021 in connection with a special stockholders meeting.

and professional fees incurred in the nine months ended September 30, 2022 were $608,830, as compared to $681,941 during the

same period in 2021, a decrease of $73,111, or 10.7%.

This decrease was primarily a result of a decrease in legal expenses of $21,403

due to one less stockholder meeting and fewer regulatory filings, a decrease in recruiting expenses of $73,223 related to new hires in

2021, and a decrease in accounting fees of $9,817 due to fulltime hire of temporary accounting support.

These decreases were partially

offset by an increase in consulting expenses of $30,530 attributable to the engagement of technical consulting support in connection

with our subscription-based pricing model, external human resources consulting, and hire of an inventory management consultant.

expenses for the nine months ended September 30, 2022 were $692,640, as compared to $472,335 for the same period in 2021, an

increase of $220,305, or 46.6%.

The increase resulted primarily from:

(a) travel and entertainment of $113,616 related to increased

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

(b) expenses of

$109,435 related to a Company-wide, global conference held in May of 2022;

related to new hires;

(d) dues & subscriptions of $21,715 for new customer relationship management, product lifecycle

management, and project management software;

and (e) an increase in utilities expenses of $1,755.

Partially offsetting these

increases was a decrease in postage and shipping of $28,783 and a decrease in office supply expense of $9,262.

and amortization expense for the nine months ended September 30, 2022 totaled $88,302 as compared to $76,502 for the same period in

2021, an increase of $11,800, or 15.4%.

The increase was primarily due to depreciation expense on PrintRite3D units leased under our

subscription-based program.

operating expenses were $263,747 for the nine months ended September 30, 2022, as compared to $267,663 for the same period in 2021, a

decrease of $3,916.

The decrease was due to:

(a) a decrease in SEC filing fees of $6,102;

(b) a decrease in licensing fees of $2,166;

and (c) a decrease in bank fees, primarily credit card transaction fees of $7,413.

These decreases were partially offset by an increase

in insurance policy premiums for 2022 of $11,765.

the nine months ended September 30, 2022, we realized net other income

of $57,336, as compared to net other income of $1,096,727 in 2021.

The decrease of $1,039,391, or 94.8%, was primarily due to a gain of

$1,092,441 from the 2021 revaluation of the derivative liability related to our private placement of warrants in the second quarter

of 2021, a foreign currency exchange loss of $16,950 in 2022 due to the strengthening of the US dollar against the Euro, and a decrease

in interest income of $7,028.

Partially offsetting these decreases was an increase of $76,628 in New Mexico state incentives in the first

quarter of 2022.

net loss applicable to common stockholders for the nine months ended September 30, 2022 was $6,789,533, as compared to $5,076,532 for

the same period of 2021, a $1,713,001 increase.

The increase was due to an increased loss from operations of $720,297 and a decrease

in other income of $1,039,391, partially offset by a decrease in preferred dividends of $46,687.

The decrease of $39,382, or 42%, was primarily due to a decrease in investor relations

consulting costs of $35,000, a decrease in attendance at tradeshows and conferences of $2,885 due to fewer employees, and a decrease

in marketing costs of $1,497.

incurred organization costs of $51,198 during the three months ended March 31, 2023, as compared to $58,749 during the same period in

The decrease of $7,551, or 13% was primarily attributable to a decrease in non-employee director compensation of $14,388 primarily

due to fewer stock options granted in 2023.

Offsetting this decrease was an increase in shareholder services of $6,837 due to transfer

agent fees for conversion of preferred stock to common stock in January of 2023, and an increase in costs related to the filing of our

annual Form 10-K.

and professional fees incurred in the three months ended March 31, 2023 were $184,251, as compared to $211,416 incurred during the same

period in 2022, a decrease of $27,165, or 13%.

This decrease was a result of a decrease in consulting expenses from 2022 of $125,504

which were related to a manufacturing consultant, technical accounting support, HR consultant, and advisor to the Board of Directors,

as well as a decrease in IT service fees of $2,729 related to new employee setup fees in 2022.

Partially offsetting these decreases was an

increase in legal fees of $91,464 due to employment related matters, a potential financing and warrant restructuring, and executive

compensation agreements, and an increase in accounting expenses of $9,604 due to increased rates for our annual audit.

expenses for the three months ended March 31, 2023, were $154,499 as compared to $205,432 for the same period in 2022, a decrease of

$50,933, or 25%.

The decrease resulted primarily from:

(a) decreased travel and entertainment expenses of $24,612;

(b) decreased office

supply expenses of $15,654;

(d) decreased postage and shipping of $2,868;

(e) decreased

rent and utilities of $2,073;

and (f) decreased training and education expense of $5,006, all due to a reduction in the number of employees.

Partially offsetting these decreases was an increase in payroll services expense of $3,120 due to the early termination of the contract

with our UK payroll company.

and amortization expense for the three months ended March 31, 2023 was $28,127, as compared to $31,584 for the same period in 2022,

a decrease of $3,457, or 11%.

The decrease was primarily the result of the increased life expectancy of our leased and consigned PrintRite3D

operating expenses were $91,980 for the three months ended March 31, 2023, as compared to $ 87,787

for the same period in 2022.

The $4,193 increase was primarily due to a FINRA filing fee in 2023.

In the three months ended March 31, 2023, we realized net other income

of $29,950, as compared to net other income of $ 76,550 in the same period in 2022.

in net other income of $46,600, was primarily due to the New Mexico High Wage Tax credit of $76,628 received in 2022, partially offset

by a write-off of accounts payable due to an unclaimed customer deposit in the first quarter of 2023.

dividends for the three months ended March 31, 2023 were 11,748, as compared to $14,220 for the same period in 2022.

was due to the conversion of 149 shares preferred stock to common stock in the first quarter of 2023.

net loss applicable to common stockholders for the three months ended March 31, 2023, was $1,763,447, as compared to $ 2,221,615

for the same period in 2022, a decrease of $458,168, or 21%.

The decrease was primarily due to the decrease in the loss from operations

of $502,296 and a decrease in preferred dividends of $2,472, partially offset by a decrease in total other income of $46,600.

and Capital Resources

of September 30, 2022, we had $4,800,680 in cash and working capital of $5,492,725, as compared with $11,447,047 in cash and working

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

to uncertainties regarding our ability to meet our current and future operating and capital expenses, there is substantial doubt about

our ability to continue as a going concern for 12 months from the date of the filing of this Quarterly Report,

of March 31, 2023, we had $1,488,704 in cash and working capital of $2,105,349, as compared with $ 2,845,931

in cash and working capital of $ 3,644,522 as of December 31, 2022.

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 of 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.

In a concurrent private placement, the Company issued to the purchasers warrants

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

Each warrant became exercisable

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

January 12, 2021, the Company closed a public offering of 1,711,783 shares of common stock at a price of $3.00 per share,

resulting in net proceeds of approximately $4,532,445 after deducting commissions and other offering expenses payable by the Company.

the first quarter of 2021, the Company received 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 the first quarter of

The Company is currently engaged in identifying sources of financing either in the form of equity or debt or a combination thereof.

No assurance can be given as to the availability of such financing, or, if available, that such financing would be on terms acceptable

to the Company.

will need to raise additional amounts to fund our operations, maintain compliance with the Nasdaq listing requirements and implement

our business plan.

We currently have no arrangement to obtain any additional financing, and there is no assurance as to the amount and

availability of any required future financing or the terms thereof.

Any such financing, if in the form of equity, may be highly dilutive

to our existing stockholders and may otherwise include onerous terms.

If in the form of debt, such financing may include covenants and

repayment obligations which may be difficult to meet and that could adversely affect our business and operations.

To the extent that

funds are not available to us, we may be required to delay, limit, or terminate our business and operations and lose our Nasdaq listing.

have taken several steps to conserve our cash, including furloughing non-essential employees, reducing or eliminating certain marketing

and advertising programs, limiting employee travel, and reducing investor relations expenses and certain consulting expenses.

cash on hand and anticipated revenues are sufficient to fund our remaining anticipated operating costs

only through June 2023.

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

sooner than we expect, or extend such resources longer than we expect.

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

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Our future capital requirements will depend on many factors, including:

from the sales of our existing and future products;

associated with the expansion of our business and operations;

cost of expending, maintaining, and enforcing our intellectual property portfolio, including filing, prosecuting, defending and enforcing

1 unchanged sentence

effect of competing technological and market developments;

the remainder of 2022, we expect to sustain our operations and our commercialization and marketing efforts with our cash reserves

and revenues generated from sales of our PrintRite3D® technology.

To support the

commercialization of our PrintRite3D® technology, we plan to continue funding our development activities and operating expenses

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

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

technologies).

ongoing impact of the COVID-19 epidemic, in particular the shortage of certain components of our PrintRite3D systems, is highly uncertain

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

It is also uncertain

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

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.

revenue from the sales of our existing and future products;

cost of operating as a public company.

effects of a US or global recession, while difficult to predict, could result in some customers delaying orders or not proceeding with

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Cash Used in Operating Activities

cash used in operating activities during the nine months ended September 30, 2022 was $6,386,415 as compared to $4,786,590 during the

same period in 2021, an increase of $1,599,825, or 33%.

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

non-cash expenses, of $1,373,377, and a decrease in accounts payable and accrued expenses of $469,397, an increase in inventory

purchases of $60,456, an increase in prepaid expenses of $49,506, and an increase in deferred revenue of $26,689.

offsetting these increases was a decrease in accounts receivable of $379,600.

cash used in operating activities during the three months ended March 31, 2023 was $1,309,537 as compared to $ 2,027,019

during the same period in 2022, a decrease of $717,482, or 35.4%.

the three months ended March 31, 2023, the net cash used in operating activities was the result of a net loss of $1,751,699 before preferred

dividends, partially offset by changes in working capital of $181,946, and non-cash expenses of $260,216 related to depreciation and

amortization of $28,127 and stock-based compensation of $232,089.

Changes in working capital were driven by a decrease in accounts receivable

of $161,171, a decrease in inventory of $6,541, an increase in accounts payable and accrued expenses of $110,641, and an increase in

deferred revenue of $33,370, partially offset by an increase in prepaid expenses of $129,777.

The decrease in accounts receivable was

a result of cash collections from 2022 sales, and the increase in prepaid expenses was due to deposits paid for a third-party software

developer, legal and accounting advisors, and a tradeshow.

the three months ended March 31, 2022, the net cash used in operating activities was the result of a net loss of $2,207,395 before preferred

dividends and the use of cash for working capital of $55,618, partially offset non-cash expenses of $235,994 related to depreciation

and amortization of $31,584 and stock-based compensation of $204,410.

Changes in working capital were driven by a decrease in accounts

payable and accrued expenses of $95,194, and increases in inventory and prepaid expenses of $72,019 and $50,996 respectively, partially

offset by a decrease in accounts receivable of $151,170 and an increase in deferred revenue of $11,421.

The decrease in accounts payable

and accrued expenses was largely driven by the payment of incentive bonuses, and the increases in inventory and prepaid expenses resulted

from the stocking of long lead-time parts for planned production and payment of our annual Nasdaq listing fee, respectively.

Cash Used in Investing Activities

cash used in investing activities during the nine months ended September

30, 2022 was $259,952, which compares to $254,772 of cash used in investing activities during the same period of 2021, an increase of

$5,180, or 2%.

The increase resulted from an increase in patent costs of $37,963, partially offset by a decrease in purchases of property,

plant and equipment of $32,783 during the first nine months of 2022.

cash used in investing activities during the three months ended March 31, 2023 was $47,690, which compares to $142,099 of cash used in

investing activities during the same period of 2022, a decrease of $94,409, or 66.4%.

The decrease resulted from a decrease in patent

costs of $11,161 and a decrease in purchases of property, plant and equipment of $83,248 during the first three months of 2023.

Cash Provided by Financing Activities

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

Cash provided

by financing activities during the nine months ended September 30, 2021 totaled $14,404,942 due to the receipt of the net proceeds of

$13,268,932 from our January and March 2021 public and private offerings and the exercise of outstanding warrants which provided an

additional $1,136,010 in cash proceeds.

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

from existing and future PrintRite3D contracts, follow-on contracts resulting from successful engagements, possible strategic partnerships,

and by obtaining additional capital from the sale of securities or by borrowing funds from lenders to fulfill our business plans.

we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have

rights, preferences or privileges senior to those of existing holders of our common stock.

There is no assurance that we will be successful

in obtaining additional funding.

The Company is unable to predict the effect a global recession or geopolitical events, including the

on-going conflict in Ukraine, may have on its access to the financing markets.

If we fail to obtain sufficient funding when needed, we

may be forced to delay, scale back or eliminate all or a portion of our commercialization efforts and operations.

Company did not raise any capital nor were there any warrant exercises during the three months ended March 31, 2023 or March 31, 2022.

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

and future PrintRite3D contracts, follow-on contracts resulting from successful engagements, possible strategic partnerships, and by

obtaining additional capital from the sale of securities or by borrowing funds from lenders to fulfill our business plans.

additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences

or privileges senior to those of existing holders of our common stock.

There is no assurance that we will be successful in obtaining

additional funding.

The Company is unable to predict the effect a global recession or geopolitical events, including the on-going conflict

in Ukraine, may have on its access to the financing markets.

If we fail to obtain sufficient funding when needed, we may be forced to

delay, scale back or eliminate all or a portion of our commercialization efforts and operations.

have no lines of credit or other financing arrangements.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis