What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-14 compared with 2023-05-15 · 274 added, 271 removed, 123 unchanged (82% of the section changed)

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Quarterly Report contains “Forward-Looking Statements.” All statements other than statements of historical fact are “Forward-Looking

Statements” including but not limited to, statements regarding our expectations about development and commercialization of our

technology, any projections of revenues or statements regarding our anticipated revenues or other financial items, any statements of

the plans and objectives of management for future operations, any statements concerning proposed new products or services, any statements

regarding future economic conditions or performance, and any statements of assumptions underlying any of the foregoing.

All Forward-Looking

Statements included in this Quarterly Report are made as of the date hereof and are based on information available to us as of such date.

Statements” including but not limited to, statements regarding a possible strategic transaction, dissolution and liquidation or

bankruptcy of the Company.

All Forward-Looking Statements included in this Quarterly Report are made as of the date hereof and are based

on information available to us as of such date.

We assume no obligation to update any Forward-Looking Statement.

In some cases, Forward-Looking Statements can be identified by the use

of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,”

“intends,” “believes,” “estimates,” “potential,” or “continue,” or the negative

thereof or other comparable terminology.

Although we believe that the expectations reflected in the Forward-Looking Statements contained

herein are reasonable, there can be no assurance that such expectations or any of the Forward-Looking Statements will prove to be correct,

and actual results could differ materially from those projected or assumed in the Forward-Looking Statements.

Future financial condition

and results of operations, as well as any Forward-Looking Statements are subject to inherent risks and uncertainties, including factors

referred to in our press releases and reports filed with the Securities and Exchange Commission (“SEC”).

All subsequent Forward-Looking

Statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary

Additional factors that may have a direct bearing on our operating results are described under the caption “Risk Factors”

in our Annual Report on Form 10-K for the year ended December 31, 2022 and elsewhere in this Quarterly Report.

In some cases, Forward-Looking

Statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,”

“anticipates,” “intends,” “believes,” “estimates,” “potential,” or “continue,”

or the negative thereof or other comparable terminology.

Although we believe that the expectations reflected in the Forward-Looking Statements

contained herein are reasonable, there can be no assurance that such expectations or any of the Forward-Looking Statements will prove

to be correct, and actual results could differ materially from those projected or assumed in the Forward-Looking Statements.

Future financial

condition and results of operations, as well as any Forward-Looking Statements are subject to inherent risks and uncertainties, including

factors referred to in our press releases and reports filed with the Securities and Exchange Commission (“SEC”).

All subsequent

Forward-Looking Statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these

cautionary statements.

Additional factors that may have a direct bearing on our operating results are described under the caption “Risk

Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 and elsewhere in this Quarterly Report.

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

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

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

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

These leases are classified

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before the end of the lease term.

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

30 days written notice.

Some, but not all, of the leases permit lessees to purchase the asset at any time at an amount that approximates

fair value and are not reasonably certain to be exercised at the inception of the lease.

There are no anticipated variable lease payments

at the inception of the lease.

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

at least 30 days written notice.

Some, but not all, of the leases permit lessees to purchase the asset at any time at an amount that

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

There are no anticipated variable

lease payments at the inception of the lease.

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

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.

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 lease consideration is allocated on a

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

The Company has estimated the residual value of the

leased equipment based on its useful life, and the ability to refurbish and sell the equipment, as well as the Company’s

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

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 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.

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 estimated allowance 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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Recoveries of trade accounts receivable previously written off are recorded as income when received.

As of June 30, 2023

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

Valuation - Inventories consist of raw materials used in the production of customized parts, work-in-process and finished goods components

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Patents which are pending are not amortized.

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.

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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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.

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

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

Additive Solutions, Inc.

(“Sigma,” “we,” “us,” “our” and the “Company”) was

founded by a group of scientists, engineers and businesspeople to develop and commercialize novel and unique manufacturing and materials

technologies.

The Company anticipated that its core technologies would allow its customers to combine advanced manufacturing quality

assurance and process control protocols with novel materials to achieve breakthrough product potential in many industries, including

aerospace, defense, oil and gas, bio-medical, and power generation.

Historically,

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

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

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.

holistic digital quality experience connects in-process data upstream to CAD/CAM through the downstream inspection and material data.

This digital quality journey begins by creating a new qualification framework for in-process data.

The path to qualified parts and continued

production relies on more than just melt pool monitoring;

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

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

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

that is integrated into their production workflow.

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

(1) new OEMs without

their own quality assurance or monitoring solution;

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

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

printers, processes and materials;

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

Sigma’s proprietary technology with their current offerings.

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

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

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

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

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.

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

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 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.

we generated revenues through sales of our PrintRite3D® technology to customers that seek to improve their manufacturing production

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

In 2022, we began offering our current PrintRite3D integrated

hardware and software solution on a subscription basis, which reduced the initial upfront cost to a new user from over $100,000 to approximately

$3,000-$5,000 per month.

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

software partner offerings was intended to make our technology more affordable to acquire and easier to bundle, distribute and support

in an effort to become the industry standard.

The shift in our business model 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.

March 1, 2023, we announced that we had retained Lake Street Capital Markets as our financial advisor in connection with our consideration

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

our Current Report on Form 8-K filed with the SEC on July 20, 2023, we reported that we had received four written, non-binding proposals

to purchase assets or acquire the company in a merger or reverse merger and were in talks regarding the respective proposals, as well

as possible alternative transactions with other parties that expressed interest in a possible transaction as we worked to formally close

our strategic transaction process.

We also reported that we had reduced our employee headcount via furloughs and layoffs to five employees,

including our President and Chief Executive Officer and Chief Financial Officer and two key employees considered important to a possible

sale of the company or all or a portion of its assets and support of current customers, and had discontinued our product development

activities and ceased to pursue new customers.

See “Liquidity and Capital Resources,” below.

Since the filing of the Current Report, we have received additional

written, non-binding proposals as well as revised previous proposals to purchase certain assets of the Company or acquire the Company

in a merger or reverse merger.

Although we have not yet entered into any definitive agreements, we are continuing to work towards such

definitive agreements with interested parties.

See “Risk Factors,” below for a discussion of certain risks and uncertainties

regarding a possible transaction.

of Operations

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

Months Ended June 30, 2023 and June 30, 2022

the three months ended June 30, 2023, we recognized revenue of $97,043, as compared to $ 236,660 in the same period in 2022, a decrease

of $139,617, or 59%.

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

The decrease was due to decreased PrintRite3D sales of $111,200, decreased annual maintenance contract revenue of

$7,739, decreased RTE revenue of $5,300 and decreased on-site development and support of 44,044 as compared to the second quarter of

Partially offsetting the decreases were increases in PrintRite3D lease revenue of $3,166 and in PrintRite3D consulting services

cost of revenue for the three months ended June 30, 2023 was $36,491, as compared to $193,075 for the same period in 2022, a decrease

of $156,584, or 81%.

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

The decrease e was primarily attributable to fewer unit sales and installations in the second quarter of 2023 as

compared to the second quarter of 2022.

total operating expenses for the three months ended June 30, 2023 were $1,364,571, as compared to $2,279,425 for the same period in 2022,

a decrease of $914,854, or 40%.

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

The decrease was primarily attributable to a decrease in salaries and benefits of $630,636, a decrease

in investor, public relations, and marketing expense of $94,475, and a decrease in office expense of $209,410 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

and benefits costs were $554,182 for the three months ended June 30, 2023, as compared to $ 1,184,818 for the same period in 2022, a

decrease of $630,636, or 53%.

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%.

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

(a) decreased salaries of $499,473 attributable to furloughed and terminated

(b) a decrease commission and bonus expense of $93,664 due to the reversal of 2022 year-end bonuses;

benefits of $75,835;

and (d) decreased severance expense of $2,035.

Offsetting these decreases was an increase in stock appreciation

rights of $40,371.

compensation was $138,489 for the three months ended June 30, 2023, as compared to $167,439 for the same period in 2022, a decrease of

$28,950, or 17%.

This decrease was primarily a result of forfeiture of options from former employees.

incurred operations and research and development costs of $105,259 during the three months ended June 30, 2023, as compared to $146,885

in the same period in 2022, a decrease of $41,626, or 28%.

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

The decrease was due to a decrease in operations costs of $14,755, and a decrease

in research and development costs of $26,871.

The decrease in operations costs related to fewer parts and material purchases in the second

quarter of 2023.

The decrease in research and development costs was primarily due to suspending consulting 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 $57,824 during the three months ended June 30, 2023, as compared to $152,300

during the same period in 2022.

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 $94,476, or 62%, was due to a decrease in investor relations consulting costs of $35,212,

a decrease in attendance at tradeshows and conferences of $48,094 due to fewer employees, and a decrease in marketing costs of $11,170.

incurred organization costs of $38,240 during the three months ended June 30, 2023, as compared to $60,817 during the same period in

The decrease of $22,577, or 37%, was primarily attributable to a decrease in non-employee director compensation of $15,926 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:

due to fewer stock options granted in 2023 and a decrease in shareholder services of $5,966.

and professional fees incurred in the three months ended June 30, 2023 were $152,025, as compared to $144,528 incurred during the same

period in 2022, an increase of $7,497, or 5%.

This increase was a result of legal fees of $64,410 due to employment related matters,

and legal and financial advisors engaged to assist in Sigma’s evaluation of a corporate transaction.

Partially offsetting the increase

was a decrease in consulting expenses from 2022 of $48,929 which were related to a manufacturing consultant, technical accounting support,

HR consultant, and advisor to the Board of Directors, a decrease in accounting expenses of $3,555 and a decrease in IT service fees of

$4,429 related to new employee setup fees in 2022.

expenses for the three months ended June 30, 2023, were $94,190 as compared to $303,600 for the same period in 2022, a decrease of $209,410,

The decrease resulted from:

(a) decreased travel and entertainment expenses of $151,630;

(b) decreased office

supply expenses of $15,654;

(b) decreased office supply expenses

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

(d) decreased payroll services expense of $7,223;

(e) decreased rent and

utilities of $11,534;

and (f) decreased training and education expense of $27,705.

These decreases were the result of a reduction in

the number of employees and no company-wide conference being held in 2023.

Partially offsetting these decreases was an increase in postage

and shipping expenses of $2,175 due to shipment of a PrintRite3D system to one of our partners in Europe.

and amortization expense for the three months ended June 30, 2023 was $21,470, as compared to $29,861 for the same period in 2022, a

decrease of $8,391, or 28%.

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

operating expenses were $202,892 for the three months ended June 30, 2023, as compared to $89,177 for the same period in 2022.

increase was primarily due to bad debt expense of $115,600 related to a customer receivable for which collectability is in doubt.

the three months ended June 30, 2023, we realized net other expense of $4,075, as compared to net other expense of $11,330 in the same

period in 2022.

The decrease in net other expense of $7,255, was primarily due to lower foreign exchange rate losses in 2023.

dividends for the three months ended June 30, 2023 were $10,668, as compared to $14,220 for the same period in 2022.

The decrease was

due to fewer outstanding shares of preferred stock as a result of conversions to common shares.

net loss applicable to common stockholders for the three months ended June 30, 2023, was $1,318,782 as compared to $2,261,390 for the

same period in 2022, a decrease of $942,608, or 42%.

The decrease was primarily due to the decrease in the loss from operations of $931,821,

a decrease in preferred dividends of $3,533, and a decrease in total other expenses of $7,255.

Months Ended June 30, 2023 and June 30, 2022

the six months ended June 30, 2023, we recognized revenue of $227,202, as compared to $ 288,504 in the same period in 2022, a decrease

of $61,302, or 21%.

The decrease was due to decreased PrintRite3D sales of $49,701, decreased annual maintenance contract revenue of

$5,829, and decreased on-site development and support of $56,043 as compared to the second quarter of 2022.

Partially offsetting the

decreases were an increase in PrintRite3D lease revenue of $14,171, an increase in PrintRite3D consulting services of $25,500, and an

increase in RTE revenue of $10,600.

cost of revenue for the six months ended June 30, 2023 was $100,155, as compared to $ 233,166 for the same period in 2022, a decrease

of $133,011, or 57%.

The decrease was primarily attributable to fewer unit sales and installations in the second quarter of 2023 as compared

to the second quarter of 2022.

total operating expenses for the six months ended June 30, 2023 were $3,212,715, as compared to $4,575,123 for the same period in 2022,

a decrease of $1,362,408, or 30%.

The decrease was primarily attributable to a decrease in salaries and benefits of $991,064, a decrease

in investor, public relations, and marketing expense of $133,857, and a decrease in office expense of $260,343 primarily attributable

to reduced headcount and travel as further described below.

and benefits costs were $1,485,764 for the six months ended June 30, 2023, as compared to $ 2,476,828 for the same period in 2022, a

decrease of $991,064, or 40%.

The decrease was comprised of:

(a) decreased salaries of $812,160 attributable to furloughed and terminated

(b) a decrease commission and bonus expense of $75,958 due to the reversal of 2022 year-end bonuses;

benefits of $126,325;

(d) decreased stock appreciation rights expense of $22,331 due to quarterly revaluation at March and June 2023.

Partially offsetting these decreases was an increase in severance expense of $45,710.

compensation was $363,339 for the six months ended June 30, 2023, as compared to $338,415 for the same period in 2022, a decrease of

$24,924, or 7%.

This decrease was primarily a result of forfeiture of options from former employees.

incurred operations and research and development costs of $231,971 during the six months ended June 30, 2023, as compared to $290,303

in the same period in 2022, a decrease of $58,332, or 20%.

The decrease was due to a decrease in operations costs of $56,840, and a decrease

in research and development costs of $1,492.

The decrease in operations costs related to fewer parts and material purchases in the second

quarter of 2023.

The decrease in research and development costs was primarily due to suspending consulting 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 $112,768 during the six months ended June 30, 2023, as compared to $246,626

during the same period in 2022.

The decrease of $133,856, or 54%, was primarily due to a decrease in investor relations consulting costs

of $70,212, a decrease in attendance at tradeshows and conferences of $50,978 due to fewer employees, and a decrease in marketing costs

incurred organization costs of $89,438 during the six months ended June 30, 2023, as compared to $119,566 during the same period in 2022.

The decrease of $30,128, or 25% was attributable to a decrease in non-employee director compensation of $29,920 primarily due to fewer

stock options granted in 2023 and a decrease in shareholder services of $872.

and professional fees incurred in the six months ended June 30, 2023 were $336,276, as compared to $355,944 incurred during the same

period in 2022, a decrease of $19,668, or 6%.

This decrease was a result of a decrease in consulting expenses from 2022 of $174,434 which

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

a decrease in IT service fees of $7,158 related to new employee setup fees in 2022.

Partially offsetting these decreases were an increase

in legal fees of $155,875 due to employment related matters and legal and financial advisors engaged to assist in Sigma’s evaluation

of strategic corporate transactions, and an increase in accounting fees of $6,049.

expenses for the six months ended June 30, 2023, were $248,689 as compared to $509,032 for the same period in 2022, a decrease of $260,343,

The decrease resulted primarily from:(a) decreased travel and entertainment expenses of $176,243;

(b) decreased office supply

expenses of $20,156;

(d) decreased payroll services expense of $4,102;

(e) decreased

rent and utilities of $13,607;

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 (f) decreased training and education expense of $32,570.

These decreases were all the result of a

reduction in the number of employees and no company-wide conference being held in 2023.

and amortization expense for the six months ended June 30, 2023 was $49,597, as compared to $61,445 for the same period in 2022, a decrease

of $11,848, or 19%.

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

operating expenses were $294,873 for the six months ended June 30, 2023, as compared to $176,964 for the same period in 2022.

increase was primarily due to bad debt expense of $115,600 related to a customer receivable for which collectability is in doubt.

the six months ended June 30, 2023, we realized net other income of $25,874, as compared to net other income of $65,220 in the same period

The decrease in net other income of $39,346, 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 six months ended June 30, 2023 were $22,435, as compared to $28,440 for the same period in 2022.

The decrease was due

to fewer outstanding shares of preferred stock as a result of conversions to common shares.

net loss applicable to common stockholders for the six months ended June 30, 2023, was $3,082,229 as compared to $4,483,005 for the same

period in 2022, a decrease of $1,400,776, or 31%.

The decrease was primarily due to the decrease in the loss from operations of $1,434,117,

and a decrease in preferred dividends of $6,005, partially offset by a decrease in total other income of $39,346.

and Capital Resources

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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.

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

to estimate the exact amount of our working capital requirements.

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

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

our patent claims and other intellectual property rights;

effect of competing technological and market developments;

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

planned orders for our PrintRite3D systems.

of June 30, 2023, we had $368,443 in cash and working capital of $948,091, as compared with $2,845,931 in cash and working capital of

$3,644,522 as of December 31, 2022.

we reported in our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 20, 2023, the Company

estimates that it has sufficient cash and working capital to fund its scaled-back operations as described below through August 2023

Since June 30, 2023, the Company has reduced its employee headcount to five, discontinued all product development activities

and ceased to pursue new customers.

We continue to explore a possible reverse merger, sale of the Company or all or a portion of its

assets, and other alternatives.

There is no assurance, however, that we will be able to enter into a definitive agreement with

respect to a possible transaction or sell the company or any of its assets or, if so, when or on what terms.

If we fail to complete

the sale of the Company or its assets or other strategic transaction in the immediate future, we will be forced to resort to the

dissolution and liquidation or bankruptcy of the Company.

For these reasons, there is substantial doubt about our ability to

continue as a going concern.

Cash Used in Operating Activities

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

cash used in operating activities during the six months ended June 30, 2023 was $2,414,881 as compared to $4,314,503 during the same

period in 2022, a decrease of $1,899,622, or 44.0%.

the six months ended June 30, 2023, the net cash used in operating activities was the result of a net loss of $3,059,794 before preferred

dividends, partially offset by changes in working capital of $218,943, and non-cash expenses of $425,970 related to depreciation and

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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

of $326,166, a decrease in inventory of $10,909, an increase in accounts payable of $23,070, and an increase in deferred revenue of $7,115,

partially offset by an increase in prepaid expenses of $31,879 and a decrease in accrued expenses of 116,438, primarily as a result of

the reversal of bonus expense accrued in 2022.

The decrease in accounts receivable was a result of cash collections from 2022 sales and

the establishment of an allowance for doubtful accounts of $115,600, and the increase in prepaid expenses was due to deposits paid for

a third-party software developer, legal and accounting advisors, and a tradeshow.

the six months ended June 30, 2022, the net cash used in operating activities was the result of a net loss of $4,454,565 before preferred

dividends and the use of cash for working capital of $327,730, partially offset non-cash expenses of $466,792 related to depreciation

and amortization of $61,445 and stock-based compensation of $405,347.

Changes in working capital were driven by 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.

Changes in working capital were driven by an increase in inventory

of $73,586, an increase in prepaid expenses of $17,197, a decrease in deferred revenue of $18,151, and a decrease in accrued expenses

of $372,188 partially offset by a decrease in accounts receivable of $120,434 and an increase in accounts payable of $33,958.

in accrued expenses was largely driven by the payment of incentive bonuses, and the decrease in accounts receivable was a result of cash

collections from 2021 sales.

Increases in inventory and prepaid expenses resulted from the stocking of long lead-time parts for planned

production and payment of our annual Nasdaq listing fee, respectively.

Cash Used in Investing Activities

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 used in investing activities during the six months ended June 30, 2023 was $62,607, which compares to $199,045 of cash used in investing

activities during the same period of 2022, a decrease of $136,438, or 68.6%.

The decrease resulted from a decrease in patent costs of

$10,074 and a decrease in purchases of property, plant and equipment of $126,364 during the first six months of 2023.

Cash Provided by Financing Activities

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.

Company did not raise any capital nor were there any warrant exercises during the six months ended June 30, 2023 or June 30, 2022.

ability to continue to fund our working capital needs will be dependent upon obtaining additional capital from the sale of

securities or by borrowing funds from lenders to fulfill our business plans.

If we issue additional equity or debt securities,

stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to

those of existing holders of our common stock.

On August 14, 2023, the Company entered into an At-the-Market Issuance Sales

Agreement (the “Sales Agreement”) with Lake Street Capital Markets, LLC, or Lake Street, pursuant to which the Company

may issue and sell from time to time through Lake Street, as sales agent, shares of our common stock having an aggregate offering

price of up to $1,500,000 (the “Offering”).

There is no assurance that we will be successful in obtaining additional

funding from this Sales Agreement.

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

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What changed 10-Q

Item 2. Management’s Discussion and Analysis