UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2021~~2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-38015

~~Sigma Labs, Inc.~~SIGMA ADDITIVE SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

nevada

27-1865814

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

3900 Paseo del Sol

Santa Fe, NM 87507

(Address of principal executive offices)

(505) 438-2576

(Registrant’s telephone ~~number)~~number, including area code)

SIGMA LABS, INC.

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol

Name of each exchange on which registered

Common Stock, par value $0.001 per share

~~SGLB~~

~~The~~ ~~NASDAQ~~ ~~Stock Market LLC~~

~~Warrants to Purchase Common Stock,~~

~~par value $0.001 per share~~

~~SGLBW~~SASI

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated Filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ~~Yes☐~~Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of ~~October 20, 2021,~~November 11, 2022, the issuer had 10,498,802shares of common stock outstanding.

SIGMA ~~LABS,~~ADDITIVE SOLUTIONS, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS	3

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	1816

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	23

ITEM 4. CONTROLS AND PROCEDURES	23

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS	2423

ITEM 1A. RISK FACTORS	2423

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.	2423

ITEM 3. DEFAULTS UPON SENIOR SECURITIES	2423

ITEM 4. MINE SAFETY DISCLOSURES	2423

ITEM 5. OTHER INFORMATION	2423

ITEM 6. EXHIBITS	24

SIGNATURES	25

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Sigma Additive Solutions, Inc. (formerly Sigma Labs, Inc.)

Condensed Balance Sheets

~~(Unaudited)~~

	September 30, 2021			December 31, 2020			September 30, 2022 (Unaudited)			December 31, 2021

ASSETS
Current Assets:
Cash	$	13,064,394		$	3,700,814		$	4,800,680		$	11,447,047
Accounts Receivable, net		666,740			331,562			367,770			412,192
Inventory		856,547			659,651			967,432			710,080
Prepaid Assets		130,675			90,735			177,724			114,278
Total Current Assets		14,718,356			4,782,762			6,313,606			12,683,597

Other Assets:
Property and Equipment, net		201,752			138,626			244,838			232,282
Intangible Assets, net		868,265			753,122			1,084,205			925,111
Long-Term Prepaid Asset		-			26,000
Total Other Assets		1,070,017			917,748			1,329,043			1,157,393

TOTAL ASSETS	$	15,788,373		$	5,700,510		$	7,642,649		$	13,840,990

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:
Accounts Payable	$	223,157		$	128,937		$	403,547		$	206,442
Deferred Revenue		85,480			77,957			129,689			148,855
Accrued Expenses		432,615			243,815			287,645			625,942
Total Current Liabilities		741,252			450,709			820,881			981,239

Long-Term Liabilities:
Stock Appreciation Rights		93,525			48,341
CARES Act Deferred Payroll Tax Liability		37,728			37,728
Total Long-Term Liabilities		131,253			86,069

TOTAL LIABILITIES		872,505			536,778			820,881			981,239

Stockholders’ Equity
Preferred Stock, $0.001 par; 10,000,000 shares authorized; 465 and 715 issued and outstanding, respectively		1			1
Common Stock, $0.001 par; 24,000,000 shares authorized; 10,498,802 and 5,995,320 issued and outstanding, respectively		10,499			5,995
Preferred Stock, $0.001 par value; 10,000,000 shares authorized; 465 shares issued and outstanding								1			1
Common Stock, $0.001 par value; 24,000,000 shares authorized; 10,498,802 shares issued and outstanding								10,499			10,499
Additional Paid-In Capital		53,086,908			38,262,744			54,193,981			53,442,431
Accumulated Deficit		(38,181,540	)		(33,105,008	)		(47,382,713	)		(40,593,180	)
Total Stockholders’ Equity		14,915,868			5,163,732			6,821,768			12,859,751

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	15,788,373		$	5,700,510		$	7,642,649		$	13,840,990

See accompanying notes to condensed financial statements.

Sigma Additive Solutions, Inc. (formerly Sigma Labs, Inc.)

Condensed Statements of Operations

(Unaudited)

													2022			2021			2022			2021
	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			2022			2021			2022			2021

REVENUES	$	700,237		$	248,526		$	1,302,525		$	637,944		$	188,245		$	700,237		$	476,749		$	1,302,525

COST OF REVENUE		164,766			97,785			409,493			400,172			79,713			164,766			312,879			409,493

GROSS PROFIT		535,471			150,741			893,032			237,772			108,532			535,471			163,870			893,032

OPERATING EXPENSES:
Salaries & Benefits		1,222,760			657,889			3,055,279			1,915,381			1,227,805			1,222,760			3,704,633			3,055,279
Stock-Based Compensation		659,512			58,219			893,431			483,208			275,418			659,512			613,833			893,431
Operating R&D Costs		131,772			79,673			608,812			245,008
Investor, Public Relations & Marketing		119,622			66,794			342,725			353,802
Operations and R&D Costs														152,245			131,772			442,548			608,812
Investor, Public Relations and Marketing														46,832			119,622			293,458			342,725
Organization Costs		342,112			173,041			578,256			328,716			140,522			342,112			260,088			578,256
Legal & Professional Service Fees		261,075			133,273			681,941			530,660			252,886			261,075			608,830			681,941
Office Expenses		172,238			84,357			472,335			310,947			183,608			172,238			692,640			472,335
Depreciation & Amortization		27,689			50,167			76,502			86,150			26,857			27,689			88,302			76,502
Other Operating Expenses		90,108			59,100			267,663			194,836			86,783			90,108			263,747			267,663
Total Operating Expenses		3,026,888			1,362,513			6,976,944			4,448,708			2,392,956			3,026,888			6,968,079			6,976,944

LOSS FROM OPERATIONS		(2,491,417	)		(1,211,772	)		(6,083,912	)		(4,210,936	)		(2,284,424	)		(2,491,417	)		(6,804,209	)		(6,083,912	)

OTHER INCOME (EXPENSE)
Interest Income		2,981			77			10,053			959			278			2,981			3,025			10,053
State Incentives		-			-			-			151,657			-			-			76,628			-
Exchange Rate Gain (Loss)		(490	)		(252	)		(333	)		(1,674	)
Exchange Rate Loss														(6,184	)		(490	)		(16,950	)		(333	)
Interest Expense		(2,052	)		(6,066	)		(5,434	)		(12,741	)		(1,978	)		(2,052	)		(5,367	)		(5,434	)
Loss on Dissolution of Joint Venture		-			-			-			(201	)
Other Income		-			-			1,092,441			361,700			-			-			-			1,092,441
Total Other Income (Expense)		439			(6,241	)		1,096,727			499,700			(7,884	)		439			57,336			1,096,727

LOSS BEFORE PROVISION FOR INCOME TAXES		(2,490,978	)		(1,218,013	)		(4,987,185	)		(3,711,236	)		(2,292,308	)		(2,490,978	)		(6,746,873	)		(4,987,185	)

Provision for income Taxes		-			-			-			-			-			-			-			-

Net Loss	$	(2,490,978	)	$	(1,218,013	)	$	(4,987,185	)	$	(3,711,236	)	$	(2,292,308	)	$	(2,490,978	)	$	(6,746,873	)	$	(4,987,185	)

Preferred Dividends		(14,220	)		(737,344	)		(89,347	)		(1,744,471	)		(14,220	)		(14,220	)		(42,660	)		(89,347	)

Net Loss Applicable to Common Stockholders	$	(2,505,198	)	$	(1,955,357	)	$	(5,076,532	)	$	(5,455,707	)	$	(2,306,528	)	$	(2,505,198	)	$	(6,789,533	)	$	(5,076,532	)

Net Loss per Common Share – Basic and Diluted	$	(0.24	)	$	(0.42	)	$	(0.53	)	$	(1.74	)	$	(0.22	)	$	(0.24	)	$	(0.65	)	$	(0.53	)

Weighted Average Number of Shares Outstanding – Basic and Diluted		10,494,560			4,675,749			9,602,666			3,137,459			10,498,802			10,494,560			10,498,802			9,602,666

See accompanying notes to condensed financial statements.

Sigma Additive Solutions, Inc. (formerly Sigma Labs, Inc.)

Statement of Stockholders’ Equity

~~For the Three and Nine Months Ended September 30, 2021 and 2020~~(Unaudited)

~~(Unaudited)~~

For the Three Months Ended September 30, ~~2021~~2022 and September 30, ~~2020~~2021

Preferred Stock Common Stock Additional
Shares Outstanding Preferred Stock Shares Outstanding Common Stock
Paid-in
Capital
Accumulated Deficit Total
Balances, June 30, 2021 465 $ 1 10,493,598 $ 10,494 $ 52,058,003 $ (35,676,342 ) $ 16,392,156

Preferred Stock Dividends - - - - 14,220 (14,220 ) -
Preferred Stock Dividends, shares
Shares Securities Issued to Directors for Services - - - - 282,306 - 282,306
Securities Issued to Directors for Services, Shares
Securities Issued for Third Party Services - - - - 72,872 - 72,872
Securities Issued for Third Party Services, shares
Securities Awarded to Employees - - 5,204 5 659,507 - 659,512
Preferred Shares issued for Exercise of Preferred Warrants
Preferred Shares issued for Exercise of Preferred Warrants, shares
Common Shares issued for Conversion of Preferred Shares
Common Shares issued for Conversion of Preferred Shares, shares
Common Shares Sold in Public Offering
Common Shares Sold in Public Offering, shares
Preferred Shares Sold in Private Offering
Preferred Shares Sold in Private Offering, shares
Extinguishment of Derivative Liability
Common Shares issued for Exercise of Common Warrants
Common Shares issued for Exercise of Common Warrants, shares
Offering Costs
Issuance of Fractional Shares from Reverse Split
Issuance of Fractional Shares from Reverse Split, shares
Stock Options Awarded to Directors
Securities Issued to Directors for Services
Net Loss - - - - - (2,490,978 ) (2,490,978 )

Balances, September 30, 2021 465 $ 1 10,498,802 $ 10,499 $ 53,086,908 $ (38,181,540 ) $ 14,915,868

Preferred Stock Common Stock Additional
Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in Capital Accumulated Deficit Total
Balances, June 30, 2020 333 $ 1 3,926,362 $ 3,926 $ 33,151,829 $ (29,595,944 ) $ 3,559,812

Preferred Stock Dividends - - 339,499 339 737,005 (737,344 ) -
Common Shares issued for Conversion of Preferred Shares (3,318 ) (3 ) 1,555,550 1,556 (1,553 ) - -
Preferred Shares issued for Exercise of Preferred Warrants 3,568 3 - - 3,478,796 - 3,478,799
Securities Issued to Directors for Services - - 8,334 8 131,142 - 131,150
Securities Issued for Third Party Services - - 3,500 4 58,918 - 58,922
Securities Awarded to Employees - - - - 58,220 - 58,220
Net Loss - - - - - (1,218,013 ) (1,218,013 )

Balances, September 30, 2020 583 $ 1 5,833,245 $ 5,833 $ 37,614,357 $ (31,551,301 ) $ 6,068,890

	Shares Outstanding		Preferred Stock		Shares Outstanding		Common Stock		Paid-in Capital		Accumulated Deficit			Total
	Preferred Stock				Common Stock				Additional
	Shares Outstanding		Preferred Stock		Shares Outstanding		Common Stock		Paid-in Capital		Accumulated Deficit			Total
Balances, June 30, 2022		465	$	1		10,498,802	$	10,499	$	53,876,218	$	(45,076,185	)	$	8,810,533
Net Loss		-		-		-		-		-		(2,292,308	)		(2,292,308	)
Preferred Stock Dividends		-		-		-		-		14,220		(14,220	)		-
Stock Options Issued for Third Party Services		-		-		-		-		973		-			973
Stock Options Awarded to Directors for Services		-		-		-		-		27,152		-			27,152
Stock Options Awarded to Employees		-		-		-		-		275,418		-			275,418

Balances, September 30, 2022		465	$	1		10,498,802	$	10,499	$	54,193,981	$	(47,382,713	)	$	6,821,768

	Preferred Stock				Common Stock				Additional
	Shares Outstanding		Preferred Stock		Shares Outstanding		Common Stock		Paid-in Capital		Accumulated Deficit			Total
Balances, June 30, 2021		465	$	1		10,493,598	$	10,494	$	52,058,003	$	(35,676,342	)	$	16,392,156
Preferred Stock Dividends		-		-		-		-		14,220		(14,220	)		-
Shares Securities Issued to Directors for Services		-		-		-		-		282,306		-			282,306
Securities Issued for Third Party Services		-		-		-		-		72,872		-			72,872
Stock Awarded to Employees		-		-		5,204		5		659,507		-			659,512
Net Loss		-		-		-		-		-		(2,490,978	)		(2,490,978	)
Balances, September 30, 2021		465	$	1		10,498,802	$	10,499	$	53,086,908	$	(38,181,540	)	$	14,915,868

See accompanying notes to condensed financial statements.

For the Nine Months Ended September 30, ~~2021~~2022 and September 30, ~~2020~~2021

Preferred Stock Common Stock Additional
Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in Capital Accumulated Deficit Total
Balances, December 31, 2020 715 $ 1 5,995,320 $ 5,995 $ 38,262,744 $ (33,105,008 ) $ 5,163,732
Beginning balance 715 $ 1 5,995,320 $ 5,995 $ 38,262,744 $ (33,105,008 ) $ 5,163,732

Common Shares Sold in Public Offering - - 3,901,783 3,902 14,865,997 - 14,869,899
Extinguishment of Derivative Liability - - - - (1,092,441 ) - (1,092,441 )
Preferred Stock Dividends - - 19,000 19 89,328 (89,347 ) -
Common Shares issued for Conversion of Preferred Shares (250 ) - 100,000 100 (100 ) - -
Common Shares issued for Exercise of Common Warrants - - 475,995 476 1,135,534 - 1,136,010
Stock Options Awarded to Directors - - - - 404,580 - 404,580
Securities Issued for Third Party Services - - 1,500 2 128,807 - 128,809
Securities Awarded to Employees - - 5,204 5 893,426 - 893,431
Offering Costs - - - - (1,600,967 ) - (1,600,967 )
Net Loss - - - - - (4,987,185 ) (4,987,185 )

Balances, September 30, 2021 465 $ 1 10,498,802 $ 10,499 $ 53,086,908 $ (38,181,540 ) $ 14,915,868
Ending balance 465 $ 1 10,498,802 $ 10,499 $ 53,086,908 $ (38,181,540 ) $ 14,915,868

	Preferred Stock				Common Stock				Additional
	Shares Outstanding		Preferred Stock		Shares Outstanding		Common Stock		Paid-in Capital		Accumulated Deficit			Total
Balances, December 31, 2021		465	$	1		10,498,802	$	10,499	$	53,442,431	$	(40,593,180	)	$	12,859,751
Net Loss		-		-		-		-		-		(6,746,873	)		(6,746,873	)
Preferred Stock Dividends		-		-		-		-		42,660		(42,660	)		-
Stock Options Issued for Third Party Services		-		-		-		-		24,463		-			24,463
Stock Options Awarded to Directors for Services		-		-		-		-		70,594		-			70,594
Stock Options Awarded to Employees		-		-		-		-		613,833		-			613,833

Balances, September 30, 2022		465	$	1		10,498,802	$	10,499	$	54,193,981	$	(47,382,713	)	$	6,821,768

Preferred Stock Common Stock Additional
Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in Capital Accumulated Deficit Total
Balances, December 31, 2019 - $ - 1,403,759 $ 1,404 $ 26,746,439 $ (26,095,594 ) $ 652,249

Common Shares Sold in Public Offering - - 493,027 493 1,499,507 - 1,500,000
Preferred Shares Sold in Private Offering 1,973 3 - - 2,099,997 - 2,100,000
Preferred Stock Dividends - - 749,924 750 1,743,721 (1,744,471 ) -
Common Shares issued for Conversion of Preferred Shares (7,154 ) (7 ) 3,157,427 3,157 (3,150 ) - -
Preferred Shares issued for Exercise of Preferred Warrants 5,764 5 - - 5,619,895 - 5,619,900
Securities Issued to Directors for Services - - 8,334 8 131,142 - 131,150
Securities Issued for Third Party Services - - 6,000 6 113,837 - 113,843
Securities Awarded to Employees - - 11,517 12 483,196 - 483,208

Offering Costs - - - (820,224 ) - (820,224 )
Issuance of Fractional Shares from Reverse Split - - 3,257 3 (3 ) - -
Net Loss - - - - - (3,711,236 ) (3,711,236 )

Balances, September 30, 2020 583 $ 1 5,833,245 $ 5,833 $ 37,614,357 $ (31,551,301 ) $ 6,068,890

	Preferred Stock					Common Stock				Additional
	Shares Outstanding			Preferred Stock		Shares Outstanding		Common Stock		Paid-in Capital			Accumulated Deficit			Total
Balances, December 31, 2020		715		$	1		5,995,320	$	5,995	$	38,262,744		$	(33,105,008	)	$	5,163,732
Common Shares Sold in Public Offerings		-			-		3,901,783		3,902		14,865,997			-			14,869,899
Extinguishment of Derivative Liability		-			-		-		-		(1,092,441	)		-			(1,092,441	)
Preferred Stock Dividends		-			-		19,000		19		89,328			(89,347	)		-
Common Shares Issued Upon Conversion of Preferred Shares		(250	)		-		100,000		100		(100	)		-			-
Common Shares issued for Exercise of Common Warrants		-			-		475,995		476		1,135,534			-			1,136,010
Stock Options Awarded to Directors		-			-		-		-		404,580			-			404,580
Securities Issued for Third Party Services		-			-		1,500		2		128,807			-			128,809
Stock Options Awarded to Employees		-			-		5,204		5		893,426			-			893,431
Offering Costs		-			-		-		-		(1,600,967	)		-			(1,600,967	)
Net Loss		-			-		-		-		-			(4,987,185	)		(4,987,185	)
Balances, September 30, 2021		465		$	1		10,498,802	$	10,499	$	53,086,908		$	(38,181,540	)	$	14,915,868

See accompanying notes to condensed financial statements.

Sigma Additive Solutions, Inc. (formerly Sigma Labs, Inc.)

Condensed Statements of Cash Flows

(Unaudited)

							September 30, 2022			September 30, 2021
	Nine Months Ended						Nine Months Ended
	September 30, 2021			September 30, 2020			September 30, 2022			September 30, 2021
OPERATING ACTIVITIES
Net Loss	$	(4,987,185	)	$	(3,711,236	)	$	(6,746,873	)	$	(4,987,185	)
Adjustments to reconcile Net Loss to Net Cash used in operating activities:
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Noncash Expenses:
Depreciation and Amortization		76,502			86,150			88,302			76,502
Gain on Derivative Liability		(1,092,441	)		-			-			(1,092,441	)
Stock Based Compensation - Employees		893,431			483,208
Stock Based Compensation – Third Party Services		128,809			113,843
Stock Based Compensation - Directors		404,580			131,150
Change in assets and liabilities:
Stock-Based Compensation - Employees								613,833			893,431
Stock-Based Compensation - Third Party Services								24,463			128,809
Stock-Based Compensation - Directors								70,594			404,580
Change in Assets and Liabilities:
Accounts Receivable		(335,178	)		(429,527	)		44,422			(335,178	)
Inventory		(196,896	)		24,178			(257,352	)		(196,896	)
Prepaid Assets		(13,940	)		55,669			(63,446	)		(13,940	)
Accounts Payable		94,220			(544,991	)		197,105			94,220
Deferred Revenue		7,523			(46,606	)		(19,166	)		7,523
Accrued Expenses		233,985			108,022			(338,297	)		233,985
Deferral of Payroll Taxes under the CARES Act		-			53,545
NET CASH USED IN OPERATING ACTIVITIES		(4,786,590	)		(3,676,595	)		(6,386,415	)		(4,786,590	)

INVESTING ACTIVITIES
Purchase of Property and Equipment		(116,631	)		(88,074	)		(83,848	)		(116,631	)
Purchase of Intangible Assets		(138,141	)		(161,878	)		(176,104	)		(138,141	)
Dissolution of Joint Venture		-			500
NET CASH USED IN INVESTING ACTIVITIES		(254,772	)		(249,452	)		(259,952	)		(254,772	)

FINANCING ACTIVITIES
Gross Proceeds from Public and Private Issuances of Securities		14,869,899			3,600,000			-			14,869,899
Less Offering Costs		(1,600,967	)		(820,224	)		-			(1,600,967	)
Payment of Note Payable		-			(50,000	)
Proceeds from Exercise of Warrants		1,136,010			5,619,900			-			1,136,010
NET CASH PROVIDED BY FINANCING ACTIVITIES		14,404,942			8,349,676			-			14,404,942

NET CHANGE IN CASH FOR PERIOD		9,363,580			4,423,629			(6,646,367	)		9,363,580

CASH AT BEGINNING OF PERIOD		3,700,814			86,919			11,447,047			3,700,814

CASH AT END OF PERIOD	$	13,064,394		$	4,510,548		$	4,800,680		$	13,064,394

Supplemental Disclosures:
Noncash investing and financing activities disclosure:
Noncash Investing and Financing Activities Disclosure:
Issuance of Common Shares for Preferred Dividends	$	89,347		$	1,744,471		$	-		$	89,347
Issuance of Securities for Services	$	533,387		$	244,993
Disclosure of cash paid for:
Other Noncash Operating Activities Disclosure:
Issuance of Securities for services							$	95,057		$	533,387
Disclosure of Cash Paid for:
Interest	$	5,434		$	12,741		$	5,367		$	5,434
Income Taxes	$	-		$	-		$	-		$	-

See accompanying notes to condensed financial statements.

SIGMA ADDITIVE SOLUTIONS, INC. (FORMERLY SIGMA LABS, INC.)

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

September 30, ~~2021~~2022

~~(Unaudited)~~

NOTE 1 - Summary of Significant Accounting Policies

Nature of Business --Sigma Additive Solutions, Inc. (formerly Sigma Labs, Inc.~~, formerly named Framewaves, Inc.~~), a Nevada corporation (“Company,” “Sigma,” “we,” “us” and “our”), was founded by a group of scientists, engineers and businessmen to develop and commercialize novel and unique manufacturing and materials technologies. Sigma believes that some of these technologies will fundamentally redefine conventional quality assurance and process control practices by embedding them into the manufacturing processes in real time, enabling process intervention and ultimately leading to closed loop process control. The Company anticipates that its core technologies will allow its ~~clientele~~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. ~~The terms the “Company,” “Sigma,” “we,” “us” and “our” refer to Sigma Labs, Inc.~~

Basis of Presentation - The accompanying financial statements have been prepared by the Company in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States of America. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at September 30, ~~2021~~2022 and ~~2020~~2021 and for the periods then ended have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with ~~U.S. generally accepted accounting principles~~GAAP have been condensed or omitted. The Company suggests these condensed financial statements be read in conjunction with the December 31, ~~2020~~2021 audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K. The results of operations for the ~~periods~~period ended September 30, ~~2021 and 2020~~2022 are not necessarily indicative of the operating results for the full year.

Reclassification - Certain amounts in prior-period financial statements have been reclassified for comparative purposes to conform to presentation in the current-period financial statements. ~~These reclassifications have no impact on the previously reported results.~~

Fair Value of Financial Instruments - ~~The Company applies ASC 820, “Fair Value Measurements~~.” This guidance defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:

	●	~~Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.~~

	●	Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

	●	~~Level 3 - inputs to valuation methodology are unobservable and significant to the fair measurement.~~

The carrying amounts reported in the balance sheets for the cash and cash equivalents, receivables, accounts payable, and accrued liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.

The Company does not use derivative instruments for hedging of market risk or for trading or speculative purposes. On March 26, 2021, the Company ~~closed an offering in which it~~ issued warrants to purchase an aggregate of 2,190,000 shares of common stock in a private placement concurrently with a registered direct offering ~~(“Registered Offering”)~~ of our common stock The warrants became exercisable on May 24, 2021, the date the Company obtained stockholder approval to increase its authorized common shares from 12,000,000 to 24,000,000 ~~(“the Initial Exercise Date”)~~, and will expire ~~two years after the Initial Exercise Date.~~on May 24, 2023.

Pursuant to ASC ~~815-40-25-10,~~815.40.25.10, such warrants were accounted for as a derivative liability because the Company did not have sufficient authorized and unissued shares of common stock available to settle the warrants at the issue ~~date, such warrants were accounted for as a derivative liability.~~date. On May 24, 2021, upon receiving ~~shareholder~~stockholder approval to increase its authorized common shares, the Company reclassified the warrant liability to equity pursuant to ASC 815.40.35.8.

For the nine months ended September 30, 2021, the Company recorded a gain of $1,092,441

~~The~~due to the change in the fair value of the ~~warrant~~derivative liability as measured on a recurring ~~basis is as follows:~~basis.

~~Schedule of Warrant Liability Measured on Recurring Basis~~

September 30, 2021 Date of Issuance March 26, 2021
Fair Value Input Level Fair Value Input Level

Derivative Liability - Warrants $ - - $ 5,708,212 Level 3

~~The following table presents a reconciliation of the derivative liability measured at fair value on a recurring basis using significant unobservable input (Level 3):~~

~~Schedule of Derivative Liability Measured on a Recurring Basis Using Significant Unobservable Input (Level 3)~~

Warrants
Fair Value on Issuance Date $ 5,708,212
Change in Fair Value (1,092,441 )
Fair Value on May 24, 2021 4,615,771
Extinguishment of Derivative Liability (4,615,771 )
Fair Value on September 30, 2021 $ -

Loss Per Share - – The computation of loss per share is based on the weighted average number of shares outstanding during the period in accordance with ASC Topic No. 260, “Earnings Per Share.” Shares underlying the ~~Companies~~Company’s outstanding warrants, options and preferred ~~shares~~stock were excluded due to the anti-dilutive effect they would have on the computation. At September 30, ~~2021~~2022 and ~~2020,~~2021, the Company had the following common shares underlying these instruments:

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

September 30,
2021 2020
Warrants 3,987,931 1,845,722
Preferred Stock Warrants - 260,089
Stock Options 1,400,407 610,229
Preferred Stock 124,483 227,695

Total Underlying Common Shares 5,512,821 2,943,735

	September 30,
	2022		2021
Warrants		3,825,781		3,987,931
Stock Options		1,784,942		1,400,407
Preferred Stock		148,918		124,483
Total Underlying Common Shares		5,759,641		5,512,821

The following ~~data~~table shows the amounts used in computing loss per share and the effect on ~~income~~net loss and the weighted average number of shares of dilutive potential common stock for the periods ended September 30, ~~2021~~2022 and ~~2020:~~2021:

Schedule of ~~Earnings~~Computing Loss Per Share ~~Basic and Diluted~~

2021 2020 2021 2020
Three Months Ended
September 30 Nine Months Ended
September 30
2021 2020 2021 2020

Net Loss per Common Share - Basic and Diluted $ (0.24 ) $ (0.42 ) $ (0.53 ) $ (1.74 )
Loss from continuing
Operations available to Common stockholders (numerator) $ (2,505,198 ) $ (1,955,357 ) $ (5,076,532 ) $ (5,455,707 )
Loss from continuing Operations available to Common stockholders (numerator) $ (2,505,198 ) $ (1,955,357 ) $ (5,076,532 ) $ (5,455,707 )

Weighted average number of common shares Outstanding used in loss per share during the Period (denominator) 10,494,560 4,675,749 9,602,666 3,137,459

~~Recently Enacted Accounting Standards~~ - The FASB established the ASC as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with GAAP. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) issued under authority of federal securities laws are also sources of GAAP for SEC registrants.

	2022			2021			2022			2021
	Three Months Ended September 30						Nine Months Ended September 30
	2022			2021			2022			2021

Net Loss per Common Share - Basic and Diluted	$	(0.22	)	$	(0.24	)	$	(0.65	)	$	(0.53	)
Loss Applicable to Common Stockholders (numerator)	$	(2,306,528	)	$	(2,505,198	)	$	(6,789,533	)	$	(5,076,532	)

Weighted Average Number of Common Shares Outstanding Used in Loss Per Share During the Period (denominator)		10,498,802			10,494,560			10,498,802			9,602,666

Accounting Estimates - The preparation of financial statements in conformity with ~~generally accepted accounting principles in the United States~~GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimated by management. Significant accounting estimates that may materially change in the near future are 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.

Revenue Recognition – The Company’s revenue is derived primarily from sales of our software and related hardware suite under perpetual licenses and from providing engineering services under contracts. The Company recognizes revenue in accordance with ASC Topic No. 606. In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that superseded nearly all existing revenue recognition guidance under prior U.S. GAAP and replaced it with a principles-based approach for determining revenue recognition. The core principle of the standard is the recognition of revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In general, we determine revenue recognition by: (1) identifying the contract, or contracts, with our customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to performance obligations in the contract; and (5) recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.

In January 2022, the Company began offering a subscription option to its customers, pursuant to which it leases its PrintRite3D platform for terms between 12 and 36 months and provide technical support and maintenance for the term of the arrangement, as well as installation and training. The Company has determined these are leases because they relate to discrete pieces of equipment to which customers have the right to substantially all the economic benefit from and exclusive right to use during the term of the arrangement. These leases are classified as operating leases and the Company retains title to the underlying equipment.

The 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 30-days written notice. Some, but not all, of the leases permit lessees to purchase the equipment 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.

There are two non-lease components in the arrangement that consist of technical support and maintenance, and installation and training. The Company has elected the single component practical expedient to combine the technical support and maintenance with the lease as they have the same pattern of transfer. The installation and training component does not have the same pattern of transfer; therefore, this component is not eligible for the single component practical expedient. The consideration has been allocated on a relative fair value basis of the underlying lease and non-lease components. The Company has estimated the residual value of the leased equipment based on its useful life, and the ability to refurbish and sell the equipment, as well as the Company’s ability to componentize the hardware and utilize subassemblies in other products.

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

Minimum Lease Payments Receivable

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

Schedule of Minimum Lease Payments Receivable

Year ending December 31,	Amount
2022 (remaining)	$	8,503
2023	$	8,503
2024		-
2025 and thereafter		-
Total	$	17,006

Equipment Underlying Operating Leases:

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

Schedule of Assets underlying Operating Leases

	September 30, 2022
PrintRite 3D Hardware	$	38,949
Accumulated Depreciation		4,173
Net Book Value	$	34,776

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

NOTE 2 – Inventory

At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company’s inventory was comprised ~~of:~~of the following:

Schedule of Inventory

	September 30, 2021		December 31, 2020		September 30, 2022		December 31, 2021
Raw Materials	$	312,181	$	309,305	$	264,558	$	202,015
Work in Process		260,380		175,884		420,420		224,079
Finished Goods		283,986		174,462		282,454		283,986
Total Inventory	$	856,547	$	659,651	$	967,432	$	710,080

NOTE 3 – ~~CARES Act Deferred Payroll Tax Liability~~Intangible Assets

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

Provisional patent applications are not amortized until a patent has been granted. Once a patent is granted, the Company will amortize the related costs over the estimated useful life of the patent. If a patent application is denied, then the costs will be expensed at that time.

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

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

Summary of Definite-life Intangible Assets and Accumulated Amortization

	September 30, 2022			December 31, 2021
Provisional Patent Applications	$	725,164		$	675,291
Patents		426,601			300,370
Less: Accumulated Amortization		(67,560	)		(50,550	)

Net Intangible Assets	$	1,084,205		$	925,111

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

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

Schedule of Aggregate Amortization Expense


2022 (Remaining)	$	6,153
2023		24,610
2024		24,610
2025		24,610
Thereafter		279,058

Intangible asset and amortization expense	$	359,041

NOTE 4 – Deferral of Social Security Tax Payments

Pursuant to sections 2302(a)(1) and (a)(2) of the CARES Act, the Company has elected to defer payments of its share of Social Security tax due during the “payroll tax deferral ~~period”.~~period.” The payroll tax deferral period began on March 27, 2020 and ended on December 31, 2020. At September 30, ~~2021~~2022, the total remaining amount of ~~such~~the deferral was $~~75,455~~37,728. Per the terms of the deferral program, 50~~% of the deferred~~such amount is due ~~on December 31, 2021, and the remaining~~by 50~~% is due on~~ December 31, 2022 ~~at 0%~~, without interest.

~~NOTE 4 -~~ ~~Derivative Liability~~

~~On March 26, 2021 (the “Issuance Date”), the Company issued warrants to purchase an aggregate of~~ ~~2,190,000~~ ~~shares of common stock to holders in a private placement concurrently with a registered direct offering of~~ ~~2,190,000~~ ~~shares of its common stock. The warrants entitle the holders to purchase one share of our common stock at an exercise price equal to $4.32~~ ~~per share commencing on~~ ~~May 24, 2021~~ ~~and will expire~~ ~~two years~~ from such date. The Company has determined that these warrants are free standing financial instruments that are legally detachable and separately exercisable from the common stock included in the registered direct offering. Management also determined that on the Issuance Date, the Company did not have sufficient authorized and unissued shares to settle the warrants, and as such required classification as a liability pursuant to ASC 815 ~~“Derivative Instruments and Hedging”~~. In accordance with the accounting guidance, the outstanding warrants were recognized as a warrant liability on the balance sheet and were measured at their inception date fair value and subsequently re-measured at each reporting period with changes being recorded as a component of other income in the statement of operations.

~~At a Special Stockholders Meeting held on May 24, 2021, the Company received approval to increase its authorized common shares from~~ ~~12,000,000~~ to ~~24,000,000. Pursuant to ASC 815-40-35-8, the Company reclassified the warrant liability to equity as of such date.~~

The fair value of the derivative liability presented below was measured using the Black Scholes valuation model. Significant inputs into the model for the nine months ended September 30, 2021 are as follows:

~~Schedule of Fair Value of Derivative Liability Using Black Scholes Valuation Model~~

	~~September 30, 2021~~
~~Dividend yield~~		~~0.00~~	%
~~Risk-free interest rate~~		~~0.6% -~~ ~~0.7~~	%
~~Expected volatility~~		~~121.2~~ ~~% -~~ ~~124.0~~	%
~~Expected life (in years)~~		2

~~The warrants outstanding and fair values at each of the respective valuation dates are summarized below:~~

~~Schedule of Fair Value of Warrant Liability~~

Warrant Liability Warrants Outstanding Fair Value Per Share Fair Value
Fair Value at initial measurement date of March 26, 2021 2,190,000 $ 2.61 $ 5,708,212
(Gain) on change in Fair Value of Warrant Liability - $ - (1,092,441 )
Fair Value as of May 24, 2021 2,190,000 $ 2.11 4,615,771
Extinguishment of Derivative Liability (2,190,000 ) $ 2.11 (4,615,771 )
Fair Value as of September 30, 2021 - $ - -

The Company has presented the fair value measurement as a Level 3 measurement, relying on unobservable inputs reflecting management’s assumptions. Level 3 measurements, which are not based on quoted prices in active markets, introduce a higher degree of subjectivity and may be more sensitive to fluctuations in stock prices, volatility rates and U.S. Treasury Bond rates and could have a material impact on future fair value measurements.

The Company uses the Black Scholes model, based on the adjusted historical volatility rates for fair value measurements through the date of stockholder approval (i.e., May 24, 2021). Management has determined the Black Scholes model to be the most reliable and least volatile determinate of the current fair value of the warrants. It is the Company’s expectation to maximize on all observable market inputs for the warrants and calibrate the model to incorporate relevant observable market data into the fair value measurement at each future measurement date, if applicable.

~~During the nine months ended September 30, 2021, the Company recognized a gain of $1,092,441~~ ~~on the change in fair value of the warrants.~~

NOTE 5 - Stockholders’ Equity

Common Stock

On May 24, 2021, at a Special Stockholders Meeting, our stockholders approved an increase in the authorized shares of common stock ~~were increased~~ from 12,000,000 to 24,000,000.

In January 2021, the Company closed a public offering of its securities in which it issued 1,711,783 shares of common stock at a price of $3.00 per share, resulting in net proceeds of approximately $4,532,445 after deducting underwriting commissions and other offering expenses payable by the Company. Pursuant to the Underwriting Agreement, the Company also issued to the Underwriter orand its ~~designee~~designees warrants to purchase 136,943 shares of common stock. Such warrants have a term of five years and an exercise price of $3.75 per share.

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

In March 2021, the Company issued 119,000 shares of common stock in exchange for the conversion of 250 shares of Series D Convertible Preferred Stock, including 19,000 shares of common stock as in-kind payment of preferred stock dividends. Also in March 2021, the ~~Company~~company issued 191,204 shares of common stock pursuant to the exercise of warrants issued in our April 2020 offering, and 21,591 shares of common stock issued pursuant to the cashless exercise of placement agent warrants.

In March 2021, the Company closed a public offering ~~of its securities~~ in which it issued 2,190,000shares of common stock at a price of $4.445per share, resulting in net proceeds to the Company of approximately $8,736,487after deducting placement agent commissions and other offering costs payable by the Company. Pursuant to the Purchase Agreement, the purchasers severally agreed to vote the shares of common stock purchased under the Purchase Agreement in favor of any resolution presented to the stockholders of the Company for the purpose of obtaining approval of an increase in the authorized shares of the Company’s Common Stock from 12,000,000 to 24,000,000 shares (“Stockholder Approval”). In a concurrent private placement under the Purchase Agreement, the Company issued to the purchasers warrants (“Warrants”) to purchase an aggregate of 2,190,000shares of Common Stock at an exercise price of $4.32per share. Each Warrant became exercisable oncommencing May 24, 2021, the date the Company obtained ~~stockholder approval of an increase in the authorized shares of the Company’s Common Stock~~Stockholder Approval, and will expire two years ~~from such~~ after the initial exercise date. The Company also issued to designees of the Placement Agent warrants to purchase up to 175,200 shares of Common Stock (the “Placement Agent Warrants”) constituting 8% of the aggregate number of shares of Common Stock sold in the ~~Registered Offering.~~public offering. The Placement Agent Warrants have substantially the same terms as the Warrants, except that the Placement Agent Warrants have an exercise price equal to 125% of the offering price per share (or $5.55625 per share). Upon any exercise of the Warrants for cash, we have also agreed to pay the Placement Agent warrants to purchase ~~8.0~~8% of the number of shares of our Common Stock issued upon ~~the cash exercise of the Warrants.~~such exercise.

In March 2021, Company issued 1,500 shares of common stock valued at $4.99 per share to ~~CorProminence,~~ an investor relations firm previously engaged by the Company as partial compensation for services ~~previously~~ rendered.

~~In September 2021, the Company granted~~ ~~5,204~~ ~~shares of common stock to non-executive employees pursuant to the 2013 Equity Incentive Plan.~~

~~On April 6, 2020, the Company closed a public offering of equity securities in which it issued~~ ~~493,027~~ ~~shares of common stock and pre-funded warrants to purchase up to~~ ~~22,438~~ ~~shares of the Company’s common stock. The Company also issued Series A Warrants to purchase an aggregate of~~ ~~515,465~~ shares of the Company’s common stock pursuant to a private placement. In connection with this offering, the Company issued Dawson James Securities, Inc., its Placement Agent, a warrant to purchase an aggregate of ~~41,237~~ ~~shares of the Company’s Common Stock (which amount is based on the number of Common Shares and shares underlying the Pre-Funded Warrants) at an exercise price of $3.64~~ ~~per share. Net proceeds to the Company after deducting offering expenses were approximately $1,230,000~~.

~~In the nine months ended September 30, 2020, the Company issued~~ ~~3,157,427~~ ~~shares of common stock in exchange for the conversion of~~ ~~6,109~~ ~~shares of Series D Convertible Preferred stock, and~~ ~~749,924~~ ~~shares of common stock as in-kind payment of preferred stock dividends.~~

~~In the nine months ended September 30, 2020, the Company issued~~ ~~25,851~~ ~~shares of common stock for services.~~

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock, $0.001par ~~value.~~value, of which 465 ~~and~~ ~~583~~shares ~~of preferred stock~~ were issued and outstanding at September 30, ~~2021~~2022 and ~~2020, respectively.~~December 31, 2021.

In January 2020, the Company entered into a Securities Purchase Agreement ~~(the “SPA”)~~ with certain institutional investors (the “Institutional Private Placement”)~~. Pursuant~~, pursuant to ~~the SPA,~~which the Company issued and sold 1,640 shares of the Company’s newly created Series D Convertible Preferred Stock (the “Series D Preferred Stock”)~~. Under the Certificate of Designations for the Series D Preferred Stock, the Series D Preferred Stock has~~ at an initial stated value of $1,000per ~~share (the “Stated Value”).~~share. Dividends accrue at a ~~dividend~~ rate of 99%% per annum (subject to increase upon the occurrence (and during the continuance) of certain triggering events described therein) and ~~on a~~are payable monthly ~~basis, shall be payable~~ in kind by the increase of the ~~Stated Value~~stated value of the Series D Preferred Shares by said amount. The holders of the Series D Preferred Shares ~~will~~ have the right at any time to convert all or a portion of the Series D Preferred Shares (including, without limitation, accrued and unpaid dividends and make-whole dividends through the third anniversary of the closing date) into shares of the Company’s Common Stock at the conversion price then in effect, which is $2.50 (subject to adjustment for stock splits, dividends, recapitalizations and similar events and full ratchet price ~~protection)~~protection in the event the Company issues or sells, or is deemed to have issued or sold, shares of Common Stock for a consideration per share less than a price equal to the conversion price then in effect). ~~In addition,~~Alternatively, a holder may at any time ~~alternatively,~~ convert all, or any part, of its Series D Preferred Shares at an alternative conversion price ~~which equals~~equal to the lower of the applicable conversion price then in effect, and the greater of (x) $1.80 and (y) 85% of the average volume weighted average price (“VWAP”) of the Common Stock for a ~~five (5) trading~~five-trading day period prior to such conversion. Upon the occurrence of certain triggering events, described in the Certificate of Designations, including, but not limited to payment defaults, breaches of transaction documents, failure to maintain listing on the Nasdaq Capital Market, and other defaults set forth therein, the Series D Preferred Shares would become subject to redemption, at the option of a holder, at a 125% premium to the underlying value of the Series D Preferred ~~Shares~~Stock being redeemed.

At September 30, ~~2021~~2022, there were 132 shares of Series D ~~Convertible~~ Preferred ~~stock~~Stock outstanding, which if converted ~~at the Conversion Price of $2.50~~as of September 30, ~~2021,~~2022, including the make-whole dividends, would ~~have resulted~~result in the issuance of ~~62,832~~87,267 shares of common stock.

Concurrent with the Institutional Private Placement, the Company entered into a Securities Purchase Agreement ~~(the “SPA”) with~~pursuant to which the Company issued and sold to certain of its directors and the Company’s ~~previously~~then largest ~~shareholder (the “Other Private Placement”). Pursuant to the SPA, the Company issued and sold~~stockholder 333shares of the Company’s newly created Series E Convertible Preferred Stock (the “Series E Preferred Stock”). at an initial stated value of $1,000 per share. Dividends accrue at a dividend rate of 99%% per annum and ~~on a~~are payable monthly ~~basis, shall be payable~~ in kind by the increase of the ~~Stated Value~~stated value of the Series E Preferred ~~Shares~~Stock by said amount. The Series E Preferred Stock is initially convertible into 48,544shares of ~~Common Stock.~~common stock (subject to adjustment for stock splits, dividends, recapitalizations and similar events).

At September 30, ~~2021, all~~2022, 333 shares of ~~the issued~~ Series E ~~Convertible~~ Preferred Stock were outstanding, which if converted as of September 30, ~~2021,~~2022, including the make-whole dividends, would ~~have resulted~~result in the issuance of 61,651 shares of common stock.

~~Deferred Compensation~~

In previous years and in the nine months ended September 30, 2021, the Company issued to various employees, directors, and contractors shares of the Company’s common stock, subject to restrictions, pursuant to the 2013 Equity Incentive Plan (the “2013 Plan”). Such shares are valued at the fair value at the date of issue. The fair value is expensed as compensation over the vesting period and recorded as an increase to stockholders’ equity. During the nine months ended September 30, 2021 and September 30, 2020, $0 ~~and $15,740, respectively, of the unvested compensation cost related to these issues was recognized.~~

~~At September 30, 2021, there was~~ 0 ~~unrecognized deferred compensation expense to be recognized over the remainder of the year.~~

1312

Stock Options

On July 15, 2021, at the Annual Meeting of Stockholders of the Company, the Company’s stockholders approved an amendment to the 2013 Equity Incentive Plan to increase the number of shares of the Company’s common stock reserved for issuance under the 2013 Plan by ~~875,000~~ ~~shares of our common stock to a total of~~ ~~1,765,000~~ ~~shares.~~

As of September 30, ~~2021,~~2022, an aggregate of ~~335,152~~450,617 shares of common stock ~~remained available~~were reserved for future issuance under the Company’s 2013 Equity Incentive Plan.

In March 2022, the Company granted options to its non-employee directors to purchase up to an aggregate of 56,000 shares of common stock at a strike price of $2.50. As of September 30, 2022, 75% of such grants were fully vested and exercisable, and the remaining 25% will vest on December 31, 2022 subject to the directors remaining in our service through such date.

During the nine months ended September 30, ~~2021,~~ 2022, the Company granted twelve employees options to purchase ~~a total~~up to an aggregate of ~~697,831~~228,973 shares of common stock ~~to 34 employees, 4 directors and 4 consultants~~in connection with their employment. The options have a strike price of $2.50 with vesting periods ranging from immediately upon issuance to three years beginning ~~January 4, 2021.~~July 1, 2022, provided that the employees remain employed by the Company on such dates. In addition, the Company granted its President and CEO options to purchase up to 135,000 shares of common stock in connection with his employment. The options have a strike price of $2.50 and will vest in equal monthly installments over 36 months beginning March 2022, provided that the President and CEO remains employed by the Company on such dates.

~~During~~Also, during the nine months ended September 30, ~~2020,~~ 2022, the Company granted two consultants options to purchase ~~a total~~up to an aggregate of ~~472,183~~14,000 shares of common stock for services to ~~20 employees, 5 directors~~be rendered. The options have a strike price of $2.50 and ~~5 consultants with vesting periods ranging from immediately upon issuance to 3 years beginning July 31, 2020.~~are fully vested.

The Company generally grants stock options to employees and directors at exercise prices equal to the fair market value of the Company’s stock on the ~~dates~~grant date, The exercise prices will not be less than 100% of ~~grant.~~the fair market value of a share on the date of grant of the option. Stock options are typically granted throughout the year and generally vest over ~~four~~a period from one to three years of service and expire five years from the grant date, ~~of the award,~~ unless otherwise specified. The Company recognizes compensation expense for the fair value of the stock options over the requisite service period for each stock option award.

Total ~~share-based~~stock-based compensation expense included in the statements of operations for the nine months ended September 30, 2022 and 2021 was $613,833and ~~2020 is~~ $893,431 ~~and $483,208~~respectively, all of which $~~874,176~~ ~~and $467,468~~ is related to stock ~~options, respectively.~~options.

The fair value of ~~share-based~~stock-based awards was estimated using the Black-Scholes model with the following ~~weighted-average~~weighted average assumptions for the nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:

~~Assumptions:~~

Schedule of ~~Share-based Payment~~Share Based Payments Award Stock Options Valuation Assumptions

2021 2020
Dividend yield 0.00 % 0.00 %
Risk-free interest rate 0.19 – 0.70 % 0.22-1.52 %
Expected volatility 116.8- 123.8 % 114.0-117.0 %
Expected life (in years) 5 5

	2022			2021
Dividend yield		0.00	%		0.00	%
Risk-free interest rate		0.95 -3.23	%		0.19 - 0.70	%
Expected volatility		106.40 -109.97	%		116.8-123.8	%
Expected life (in years)		5			5

Option activity for the nine months ended September 30, ~~2021~~2022 and the year ended December 31, ~~2020~~2021 was as follows:

Schedule of Stock Option Activity

				Weighted Average		Weighted Average				Options			Weighted Average Exercise Price ($)		Weighted Average Remaining Contractual Life (Yrs.)		Aggregate Intrinsic Value ($)
				Exercise		Remaining		Aggregate
				Price		Contractual		Intrinsic
	Options			($)		Life (Yrs.)		Value ($)
Options outstanding at December 31, 2019		180,912			18.11		5.09		25,988
Granted		579,998			2.55		4.57		-
Exercised		-			-		-		-
Forfeited or cancelled		(47,900	)		22.62		-		-
Options outstanding at December 31, 2020		713,010			5.15		4.40		477,802		713,010			5.15		4.40		477,802
Granted		697,831			3.29		4.64		46,800		698,831			3.29		4.39		46,800
Exercised		(5,204	)		2.50		-		-		(5,204	)		2.50		-		-
Forfeited or cancelled		(5,230	)		4.41		-		-		(10,755	)		3.49		-		-
Options outstanding September 30, 2021		1,400,407			4.24		4.14		267,577
Options expected to vest in the future as of September 30, 2021		574,146			3.59		4.29		110,275
Options exercisable at September 30, 2021		826,261			4.68		4.04		157,302
Options vested, exercisable, and options expected to vest at September 30, 2021		1,400,407			4.24		4.14		267,577
Options outstanding at December 31, 2021											1,395,882			4.24		3.89		-
Granted											433,973			2.50		4.64		-
Exercised											-			-		-		-
Forfeited or cancelled											(44,913	)		4.21		-		-
Options outstanding September 30, 2022											1,784,942			3.82		3.50		-
Options expected to vest in the future as of September 30, 2022											534,242			2.91		4.08		-
Options exercisable at September 30, 2022											1,250,700			4.21		3.25		-
Options vested, exercisable, and options expected to vest at September 30, 2022											1,784,942			3.82		3.50		-

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the ~~quoted~~market price of our common stock for those awards that have an exercise price ~~currently~~below the market price of our common stock. At September 30, 2022, no option had an exercise price below the $~~3.02~~0.815 closing price of our common stock as reported on ~~September 30, 2021. None of the 2021 option grants have an exercise price currently below $3.02~~.The Nasdaq Capital Market.

At September 30, ~~2021,~~2022, there was $~~1,544,383~~908,588 of unrecognized ~~share-based~~stock-based compensation expense related to unvested ~~share~~stock options with a weighted average remaining recognition period of ~~3.0~~2.0 years.

Stock Appreciation Rights

On June 23, 2020, the board of directors (the “Board”) of the Company adopted the ~~Sigma Labs, Inc.~~ 2020 Stock Appreciation Rights Plan (the “Plan”). The purposes of the Plan are to: (i) enable the Company to attract and retain the types of employees, consultants, and directors (collectively, “Service Providers”) who will contribute to the Company’s ~~long range~~long-range success; (ii) provide incentives that align the interests of Service Providers with those of the ~~shareholders~~stockholders of the Company; and (iii) promote the success of the Company’s business. The Plan provides for incentive awards ~~that are~~ only ~~made~~ in the form of stock appreciation rights payable in cash (“SARs”)~~. No~~ and no shares of common stock ~~were~~are reserved ~~in connection with the adoption of the Plan since no shares~~or will be issued pursuant to the Plan.

SARs may be granted to any Service Provider. A SAR is the right to receive an amount equal to the Spread with respect to a share of the Company’s common stock (“Share”) upon the exercise of the SAR. The “Spread” is the difference between the exercise price per share specified in a SAR agreement on the date of grant and the fair market value per share on the date of exercise of the SAR. The exercise price per share will not be less than 100% of the fair market value of a ~~Share~~share on the date of grant of the SAR. The administrator of the Plan will have the authority to, among other things, prescribe the terms and conditions of each SAR, including, without limitation, the exercise price and ~~medium of payment and~~ vesting provisions, and to specify the provisions of the SAR Agreement relating to such grant.

During the nine months ended September 30, 2022, the Company granted a total of 404,975 SARs to fifteen employees at exercise prices ranging from $1.30 to $2.50 with vesting periods ranging from immediately upon issuance to three years, beginning January 3, 2022, provided that the employees remain employed by the Company on such dates. The SARs expire on the fifth anniversary of the grant date.

~~On August 11, 2021,~~Also, during the nine months ended September 30, 2022, the Company granted ~~pursuant to the Plan, (i)~~ ~~77,748~~406,887 SARs to ~~its~~our President and Chief Executive Officer ~~(ii)~~ at exercise prices ranging from $~~30,313~~1.30 to $2.50. Of the SARs, ~~to its Vice~~30,000 will vest equally over 36 months beginning March 2022, 194,940 will vest over 36 months beginning July 1, 2022, and 181,947will vest on March 15, 2025, in each case provided that the President and Chief Executive Officer remains an employee of ~~Business Development, (iii)~~ ~~76,304~~the Company on such dates. The SARs ~~to its Chief Technology Officer, and (iv)~~ ~~48,580~~ ~~SARs to its Chief Financial Officer. The exercise price~~will expire on the fifth anniversary of each ~~such SAR is $3.42, which was the closing price~~ of the ~~Company’s common stock on the date of grant.~~grant dates.

On ~~June 23, 2020,~~March 31, 2022, the Company granted ~~pursuant to the Plan, (i)~~ ~~60,094~~3,000 SARs to ~~its President and Chief Executive Officer, (ii)~~ ~~12,019~~ ~~SARs~~a consultant as partial compensation for services pursuant to ~~its Vice President of Business Development, (iii)~~ ~~24,038~~ ~~SARs to its Chief Technology Officer, and (iv)~~ ~~18,028~~ ~~SARs to its Chief Financial Officer. The~~a consulting agreement at an exercise price of ~~each such SAR is~~ $~~2.63~~2.50~~, which was the closing price of the Company’s common stock on the date of grant.~~

. The SARs expire on the fifth anniversary of the grant date and may be settled only in cash. Additionally, each such SAR will vest and become exercisable in three equal (as closely as possible) installments on each of the first, second and third anniversaries of the grant date, subject, in each case, to the applicable SAR holder being in the continuous employ of the Company on the applicable vesting date, and, in the event of a Change in Control (as defined in the Plan), will become immediatelyare fully vested and exercisable as long as the applicable holder is in the Company’s employ immediately prior to the Change in Control, and will otherwise be on such other terms set forth in the form of Stock Appreciation Rights Agreement.exercisable.

The Company recognizes compensation expense and a corresponding liability for the fair value of the SARs over the requisite service period for each SAR award. The ~~SAR’s~~SARs are revalued at each reporting date in accordance with ASC 718 “Compensation-Stock Compensation”, and any changes in fair value are reflected in ~~income~~the Statement of Operations as of the applicable reporting date.

The fair value of SAR awards was estimated using the Black-Scholes model with the following weighted-average assumptions for the nine months ended September 30, ~~2021~~2022 and ~~2020:~~the year ended December 31, 2021:

Schedule of ~~Share-based Payment~~Share Based Payments Award Stock Options Valuation Assumptions

~~Assumptions:~~

	2021			2020			2022			2021
Dividend yield		0.00	%		0.00	%		0.00	%		0.00	%
Risk-free interest rate		0.4	%		0.22	%		0.82-2.79	%		0.39-0.40	%
Expected volatility		122.8	%		116.8	%		108.38-119.02	%		123.0	%
Expected life (in years)		5			5			5			5

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

Schedule of Stock Option Activity

			Weighted Average		Weighted Average
			Exercise		Remaining		Aggregate
			Price		Contractual		Intrinsic
	SARs		($)		Life (Yrs.)		Value ($)		Options		Weighted Average Exercise Price ($)		Weighted Average Remaining Contractual Life (Yrs.)		Aggregate Intrinsic Value ($)
														-
SARs outstanding at December 31, 2020		127,679		2.61		4.52		97,919		127,679		2.61		4.52		97,919
Granted		242,945		3.43		4.86		-		242,945		3.43		4.61		-
Exercised		-		-		-		-		-		-		-		-
Forfeited or cancelled		-		-		-		-		-		-		-		-
SARs outstanding September 30, 2021		370,624		3.15		4.49		51,955
SARs expected to vest in the future as of September 30, 2021		250,975		3.19		4.52		29,687
SARs exercisable at September 30, 2021		119,649		3.08		4.42		22,268
SARs vested, exercisable, and options expected to vest at September 30, 2021		370,624		3.15		4.49		51,955
SARs outstanding at December 31, 2021										370,624		3.15		4.24		-
Granted										814,862		1.81		4.73		-
Exercised										-		-		-		-
Forfeited or cancelled										-		-		-		-
SARs outstanding September 30, 2022										1,185,486		2.23		4.34		-
SARs expected to vest in the future as of September 30, 2022										897,970		2.05		4.50		-
SARs exercisable at September 30, 2022										287,516		2.80		3.84		-
SARs vested, exercisable, and SARs expected to vest at September 30, 2022										1,185,486		2.23		4.34		-

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the ~~quoted~~market price of our common stock for those awards that have an exercise price ~~currently~~below the market price of our common stock. At September 30, 2022, no SAR had an exercise price below the $~~3.02~~0.815 closing price of our common stock as reported on ~~September 30, 2021. None of the 2021 SARs grants have an exercise price currently below $3.02~~The Nasdaq Capital Market.

At September 30, ~~2021,~~2022, there was $~~614,947~~1,128,615 of unrecognized ~~share-based~~stock-based compensation expense related to unvested SARs with a weighted average remaining recognition period of ~~2.87~~2.38 years.

Warrants

Warrant activity for the nine months ended September 30, ~~2021~~2022 and ~~2020~~the year ended December 31, 2021 was as follows:

~~Summary~~Schedule of ~~Warrant~~Warranty Activity

Weighted Average Weighted Average
Exercise Remaining
Price Contractual
Warrants ($) Life (Yrs.)
Warrants outstanding at December 31, 2019 363,727 25.60 3.12
Granted 1,481,995 3.22 4.89
Exercised - - -
Forfeited or cancelled - - -
Warrants outstanding at September 30, 2020 1,845,722 7.64 4.39

Warrants outstanding at December 31, 2020 1,881,429 7.57 4.16
Granted 2,602,143 4.36 1.89
Exercised (495,641 ) 2.59 -
Forfeited or cancelled - - -
Warrants outstanding at September 30, 2021 3,987,931 6.10 2.36

~~In connection with its March 2021 private placement, the Company issued warrants to purchase~~ ~~2,190,000~~ ~~shares of its common stock at an exercise price of $4.32~~ ~~per share. Each Warrant became exercisable on~~ ~~May 24, 2021, the date the Company obtained stockholder approval of an increase in the authorized shares of the Company’s Common Stock and will expire~~ ~~two years~~ ~~from such date. The Company also issued to designees of the Placement Agent warrants to purchase up to~~ ~~175,200~~ ~~shares of Common Stock (the “Placement Agent Warrants”) constituting~~ 8% of the aggregate number of shares of Common Stock sold in the Registered Offering. The Placement Agent Warrants have substantially the same terms as the Warrants, except that the Placement Agent Warrants have an exercise price equal to ~~125% of the offering price per share (or $5.55625~~ ~~per share). Upon any exercise of the Warrants for cash, we have also agreed to pay the Placement Agent warrants to purchase~~ ~~8.0% of the number of shares of our Common Stock issued upon the cash exercise of the Warrants.~~

~~In connection with its January 2021 public offering, the Company issued to the Underwriter or its designee warrants to purchase~~ ~~136,943~~ ~~of shares of common stock. Such warrants have a term of~~ ~~five years~~ ~~from the commencement of sales in the Offering and an exercise price of $3.75~~ ~~per share.~~

On January 8, 2021, the Company obtained a waiver (“Waiver”) from certain investors (“Investors”) with respect to certain anti-dilution adjustment provisions of a January 2020 warrant and an April 2020 warrant issued to the Investors. ~~As consideration for the Waiver, the Company issued an additional warrant (“Warrant”) to the Investors to purchase an aggregate of~~ ~~100,000~~ ~~shares of common stock, each exercisable after six months for a five-year period with an exercise price equal to 115% of the closing price of the Company’s stock on the date of the waiver.~~

	Warrants			Weighted Average Exercise Price ($)		Weighted Average Remaining Contractual Life (Yrs.)
Warrants outstanding at December 31, 2020		1,881,429			7.57		4.16
Granted		2,602,143			4.36		1.63
Exercised		(495,641	)		2.59		-
Forfeited or cancelled		-			-		-
Warrants outstanding at December 31, 2021		3,987,931			6.10		2.10
Granted		-			-		-
Exercised		-			-		-
Forfeited or cancelled		(162,150	)		40.00		-
Warrants outstanding at September 30, 2022		3,825,781			4.66		2.10

NOTE 6 - Subsequent Events

On October 14, 2022, the Company received notice from The Nasdaq Stock Market (“Nasdaq”) that the closing bid price for our common stock had been below $1.00 per share for 30 consecutive business days, and that the Company therefore is not in compliance with the minimum bid price requirement for continued inclusion on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2). The notice indicates that the Company has 180 calendar days, or until April 12, 2023, to regain compliance with this requirement. The Company ~~performed~~may also be eligible for an ~~evaluation of subsequent events through the date of filing of these condensed financial statements~~additional 180 calendar days to regain compliance.

The Company believes that it will regain compliance with the ~~SEC. There were no material subsequent events which affected, or could affect, the amounts or disclosures in the condensed financial statements.~~$1.00 minimum bid price requirement.

1715

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward-looking statements

This Quarterly Report ~~including any documents which may be incorporated by reference into this Report,~~ contains “Forward-Looking Statements.” All statements other than statements of historical fact are “Forward-Looking Statements” ~~for purposes of these provisions,~~ 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, ~~or the impact of COVID-19 on our business,~~ 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 ~~document~~Quarterly Report are made as of the date hereof and are based on information available to us as of such date. We assume no obligation to update any Forward-Looking Statement. In some cases, Forward-Looking Statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “potential,” or “continue,” or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the Forward-Looking Statements contained herein are reasonable, there can be no assurance that such expectations or any of the Forward-Looking Statements will prove to be correct, and actual results could differ materially from those projected or assumed in the Forward-Looking Statements. Future financial condition and results of operations, as well as any Forward-Looking Statements are subject to inherent risks and uncertainties, including ~~any other~~ 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, ~~2020~~2021 and elsewhere in this ~~report.~~Quarterly Report.

Corporation Information

We were incorporated as Messidor Limited in Nevada on December 23, 1985 and changed our name to Framewaves Inc. in 2001. On September 27, 2010, we changed our name ~~from Framewaves Inc.~~ to Sigma Labs, Inc. We commenced our current business operations in 2010. On May 17, 2022, we began doing business as Sigma Additive Solutions, and on August 9, 2022 changed our name to Sigma Additive Solutions, Inc.

Our principal executive offices are located at 3900 Paseo del Sol, Santa Fe, New Mexico 87507, and our telephone number is (505) 438-2576. Our website address is ~~www.sigmalabsinc.com~~www.sigmaadditive.com. The Company’s annual reports, quarterly reports, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”), and other information related to the Company, are available, free of charge, on ~~that website as soon as we electronically file those documents with, or otherwise furnish them to, the SEC.~~our website. The Company’s website and the information contained therein, or connected thereto, are not and are not intended to be incorporated into this Quarterly ~~Report on Form 10-Q.~~Report.

Critical Accounting Policies and Estimates

The 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 ~~amounts~~assets, liabilities, sales and expenses in the accompanying ~~consolidated financial statements and related notes. These estimates and assumptions have a significant impact on our consolidated~~ financial statements. ~~Actual results could differ materially from those estimates.~~ 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. ~~Our significant~~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 ~~the~~ Financial Statements included in this Quarterly ~~Report on Form 10-Q.~~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.

~~Results~~The critical accounting policies and estimates addressed below reflect our most significant judgements and estimates used in the preparation of ~~Operations~~our financial statements

Revenue Recognition – The Company’s revenue is derived primarily from sales of our software and related hardware suite under perpetual licenses and from providing engineering services under contracts. The Company recognizes revenue in accordance with ASC Topic No. 606. In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that superseded nearly all existing revenue recognition guidance under prior GAAP and replaced it with a principles-based approach for determining revenue recognition. The core principle of the standard is the recognition of revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In general, we determine revenue recognition by: (1) identifying the contract, or contracts, with our customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to performance obligations in the contract; and (5) recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.

In January 2022, the Company began offering a subscription option to its customers, pursuant to which it leases its PrintRite3D platform for terms between 12 and 36 months and provide technical support and maintenance for the term of the arrangement, as well as installation and training. The Company has determined these are leases because they relate to discrete pieces of equipment to which customers have the right to substantially all the economic benefit and exclusive right to use during the term of the arrangement. These leases are classified as operating leases and the Company retains title to the underlying equipment.

The 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 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.

There are two non-lease components in the arrangement that consist of technical support and maintenance, and installation and training. The Company has elected the single component practical expedient to combine the technical support and maintenance with the lease as they have the same pattern of transfer. The installation and training 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. 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.

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

Accounts Receivable and Allowance for Doubtful Accounts - Trade accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts. We determine the allowance for doubtful accounts by identifying potential troubled accounts and by using historical experience and future expectations applied to an aging of accounts. Trade accounts receivable are written off when deemed uncollectible. Recoveries of trade accounts receivable previously written off are recorded as income when received.

Inventory Valuation - Inventories consist of raw materials used in the production of customized parts, work-in-process and finished goods components which will be sold to customers. Inventories are valued at the lower of cost or net realizable value, using the first-in, first-out (FIFO) method. Charges for obsolete inventory are based on identification of specific items resulting from regular, on ongoing reviews of our inventory.

Long-Lived and Intangible Assets – Long-lived assets and certain identifiable definite life intangibles to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company continuously evaluates the recoverability of its long-lived assets based on estimated future cash flows and the estimated liquidation value of such long-lived assets and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the long-lived assets. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows or internal or external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value. Utility patents are amortized over a 17-year period. 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.

Equity instruments issued to non-employees are recorded on the basis of the grant date fair value of the instruments. In general, the measurement 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. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant.

The 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.

Business Overview

~~Three Months Ended September 30, 2021 and September 30, 2020~~

~~We generate~~Historically, we have generated revenues through sales, and more recently, subscription-based licensing of our PrintRite3D® ~~hardware and software edge computing platform~~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 workflow.
	●	Building strategic partnerships, expanding our partner ecosystem, and best ensuring success of existing customers as they move into production.
	●	Offering products that are easier to use and less expensive, both for initial purchases and as expansion opportunities.
	●	Attracting a strategic corporate investment partner with clear product, customer, and financial synergies.

A 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.

In order to expand the number of OEMs distributing our technology, we launched a three-tiered OEM program directed to: (1) new OEMs without their own quality assurance or monitoring solution; (2) established OEMs with a quality monitoring offering, but who have customers with multiple printers from multiple OEMs and want a single 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. The 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.

The 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® ~~technologies, and~~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 ~~AM metal~~additive manufacturing prototyping to ~~production.~~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 to Sigma. 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.

Over the past ten 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.

We 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. Sigma 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 vision.

Results of Operations

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

During the three months ended September 30, ~~2021,~~2022, we recognized revenue of ~~$700,237,~~$188,245, as compared to ~~$248,526~~$700,237 in ~~revenue recognized during~~ the same period in ~~2020, an increase~~2021, a decrease of ~~$451,711.~~$511,992, or 72.7%. The ~~increase is~~decrease was primarily due to ~~increased~~lower PrintRite3D® unit sales ~~including~~of $511,870, the ~~Company’s first multi-unit sale, which was~~shift to subscription-based sales, and a ~~U.S. Department~~decrease in contract additive manufacturing revenue of ~~Energy contractor, as well as a single unit sale to a U.S. National Laboratory. Third quarter 2021 revenues were~~$11,190, partially offset by ~~a return from a first~~an increase in annual maintenance contract renewals in the third quarter ~~sale~~ of ~~$72,000.~~2022 of $11,068, as compared to the third quarter of 2021.

Our cost of revenue for the three months ended September 30, ~~2021 and 2020~~2022 was $164,766 and $97,785, respectively, an increase of $66,981. The increase is primarily attributable to additional PrintRite3D unit sales, partially offset by a decrease in certain material costs, and lower costs associated with the Company’s Rapid Test and Evaluation (“RTE”) program.

~~Our gross profit for the three months ended September 30, 2021 was $535,471, or 76.5% of revenues,~~$79,713, as compared to ~~$150,741, or 60.7% of revenues~~$164,766 for the same period in ~~2020.~~2021, a decrease of $85,053, or 51.6%. The decrease was primarily attributable to lower unit sales in the quarter.

~~Sigma’s~~Our total operating expenses for the three months ended September 30, ~~2021~~2022 were ~~$3,026,888~~$2,392,596, as compared to ~~$1,362,513~~$3,026,888 for the same period in ~~2020,~~2021, an ~~increase~~decrease of ~~$1,664,375.~~$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.

Salary and benefits costs were ~~$1,222,760~~$1,227,805 for the three months ended September 30, ~~2021,~~2022, as compared to ~~$657,889~~$1,222,760 for the same period in ~~2020,~~2021, an increase of ~~$564,871~~$5,045, or ~~86%~~0.4%. ~~Employee~~The increase was comprised of: (a) $100,125 of salary increases ~~together with 13 additional~~for existing employees ~~contributed $289,356, while associated~~and two new hires; (b) an increase in severance costs of $88,379; and (d) increased taxes and benefits ~~contributed $75,511, and increased~~of $18,737. Offsetting these increases was a decrease in SAR expense ~~associated with~~of $196,766 resulting from the ~~stock appreciation rights granted to executive management in August 2021 contributed $200,004~~September 30, 2022 revaluation due to the ~~increase.~~decrease in our stock price, and a decrease in employee commissions and bonuses of $5,429.

Stock-based compensation was ~~$659,512~~$275,418 for the three months ended September 30, ~~2021,~~2022, as compared to ~~$58,219~~$659,512 for the same period in ~~2020,~~2021, a ~~$601,293, increase.~~decrease of $384,094, or 58.2%. This ~~increase is partially due~~decrease was primarily a result of the expense related to ~~a timing difference as stock~~ options ~~were~~ awarded to new employees and annual option grants awarded to other employees in ~~the second quarter of 2020 versus~~ the third quarter of 2021, as well as an overall increase in stock options granted to employees, including our thirteen new employees in August 2021, and fully vested stock options granted to the Company’s newly hired Senior Vice President.2021.

~~Research~~We incurred operations and research and development ~~expenditures~~costs of ~~$131,772 were incurred~~$152,245 during the three months ended September 30, ~~2021~~2022, as compared to ~~$79,673~~$131,772 in the same period of ~~2020, a $52,099~~2021, an increase of $20,473, or ~~65% increase.~~15.5%. The increase iswas primarily due to an increase in research and development expenses of $27,430, partially offset by a decrease in operations costs of $6,614. The increase in research and development expenses was attributable to ~~$27,500~~an increase in ~~CT scans~~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 ~~new development work, $5,019~~a simulation project. The decrease in operations costs related to ~~optics redesign,~~charges in the third quarter of 2021 for inventory obsolescence and ~~$19,580 in purchase~~purchases of ~~lab supplies and part~~parts and materials.

~~Investor,~~We incurred investor, public relations, and marketing ~~expenses~~costs of ~~$119,622 were incurred~~$46,832 during the three months ended September 30, ~~2021,~~2022, as compared to ~~$66,794 incurred~~$119,622 during the same period in ~~2020.~~2021. The ~~increase~~decrease of ~~$52,828~~$72,790, or ~~79% is~~60.9%, was primarily due to ~~an increase~~a decrease in tradeshow expenses of ~~$38,699,~~$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 ~~the reclassification of proxy management expenses from Investor Relations to Organization Costs of $26,135~~a decrease in ~~2020, partially offset by decreased advertising~~investor relations consulting costs of ~~$8,252 in 2021.~~$33,207 due to decreased consulting fees and revaluation of outstanding SARs held by consultants.

~~Organization~~We incurred organization costs of ~~$342,112 were incurred~~$140,522 during the three months ended September 30, ~~2021,~~2022, as compared to ~~$173,041~~$342,112 during the same period in 2021. The 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 ~~2020. The~~2021, partially offset by an increase ~~of $169,071 or 98% is primarily~~in directors cash compensation. Offsetting this decrease was an increase due to ~~additional $6,465~~a timing difference of $33,909 resulting from expense recognized in ~~Shareholder Services, $11,450~~the second quarter of 2021 as our annual stockholders meeting was held earlier in ~~Organization Costs, and $151,156~~2021 than in ~~Stock Options expense from grants made to non-employee directors in August 2021.~~2022.

Legal &and professional fees incurred in the three months ended September 30, ~~2021~~2022 were ~~$261,075~~$252,886, as compared to ~~$133,273~~$261,075 incurred during the same period in ~~2020. The increase~~2021, a decrease of ~~$127,802 is~~$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 ~~attributed~~due to increased legal fees of $20,415, increased accounting fees of $7,244 related to certain regulatory filings, increased recruiting fees of $56,805 related to new hires, increased consulting fees of $51,966,stock option grant and ~~increased information technology expense of $1,517, partially offset by a $10,145~~the reclassification of ~~other professional services~~a consulting expense to research and ~~development.~~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.

Office expenses ~~incurred during~~for the three months ended September 30, ~~2021~~2022 were ~~$172,238~~$183,608 as compared to ~~$84,357 incurred during~~$172,238 for the same period in ~~2020,~~2021, an increase of ~~$87,881,~~$11,370, or ~~104%~~6.6%. The increase isresulted primarily ~~due~~from: (a) an increase in travel and entertainment expenses of $17,825 as compared to ~~increased travel costs of $54,864~~the same period in 2021 as a result of ~~easing of COVID~~COVID-19 related travel ~~restrictions,~~restrictions; (b) an increase in payroll service fees of ~~$12,659 in dues and subscriptions, primarily~~$4,486 related to annual price increases; and (c) dues & subscriptions of $6,514 for new ~~software applications including~~ customer relationship management, product lifecycle management, and ~~compliance, an increase of $9,312~~project management software. Partially offsetting these increases was: (a) a decrease in postage and shipping ~~increased~~of $8,093; (b) a decrease in office supplies of $2,645; and (c) and a decrease in training and education expense of ~~$6,082 and an increase in supplies and miscellaneous expenses of $4,964.~~$5,368.

Depreciation and amortization expense for the three months ended September 30, ~~2021 was $27,689,~~2022 totaled $26,857, as compared to ~~$50,167~~$27,689 for the same period in ~~2020, a decrease~~2021, an increase of ~~$22,478,~~$832, or ~~45%~~7.2%. The ~~primary reason for~~increase was primarily the ~~decrease is an adjustment in 2020 for the reclassification~~result of ~~a protype~~depreciation expense associated with PrintRite3D ~~system from finished goods to fixed assets.~~units sold under our subscription-based pricing program.

Other operating expenses were ~~$90,108~~$86,783 for the three months ended September 30, ~~2021,~~2022, as compared to ~~$59,100 incurred during~~$90,108 for the same period in ~~2020.~~2021. The ~~increase is~~$3,326 decrease was primarily due to ~~higher insurance premiums~~credit card transaction fees in September 2021, ~~and~~as compared to none in the third quarter of 2022, partially offset by an increase in ~~bank fees from a credit card transaction.~~insurance premiums.

In the three months ended September 30, ~~2021, our~~2022, we realized net other expenses of $7,884, as compared to net other income ~~& expense was net income~~ of $439 ~~compared to net expense of $6,241~~ in ~~2020.~~2021. The increase isin net other expenses of $8,323, was primarily due to a foreign currency exchange loss in 2022 due to the ~~result~~strengthening of the ~~interest paid to employees on salary reductions in 2020.~~US dollar against the Euro.

~~Sigma’s~~Our net loss applicable to common stockholders for the three months ended September 30, ~~2021 totaled $2,505,198~~2022 was $2,306,528, as compared to ~~$1,955,357~~$2,505,198 for the same period of ~~2020,~~2021, a ~~$549,841 decrease.~~decrease of $198,670, or 7.9%. The ~~third quarter net operating loss contributed $1,279,646~~decrease was primarily due to the decrease in the loss ~~increase,~~from operations of $206,993, partially ~~offsetting these losses was~~offset by an increase in net other ~~income~~expense of ~~$6,680, and preferred dividends of $723,124.~~$8,323.

Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~September 30, 2021

During the nine months ended September 30, ~~2021,~~2022, we recognized revenue of ~~$1,302,525~~$476,749, as compared to ~~$637,944 during~~$1,302,525 in the same period in 2021, a decrease of ~~2020.~~$825,776, or 63.4%. The ~~primary contributors~~decrease was primarily due to ~~the $664,581 increase were an increase in PrintRite3D® unit sales contributing $799,221, partially offset by~~ a decrease in ~~revenue~~sales of our PrintRite3D® units of $919,355, decreased revenues from our legacy Rapid Test and Evaluation ~~Program (RTE)~~(“RTE”) program of ~~$82,064~~$4,100, and ~~a first quarter sale return for $72,000. Third quarter 2021~~decreased contract additive manufacturing revenue of $11,189 in 2022. Partially offsetting these decreases was an increase in revenues ~~included the Company’s first multi-unit sale, which was to a U.S. Department~~ of ~~Energy contractor,~~$17,006 from our subscription-based pricing program, on-site installation and ~~a single unit sale to a U.S. National Laboratory.~~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.

Our cost of revenue for the nine months ended September 30, ~~2021~~2022 was $409,493 compared to $400,172 during the same period in 2020. The increase of $9,321 is primarily due to the cost associated with our increase in PrintRite3D® unit sales, partially offset by a decrease in certain material parts, as well as a decrease in the ongoing support of legacy RTE programs, including equipment upgrades and additional labor costs.

~~Our gross profit for the nine months ended September 30, 2021 was $893,032, or 68.6% of revenues,~~$312,879, as compared to ~~$237,772, or 37.3% of revenues~~$409,493 for the same period in ~~2020.~~2021, a decrease of $96,614, or 23.6%. The decrease was primarily attributable to fewer unit sales in 2022 partially offset by increased travel costs incurred related to installations from 2021 sales.

~~Sigma’s total~~Our operating expenses for the nine months ended September 30, ~~2021~~2022 were ~~$6,976,944~~$6,968,079, as compared to ~~$4,448,708~~$6,976,944 for the same period in ~~2020,~~2021, an decrease of $8,865. The decrease was primarily attributable to a ~~$2,528,236, or 56.8% increase.~~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.

~~Payroll~~Salary and benefits costs were $3,704,633 for the nine months ended September 30, ~~2021 were $3,055,279~~2022, as compared to ~~$1,915,381~~$3,055,279 for the same period in ~~2020,~~2021, an increase of ~~$1,139,898.~~$649,354, or 21.3%. The increase ~~is primarily~~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 ~~increased salaries~~the termination of ~~$741,303 reflecting raises granted in January~~employment of six employees; and ~~13 additional employees in 2021 as compared to 2020, an associated increase in~~(c) increased taxes and benefits of ~~$137,976, and $260,619 of increased expense related to stock appreciation rights granted to executive management in August, 2021.~~

Stock-based compensation for the nine months ended September 30, 2021 was $893,431 compared to $483,208 for the same period in 2020, a $410,223 increase, primarily due annual option grants made to employees in August of 2021, including 13 additional employees as compared to 2020, and options granted to the Company’s newly hired Senior Vice President.

During the nine months ended September 30, 2021, Sigma incurred research and development expenditures of $608,812 compared to $245,008 in the same period of 2020. The $363,804 increase is a result of development costs incurred in connection with PrintRite3D version 7.0 of $89,800, increased purchase of lab supplies of $115,453, CT scans conducted for new development work and a simulation project totaling $101,138, increased write-offs of obsolete inventory and metal powder of $53,082, and $26,351 related to an optics redesign.$206,257. Partially offsetting these increases was a decrease in ~~consulting costs~~commissions of ~~$22,020~~$38,682 due to ~~the full time hire~~fewer unit sales and a decrease in SARs of $251,965 due to revaluations resulting from a ~~consultant~~decrease in ~~2021.~~our stock price.

~~Investor, public relations and marketing expenses incurred in~~Stock-based compensation was $613,833 for the nine months ended September 30, ~~2021 were $342,725~~2022, as compared to ~~$353,802 during~~$893,431 for the same period in ~~2020. The $11,077~~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 ~~nine-month comparative expenditures results primarily from decrease in marketing and advertising expenses~~third quarter of $72,490 as a result of discontinuing Network Newswire services and the use of a public relations firm. Partially offsetting these decreases were an increase in Tradeshow expense of $38,698, and the reclassification of proxy management expenses of $26,135 to organization costs in 2020.2021.

~~Organization~~We incurred operations and research and development costs ~~for~~of $442,548 during the nine months ended ~~for~~ September 30, ~~2021 were $578,256~~2022, as compared to ~~$328,716 during~~$608,812 in the same period ~~in 2020, an increase~~ of ~~$249,540.~~2021, a decrease of $166,266, or 27.3%. The ~~increase is~~decrease was primarily due to an increase of $273,429 related to stock option grants to non-employee directors in January and July of 2021 verses none in the first half of 2020. Non-employee directors received their option grants at the end of July, 2020. Partially offsetting this increase was a decrease in ~~non-employee director cash compensation~~operations costs of ~~$20,931,~~$133,827 and ~~lower transfer agent expenses~~a decrease in research and development costs of ~~$2,958 resulting from fewer share transactions~~$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; (c) a decrease in parts and material purchases of $77,374 in the first nine months of ~~2021.~~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 during the same period in 2021. 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.

Legal and professional fees incurred in the nine months ended September 30, ~~2021~~2022 were ~~$681,941,~~$608,830, as compared to ~~$530,660 incurred~~$681,941 during the same period in ~~2020,~~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 ~~$151,281, or 29%. Legal fees decreased by $81,822 due~~$30,530 attributable to ~~expenses incurred during~~ the ~~first quarter~~engagement of ~~2020~~technical consulting support in connection with our ~~January 2020 private offering, Nasdaq related matters,~~subscription-based pricing model, external human resources consulting, and ~~our February 27, 2020 reverse stock split. Also contributing to the decrease were lower accounting related expenses~~hire of ~~$9,426. Partially offsetting these decreases was~~ an increase in recruiting fees of $147,473 related to 13 new hires in 2021, increased consulting fees of $87,301 related to an external marketing consultant and corporate consulting services, and increased IT services of $7,755.inventory management consultant.

~~During~~Office expenses for the nine months ended September 30, ~~2021, Sigma’s office expenses~~2022 were ~~$472,335~~$692,640, as compared to ~~$310,947 in~~$472,335 for the same period in 2021, an increase of ~~2020.~~$220,305, or 46.6%. The ~~$161,388~~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; (c) an increase in ~~these expenditures primarily resulted from $30,693 in postage and shipping, $27,500 in new computer hardware and software~~payroll service fees of $12,867 related to new ~~hires, payroll servicing fees of $10,685 due to new hires and a first-year fee discount that ended in 2020, increased~~hires; (d) dues ~~and~~& subscriptions of ~~$35,786 to~~$21,715 for new ~~software applications, including~~ customer relationship management, product lifecycle management, and ~~compliance, increased travel~~project management software; and (e) an increase in utilities expenses of ~~$46,438 and increased training and education expense of $12,146, partially offset by~~$1,755. Partially offsetting these increases was a decrease in ~~rent~~postage and ~~utilities~~shipping of $28,783 and a decrease in office supply expense of ~~$1,861.~~$9,262.

Depreciation and ~~Amortization~~amortization expense for the nine months ended September 30, ~~2021 was $76,502,~~2022 totaled $88,302 as compared to ~~$86,150~~$76,502 for the same period in ~~2020.~~2021, an increase of $11,800, or 15.4%. The ~~primary reason for the decrease is~~increase was primarily due to ~~a nine month catch up adjustment in 2020 from the reclassification of a prototype~~depreciation expense on PrintRite3D ~~system from finished goods inventory to fixed assets.~~units leased under our subscription-based program.

Other operating expenses were $263,747 for the nine months ended September 30, ~~2021 were $267,663,~~2022, as compared to ~~$194,836 during~~$267,663 for the same period in ~~2020.~~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 ~~$72,827 is primarily due to increased insurance premiums.~~$11,765.

In the nine months ended September 30, ~~2021, our~~2022, we realized net other income ~~& expense was net income~~ of ~~$1,096,727,~~$57,336, as compared to net other income of ~~$499,700 during the same period~~$1,096,727 in ~~2020.~~2021. The ~~increase is~~decrease of $1,039,391, or 94.8%, was primarily ~~a result of~~due to a gain of $1,092,441 onfrom the 2021 revaluation of the derivative liability ~~incurred in connection with the issuance~~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 ~~purchase common stock~~the strengthening of the US dollar against the Euro, and a decrease in ~~our March 2021 offering, and $9,095 from a new interest-bearing sweep bank account, as compared to 2020~~interest income of $7,028. Partially offsetting these decreases was an increase of $76,628 in New Mexico state ~~job incentive credits~~incentives in the first quarter of ~~$151,657 and $361,700 from the forgiveness of our PPP loan.~~2022.

~~Sigma’s~~Our net loss applicable to common ~~shareholders~~stockholders for the nine months ended September 30, ~~2021 totaled $5,076,532~~2022 was $6,789,533, as compared to ~~$5,455,707~~$5,076,532 for the same period ~~in 2020,~~of 2021, a ~~$379,175 decrease. While the net operating~~$1,713,001 increase. The increase was due to an increased loss ~~increased by $1,872,976, the increase~~from operations of ~~$597,027~~$720,297 and a decrease in other income ~~together with~~of $1,039,391, partially offset by a decrease in preferred ~~dividend expense~~dividends of ~~$1,655,124 accounted for the overall decrease.~~

We financed our operations during the three and nine months ended September 30, 2021 and 2020 primarily from revenue generated from PrintRite3D® system sales and engineering consulting services we provided to third parties during these periods and through sales of our common and preferred stock. We expect that our revenue will increase in future periods as we seek to further commercialize and expand our market presence for our PrintRite3D®-related technologies.$46,687.

Liquidity and Capital Resources

As of September 30, ~~2021,~~2022, we had ~~$13,064,394~~$4,800,680 in cash and working capital of ~~$13,977,104,~~$5,492,725, as compared with ~~$3,700,814~~$11,447,047 in cash and working capital of ~~$4,332,053~~$11,702,358 as of December 31, ~~2020.~~2021.

Our major sources of funding have been proceeds from public and private offerings of our equity securities ~~(both common stock and preferred stock),~~ and from warrant exercises.

~~In January~~On March 26, 2021, the Company closed a public offering of ~~its securities in which it issued 1,711,783~~2,190,000 shares of common stock at ~~$3.00 per share, resulting in net proceeds~~a price of ~~approximately $4,532,445 after deducting underwriting commissions and other offering expenses payable by the Company.~~

~~In March 2021, the Company closed a public offering of its securities in which it issued 2,190,000 shares of common stock at~~ $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. ~~Concurrent with the public offering,~~In a concurrent private placement, the Company issued ~~warrants~~ to ~~investors~~the purchasers warrants to purchase an aggregate of 2,190,000 shares of common stock ~~to holders in a private placement. The warrants entitle the holders to purchase one share of our common stock~~ at an exercise price ~~equal to~~of $4.32 per ~~share commencing~~share. Each warrant became exercisable on May 24, 2021, and will expire two years ~~from such~~after the initial exercise date. ~~If all~~

On January 12, 2021, the Company closed a public offering of ~~the warrants are exercised~~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 ~~holders thereof, the potential gross proceeds to the Company will be $9,460,800.~~Company.

During the first quarter of 2021, the Company ~~issued 454,404 shares~~received cash proceeds of ~~common stock pursuant to the exercise of warrants, resulting in net proceeds to the Company of $1,136,010.~~$1,136,010 from warrant exercises.

We 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 ~~2022. We have based this estimate~~at least the first quarter of 2023. 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 ~~assumptions that may prove~~terms acceptable to ~~be wrong, such as our current expectations of revenue generation and burn rate, and we could exhaust our capital resources sooner than we expect.~~the Company.

Because 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:

	●	Revenue from the sales of our existing and future products;
	●	Costs associated with the expansion of our business and operations;
	●	The cost of expending, maintaining, and enforcing our intellectual property portfolio, including filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights; and
	●	The effect of competing technological and market ~~developments;~~developments.
	●	~~The revenue from the sales of our existing and future products;~~
	●	~~The cost of operating as a public company; and~~
	●	~~The increasing cost of engineering talent.~~

During the remainder of ~~2021 and throughout~~ 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. We expect that continued enhancements of our IPQA®-enabled PrintRite3D® technology, including the May 2021 release of version 7.0, will enable us to further commercialize this technology into the AM metal market in 2021. 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).

AsThe ongoing impact of the ~~third quarter~~COVID-19 epidemic, in particular the shortage of ~~2021 progressed,~~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 ~~effect of COVID-19 on~~financial markets, which may reduce our ability to generate revenue, seemed to lessen; however, the Company continued to be adversely affected by the COVID-19 global economic slowdown, which has resulted in lower revenue than anticipated. Two key industries with which we do business, aerospace and oil and gas, have experienced a reduction in the global demand for their products due to the pandemic. As a result of the decrease in the demand for our products from customers and potential customers in these and other industries, the Company expects that revenue from these sectors will remain under pressure. It is impossible to knowaccess capital on favorable terms or at this time how long companies will limit capital expenditures and if the industries that have been most negatively affected will resume normal purchasing. Additionally, access to customer and prospect installations due to country specific regulations regarding COVID-19 quarantining has consumed resources for longer periods of time than expected, resulting in overall lower productivity and increased expenses.all. However, due to the need to have more flexibility in supply chains with the ability to respond quickly to shortages in parts or products, we believe that the crisis will eventually accelerate the adoption of 3D printing, which ~~would be~~may benefit the Company.

The effects of a ~~positive trend~~US or global recession, while difficult to predict, could result in some customers delaying orders or not proceeding with planned orders for ~~the Company.~~

our PrintRite3D systems.

Net Cash Used in Operating Activities

Net cash used in operating activities during the nine months ended September 30, ~~2021 increased~~2022 was $6,386,415 as compared to $4,786,590 ~~from $3,676,595~~ during the same period in ~~2020, a $1,109,995 increase. Primary drivers~~2021, an increase of ~~the~~$1,599,825, or 33%. Contributing to this increase ~~were increased net loss of $1,275,948, the gain on the derivative liability of $1,092,441, and increased inventory of $231,148. Partially offsetting these increases were~~was an increase in net loss, adjusted for non-cash ~~securities-based compensation~~expenses, of ~~$698,618, a decrease in accounts receivable of $94,349,~~$1,373,377, and a decrease in accounts payable and accrued expenses of ~~$721,705.~~$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. Partially offsetting these increases was a decrease in accounts receivable of $379,600.

Net Cash ~~Used/Provided by~~Used in Investing Activities

Net cash used byin investing activities during the nine months ended September 30, ~~2021~~2022 was ~~$254,772,~~$259,952, which compares to ~~$249,452~~$254,772 of cash used byin investing activities during the same period of ~~2020,~~2021, an increase of ~~$5,320. This is primarily attributable to increased equipment purchases~~$5,180, or 2%. The increase resulted from an increase in patent costs of ~~$28,557,~~$37,963, partially offset by ~~lower patent costs~~a decrease in purchases of ~~$23,737~~property, plant and equipment of $32,783 during the ~~period.~~first nine months of 2022.

Net Cash Provided by Financing Activities

The 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 ~~increased to~~totaled $14,404,942 ~~from $8,349,676 during the same period in 2020~~ due to the receipt of ~~$14,869,899~~the net proceeds of ~~proceeds less $1,600,967 of offering costs, in connection with~~$13,268,932 from our January ~~2021~~ and March 2021 ~~private~~public and ~~public~~private offerings and exercise of Preferred Warrants. Cash provided by financing activities during the same period in 2020 resulted from the receipt of $3,600,000 in proceeds less $820,224 of offering costs in connection with our January 2020 and April 2020 offerings, and $5,619,900 in proceeds from the exercise of outstanding warrants ~~partially offset by the payment of the remaining outstanding principal balance on a convertible note payable~~which provided an additional $1,136,010 in ~~the amount of $50,000.~~cash proceeds.

Our ability to continue to fund our ~~liquidity and~~ working capital needs will be dependent upon the success of our efforts to generate revenues from existing and future ~~PrintRite3D®-proof-of-concept~~PrintRite3D contracts, follow-on contracts resulting from successful ~~proof-of-concept~~ engagements, possible strategic partnerships, and by obtaining additional capital from the ~~issuance~~sale of securities or by borrowing funds from lenders to fulfill our business plans. ~~Such financing, if in~~If we issue additional equity or debt securities, stockholders may experience additional dilution or the ~~form~~new equity securities may have rights, preferences or privileges senior to those of ~~equity, may be highly dilutive to~~existing holders of 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 operations.common stock. There is no assurance ~~as to the amount and availability of any required future financing or the terms thereof.~~that we will be successful in obtaining additional funding. The Company is unable to predict the effect ~~that~~a global recession or geopolitical events, including the ~~ongoing COVID-19 pandemic~~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, or scale back or eliminate all or a portion of our commercialization efforts and operations.

We have no lines of credit ~~lines as of October 21, 2021, nor have we ever had a credit line since our inception.~~or other financing arrangements.

Inflation, ~~and~~ changing prices and rising interest rates have had no material effect on our continuing operations over our two most recent fiscal years. However, continued unfavorable trends may affect the prices we pay for materials and other goods and services necessary to our business, thus increasing our use of cash.

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of disclosure controls and procedures and changes in internal controls over financial reporting.

Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), defines the term “disclosure controls and procedures” as those controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Based upon an evaluation of the effectiveness of our disclosure controls and procedures performed by our management, with the participation of our President and Chief Executive Officer, and our Principal Financial and Accounting Officer, as of the end of the period covered by this quarterly report, our management concluded that our disclosure controls and procedures are effective at a reasonable assurance level in ensuring that information required to be disclosed by us in our reports is recorded, processed, summarized and reported within the required time periods. ~~In addition, no~~No change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the ~~three~~nine months ended September 30, ~~2021~~2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Not applicable.

ITEM 1A. RISK FACTORS.

You should consider the “Risk Factors” included under Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 filed with the SEC on March 24, ~~2021.~~2022.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

~~None.~~None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

~~None.~~None

ITEM 6. EXHIBITS.

3.1	Certificate of Amendment to Amended and Restated Articles of Incorporation, as amended (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed August 12, 2022, and incorporated herein by reference).

10.1	Sigma ~~Labs,~~Additive Solutions, Inc. 2013 Equity Incentive Plan, as Amended (filed as Exhibit ~~10.1~~99.1 to the Company’s ~~Current Report~~Form S-8 Registration Statement, filed on ~~Form 8-K filed July 16, 2021~~October 19, 2022, and incorporated herein by reference).*

~~10.2~~	Sigma Labs, Inc. 2021 Employee Stock Purchase Plan (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed July 16, 2021 and incorporated herein by reference).*

~~10.3~~	Employment letter agreement, effective as of September 20, 2021, between Sigma Labs, Inc. and Jacob Brunsberg.* **

31.1	Rule 13a-14(a) Certification of Principal Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**

31.2	Rule 13a-14(a) Certification of Principal Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**

32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.***


101.INS	Inline XBRL Instance ~~Document – the instance document does not appear in the Interactive Data File because its XBRL tags are imbedded within the Inline XBRL document.~~Document.
101.SCH	Inline XBRL Schema Document.
101.CAL	Inline XBRL Calculation Linkbase Document.
101.DEF	Inline XBRL Definition Linkbase Document.
101.LAB	Inline XBRL Labels Linkbase Document.
101.PRE	Inline XBRL Presentation Linkbase Document.
104	Cover Page Interactive Data File ~~(formatted as~~(embedded within the Inline XBRL ~~and contained in Exhibit 101)~~document)

* Indicates a management contract or compensatory plan or arrangement.

** Filed herewith.

*** Furnished herewith and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SIGMA ~~LABS,~~ADDITIVE SOLUTIONS, INC.

~~October 21, 2021~~November 14, 2022	By:	/s/ ~~Mark K Ruport~~Jacob Brunsberg
		~~Mark K. Ruport~~Jacob Brunsberg
		President and Chief Executive Officer ~~(Principal~~ (Principal Executive Officer)

~~October 21, 2021~~November 14, 2022	By:	/s/ Frank Orzechowski
		Frank Orzechowski
		Chief Financial Officer and Treasurer ~~(Principal~~ (Principal Financial and Accounting Officer)

	Warrants
Fair Value on Issuance Date	$	5,708,212
Change in Fair Value		(1,092,441	)
Fair Value on May 24, 2021		4,615,771
Extinguishment of Derivative Liability		(4,615,771	)
Fair Value on September 30, 2021	$	-

Warrant Liability	Warrants Outstanding			Fair Value Per Share		Fair Value
Fair Value at initial measurement date of March 26, 2021		2,190,000		$	2.61	$	5,708,212
(Gain) on change in Fair Value of Warrant Liability		-		$	-		(1,092,441	)
Fair Value as of May 24, 2021		2,190,000		$	2.11		4,615,771
Extinguishment of Derivative Liability		(2,190,000	)	$	2.11		(4,615,771	)
Fair Value as of September 30, 2021		-		$	-		-