What changed in this filing

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Item 9A. Controls and Procedures

2021-03-24 compared with 2020-03-24 · 1220 added, 971 removed, 1157 unchanged (65% of the section changed)

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Management’s

Annual Report on Internal Control Over Financial Reporting

Report on Internal Control Over Financial Reporting

is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in

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Management’s report was not subject to attestation by our registered public accounting

firm pursuant to SEC rules that permit us to provide only management’s report in this annual report.

have been no changes in our internal controls over financial reporting during the fourth quarter of the year ended December 31,

2019 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

firm pursuant to SEC rules applicable to smaller reporting companies that permit us to provide only management’s

report in this annual report.

in Internal Control Over Financial Reporting

have been no changes in our internal control over financial reporting during the fourth quarter of the year ended December 31,

2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

OTHER INFORMATION

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Technology Officer

Rice was appointed as a director on February 15, 2017 became our Chief Executive Officer on June 21, 2018 and was appointed

as our President on October 10, 2018.

Additional information regarding Mr.

Rice is set forth below under “Board of Directors

and Corporate Governance.”

Ruport was appointed Executive Chairman on December 3, 2019.

Ruport served as Executive Chairman from December 3, 2019 until April 30, 2020 and became our President and

Chief Executive Officer on April 30, 2020.

Additional information regarding Mr.

Ruport is set forth below

under “Board of Directors and Corporate Governance.”

Ruport is set forth below under “Board

of Directors and Corporate Governance.”

Orzechowski has served as our Chief Financial Officer, Treasurer, principal accounting officer, principal financial officer,

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Prior to joining the Company, Mr.

served as the Chief Financial Officer of StormHarbour Partners LP, an independent global markets and financial advisory firm since

September 2013.

From May 2013 to August 2013, Mr.

Orzechowski served as a contract CFO for Etouches Inc., a cloud-based event

management software company, to assist with financial matters in connection with that company’s planned equity financing.

Prior to that, he served as President and Owner/Operator of Four-O Technologies Inc.

from August 2009 to December 2012, where

he successfully launched and guided operations for two Cartridge World franchise units in Connecticut.

From February 2006 to July

Orzechowski served as President and Chief Financial Officer of Nikko Americas Holding Company Inc., where he was responsible

for managing all of the support and infrastructure for that company’s U.S.

business, as well as investment manager selection

and due diligence functions for its World Series Platform.

Orzechowski began his career at Coopers & Lybrand in 1982,

received his CPA certification in 1984 and received his Bachelor of Science in Business Administration with a major in Accounting

from Georgetown University in 1982.

Orzechowski served as the Chief Financial Officer

of StormHarbour Partners LP, an independent global markets and financial advisory firm since September 2013.

From May 2013 to

August 2013, Mr.

Orzechowski served as a contract CFO for Etouches Inc., a cloud-based event management software company, to assist

with financial matters in connection with that company’s planned equity financing.

Prior to that, he served as President

and Owner/Operator of Four-O Technologies Inc.

from August 2009 to December 2012, where he successfully launched and guided operations

for two Cartridge World franchise units in Connecticut.

From February 2006 to July 2009, Mr.

Orzechowski served as President and

Chief Financial Officer of Nikko Americas Holding Company Inc., where he was responsible for managing all of the support and infrastructure

for that company’s U.S.

business, as well as investment manager selection and due diligence functions for its World Series

Orzechowski began his career at Coopers & Lybrand in 1982, received his CPA certification in 1984 and received

his Bachelor of Science in Business Administration with a major in Accounting from Georgetown University in 1982.

Beckett served as our Engineering Manager beginning on September 25, 2017, was appointed as our Vice President of Engineering

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Measurement Systems from 2004 until 2013, and a Partner and COO of Laszeray Technology, LLC from 2013 until 2014.

a Bachelor’s Degree in Mechanical Engineering Technology from the University of Akron as well as an MBA from Kent State

a bachelor’s degree in Mechanical Engineering Technology from the University of Akron as well as an MBA from Kent

State University.

OF DIRECTORS AND CORPORATE GOVERNANCE

following table sets forth the names, ages as of March 24, 2021, and certain other information regarding our directors:

and Chief Executive Officer, Director and Chairman of the Board

Chairman of the Board

of the Board and Director

and Chief Executive Officer

Battinelli(1)(2)(3)

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Rice was appointed to our Board of Directors on February 15, 2017, was appointed as Chairman of our Board on April 19, 2017,

he was appointed as our interim Chief Executive Officer on July 24, 2017, became our Chief Executive Officer on June 21, 2018

was appointed as our interim Chief Executive Officer on July 24, 2017, became our Chief Executive Officer on July 14, 2017

and was appointed as our President on October 10, 2018.

Effective April 30, 2020, Mr.

Rice resigned from his position as President

and Chief Executive Officer.

Rice remains a director on the Board of Directors and continues to serve as Chairman of the Board.

Rice has extensive experience in business operations.

Rice founded ASiQ, LLC, a firm specializing in operations management services ranging from launching successful startups and executing

business turnarounds to financings, crisis management and the repositioning of enterprises for sale at optimum market prices.

Rice founded ASiQ, LLC, a firm specializing in operations

management services ranging from launching successful startups and executing business turnarounds to financings, crisis management

and the repositioning of enterprises for sale at optimum market prices.

Rice presently serves as ASiQ’s CEO and President.

He also served as CEO of Coca-Cola Bottling Company of Santa Fe,

a client of ASiQ’s, from 2009 to 2015.

From 2010 to 2012, Mr.

Rice served as Director and Contracts Officer of Detector

Networks International.

Rice frequently lectures on breakout growth strategies, crisis management, corporate turnarounds,

venture capital, and financial structuring and strategies.

He has also served on a number of boards.

He also served as CEO of Coca-Cola Bottling Company of Santa Fe, a client of ASiQ’s, from 2009 to 2015.

From 2010 to 2012,

Rice served as Director and Contracts Officer of Detector Networks International.

Rice frequently lectures on breakout

growth strategies, crisis management, corporate turnarounds, venture capital, and financial structuring and strategies.

also served on a number of boards.

Since 2005, Mr.

served as Director of New Mexico Angels, Inc., a New Mexico based group of accredited individual angel investors.

Rice has served as Director of New Mexico Angels, Inc., a New Mexico based

group of accredited individual angel investors.

Since 2016, Mr.

Rice has served as Director of Akal Security, Inc.

He was also a Director of Detector Networks International from 2010-2012,

where he successfully negotiated the principal component of a business turnaround for the company.

Rice is an honors graduate

of Harvard College.

a Director of Detector Networks International from 2010-2012, where he successfully negotiated the principal component of a business

turnaround for the company.

Rice is an honors graduate of Harvard College.

Board of Directors believes that Mr.

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investor and shareholder values.

Salvatore Battinelli

was appointed to our Board of Directors on August 16, 2017.

Battinelli is currently the President and Chief Executive

Officer of Bello e Preciso Co., a manufacturer and wholesaler of Italian-made fashion watches and has served in those roles

since early 2017.

Battinelli was appointed to our Board of Directors on August 16, 2017.

Battinelli is currently the President and Chief

Executive Officer of Bello e Preciso Co., a manufacturer and wholesaler of Italian-made fashion watches and has served in those

roles since early 2017.

Prior to joining Bello e Preciso Co., from 2011 to 2013, Mr.

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Battinelli served as an executive officer or director

for certain of the family owned entities and successfully managed several portfolio company IPOs, as well as serving as CEO and

COO for Designhouse International, a Scandinavian furniture company operating out of Atlanta, Georgia, which was previously listed

on NASDAQ in 1983.

for certain of the family-owned entities and successfully managed several portfolio company IPOs, as well as serving as

CEO and COO for Designhouse International, a Scandinavian furniture company operating out of Atlanta, Georgia, which was previously

listed on NASDAQ in 1983.

1970 to 1974, Mr.

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Ruport was appointed as Executive Chairman and as a director on December 3, 2019.

Ruport brings more than 30 years

of public and private company experience in the software sector to his position at Sigma Labs.

Effective April 30, 2020, Mr.

became our President and Chief Executive Officer.

Ruport remains a director on the Board of Directors but no longer serves

as Executive Chairman.

Ruport brings more than 30 years of public and private company experience in the software sector to

his position at Sigma Labs.

Prior to joining Sigma Labs, Mr.

Ruport served since 2010 as the President of Step Function Consulting, LLC, a consulting firm that provides strategic consulting

services to early and mid-stage portfolio software companies.

Ruport also served from 2014 to 2017 as the Executive Chairman

of the Board of Directors of Content Analyst Company, a leading developer of advanced analytics software for searching and analyzing

unstructured text, and before that served as its Vice Chairman from 2012 to 2013.

Ruport served since 2010 as the President of Step Function Consulting,

LLC, a consulting firm that provides strategic consulting services to early and mid-stage portfolio software companies.

also served from 2014 to 2017 as the Executive Chairman of the Board of Directors of Content Analyst Company, a leading developer

of advanced analytics software for searching and analyzing unstructured text, and before that served as its Vice Chairman from

2012 to 2013.

From 2005 to 2009, Mr.

Ruport served as the

President and Chief Executive Officer of Configuresoft, Inc., a venture-backed Enterprise Systems Management company, where he

orchestrated an OEM agreement which later led to its acquisition by EMC Corp.

Ruport served as the President and Chief Executive Officer of Configuresoft, Inc., a venture-backed

Enterprise Systems Management company, where he orchestrated an OEM agreement which later led to its acquisition by EMC Corp.

Prior to Configuresoft, Mr.

Ruport served from 2004

to 2005 as the Executive Vice President of Worldwide Operations at Stellent, Inc., which was subsequently acquired by Oracle,

Inc., and from 1995 to 2005 as the President, Chief Executive Officer and Chairman of the Board of Directors of Optika, Inc.,

a venture-backed Enterprise Content Management Company that he led through its initial public offering and merger with Stellent,

Ruport served from 2004 to 2005 as the Executive Vice President of Worldwide Operations at Stellent,

Inc., which was subsequently acquired by Oracle, Inc., and from 1995 to 2005 as the President, Chief Executive Officer and Chairman

of the Board of Directors of Optika, Inc., a venture-backed Enterprise Content Management Company that he led through its initial

public offering and merger with Stellent, Inc.

From 1990 to 1994, Mr.

Ruport served as the President and Chief Executive Officer of Interleaf, Inc., a public software company.

He also held various senior executive positions from 1985 to 1989 at Informix, Inc., a relational database management system company

later acquired by IBM, and from 1985 to 1989 at Cullinet, Inc., a mainframe database management system and enterprise resource

planning company later acquired by Computer Associates, Inc.

Ruport received his Bachelor of Science degree and MBA from Bowling

Green State University.Mr.

Ruport received a Bachelor of Science in Business and an MBA from Bowling Green State University.

Ruport served as the President and Chief Executive Officer

of Interleaf, Inc., a public software company.

He also held various senior executive positions from 1985 to 1989 at Informix,

Inc., a relational database management system company later acquired by IBM, and from 1985 to 1989 at Cullinet, Inc., a mainframe

database management system and enterprise resource planning company later acquired by Computer Associates, Inc.

Ruport received

his Bachelor of Science degree and MBA from Bowling Green State University.Mr.

Ruport received a Bachelor of Science in Business

and an MBA from Bowling Green State University.

Board of Directors believes that Mr.

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He subsequently served as President for

a consumer products company with direct responsibility for marketing, retail, and fulfillment operations, until forming

Duitch Consulting Group in 2003 to serve clients in advisory, C-level, and board of director roles.

a consumer products company with direct responsibility for marketing, retail, and fulfillment operations, until forming Duitch

Consulting Group in 2003 to serve clients in advisory, C-level, and board of director roles.

Duitch is a Certified Family Business and Estate Advisor, and mediator for matters including partner/shareholder agreements and

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Board of Directors currently consists of five members.

As a result of his appointment as Chief Executive Officer, Mr.

not considered an independent director.

As a result of his appointment as Executive Chairman, Mr.

Ruport is also not considered

an independent director.

Our Board of Directors has determined that our other directors, Salvatore Battinelli, Dennis Duitch

and Kent Summers, constituting a majority of our directors, are “independent”

as that term is defined under Rule 5605(a)(2)

of the NASDAQ marketplace rules.

Pursuant to NASDAQ rules, our board must consist of a majority of independent directors.

As a result of his previous role as Chief Executive Officer, Mr.

Rice is not considered an independent director.

As a result of his April 30, 2020 appointment as Chief Executive

Ruport is also not considered an independent director.

Our Board of Directors has determined that our other

directors, Salvatore Battinelli, Dennis Duitch and Kent Summers, constituting a majority of our directors, are “independent”

as that term is defined under Rule 5605(a)(2) of the NASDAQ marketplace rules.

Pursuant to NASDAQ rules, our board must consist

of a majority of independent directors.

NASDAQ independence definition includes a series of objective tests, including that the director is not, and has not been for

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Class III directors are Dennis Duitch and Kent Summers, with terms expiring at our 2023 annual meeting of stockholders.

Board of Directors appointed Mark Ruport as Executive Chairman of the Board on December 3, 2019.

Our amended and restated bylaws

provide that the authorized number of directors may be changed by resolution of the Board of Directors.

Any additional directorships

resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible,

each class will consist of one-third of the directors.

The division of our Board of Directors into three classes with staggered

three-year terms may delay or prevent a change of our management or a change in control of our company.

amended and restated bylaws provide that the authorized number of directors may be changed by resolution of the Board of Directors.

Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes

so that, as nearly as possible, each class will consist of one-third of the directors.

The division of our Board of Directors

into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control of our

Structure of the Board

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Rice as Chairman of the Board.

On December 3, 2019, our Board of Directors

appointed Mr.

Ruport as Executive Chairman of the Board.

The Chairman of the Board and the Executive Chairman preside at all meetings

of our Board of Directors and exercise and perform such other powers and duties as may be assigned to them from time to time by

the Board or prescribed by our amended and restated bylaws.

The Chairman of the Board is appointed by our Board of Directors on

an annual basis.

The Chairman of the Board presides

at all meetings of our Board of Directors and exercises and performs such other powers and duties as may be assigned

to him from time to time by the Board or prescribed by our amended and restated bylaws.

The Chairman of the Board is appointed

by our Board of Directors on an annual basis.

Board of Directors has no established policy on whether it should be led by a Chairman who is also the Chief Executive Officer,

but periodically considers whether combining, or separating, the role of Chairman and Chief Executive Officer is appropriate.

At this time, our Board is committed to the combined role given the circumstances of our Company, including Mr.

Rice’s knowledge

of our Company’s strategy, and has also determined at this time that having an Executive Chairman together with a Chairman

is in the best interest of the Company based on Mr.

Ruport’s leadership experience in the technology industry.

believes that having a Chairman who also serves as the Chief Executive Officer allows timely communication with our board on company

strategy and critical business issues, facilitates bringing key strategic and business issues and risks to the Board’s attention,

avoids ambiguity in leadership within the Company, provides a unified leadership voice externally and clarifies accountability

for Company business decisions and initiatives.

However, our Board of Directors continually evaluates our leadership structure

and could, in the future, decide to separate the Chairman and Chief Executive Officer positions if it believes that doing so would

serve the best interests of our Company and our stockholders.

and has in the past combined the roles of Chairman and Chief Executive Officer.

Our Board currently is committed

to the separated roles given the circumstances of our Company.

However, our Board of Directors continually evaluates

our leadership structure and could, in the future, decide to combine the Chairman and Chief Executive Officer positions

if it believes that doing so would serve the best interests of our Company and our stockholders.

Meetings and Committees

our fiscal year ended December 31, 2019, the Board of Directors held four meetings, and each director attended at least 75% of

our fiscal year ended December 31, 2020, the Board of Directors held five meetings, and each director attended at least 75% of

the aggregate of (i) the total number of meetings of our Board of Directors held during the period for which he has been a director

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Nasdaq Capital Market, we were not required to establish or maintain an audit, nominating or compensation committee.

Each committee

charter has been posted on the Investors section of our website at www.sigmalabsinc.com.

The reference to our website address

does not constitute incorporation by reference of the information contained at or available through our website, and you should

not consider it to be a part of this Annual Report.

committee charter has been posted on the Investors section of our website at www.sigmalabsinc.com.

The reference to our website

address does not constitute incorporation by reference of the information contained at or available through our website, and you

should not consider it to be a part of this Annual Report.

Audit Committee’s responsibilities include:

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Our Board of Directors has determined that each of Messrs.

Duitch, Battinelli and Summers is an independent director under NASDAQ

rules and under SEC Rule 10A-3.

All members of our Audit Committee meet the requirements for financial literacy under the applicable

rules and regulations of the SEC and NASDAQ.

Our Board of Directors has determined that each member of our Audit Committee is

an “audit committee financial expert”

as defined by applicable SEC rules and has the requisite financial sophistication

as defined under the applicable NASDAQ rules and regulations.

The Audit Committee met four times during 2019.

Duitch, Battinelli and Summers is an independent director under the

applicable Nasdaq rules and under SEC Rule 10A-3.

All members of our Audit Committee meet the requirements for financial literacy

under the applicable rules and regulations of the SEC and Nasdaq.

Our Board of Directors has determined that each member

of our Audit Committee is an “audit committee financial expert”

as defined by applicable SEC rules and has the requisite

financial sophistication as defined under the applicable Nasdaq rules and regulations.

The Audit Committee met four times

Compensation Committee’s responsibilities include:

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Nasdaq rules and regulations and is a “non-employee director”

as defined in Rule 16b-3 promulgated under the Securities

Exchange Act of 1934, as amended (the “Exchange Act”).

The Compensation Committee was established effective February

15, 2017 (i.e., when our common stock became listed on The NASDAQ Capital Market).

as defined in Rule 16b-3 promulgated under the

Securities Exchange Act of 1934, as amended (the “Exchange Act”).

The Compensation Committee was established effective

February 15, 2017 (i.e., when our common stock became listed on The Nasdaq Capital Market).

and Corporate Governance Committee

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has the potential to encourage excessive risk-taking by our management.

16(a) Beneficial Ownership Reporting Compliance

Section 16(a) Reports

16(a) of the Securities Exchange Act of 1934 requires the Company’s executive officers and directors, and persons who own

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Company believes that during its most recent fiscal year ended December 31, 2020, its executive officers, directors and greater

than 10% stockholders complied with the filing requirements under Section 16(a), except that (i) Ronald Fisher filed a Form

4 late in connection with (a) the forfeiture of shares of common stock with respect to an applicable milestone not being satisfied,

and (b) the receipt of shares of common stock based on an applicable milestone being achieved, and (ii) John Rice filed a Form

4 late relating to his acquisition of two stock options as compensation in his capacity as an officer.

than 10% stockholders complied with the filing requirements under Section 16(a), except that each of Salvatore Battinelli and

Mark Ruport filed a Form 4 late in connection with their respective purchase of shares of the Company’s Series E Preferred

Stock and warrants to purchase shares of common stock.

EXECUTIVE COMPENSATION

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Awards ($) (5)

Awards ($) (6)

Other Compensation ($)

Rice - President, Chief Executive Officer (Principal Executive Officer) and Director

Rice - Former President & Chief

Officer (1) and Director

of the Board)

Ruport - President & Chief

Officer and Director (2)

Fisher - Vice President

Beckett –

Chief Technology

Beckett - Chief Technology Officer

Rice served as President and Chief Executive Officer from January 1, 2020 through April 30, 2020.

Ruport has served as President and Chief Executive Officer since April 30, 2020.

amounts paid or accrued.

Fair Value of option awards is calculated in accordance with FASB ASC Topic 718.

The amount recognized for all awards

is calculated using the Black Scholes option-pricing model.

February 25, 2021, the Compensation Committee granted Mr.

Ruport a $50,000 performance bonus for the fiscal year ended December

In October 2020, we granted Mr.

Beckett a performance

bonus of $10,000, and in December 2020, Mr.

Beckett was granted an additional performance bonus of $8,000.

April 10, 2020 Messrs.

Ruport, Fisher, and Beckett were granted 969, 1,125, and 1,125 shares of our common stock, respectively,

at the closing price of $2.05 on the date of the grant.

The shares fully vested on December 31, 2020.

option awards and stock appreciation rights awards.

On June 23, 2020, we adopted the 2020 Stock Appreciation Rights Plan.

The Plan only provides for incentive awards that are only made in the form of stock appreciation rights (“SARs”)

payable in cash.

No shares of common stock were reserved in connection with the adoption of the Plan since no shares will

be issued pursuant to the Plan.

The Fair Value of option

and SARs awards are calculated in accordance with FASB ASC Topic 718.

The amount recognized for all awards is

calculated using the Black Scholes pricing model.

May 1, 2020, we granted Mr.

Rice an option to purchase up to 16,044 shares of our common stock under our 2013 Equity Incentive

Plan in connection with his employment arrangement.

The option has an exercise price of $2.28, is fully vested, and

had an aggregate grant date fair value of $29,583.

each of the first day of each month commencing January 1, 2019 and ending on August 1, 2019, we granted Mr.

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$21,291, $25,405, and $13,546, respectively

April 19, 2018, we granted Mr.

Rice three options (the “Options”) to purchase up to 2,000 shares of our common

stock under our 2013 Equity Incentive Plan in connection with his employment arrangement.

The Options have an exercise price

per share equal to $18.80, $15.40 and $14.80, respectively, and each is fully vested.

The options had an aggregate grant date

fair value of $31,010, $25,402 and $24,412, respectively.

The Company also granted Mr.

Rice an option to purchase up to 2,000

shares on each of April 30, 2018, May 31, 2018, June 30, 2018 and July 31, 2018.

Such options have an exercise price per share

equal to $11.00, $14.70, $11.90 and $8.70, respectively, and each is fully vested.

The options had an aggregate grant date

fair value of $18,184, $24,248, $19,460 and $13,975, respectively.

On November 1, 2018 the Company granted Mr.

vested option to purchase up to 6,875 shares at an exercise price of $17.90 The option had an aggregate grant day fair value

On December 1, 2018 the Company granted Mr.

Rice a fully vested option to purchase up to 2,292 shares at an exercise

price of $15.70.

The option had an aggregate grant day fair value of $28,038.

January 10, 2019, we granted Mr.

Fisher an option to purchase 1,183 shares of our common stock under our 2013 Equity Incentive

May 28, 2020, we granted Mr.

Ruport an option to purchase 116,654 shares of our common stock under our 2013 Equity Incentive

Plan in connection with his employment arrangement.

The option has an exercise price per share equal to $20.20 and is fully

The option had a grant date fair value of $18,271.

The option has an exercise price of $2.50 and vests as follows:

29,164 shares vested and became exercisable on June 15, 2020, and the remaining 87,490 shares will vest in equal monthly

installments over the next three years.

As of December 31, 2020, 43,744 shares were vested and exercisable.

had an aggregate grant date fair value of $254,474.

On November 24, 2020, we granted Mr.

Fisher an option to purchase

Ruport and option to purchase 114,915

shares of our common stock under our 2013 Equity Incentive Plan in connection with his employment arrangement.

has an exercise price per share equal to $5.20 and is fully vested.

The option had a grant date fair value of $420.

On November 26, 2019, we granted Mr.

option has an exercise price of $2.55 and vests over three years in equal monthly installments beginning one month from the

As of December 31, 2020, 3,192 shares were fully vested and exercisable.

The option had an aggregate grant

date fair value of $236,519.

On June 23, 2020, pursuant to our 2020 Stock Appreciation Rights Plan, we granted Mr.

60,094 Stock Appreciation Rights (“SAR’s).

The SAR’s have an exercise price of $2.63 and will vest and become

exercisable in three equal installments on each of the first, second, and third anniversaries of the grant date.

The SAR’s

had an aggregate grant date fair value of $127,987.

December 3, 2019, we granted Mr.

Ruport (i) an option to purchase up to 10,000 shares of our common stock with an exercise

price of $11.20, which fully vested and became exercisable on January 3, 2020;

and (ii) an option to purchase up to 40,000

shares of our common stock with an exercise price of $11.20, which will vest and become exercisable in equal monthly installments

over three years from the grant date.

As of December 31, 2020, 14,053 shares were fully vested and exercisable.

had aggregate grant date fair values of $90,366 and $361,457, respectively.

May 28, 2020, we granted Mr.

Fisher an option to purchase 23,331 shares of our common stock under our 2013 Equity Incentive

Plan in connection with his employment arrangement.

The option has an exercise price per share equal to $8.20 and is fully

The option had a grant date fair value of $661.

The option has an exercise price of $2.50 and vests as follows:

5,833 shares vested and became exercisable on June 15, 2020, and the remaining 17,498 shares will vest in equal monthly installments

over the next three years.

As of December 31, 2020, 8,749 shares were fully vested and exercisable.

The option had

an aggregate grant date fair value of $50,895.

On June 23, 2020, pursuant to our 2020 Stock Appreciation Rights Plan, we

Fisher 12,019 Stock Appreciation Rights (“SAR’s).

The SAR’s have an exercise price of $2.63

and will vest and become exercisable in three equal installments on each of the first, second, and third anniversaries of

the grant date.

The SAR’s had an aggregate grant date fair value of $25,598.

January 10, 2019, we granted Mr.

Fisher an option to purchase 1,184 shares of our common stock.

The option has an exercise

price equal to $20.20 per share and is fully vested.

On November 1, 2019, we granted Mr.

Fisher an option to purchase

100 shares of our common stock.

The option has an exercise price equal to $5.20 per share and is fully vested.

26, 2019, we granted Mr.

Fisher an option to purchase 100 shares of our common stock.

The option has an exercise price equal

to $8.20 per share and is fully vested.

On December 3, 2019, we granted Mr.

Fisher an option to purchase 500

500 shares of our common stock under our 2013 Equity Incentive Plan in connection with his employment arrangement.

has an exercise price per share equal to $11.20 and is fully vested.

The option had a grant date fair value of $4,518.

April 19, 2018, we granted Mr.

Fisher an option to purchase 2,875 shares of our common

stock under our 2013 Equity Incentive Plan in connection with his employment arrangement.

The option has an exercise price per share equal to $12.20, and is vested as to 281

shares, and the balance of the shares under the stock option will vest in three

additional annual installments as follows:

410 shares will vest and become exercisable

on April 19, 2020;

683 shares will vest and become exercisable April 19, 2021;

and 1,501 shares will vest and become exercisable on April 19, 2022.

had a grant date fair value of $28,927.

shares of our common stock.

The option has an exercise price equal to $11.20 per share and is fully vested.

had aggregate grant date fair value of $18,271, $420, $661, and $4,518, respectively.

May 28, 2020, we granted Mr.

Beckett an option to purchase 46,661 shares of our common stock under our 2013 Equity Incentive

Plan in connection with his employment arrangement.

The option has an exercise price equal to $2.50 per share

and vests as follows:

25%, or 11,665 shares vested and became exercisable on June 15, 2020, and the remaining 34,996 shares

will vest in equal monthly installments over the next three years.

As of December 31, 2020, 17,497 shares were fully

vested and exercisable.

The option had an aggregate grant date fair value of $101,788.

On June 23, 2020, pursuant to our

2020 Stock Appreciation Rights Plan, we granted Mr.

Beckett 24,038 Stock Appreciation Rights (“SAR’s).

The SAR’s

have an exercise price of $2.63 and will vest and become exercisable in three equal installments on each of the first, second,

and third anniversaries of the grant date.

The SAR’s had an aggregate grant date fair value of $51,196.

January 1, 2019, we granted Mr.

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the remaining 281 shares will vest and become

exercisable equally on the second through the fourth anniversaries of the date of grant.

The option has an aggregate grant

date fair value of $4,358.

exercisable in equal installments on the second through the fourth anniversaries of the date of grant.

As of December 31,

2020, 94 shares were fully vested and exercisable.

On July 18, 2019, we granted Mr.

Beckett an option to purchase up to 500 shares of our common

stock under our 2013 Equity Incentive Plan.

The option has an exercise price per share equal to $12.40.

The option vests and

will become exercisable equally on the first through the fourth anniversaries of the date of grant.

The option has an aggregate

grant date fair value of $4,885.

Beckett an option to purchase up to 500

shares of our common stock under our 2013 Equity Incentive Plan in connection with his employment arrangement.

has an exercise price per share equal to $12.40.

The option vests and will become exercisable in equal installments on the

first through the fourth anniversaries of the date of grant.

As of December 31, 2020, 125 shares were fully vested and exercisable.

On October 11, 2019, we granted Mr.

Beckett an option to purchase up to 5,000 shares of our

common stock under our 2013 Equity Incentive Plan.

Beckett an option to purchase up to 5,000 shares of our common stock under our 2013 Equity

Incentive Plan in connection with his employment arrangement.

The option has an exercise price per share equal to $6.70.

The option is

fully vested and exercisable.

The option has an aggregate grant date fair value of $26,857.

February 26, 2018 and October 18, 2018, we granted Mr.

Beckett an option to purchase up to 1,500 and 2,000 shares of our common

stock, respectively, under our 2013 Equity Incentive Plan in connection with his employment arrangement.

The options have

an exercise price per share equal to $15.60 and $12.10, respectively.

The February 2018 option vests as follows:

shares vested and became exercisable on October 13, 2018;

225 shares vested and became exercisable on October 13, 2019;

shares will vest and become exercisable on October 13, 2020;

and 825 shares will vest and become exercisable on October 13,

The October 2018 option vests in equal annual installment over four years from the date of grant.

The options have an

aggregate grant date fair value of $22,790 and $18,784, respectively.

option is fully vested and exercisable.

The options had aggregate grant date fair values of $4,358, $4,885,

and $26,857, respectively.

Executive Officer Employment Agreements

August 8, 2017, we entered into an “at will”

unwritten employment arrangement with Mr.

John Rice, pursuant to which

Rice served as our interim Chief Executive Officer and interim principal executive officer, will receive a monthly salary

of $9,000, and is eligible to receive medical and dental benefits, life insurance, and long term and short term disability coverage.

Rice is eligible under his employment arrangement to participate in the Company’s 2013 Equity Incentive Plan,

with equity compensation to Mr.

Rice to be determined by our Compensation Committee at a later date.

Effective as of Mr.

appointment as interim Chief Executive Officer, Mr.

Rice is no longer entitled to receive compensation for his service as a director

of the Company during his service as our interim Chief Executive Officer.

On April 19, 2018, we granted Mr.

Rice three options

(the “Options”) to purchase up to 2,000 shares of our common stock under our 2013 Equity Incentive Plan.

Options have an exercise price per share equal to $18.80, $15.40 and $14.80, respectively, which is greater than

the closing price of our common stock on the date of grant (the “Grant Date”), and each is fully vested as of the

Company also granted Mr.

Rice an option to purchase up to 2,000 shares on each of April 30, 2018, May 31, 2018, June 30, 2018

and July 31, 2018 (each, a “Monthly Option”), and agreed that that Mr.

Rice is entitled to a bonus of ( x) 10,000

shares of common stock under our 2013 Equity Incentive Plan if the average closing price of our common stock is $60.00, $70.00,

$80.00 or $90.00 for three consecutive months (for a total possible bonus of up to 40,000 shares if each of the foregoing performance

milestones is satisfied), and (y) the balance of any portion of the foregoing 40,000 shares if the Company is sold for a price

equivalent to at least $80.00 per outstanding share of common stock while Mr.

Rice serves as our Chief Executive Officer (or during

the 12-month period thereafter), and that in the event that our Board of Directors determines that Mr.

Rice is unable to perform

his duties as our Chief Executive Officer due to an accident, illness or other event or condition which physically or mentally

incapacitates Mr.

Rice for a period of 45 consecutive days (“Disability”), (x) if Mr.

Rice ceases to be employed by

the Company as a result of a Disability, the Options will remain exercisable for the 5-year term of such Options, unless the Options

are terminated pursuant to a “Corporate Transaction”

(as defined in the 2013 Equity Incentive Plan);

and (y) if Mr.

Rice ceases to be employed by the Company as a result of a Disability, the Monthly Options will remain exercisable for the 5-year

term of such Monthly Options, unless the Monthly Options are terminated pursuant to a Corporate Transaction.

June 21, 2018, Mr.

Rice’s title was changed to Chief Executive Officer of the Company.

On August 1, 2018, the Company increased

the annual base salary of Mr.

Rice from $108,000 to $155,000.

On November 1, 2018, the Company granted Mr.

Rice an option to purchase

6,875 shares of the Company’s common stock under the 2013 Plan at an exercise price of $17.90 per share, with such option

having a term of five years and being fully vested on the grant date.

The Company also agreed to grant Mr.

Rice an option under

the 2013 Plan to purchase up to (i) 2,292 shares on the first day of each month commencing on December 1, 2018 and ending on August

1, 2019 (collectively, the “Monthly Options”), so long as Mr.

Rice remains an employee of the Company as of the applicable

grant date (except that if Mr.

Rice ceases to be employed by the Company as a result of an accident, illness or other event or

condition which physically or mentally incapacitates Mr.

Rice for a period of 45 consecutive days, any Monthly Option that has

not been granted as of such date will still be granted on the applicable grant date), with each Monthly Option to have a 5-year

term, an exercise price equal to the closing price of the Company’s common stock on the date of grant, to be vested in full

on the date of grant and otherwise to be on such other terms set forth in the Company’s standard form of non-qualified stock

to April 30, 2020, Mr.

Rice served as President, Chief

Executive Officer, and principal executive officer of the Company at an annual base salary of $155,000.

On April 30, 2020,

he resigned from such positions.

Rice has remained a director on the Board of Directors and has continued to serve as

Chairman of the Board.

Rice was compensated as a non-employee director (on a pro-rata basis for 2020 based on the partial

year during which Mr.

Rice served as a non-employee director) under the Company’s director compensation program,

as may be adjusted from to time for all non-employee directors.

On May 1, 2020, we entered into a consulting agreement with Mr.

Rice, pursuant to which Mr.

Rice was engaged to provide, among other services to be determined by the Company, advice regarding

the structure of certain financial and other strategic transactions involving the Company, on an as-needed basis.

The consulting

agreement expired on December 31, 2020.

December 3, 2019, we entered into an “at-will’

employment letter agreement with Mark Ruport, effective as of December

3, 2019 (the “effective date”), pursuant to which Mr.

Ruport agreed to serve as our Executive Chairman on an

“at-will”

Additionally, Mr.

Ruport was appointed to serve as a member of our Board of Directors, effective

as of December 3, 2019, with a term expiring at the 2021 annual meeting of stockholders.

As of April 30, 2020, Mr.

appointed as President, Chief Executive Officer, and principal executive officer of the Company, and no longer serves as Executive

the employment letter agreement, Mr.

Ruport is entitled to (i) an annual base salary of $155,000 (such base salary is not subject

to decrease, but may be increased in the discretion of the Company’s Compensation Committee of the Board of Directors based

on annual or special case assessments of Mr.

Ruport’s performance and other factors), and (ii) all benefits that

we elect in our sole discretion to provide from time to time to our other executive officers, and received a grant of (1)

a five-year stock option to purchase up to 10,000 shares of common stock of the Company, which has an exercise price

equal to the closing price of the Company’s common stock on the effective date, and vested and became exercisable

in full on the first month’s anniversary of the effective date, and (2) a five-year stock option to purchase up to

40,000 shares of common stock of the Company, which has an exercise price equal to the closing price of the Company’s

common stock on the effective date, and will vest and become exercisable in equal (as closely as possible) monthly installments

over three years from the effective date, provided, in each case, that Mr.

Ruport remains an employee of the Company through

such vesting date.

options are on such other terms and provisions as are contained in the Company’s standard form nonqualified stock

option agreement;

October 18, 2018, Darren Beckett’s title was changed from Vice President of Engineering to Chief Technology Officer of the

On October 18, 2018, the Company also increased the annual base salary of Mr.

Beckett from $135,000 to $180,000, effective

retroactive to September 16, 2018, and granted Mr.

Beckett an option to purchase 2,000 shares of common stock under the 2013 Plan

at an exercise price of $12.10 per share.

The option has a term of five years and vests in equal annual installment over

four years from the date of grant subject, in each case, to Mr.

Beckett being in the continuous employ of the Company on the applicable

vesting date.

provided, however, that (x) upon the occurrence of a Change of Control (as defined in the employment letter

agreement), any unvested portion of the options as of the date of such Change of Control will immediately and automatically vest;

provided, however, that, the options may be assumed or, in the discretion of the Board of Directors, an equivalent option may

be substituted by an applicable successor corporation or any subsidiary of the successor corporation in connection with a Change

of Control), and (y) in the event that the Board of Directors determines that Mr.

Ruport is unable to perform his duties due to

an accident, illness or other event or condition which physically or mentally incapacitates him for a period of 45 consecutive

days (“Disability”), if he ceases to be employed by the Company as a result of a Disability, the options will continue

to vest and remain exercisable for the 5-year term of the options in accordance with the terms of the option agreements.

Additionally,

during the term of his employment, Mr.

Ruport is eligible to receive one or more bonuses relating to each fiscal year in

recognition of his achievement of individual and Company goals established by the Board of Directors from time to time.

the decision to provide any such bonuses and the amount and terms of any such bonuses is in the sole discretion of the

Board of Directors.

On February 25, 2021, Mr.

Ruport received a performance bonus of $50,000 for 2020.

Beckett has served as an employee of the Company since September 25, 2017, pursuant to an “at will”

employment agreement with the Company, under which he was engaged to serve as our Engineering Manager.

employment agreement

with the Company, under which he was engaged to serve as our Engineering Manager.

On October 18, 2018, his title was changed from Vice President of Engineering to Chief Technology

Officer of the Company.

On October 18, 2018, the Company also increased the annual base salary of Mr.

Beckett from $135,000 to

$180,000, effective retroactive to September 16, 2018, and granted Mr.

Beckett an option to purchase 2,000 shares of common stock

under the 2013 Plan at an exercise price of $12.10 per share.

The option has a term of five years and vests in equal annual installments

over four years from the date of grant subject, in each case, to Mr.

Beckett being in the continuous employ of the Company

on the applicable vesting date.

Under the agreement, Mr.

Beckett was entitled to receive an annual base salary of $135,000 prior to the foregoing increase, and is eligible to receive

medical and dental benefits, life insurance, short and long-term disability coverage, and to participate in the Company’s

Section 125 cafeteria plan, vision plan and 401K plan.

On January 1, 2019 the Company granted Mr.

Beckett an option to purchase

up to 375 shares of common stock under the 2013 Plan at an exercise price of $15.00.

The option has a term of five years and vests

in equal annual installments over four years form the date of grant.

Beckett is eligible to receive medical and dental benefits, life insurance,

short and long-term disability coverage, and to participate in the Company’s Section 125 cafeteria plan, vision plan and

On October 13, 2017, in connection with his employment, Mr.

Beckett was granted an option to purchase up to

1,500 shares of our common stock with an exercise price equal to $19.20 per share.

Such option is vested and exercisable as to

675 shares at December 31, 2020, and the remaining 825 shares will vest on October 23, 2021 provided Mr.

Beckett is an employee

of the Company on that date.

have entered into an “at will”

4 unchanged sentences

Pursuant to the employment agreement, Mr.

Fisher also was granted, as a signing bonus, a stock option to purchase

up to 2,375 shares of common stock of the Company, at an exercise price equal to $118.00 per share, which was the closing market

price of the Company’s common stock on August 10, 2015 (i.e., the date of grant), under the 2013 Equity Incentive Plan.

Such option vested and became exercisable as to 138 shares on the first anniversary of the grant date, as to 338 shares on the

second anniversary of the grant date, as to 638 shares on the third anniversary of the grant date, and will vest and become exercisable

as to 1,263 shares on the fourth anniversary of the grant date, provided that Mr.

Fisher remains an employee of the Company through

such vesting date.

The option has a ten - year term and is on such other terms set forth in the Company’s standard

form of non-qualified stock option agreement.

Fisher also was granted, as a signing bonus, (i) a stock option

to purchase up to 2,375 shares of common stock of the Company, at an exercise price equal to $118.00 per share, which was the

closing market price of the Company’s common stock on August 10, 2015 (i.e., the date of grant), under the 2013 Equity Incentive

Such option is fully vested and exercisable.

The option has a ten - year term and is on such other terms

set forth in the Company’s standard form of non-qualified stock option agreement, and (ii) 125 shares of common stock

of the Company with a value equal to the closing price of our common stock on the date of grant and is on such other terms and

provisions as are contained in Sigma Labs’

standard form of restricted stock letter agreement under the Plan.

are fully vested.

Additionally, the Company granted Mr.

Fisher under the 2013 Plan, effective as of

August 11, 2016, a stock option to purchase up to 500 shares of common stock of the Company.

Such option has an exercise price

equal to the closing price of our common stock on the date of grant, and vests and becomes exercisable as to (i) 30 shares on

August 11, 2017, (ii) 70 shares on August 11, 2018, (iii) 135 shares on August 11, 2019, and (iv) 265 shares on August 11, 2020,

Fisher is in the employ of the Company on August 11, 2019 and 2020.

Fisher is eligible to participate

in the Company’s 2013 Equity Incentive Plan and is eligible to receive medical and dental benefits, life insurance, short

and long-term disability coverage, and to participate in the Company’s Section 125 cafeteria plan, vision plan and 401K

Fisher under the 2013 Plan, effective as of August 11, 2016, a stock

option to purchase up to 500 shares of common stock of the Company.

Such option has an exercise price equal to the closing price

of our common stock on the date of grant and is fully vested and exercisable.

Fisher is eligible to

participate in the Company’s 2013 Equity Incentive Plan and is eligible to receive medical and dental benefits, life insurance,

short and long-term disability coverage, and to participate in the Company’s Section 125 cafeteria plan, vision plan and

September 18, 2017, we and Mr.

21 unchanged sentences

Equity Awards at 2020 Fiscal Year-End

following table sets forth outstanding equity awards issued under our 2013 Equity Incentive Plan as of December 31, 2019 that

are held by our named executive officers.

following tables set forth outstanding equity awards issued under our 2013 Equity Incentive Plan and 2020 Stock Appreciation

Rights Plan as of December 31, 2020 that are held by our named executive officers.

of securities underlying unexercised options (#) exercisable

of securities underlying unexercised options (#) unexercisable

On June 23, 2020, we adopted the 2020 Stock Appreciation Rights Plan.

The Plan only provides for incentive awards that are only

made in the form of stock appreciation rights (“SARs”) payable in cash.

No shares of common stock were reserved in

connection with the adoption of the Plan since no shares will be issued pursuant to the Plan.

On April 19, 2018, we granted Mr.

Rice three options (the “Options”) to purchase up to 2,000 shares of our common

stock under our 2013 Equity Incentive Plan in connection with his employment arrangement.

The Options have an exercise price per

share equal to $18.80, $15.40 and $14.80, respectively, and each is fully vested.

The Company also granted Mr.

Rice an option

to purchase up to 2,000 shares on each of April 30, 2018, May 31, 2018, June 30, 2018 and July 31, 2018.

Such options have an

exercise price per share equal to $11.00 $14.70, $11.90 and $8.70, respectively, and each is fully vested.

On November 1, 2018

the Company granted Mr.

Rice a fully vested option to purchase up to 6,875 shares at an exercise price of $17.90.

1, 2018 the Company granted Mr.

Rice a fully vested option to purchase up to 2,292 shares at an exercise price of $15.70.

of the first day of each month commencing January 1, 2019 and ending on August 1, 2019, we granted Mr.

Rice an option to purchase

up to 2,292 shares of our common stock, under our 2013 Equity Incentive Plan in connection with his employment arrangement.

options are fully vested and have the following exercise prices:

Rice three options (the “Options”)

to purchase up to 2,000 shares of our common stock under our 2013 Equity Incentive Plan in connection with his employment arrangement.

The Options have an exercise price per share equal to $18.80, $15.40 and $14.80, respectively, and each is fully vested.

also granted Mr.

Rice an option to purchase up to 2,000 shares on each of April 30, 2018, May 31, 2018, June 30, 2018 and July

Such options have an exercise price per share equal to $11.00 $14.70, $11.90 and $8.70, respectively, and each is fully

On November 1, 2018 the Company granted Mr.

Rice a fully vested option to purchase up to 6,875 shares at an exercise price

On December 1, 2018 the Company granted Mr.

Rice a fully vested option to purchase up to 2,292 shares at an exercise

price of $15.70.

On each of the first day of each month commencing January 1, 2019 and ending on August 1, 2019, we granted Mr.

Rice an option to purchase up to 2,292 shares of our common stock, under our 2013 Equity Incentive Plan in connection with his

employment arrangement.

The options are fully vested and have the following exercise prices:

$15.00, $19.30, $20.40, $14.70, $15.00,

The options had an aggregate grant date fair value of $26,630, $34,254, $36,418, $26,161, $26,642, $21,291, $25,405,

and $13,546, respectively, calculated in accordance with FASB ASC Topic 718.

The amount recognized for this award was calculated

using the Black Scholes option-pricing model.

In August 2015, in conjunction with the hiring of Ronald Fisher, the Company’s Vice President of Business Development,

the Company granted to Mr.

Fisher a stock option (the “Option”) to purchase up to 2,375 shares of common stock of

the Company, at an exercise price equal to $118.00 per share, which was the closing market price of the Company’s

common stock on August 10, 2015 (i.e., the date of grant), under the 2013 Plan.

The Option is fully vested.

has a ten-year term and is on such other terms set forth in the Company’s standard form of non-qualified stock option

$12.00, $14.00, and $7.40.

On May 1, 2020, we granted Mr.

Rice an option to purchase up to 16,044 shares of our common stock under

our 2013 Equity Incentive Plan in connection with his employment arrangement.

The option has an exercise price of $2.28

and is fully vested and exercisable.

On December 3, 2019, in conjunction with the hiring of Mark

Ruport, the Company’s President and Chief Executive Officer, the Company granted to Mr.

Ruport (i) an option to purchase

10,000 shares of our common stock with an exercise price of $11.20, which fully vested and became exercisable on January 3,2020;

and (ii) an option to purchase up to 40,000 shares of our common stock, with an exercise price of $11.20, which will vest and

become exercisable in equal monthly installments over three years from the date of grant.

On May 28, 2020, we granted Mr.

an option to purchase 116,654 shares of our common stock under our 2013 Equity Incentive Plan in connection with his employment

The option has an exercise price of $2.50 and vests as follows:

29,164 shares vested and became exercisable on June

15, 2020, and the remaining 87,490 shares will vest in equal monthly installments over the next three years.

As of December 31,

2020, a total of 43,744 shares were vested and exercisable.

On November 24, 2020, we granted Mr.

Ruport an option to purchase

up to 114,915 shares of our common stock.

The option has an exercise price of $2.55 and vests over three years in equal monthly

installments beginning one month from the grant date.

As of December 31, 2020, 3,192 shares were vested and exercisable.

June 23, 2020, pursuant to our 2020 Stock Appreciation Rights Plan, we granted Mr.

Ruport 60,094 SARs.

The SARs have an exercise

price of $2.63 and will vest and become exercisable in three equal installments on each of the first, second, and third anniversaries

of the grant date.

In August 2015, in conjunction with the hiring of Ronald Fisher,

the Company’s Vice President of Business Development, the Company granted to Mr.

Fisher a stock option (the “Option”)

to purchase up to 2,375 shares of common stock of the Company, at an exercise price equal to $118.00 per share, which was the

closing market price of the Company’s common stock on August 10, 2015 (i.e., the date of grant), under the 2013 Plan.

Option is fully vested.

The Option has a ten-year term and is on such other terms set forth in the Company’s standard form

of non-qualified stock option agreement.

The Company granted Mr.

Fisher under the 2013 Equity Incentive Plan, effective as of August 11, 2016, a stock

option to purchase up to 500 shares of common stock of the Company.

Such option has an exercise price equal to the closing

price of our common stock on the date of grant, and vested and became exercisable (i) as to 30 shares on August 11,

2017, as to (ii) 70 shares on August 11, 2018, and (iii) as to 135 shares on August 11, 2019, and will vest

and become exercisable as to 265 shares on August 11, 2020, provided Mr.

Fisher is in the employ of the Company on such

On April 19, 2018, we granted to Mr.

Fisher an option to purchase 2,875 shares of our common stock.

Such option has a

five-year term with an exercise price equal to the closing price of our common stock on the date of the grant.

The option is

vested as to 281 shares and the remaining shares vest as follows:

410 shares will vest on April 19, 2020, 683 shares will

vest on April 19, 2021, and the remaining 1,501 shares will vest on April 19, 2022.

On January 10, 2019, we granted Mr.

Fisher under the 2013 Equity Incentive Plan, effective as of

August 11, 2016, a stock option to purchase up to 500 shares of common stock of the Company.

Such option has an exercise price

equal to the closing price of our common stock on the date of grant and is fully vested and exercisable.

On April 19, 2018, we

granted to Mr.

Fisher an option to purchase 2,875 shares of our common stock.

The option has an exercise price per share equal to $20.20 and

is fully vested.

On November 1, 2019, we granted Mr.

Such option has a five-year term with an exercise

price equal to the closing price of our common stock on the date of the grant.

The option is vested as to 691 shares and the remaining

shares vest as follows:

683 shares will vest on April 19, 2021, and the remaining 1,501 shares will vest on April 19, 2022.

January 10, 2019, we granted Mr.

Fisher an option to purchase 1,183 shares of our common stock.

has an exercise price per share equal to $5.20 and is fully vested.

The option has an exercise price

per share equal to $20.20 and is fully vested.

On November 1, 2019, we granted Mr.

Fisher an option to

purchase 100 shares of our common stock.

Fisher an option to purchase 100 shares of

our common stock.

The option has an exercise price per share equal to $5.20 and is fully vested.

December 3, 2019, we granted Mr.

On November 26, 2019, we granted

Fisher an option to purchase 100 shares of our common stock.

The option has an exercise

price per share equal to $11.20 and is fully vested.

On February 26, 2018 and October 18, 2018, we granted Mr.

Beckett an option to purchase up to 1,500 and 2,000 shares of our common

stock, respectively, under our 2013 Equity Incentive Plan in connection with his employment arrangement.

The options have an exercise

price per share equal to $15.60 and $12.10, respectively.

The February 2018 option vests as follows:

75 shares vested and

became exercisable on October 13, 2018;

225 shares vested and became exercisable on October 13, 2019;

will vest and become exercisable on October 13, 2020;

and 825 shares will vest and become exercisable on October 13, 2021.

October 2018 option vests in equal annual installment over four years from the date of grant.

On October 13, 2017, we granted

Beckett an option to purchase up to 1,500 shares of our common stock under our 2013 Equity Incentive Plan in connection with

his employment arrangement.

The option has an exercise price per share equal to $19.20.

The option vests as follows:

vested and became exercisable on October 13, 2018;

225 shares vested and became exercisable on October 13, 2019;

375 shares will vest and become exercisable on October 13, 2020;

and 825 shares will vest and become exercisable on October 13,

On January 1, 2019, we granted Mr.

Beckett an option to purchase up to 375 shares of our common stock under our 2013 Equity

Incentive Plan in connection with his employment arrangement.

The option has an exercise price per share equal to $8.20 and

is fully vested.

On December 3, 2019, we granted Mr.

Fisher an option to purchase 500 shares of our common stock.

The option has

an exercise price per share equal to $11.20 and is fully vested.

On May 28, 2020, we granted Mr.

Fisher an option to purchase

23,331 shares of our common stock.

The option has an exercise price per share equal to $2.50 and vests as follows:

vested and became exercisable on June 15, 2020, and the remaining 17,498 shares will vest in equal monthly installments over the

next three years.

As of December 31, 2020, a total of 8,749 shares were vested and exercisable.

On June 23, 2020, pursuant

to our 2020 Stock Appreciation Rights Plan, we granted Mr.

Fisher 12,019 SARs.

The SARs have an exercise price of $2.63 and will

vest and become exercisable in three equal installments on each of the first, second, and third anniversaries of the grant date.

On February 26, 2018 we granted Mr.

Beckett an option to purchase

up to 1,500 shares of our common stock under our 2013 Equity Incentive Plan in connection with his employment arrangement.

option has an exercise price per share equal to $15.60 and is vested as to 300 shares.

The remaining shares will vest as follows:

375 shares will vest and become exercisable on February 26, 2021;

and 825 shares will vest and become exercisable on February

On October 18, 2018, we granted Mr.

Beckett an option to purchase up to 2,000 shares of our common stock.

option has an exercise price per share equal to $12.10 and is vested as to 400 shares.

The remaining shares vest as follows:

shares will vest and become exercisable on September 16, 2021, and 1,100 shares will vest and become exercisable on September

On October 13, 2017, we granted Mr.

Beckett an option to purchase up to 1,500 shares of our common stock under our 2013

Equity Incentive Plan in connection with his employment arrangement.

The option has an exercise price per share equal to $19.20.

option vests as follows:

94 shares vested and became exercisable on January 1, 2020;

the remaining 281 shares will vest and become

exercisable in equal installments on the second through the fourth anniversaries of the date of grant.

On July 18, 2019,

The option is vested as to 675 shares and the remaining 825 shares will vest and become exercisable on October 13, 2021.

1, 2019, we granted Mr.

Beckett an option to purchase up to 500 shares of our common stock under our 2013 Equity Incentive Plan in connection

with his employment arrangement.

Beckett an option to purchase up to 375 shares of our common stock under our 2013 Equity Incentive Plan

in connection with his employment arrangement.

The option has an exercise price per share equal to $15.00.

The option vests and will become

exercisable in equal installments on the first through the fourth anniversaries of the date of grant.

On October 11, 2019,

we granted Mr.

Beckett an option to purchase up to 5,000 shares of our common stock under our 2013 Equity Incentive Plan in connection

with his employment arrangement.

The option vests as

94 shares vested and became exercisable on January 1, 2020;

the remaining 281 shares will vest and become exercisable

in equal installments on the second through the fourth anniversaries of the date of grant.

On July 18, 2019, we granted Mr.

an option to purchase up to 500 shares of our common stock under our 2013 Equity Incentive Plan in connection with his employment

The option has an exercise price per share equal to $12.40.

The option is fully vested and exercisable.

offer stock options and stock awards to certain of our employees, including our executive officers, as the long-term incentive

component of our compensation program.

We generally grant equity awards to new hires upon their commencing employment with us.

Our stock options allow employees to purchase shares of our common stock at a price per share equal to the fair market value of

our common stock on the date of grant and may or may not be intended to qualify as “incentive stock options”

The option vests and will become exercisable in equal

installments on the first through the fourth anniversaries of the date of grant.

As of December 31, 2020, the option was vested

as to 125 shares.

On October 11, 2019, we granted Mr.

Beckett an option to purchase up to 5,000 shares of our common stock under

our 2013 Equity Incentive Plan in connection with his employment arrangement.

The option has an exercise price per share equal

to $6.70 and is fully vested and exercisable.

On May 28, 2020, we granted Mr.

Beckett an option to purchase 46,661

shares of our common stock.

The option has an exercise price per share equal to $2.50 and vests as follows:

11,665 shares vested

and became exercisable on June 15, 2020, and the remaining 34,996 shares will vest in equal monthly installments over the next

As of December 31, 2020, a total of 17,497 shares were vested and exercisable.

On June 23, 2020, pursuant to our

2020 Stock Appreciation Rights Plan, we granted Mr.

Beckett 24,038 SARs.

The SARs have an exercise price of $2.63 and will vest

and become exercisable in three equal installments on each of the first, second, and third anniversaries of the grant date.

offer stock options, stock appreciation rights, and stock awards to certain of our employees, including our executive officers,

as the long-term incentive component of our compensation program.

We generally grant equity awards to new hires upon their commencing

employment with us.

Our stock options allow employees to purchase shares of our common stock at a price per share equal to the

fair market value of our common stock on the date of grant and may or may not be intended to qualify as “incentive stock

options”

federal income tax purposes.

We sometimes also offer stock options and stock awards to our consultants in lieu of cash.

options allow consultants to purchase shares of our common stock at a price per share equal to the fair market value of our common

stock on the date of grant and are not intended to qualify as “incentive stock options”

federal income tax

Stock options and stock awards granted to our executive officers may be subject to accelerated vesting in certain circumstances.

Our stock appreciation rights allow employees to receive a cash payment for

the difference between the market price of our common stock on the date of exercise and the strike price.

We sometimes also offer

stock options, stock appreciation rights and stock awards to our consultants in lieu of cash.

Our stock options allow consultants

to purchase shares of our common stock at a price per share equal to the fair market value of our common stock on the date of

grant and are not intended to qualify as “incentive stock options”

federal income tax purposes.

appreciation rights allow consultants to receive a cash payment for the difference between the market price of our common

stock on the date of exercise and the strike price.

Stock options, stock appreciation rights, and stock awards granted to our

executive officers may be subject to accelerated vesting in certain circumstances.

maintain a qualified 401(k) plan, in which all eligible employees may participate.

We have elected to match 100% of each participant’s

contribution up to 3% of salary, and 50% of the next 2% of salary contributed.

We may also elect, on an annual basis, to make

a discretionary contribution to the plan, but have not done so to date.

Our matches and elective contributions vest to participant

accounts as follows:

20% after two years of service, and 20% per year thereafter until the participant reaches 6 years of service,

at which time, employer contributions vest 100%.

As a tax-qualified retirement plan, contributions to the 401(k) plan and earnings

on those contributions are not taxable to the employees until distributed from the 401(k) plan.

We make safe harbor contributions to

match 100% of each participant’s contribution up to 3% of salary, and 50% of the next 2% of salary contributed.

harbor contributions are 100% vested.

We may also elect, on an annual basis, to make a discretionary contribution to the plan,

but have not done so to date.

Our elective matches and elective contributions vest to participant accounts as follows:

20% after two years of service, and 20% per year thereafter until the participant reaches 6 years of service, at which time, employer

contributions vest 100%.

As a tax-qualified retirement plan, contributions to the 401(k) plan and earnings on those contributions

are not taxable to the employees until distributed from the 401(k) plan.

Tax Gross-Ups

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Equity Incentive Plan

August 23, 2019, our Board of Directors terminated the 2011 Equity Incentive Plan.

Equity Incentive

Board of Directors adopted the 2013 Plan to (1) encourage selected employees, officers, directors, consultants and advisers to

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Subject to the 2013 Plan

to the provisions of the 2013 Plan relating to adjustments upon changes in common stock, an aggregate of 240,000 shares of common

stock are currently subject to outstanding awards under the 2013 Plan or future awards under the 2013 Plan.

to the provisions of the 2013 Plan relating to adjustments upon changes in common stock, an aggregate of 890,000 shares

of common stock are currently subject to outstanding awards under the 2013 Plan or future awards under the 2013 Plan.

awards granted under the 2013 Plan expire or otherwise terminate or are cancelled without being exercised in full, the shares

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or a subsidiary.

The Administrator will determine from time to time which directors, employees, consultants and advisers will

be granted awards under the 2013 Plan.

The Administrator will determine from time-to-time which directors, employees, consultants and advisers

will be granted awards under the 2013 Plan.

award under the 2013 Plan will be evidenced by an agreement in a form approved by the Administrator.

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and 9,681 shares were available for future issuance under the 2013 Plan.

Stock Appreciation Rights Plan

June 23, 2020, our Board of Directors 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 success;

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

promote the success of the Company’s business.

The Plan only provides for incentive awards that are only made in the form

of stock appreciation rights payable in cash (“SARs”).

No shares of common stock were reserved in connection with

the adoption of the Plan since no shares will be issued pursuant to the Plan.

Plan will be administered by the Compensation Committee of the Board or, in the Board’s sole discretion, by the Board.

Compensation Committee will have the authority to, among other things, (i) construe and interpret the Plan and apply its provisions;

(ii) promulgate, amend, and rescind rules and regulations relating to the administration of the Plan;

(iii) delegate its authority

to one or more persons who is an officer of the Company within the meaning of Section 16 of the Securities Exchange Act of 1934,

as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder with respect to SARs that do

not involve “insiders”

within the meaning of Section 16 of the Exchange Act;

(iv) determine when SARs are to be granted

under the Plan and the applicable grant date;

(v) 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

(vi) amend any outstanding SARs, subject, in certain cases, to the participant’s consent;

and (vii) make all

other determinations which may be necessary or advisable for the administration of the Plan.

may be granted only to persons who are Service Providers, and those persons whom the Committee determines are reasonably expected

to become Service Providers following the grant date.

The Committee may from time to time designate those Service Providers, if

any, to be granted SARs under the Plan, the number of SARs which will be granted to each such person, and any other terms or conditions

relating to SARs as it may deem appropriate to the extent consistent with the provisions of the Plan.

A participant who has been

granted a SAR may, if otherwise eligible, be granted additional incentive awards at any time.

The Committee may grant SARs 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 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 terms and conditions of each SAR will be evidenced by a SAR agreement.

The exercise price per share will not

be less than 100% of the fair market value of a Share on the date of grant of the SAR.

The term of the SAR will be determined

by the Committee but may not be greater than ten years from the date of grant.

SARs are exercisable subject to such terms and conditions as the Committee may specify in the SAR agreement for the SAR.

may be exercised by the delivery of a signed written notice of exercise to the Company, which must be received and accepted by

the Company as of a date set by the Company in advance of the effective date of the proposed exercise.

The notice must set forth

the number of SARs being exercised, together with any additional documents the Company may require.

Upon exercise of a SAR, the Grantee will receive an amount equal to the Spread.

The Spread, less applicable withholdings, will

be payable only in cash.

In no event may any SAR be settled in any manner other than by delivery of a cash payment from the Company.

of SAR Agreement

participant to whom a SAR is granted will be required to enter into a SAR agreement with the Company, in such a form as is provided

by the Committee.

The SAR agreement will contain specific terms as determined by the Committee, in its discretion, with respect

to the participant’s particular SAR.

Such terms need not be uniform among all participants or any similarly situated participants.

The SAR agreement may include, without limitation, vesting, forfeiture and other provisions particular to the particular participant’s

SAR, as well as, for example, provisions to the effect that the participant must abide by all the terms and conditions of the

Plan and such other terms and conditions as may be imposed by the Committee.

A SAR will include such terms and conditions as are

determined by the Committee, in its discretion, to be appropriate with respect to any participant.

Committee may specify in a SAR agreement that the participant’s rights, payments, and benefits with respect to a SAR will

be subject to forfeiture upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance

conditions of the incentive award.

Such events may include, but are not limited to, termination with cause or other conduct by

the participant that is detrimental to the business or reputation of the Company.

of Employment

otherwise expressly provided in the participant’s SAR agreement, if the participant’s employment is terminated for

any reason other than due to cause, death or disability, any non-vested portion of any outstanding SAR at the time of such termination

will automatically expire and terminate and no further vesting will occur after the termination date.

In such event, except as

otherwise expressly provided in the SAR agreement, the participant will be entitled to exercise such participant’s rights

only with respect to the portion of the SAR that was vested as of the termination date for a period that will end on the earlier

of (i) the expiration date set forth in the SAR agreement or (ii) ninety days after the date of termination.

otherwise expressly provided in the participant’s SAR agreement, in the event of the termination of a participant’s

employment for cause, all vested and non-vested SARs granted to such participant will immediately expire, and will not be exercisable

to any extent.

otherwise expressly provided in the participant’s SAR agreement, upon termination of employment as a result of the participant’s

disability or death, (i) any non-vested portion of any outstanding SAR will immediately terminate upon termination and no further

vesting will occur, and (ii) any vested SAR will expire on the earlier of either (A) the expiration date set forth in the SAR

agreement or (B) 12 months following the participant’s termination of employment.

to the conditions and limitations of the Plan and applicable law, in the event that a participant ceases to be an employee, outside

director or consultant, as applicable, for whatever reason, the Committee and participant may mutually agree with respect to any

outstanding SAR then held by the participant (i) for an acceleration or other adjustment in any vesting schedule applicable to

the SAR award;

(ii) for a continuation of the exercise period following termination for a longer period than is otherwise provided

under such SAR;

or (iii) to any other change in the terms and conditions of the SAR.

In the event of any such change to an outstanding

SAR, a written amendment to the participant’s SAR agreement will be required.

No amendment to a participant’s SAR

will be made to the extent compensation payable pursuant thereto as a result of such amendment would be considered deferred compensation

that is not excepted from taxation or penalties under Code Section 409A, unless otherwise determined by the Committee.

granted under the Plan are not transferable other than to a designated beneficiary upon the Participant’s death or by will

or the laws of descent and distribution.

otherwise provided in a SAR Agreement, notwithstanding any contrary provision in the Plan, in the event of a Change in Control

(as defined in the Plan), all outstanding SARs will become 100% vested and immediately and fully exercisable.

Board at any time, and from time to time, may amend or terminate the Plan.

The Committee at any time, and from time to time, may

amend the terms of any one or more SAR agreements, except that the Committee may not affect any amendment which would otherwise

constitute an impairment of the rights under any SAR unless the participant consents in writing.

of March 24, 2021, there were 127,629 SARs previously issued under the 2020 Plan.

believe that a combination of cash and equity compensation is appropriate to attract and retain the individuals we desire to serve

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and our executives both during and between formal meetings as well as compensate our directors for their time and effort.

we believe it is important to align the long-term interests of our non-employee directors (i.e.

directors who are not employed

by us as officers or employees) with those of the Company and its stockholders, and that awarding equity compensation to, and

thereby increasing ownership of our common stock by, our non-employee directors is an appropriate means to achieve this alignment.

we believe it is important to align the long-term interests of our non-employee directors (i.e., directors who are not

employed by us as officers or employees) with those of the Company and its stockholders, and that awarding equity compensation

to, and thereby increasing ownership of our common stock by, our non-employee directors is an appropriate means to achieve this

Directors who are also employees of our company do not receive compensation for their service on our Board of Directors.

our director compensation program, each non-employee director received annual compensation of $27,000 and 5,000 shares

of restricted common stock, which vested ratably each quarter.

our director compensation program for 2020, each non-employee director received annual compensation of $18,500, 2,500 shares

of restricted common stock, which is fully vested, and an option to purchase 25,000 shares of our common stock, which is also

fully vested.

Such grants were fully vested because the directors agreed to defer the payment of their cash compensation for

the first two quarters of 2020 as a cash saving measure.

In addition, the Chairperson of the Audit Committee received a $2,500

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All cash fees are paid quarterly.

Also, each non-employee director may be reimbursed for his

reasonable expenses incurred in the performance of his duties as a director as our Board of Directors determines from time to

Our Compensation Committee periodically evaluates our director compensation program and determines whether any changes

should be recommended to the Board.

In that regard, while the foregoing director compensation program will continue for

2020, in February 2020, our directors agreed to defer the payment of their cash compensation for the first two quarters of

2020 as a cash saving measure, and to defer the issuance of shares of common stock.

Also, each non-employee director may be reimbursed for his reasonable

expenses incurred in the performance of his duties as a director as our Board of Directors determines from time to time.

Our Compensation

Committee periodically evaluates our director compensation program and determines whether any changes should be recommended to

In that regard, under our director compensation program for 2021, each non-employee director will receive a quarterly

cash payment of $2,500, and received a stock option to purchase 50,000 shares of our common stock, which option will vest ratably

each month through December 31, 2021 (26,000 of such shares will only be exercisable upon approval by the Company’s stockholders

at the annual meeting of the Company’s stockholders of an increase in the aggregate number of shares of the Company’s

common stock that may be issued or issuable under the Plan) .

following table sets forth certain information concerning the compensation paid to non-employee directors in 2020 for their services

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The compensation of Mr.

Rice, who serves as a director and serves as our President and Chief Executive

Ruport, who serves as a director and serves as our President and Chief Executive

Officer, is described in the Summary Compensation Table of Executive Officers.

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Battinelli (2)

Dennis Duitch (2)

Frank Garofalo (3)

Kent Summers (4)

fees shown were paid to Mr.

Rice for services as a non-employee director from May 1, 2020 through December 31, 2020.

31, 2020, the Company issued 834 shares of the Company’s common stock to Mr.

Rice, pursuant to the Company’s 2013

Equity Incentive Plan, in connection with his service as a director, with such shares immediately vested.

Such shares were

valued at $2,243 or $2.69 per share.

Also on July 31, 2020, the Company granted Mr.

Rice an option to purchase

up to 25,000 shares of the Company’s common stock in connection with his service as a director.

The exercise price of

the option is equal to $2.69 per share, is fully vested, and had a grant date fair value of $54,366.

The compensation of Mr.

Rice for the period January 1, 2020 through April 30, 2020, during which time he served as President and Chief Executive officer

in addition to his service as a director, is described in the Summary Compensation Table of Executive Officers.

fees shown were paid to Mr.

Battinelli for services as a director.

In January 2019, the Company issued 5,000 shares of the

On July 31, 2020, the Company issued 2,500 shares of the

Company’s common stock to Mr.

Battinelli, pursuant to the Company’s 2013 Equity Incentive Plan, in connection

with his service as a director, with such shares to vest in four equal, successive quarterly installments.

Such shares were

valued at $75,000 or $15.00 per share.

with his service as a director, with such shares immediately vested.

Such shares were valued at $6,725 or $2.69

Also on July 31, 2020, the Company granted Mr.

Battinelli an option to purchase up to 25,000 shares of the

Company’s common stock in connection with his service as a director.

The exercise price of the option is equal to $2.69

per share, is fully vested, and had a grant date fair value of $54,366.

fees shown were paid to Mr.

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of the Audit Committee.

In January 2019, the Company issued 5,000 shares of the Company’s common stock to Mr.

On July 31, 2020, the Company issued 2,500 shares of the Company’s common stock to Mr.

pursuant to the Company’s 2013 Equity Incentive Plan, in connection with his service as a director, with such shares

to vest in four equal, successive quarterly installments.

immediately vested.

Such shares were valued at $6,725 or $2.69 per share.

Also on July 31, 2020, the Company

Duitch an option to purchase up to 25,000 shares of the Company’s common stock in connection with his service

as a director.

The exercise price of the option is equal to $2.69 per share, is fully vested, and had a grant date fair value

fees shown were paid to Mr.

Garofalo for services as a director.

In January 2019, the Company issued 5,000 shares, of the

Company’s common stock to Mr.

Garofalo, pursuant to the Company’s 2013 Equity Incentive Plan, in connection with

his service as a director, with such shares to vest in four equal, successive quarterly installments.

Such shares were valued

at $75,000 or $15.00 per share.

Garofalo resigned from the Board of Directors on February

fees shown were paid to Mr.

Summers for services as a director, including $45,000 for his additional services as a director

in his capacity as the Chairman of the Special Projects Committee.

In January 2019, the Company issued 5,000 shares of the

Company’s common stock to Mr.

Summers, pursuant to the Company’s 2013 Equity Incentive Plan, in connection with

his appointment and service as a director, with such shares to vest in four equal, successive quarterly installments.

shares were valued at $75,000 or $15.00 per share.

column represents the aggregate grant date fair value of stock awards computed in accordance with FASB ASC Topic 718.

amounts do not correspond to the actual value that will be recognized by the named directors from these awards.

Summers for services as a director.

On July 31, 2020, the Company issued 2,500 shares of the Company’s

common stock to Mr.

Summers, pursuant to the Company’s 2013 Equity Incentive Plan, in connection with his service as

a director, with such shares immediately vested.

Such shares were valued at $6,725 or $2.69 per share.

on July 31, 2020, the Company granted Mr.

Summers an option to purchase up to 25,000 shares of the Company’s common

stock in connection with his service as a director.

The exercise price of the option is equal to $2.69 per share, is fully

vested, and had a grant date fair value of $54,366.

columns represent the aggregate grant date fair value of stock awards and stock options computed in accordance with FASB ASC

These amounts do not correspond to the actual value that will be recognized by the named directors from these awards.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

following table sets forth certain information regarding beneficial ownership of our common stock as of March 24, 2021

(a) by each person known by us to own beneficially 5% or more of any class of our common stock, (b) by our named executive officers

and each of our directors (and director nominees) and (c) by all executive officers and directors of the Company as a group.

(a) by each person known by us to own beneficially 5% or more of any class of our common stock, (b) by our named executive

officers and each of our directors (and director nominees) and (c) by all executive officers and directors of the Company as a

number of shares beneficially owned by each stockholder is determined in accordance with SEC rules.

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rights held by such person that are currently convertible or exercisable or will become convertible or exercisable within 60 days

of March 24, 2020 are considered outstanding, although these shares are not considered outstanding for purposes of computing the

percentage ownership of any other person.

otherwise stated, the address of each 5% or greater beneficial holder is c/o Sigma Labs, Inc., 3900 Paseo del Sol, Santa Fe, New

Mexico 87507.

We believe, based on information provided to us, that each of the stockholders listed below has sole voting and

investment power with respect to the shares beneficially owned by the stockholder unless noted otherwise, subject to community

property laws where applicable.

and Address of Beneficial Owner

of March 24, 2021 are considered outstanding, although these shares are not considered outstanding for purposes of computing

the percentage ownership of any other person.

of March 24, 2021, there are no 5% or greater beneficial holders

of our common shares.

We believe, based on information provided to us, that each of the stockholders listed below has sole

voting and investment power with respect to the shares beneficially owned by the stockholder unless noted otherwise, subject to

community property laws where applicable.

of Beneficial Owner

of Shares Beneficially Owned

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Executive Officers and Directors

Ronald Fisher (2)

Darren Beckett (3)

Battinelli (5)

executive officers and directors as a group (8 persons) (8)

or Greater Stockholders

41,500 shares that may be acquired now or within 60 days of March 20, 2020 upon the exercise of outstanding stock options.

5,183 shares that may be acquired now or within 60 days of March 20, 2020 upon the exercise of outstanding stock options.

5,794 shares that may be acquired now or within 60 days of March 20, 2020 upon the exercise of outstanding stock options

3,084 shares that may be acquired now or within 60 days of March 20, 2020 pursuant to the conversion of shares of the

Company’s Series E Preferred Stock.

4,000 shares that may be acquired now or within 60 days of March 24, 2021 upon the exercise of outstanding stock

(a) 13,406 shares that may be acquired now or within 60 days of March 24, 2021 upon the

exercise of outstanding stock options;

(b) 6,166 shares that may be acquired now or within

60 days of March 24, 2021 pursuant to the conversion of the shares of the Company’s

Series E Preferred Stock;

and (c) 4,855 shares that may be acquired now or within 60

days of March 24, 2021 upon exercise of outstanding Class A Warrants.

1,655 shares that may be acquired now or within 60 days of March 24, 2021 upon the exercise of outstanding stock

1,944 shares that may be acquired now or within 60 days of March 24, 2021 upon the exercise of outstanding stock

(a) 4,000 shares that may be acquired now or within 60 days of March 24, 2021 upon the exercise of outstanding stock

and (b) 6,166 shares that may be acquired now or within 60 days of March 20, 2020 pursuant to the conversion

of the shares of the Company’s Series E Preferred Stock.

options, (b) 3,127 shares that may be acquired now or within 60 days of March 24, 2021 pursuant to the conversion of shares

of the Company’s Series E Preferred Stock, and (c) 2,428 shares that may be acquired now or within 60 days of March

24, 2021 upon exercise of outstanding Class A Warrants.

4,000 shares that may be acquired now or within 60 days of March 24, 2021 upon the exercise

of outstanding stock options.

4,000 shares that may be acquired now or within 60 days of March 24, 2021 upon the exercise of outstanding stock options.

and 12,334 shares that may be acquired now or within 60 days of March 20, 2020 pursuant to the conversion of the shares

of the Company’s Series E Preferred Stock.

49,321 shares that may be acquired now or within 60 days of March 20, 2020 pursuant to the conversion of the Company’s

Series E Preferred Stock The address of Carl I.

Schwartz is 3750 Las Vegas Blvd.

South, Apartment 4303, Las Vegas, Nevada,

34,463 shares that may be acquired now or within 60 days of March 24, 2021 upon the exercise of outstanding

stock options and 9,293 shares that may be acquired now or within 60 days of March 24, 2021 pursuant to the

conversion of the shares of the Company’s Series E Preferred Stock.

Compensation Plan Information

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of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights

Weighted-average

Exercise Price of Outstanding Options, Warrants and Rights

Outstanding Options,

of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column

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As of December 31, 2020,

the Company issued an aggregate of 50,886 shares of the Company’s common stock, as well as options to purchase up to 180,903

shares of the Company’s common stock, some of which are subject to vesting restrictions, pursuant to the Company’s

2013 Equity Incentive Plan.

On July 18, 2018, an amendment to our 2013 Equity Incentive Plan was approved by holders of at least

a majority of the issued and outstanding shares of common stock of the Company, to increase the number of shares of our common

stock subject to the 2013 Equity Incentive Plan to 240,000.

the Company issued an aggregate of 74,237 shares of the Company’s common stock, as well as options to purchase up

to 713,010 shares of the Company’s common stock, some of which are subject to vesting restrictions, pursuant to the

Company’s 2013 Equity Incentive Plan.

On June 15, 2020, an amendment to our 2013 Equity Incentive Plan was approved

by holders of at least a majority of the issued and outstanding shares of common stock of the Company, to increase the number

of shares of our common stock subject to the 2013 Equity Incentive Plan to 890,000.

On June 23, 2020, our Board of Directors 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

who will contribute to the Company’s long-range success;

(ii) provide incentives that align the interests of Service Providers

with those of the shareholders of the Company;

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

The Plan only provides

for incentive awards that are only made in the form of stock appreciation rights payable in cash (“SARs”).

of common stock were reserved in connection with the adoption of the Plan since no shares will be issued pursuant to the Plan.

As of December 31, 2020, the Company issued an aggregate of 127,679 SARs pursuant to the Plan.

Equity Compensation

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In connection

with our January 27, 2020 private placement of equity securities, we issued Dawson James a warrant to purchase up to 17,004

shares of common stock at an initial exercise price of $11.30.

with our January 27, 2020 private placement of equity securities, we issued Dawson James a warrant to purchase up to 17,004 shares

of common stock at an initial exercise price of $11.30.

During 2020, we issued Dawson James additional warrants to purchase

up to 21,870 shares of common stock at an exercise price of $11.70 per share in connection with the exercise of Series D Preferred

Warrants by certain institutional investors,

January 8, 2021, we entered into an underwriting agreement with H.C.

Wainwright & Co., for which compensation has been paid

with equity securities that have been previously disclosed in our filings with the SEC, including warrants issued in January 2021

to purchase up to 146,943 shares of common stock at an exercise price of $3.75 per share.

August 5, 2019 we entered into an agreement with MHZCI, LLC to provide investor relations services to the Company.

the terms of the agreement, as partial compensation for services to be rendered 5,000 shares of common stock of the Company are

to be issued to MHZCI, LLC as follows (1) 2,500 shares on or before the 10th day following the Effective Date of the agreement,

and (2) 2,500 shares on or before the 10th day following the six month anniversary of the agreement, if the agreement is still

then in effect.

the terms of the agreement, as partial compensation for services to be rendered 5,000 shares of common stock of the Company were

issued to MHZCI, LLC as follows (1) 2,500 shares on or before the 10th day following the Effective Date of the agreement,

and (2) 2,500 shares on or before the 10th day following the six-month anniversary of the agreement, if the agreement is

still then in effect.

Accordingly, on August 15, 2019 the Company issued 2,500 shares of common stock to MHZCI, LLC, and on February

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agreed to issue to Iron Dome Ventures LLC each month, beginning on the Effective Date, and subsequently on the 18th of each month

during the term of the agreement, a warrant to purchase 833 shares of the Company’s common stock at an exercise price of

during the first three months of the agreement, a warrant to purchase 833 shares of the Company’s common stock at

an exercise price of $0.10.

Effective November 18, 2020, we entered into a new six-month contract with Iron Dome Ventures,

LLC in which we granted 13,500 Stock Appreciation Rights, payable in cash only, with an exercise price of $2.47 per share.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

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with Directors and Officers

August 8, 2017, we engaged Garofalo & Associates, LLC, a limited liability company owned and controlled by Mr.

former director of the Company, to provide services to the Company as corporate development consultant and financial advisor.

Under the engagement letter agreement, Garofalo & Associates, LLC, is entitled to receive in consideration for its services

a monthly retainer of $3,000 in cash during the term of the engagement (the engagement may be terminated by both parties upon

30 days’

written notice), and (i) 10,500 shares of common stock of the Company upon the closing of an acquisition by the

Company of all or substantially all of the equity or assets (or a controlling interest therein) (the “Closing”) with

respect to a specified entity (the value of such shares would have been $238,350 if such shares would have been issued on August

8, 2017, based on a closing price per share of $22.70 on such date), and (ii) 7,500 shares of common stock of the Company upon

the Closing with respect to at least one of two other specified entities (the value of such shares would have been $170,250 if

such shares would have been issued on August 8, 2017, based on a closing price per share of $22.70 on such date).

As of the date

of this Annual Report, there are no agreements with respect to the acquisition by the Company of any third party, and there can

be no assurance that any agreements will be entered into or, if entered into, that any acquisition or other transaction will be

December 3, 2019, we entered into an employment letter agreement with Mark Ruport, effective as of December 3, 2019 (the “Effective

Date”), pursuant to which Mr.

Ruport has agreed to serve as our Executive Chairman on an “at-will”

Additionally,

Ruport was appointed to serve as a member of our Board of Directors, effective as of December 3, 2019, with a term expiring

at the 2021 annual meeting of stockholders.

Under the employment

letter agreement, Mr.

Ruport is entitled to (i) an annual base salary of $155,000 (such base salary is not subject to decrease,

but may be increased in the discretion of the Company’s Compensation Committee of the Board of Directors based on annual

or special case assessments of Mr.

Ruport’s performance and other factors), (ii) all benefits that we elect in our sole

discretion to provide from time to time to our other executive officers, and (iii) a grant of (1) a five-year stock option to

purchase up to 10,000 shares of common stock of the Company, which will have an exercise price equal to the closing price of the

Company’s common stock on the Effective Date, and will vest and become exercisable in full on the first month’s anniversary

of the Effective Date, and (2) a five-year stock option to purchase up to 40,000 shares of common stock of the Company, which

will have an exercise price equal to the closing price of the Company’s common stock on the Effective Date, and will vest

and become exercisable in equal (as closely as possible) monthly installments over three years from the Effective Date, provided,

in each case, that Mr.

Ruport remains an employee of the Company through such vesting date.

options will be on such other terms and provisions as are contained in the Company’s standard form nonqualified stock option

provided, however, that (x) upon the occurrence of a Change of Control (as defined in the employment letter agreement),

any unvested portion of the options as of the date of such Change of Control will immediately and automatically vest;

however, that, the options may be assumed or, in the discretion of the Board of Directors, an equivalent option may be substituted

by an applicable successor corporation or any subsidiary of the successor corporation in connection with a Change of Control),

and (y) in the event that the Board of Directors determines that Mr.

Ruport is unable to perform his duties as the Company’s

Executive Chairman due to an accident, illness or other event or condition which physically or mentally incapacitates him for

a period of 45 consecutive days (“Disability”), if he ceases to be employed by the Company as a result of a Disability,

the options will continue to vest and remain exercisable for the 5-year term of the options in accordance with the terms of the

option agreements.

Additionally,

during the term of his employment, Mr.

Ruport will be eligible to receive one or more bonuses relating to each fiscal year in

recognition of his achievement of individual and Company goals established by the Board of Directors from time to time.

the decision to provide any such bonuses and the amount and terms of any such bonuses will be in the sole discretion of the Board

of Directors.

have entered into an “at will”

employment agreement,

effective as of July 1, 2019, with Frank Orzechowski under which he was engaged to serve as our Chief Financial

Officer, Treasurer, Principal Accounting Officer and Corporate Secretary of the Company.

Orzechowski is entitled to receive

an annual base salary of $135,000.

Pursuant to the employment agreement, Mr.

Orzechowski was granted (1) a stock option to purchase

up to 250 shares of common stock of the Company, at an exercise price equal to $14.00 per share, which was the closing market

price of the Company’s common stock on July 1, 2019 (i.e., the Effective Date), and (2) to purchase up to 6,000 shares of

common stock of the Company, with an exercise price of $14.00, and will vest and become exercisable as follows:

387 shares will

vest and become exercisable on the one-year anniversary of the Effective Date, 900 shares will vest and become exercisable on

the second-year anniversary of the Effective Date, 1,413 shares will vest and become exercisable on the third-year anniversary

of the Effective Date, and 3,300 shares will vest and become exercisable on the fourth-year anniversary of the Effective Date,

provided, in each case, that Mr.

Orzechowski remains an employee of the Company through such vesting dates.

is eligible to participate in the Company’s 2013 Equity Incentive Plan, and is eligible to receive medical and dental benefits,

life insurance, short and long-term disability coverage, and to participate in the Company’s Section 125 cafeteria plan,

vision plan and 401K plan.

On February 19, 2020 the Company increased Mr.

Orzechowski’s annual base salary to $155,000 effective

March 1, 2020.

On January 27, 2020 the Company entered into a Securities Purchase

Agreement (the “SPA”) with certain of its directors (Mark K.

Ruport, Salvatore Battinelli and Frank Garofalo, a former

director) and Carl Schwartz, the Company’s largest shareholder.

Pursuant to the SPA, the Company issued and sold 333.33 shares

of the Company’s Series E Convertible Preferred Stock (the “Series E Preferred Stock”), and Class A Warrants

to purchase 48,544 shares of the Company’s Common Stock (the “Common Warrants”) for a total gross purchase price

The Series E Preferred Stock is initially convertible into 48,544 shares of Common Stock, and the Class A Warrants

have an initial exercise price of $11.30 per share.

employment agreement, effective as of July 1, 2019, with Frank Orzechowski under which

he was engaged to serve as our Chief Financial Officer, Treasurer, Principal Accounting Officer and Corporate Secretary of the

Orzechowski’s employment agreement, he was entitled to receive an annual base salary of $135,000, which

was increased to $155,000 effective March 1, 2020, and which was increased to $180,000 on January 1, 2021.

Pursuant to the employment

agreement, Mr.

Orzechowski was granted (1) a stock option to purchase up to 250 shares of common stock of the Company, at an exercise

price equal to $14.00 per share, which was the closing market price of the Company’s common stock on July 1, 2019 (i.e.,

the Effective Date), and (2) to purchase up to 6,000 shares of common stock of the Company, with an exercise price of $14.00,

and will vest and become exercisable as follows:

387 shares vested and became exercisable on the one-year anniversary of the Effective

Date, 900 shares will vest and become exercisable on the second-year anniversary of the Effective Date, 1,413 shares will vest

and become exercisable on the third-year anniversary of the Effective Date, and 3,300 shares will vest and become exercisable

on the fourth-year anniversary of the Effective Date, provided, in each case, that Mr.

Orzechowski remains an employee of the

Company through such vesting dates.

Orzechowski is eligible to participate in the Company’s 2013 Equity Incentive

Plan, and is eligible to receive medical and dental benefits, life insurance, short and long-term disability coverage, and to

participate in the Company’s Section 125 cafeteria plan, vision plan and 401K plan.

January 27, 2020, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain of its

directors (Mark K.

Ruport, Salvatore Battinelli and Frank Garofalo, a former director) and Carl Schwartz, who was the Company’s

largest shareholder.

Pursuant to the SPA, the Company issued and sold 333.33 shares of the Company’s Series E Convertible

Preferred Stock (the “Series E Preferred Stock”), and Class A Warrants to purchase 48,544 shares of the Company’s

Common Stock (the “Common Warrants”) for a total gross purchase price of $500,000.

The Series E Preferred Stock is

initially convertible into 48,544 shares of Common Stock (61,651 shares of common stock including the “make-whole dividend),

and the Class A Warrants have an initial exercise price of $11.30 per share.

Indemnification

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PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit Committee has approved Haynie & Company (“H&C”) to continue as our independent registered public accounting

firm to audit our financial statements for the fiscal year ending December 31, 2019.

the Company’s two most recent fiscal years, neither we nor anyone acting on our behalf consulted with H&C regarding

either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit

opinion that might be rendered on our financial statements, and neither a written report nor oral advice was provided to the Company

that H&C concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing

or financial reporting issue, or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv)

of Regulation S-K and the related instructions to Item 304 of Regulation S-K) or a reportable event (as defined in Item 304(a)(1)(v)

of Regulation S-K).

Paid to the Independent Registered Public Accounting Firm

following table sets forth fees billed with respect to the years ended December 31, 2019 and 2018:

following is a summary of the fees billed to the Company by Haynie & Company for professional services rendered

with respect to the years ended December 31, 2020 and 2019:

the above table, in accordance with the SEC’s definitions and rules, “audit fees”

are fees that Sigma Labs,

paid for professional services for the audit of our financial statements included in our Form 10-K and for services that

are normally provided by the registered public accounting firm in connection with statutory and regulatory filings or engagements;

paid for professional services for the audit of our financial statements included in our Form 10-K and review of the interim

financial statements included in quarterly reports, and for services that are normally provided by the registered public accounting

firm in connection with statutory and regulatory filings or engagements;

“audit-related fees”

are fees for assurance and related services that are reasonably related to the performance of

the audit or review of our financial statements;

and “tax fees”

are fees for assurance

and related services that are reasonably related to the performance of the audit or review of our financial statements;

and “tax

are fees for tax compliance, tax advice and tax planning.

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exhibits previously have been filed with the SEC and are incorporated herein by reference.

Placement Agency Agreement, dated as of March 13, 2019, between Sigma Labs, Inc.

and Dawson James Securities, Inc.

(filed as Exhibit 1.1 to the Company’s Current Report on Form 8-K filed March 14, 2019, and incorporated herein by reference).

Underwriting Agreement, dated July 30, 2019, by and among Sigma Labs, Inc.

and Aegis Capital Corp.

acting as the representative of the several underwriters named on Schedule I thereto (filed as Exhibit 1.1 to the Company’s Current Report on Form 8-K filed August 1, 2019, and incorporated herein by reference).

Amended and Restated Articles of Incorporation of the Company, as amended (previously filed by the Company as Exhibit 3.1 to the Company’s Form 10-K, filed on April 1, 2019, and incorporated herein by reference).

Agreement, dated January 8, 2021, by and among Sigma Labs, Inc.

Wainwright & Co., LLC, as the representative

for the underwriters named therein (filed as Exhibit 1.1 to the Company’s Current Report on Form 8-K filed January

12, 2021, and incorporated herein by reference).

Amended and Restated Articles of Incorporation of the Company, as amended .**

of Correction to Amended and Restated Articles of Incorporation, as filed with the Nevada Secretary of State on May 25, 2011

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2017, and incorporated herein by reference).

Certificate of Change Pursuant to NRS 78.209.

(filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed February 28, 2020, and incorporated herein by reference).

of Change Pursuant to NRS 78.209.

(filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed February 28,

2020, and incorporated herein by reference).

of Designation of Rights, Preference and Privileges of Series A Convertible Preferred Stock (filed as Exhibit 3.1 to the Company’s

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Exhibit 3.1 to the Company’s Current Report on Form 8-K filed June 26, 2018, and incorporated herein by reference).

Certificate of Designations (Series D Convertible Preferred Stock) (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on January 30, 2020 and incorporated herein by reference).

Certificate of Designations (Series EA Convertible Preferred Stock) (filed as Exhibit 10.7 to the Company’s Current Report on Form 8-K filed January 30, 2020 and incorporated herein by reference).

and Restated Bylaws of the Company, as amended (filed as Exhibit 3.1 to the Company’s Form 10-Q filed November 14, 2017,

for the period ended September 30, 2017, and incorporated herein by reference).

of Designations (Series D Convertible Preferred Stock) (filed as Exhibit 10.2 to the Company’s Current Report on Form

8-K filed on January 30, 2020 and incorporated herein by reference).

of Designations (Series E Convertible Preferred Stock) (filed as Exhibit 10.7 to the Company’s Current Report on Form

8-K filed January 30, 2020 and incorporated herein by reference).

Amended and Restated Bylaws of the Company, as amended .**

of Common Stock Purchase Warrant (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed April 6, 2018,

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incorporated herein by reference).

Form of Common Stock Purchase Warrant.(filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed May 8, 2019, and incorporated herein by reference).

Form of Placement Agent Warrant (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K filed May 8, 2019, and incorporated herein by reference).

Form of Institutional Common Warrant ( filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed January 30, 2020, and incorporated herein by reference).

Form of Preferred Warrant ( filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed January 30, 2020, and incorporated herein by reference).

of Common Stock Purchase Warrant.(filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed May 8, 2019,

and incorporated herein by reference).

of Placement Agent Warrant (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K filed May 8, 2019, and

incorporated herein by reference).

of Institutional Common Warrant (filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed January 30,

2020, and incorporated herein by reference).

Form of Class A Warrant(filed as Exhibit 10.8 to the Company’s Current Report on Form 8-K, filed January 30, 2020, and incorporated herein by reference).

Form of Common Stock Purchase Warrants (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed April 3, 2020, and incorporated herein by reference).

Form of Underwriter Common Stock Purchase Warrant (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed January 12, 2021, and incorporated herein by reference).

Form of Warrant to Purchase Common Stock (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K filed January 12, 2021, and incorporated herein by reference).

Description of Securities.

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Registration Statement on Form S-1, filed on July 28, 2016, and incorporated herein by reference).*

of unwritten Employment Agreement between Sigma Labs, Inc.

and John Rice entered into on August 8, 2017 (filed as Exhibit

10.2 to the Company’s Form 10-Q, filed on November 14, 2017, for the period ended September 30, 2017, and incorporated

herein by reference).*

1, dated September 18, 2017, to Employment Offer Letter Agreement, effective August 10, 2015, between Sigma Labs, Inc.

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Form 10-Q, filed on November 14, 2018, for the period ended September 30, 2018, and incorporated herein by reference).*

Securities Purchase Agreement, dated as of May 7, 2019, between the Company and the Purchaser (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed May 8, 2019, and incorporated herein by reference).

Employment letter agreement, effective as of July 1, 2019, between the Company and Frank D.

(filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed August 14, 2019, and incorporated herein by reference) *

2013 Equity Incentive Plan, as amended, of Sigma Labs, Inc.

(previously filed by the Company as Annex A to the Company’s Definitive Proxy Statement on Schedule 14A filed on June 18, 2019, and incorporated herein by reference).*

Employment letter agreement, effective as of December 3, 2020, between the Company and Mark Ruport.***

Purchase Agreement, dated as of May 7, 2019, between the Company and the Purchaser (filed as Exhibit 10.1 to the Company’s

Current Report on Form 8-K filed May 8, 2019, and incorporated herein by reference).

letter agreement, effective as of July 1, 2019, between the Company and Frank D.

(filed as Exhibit 10.2 to the

Company’s Quarterly Report on Form 10-Q filed August 14, 2019, and incorporated herein by reference) *

Sigma Labs, Inc.

2013 Equity Incentive Plan, as Amended (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 19, 2020 and incorporated herein by reference).

Employment letter agreement, effective as of December 3, 2020, between the Company and Mark Ruport (filed by the Company as Exhibit 10.15 to the Company’s Form 10-K, filed on March 24, 2020, and incorporated herein by reference).*

Securities Purchase Agreement (Institutional Investors) (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed January 27, 2020, and incorporated herein by reference).

Registration Rights Agreement (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed January 27, 2020, and incorporated herein by reference).

Securities Purchase Agreement (Other Investors) ( filed as Exhibit 10.6 to the Company’s Current Report on Form 8-K, filed January 27, 2020, and incorporated herein by reference).

Private Placement Agreement ( filed as Exhibit 10.9 to the Company’s Current Report on Form 8-K, filed January 27, 2020, and incorporated herein by reference).

Form of Limited Waiver ( filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed February 4, 2020, and incorporated herein by reference).

Rights Agreement (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed January 27, 2020, and incorporated

herein by reference).

Purchase Agreement (Other Investors) (filed as Exhibit 10.6 to the Company’s Current Report on Form 8-K, filed January

27, 2020, and incorporated herein by reference).

Placement Agreement (filed as Exhibit 10.9 to the Company’s Current Report on Form 8-K, filed January 27, 2020, and

incorporated herein by reference).

Securities Purchase Agreement, dated as of April 2, 2020, between the Company and Purchasers (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed April 3, 2020, and incorporated herein by reference).

Sigma Labs, Inc.

2020 Stock Appreciation Rights Plan (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 29, 2020 and incorporated herein by reference).*

Form of Stock Appreciation Rights Agreement (Employees;

2020 Stock Appreciation Rights Plan) (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed June 29, 2020 and incorporated herein by reference).*

Form of Stock Appreciation Rights Agreement (Non-employee Directors;

2020 Stock Appreciation Rights Plan) (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed June 29, 2020 and incorporated herein by reference).

Form of Waiver (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 12, 2021, and incorporated herein by reference).

of Haynie & Company.**

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may voluntarily include a summary of information required by Form 10-K under this Item 16.

We have elected not to include

such summary information.

We have elected not to include such

summary information.

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report

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We believe that our audits provide a reasonable basis for our opinion.

Audit Matters

critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was

communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material

to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of

the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not,

by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts

or disclosures to which it relates.

Recognition –

Multiple Deliverables in Revenue Contracts

of the Matter:

discussed in Note 1 to the financial statements, Sigma Labs, Inc.’s revenue is derived primarily from the sale of software,

the related hardware suite, and engineering services.

The Company’s contracts with customers typically include the promise

to transfer multiple goods and/or services to the customer.

Management must assess whether each promised good or service is distinct

for the purpose of identifying the performance obligations within the contract and must then determine and allocate the transaction

price to the performance obligations.

This assessment can be subjective and requires management to make judgments about the individual

promised goods or services and whether such goods or services are separable and distinct from the other aspects of the contractual

relationship.

management’s assessment and recognition of revenue can be complex, involves judgment, and is based on a thorough understanding

of the Company’s offerings.

we Addressed the Matter in Our Audit:

obtained a thorough understanding of the controls the Company has in place to perform this assessment including walk-throughs

of the key controls and analysis of whether the controls are designed and operating effectively.

To evaluate Sigma Labs Inc.’s

assessment of performance obligations and allocation of price, our audit procedures included, among others, reading and evaluating

management’s assumptions used to determine the distinct performance obligations and price allocations.

We compared the stand-alone

price for each performance obligation to the allocated prices to ensure the allocation was reasonable.

We also obtained confirmations

from customers verifying the terms of the contracts.

Haynie & Company

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Receivable, net

Current Assets

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Current Liabilities

& Contingencies

Appreciation Rights

Act Deferred Payroll Taxes

Long-Term Liabilities

Stockholders’

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10,000,000 shares authorized;

none issued and outstanding

715 and 0 issued and outstanding, respectively

Stock, $0.001 par;

2,250,000 shares authorized;

12,000,000 authorized;

5,995,320 and 1,403,759 issued and outstanding, respectively

Paid-In Capital

(26,095,594 )

(19,774,745 )

Stockholders’

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& Public Relations

Organizational

& Professional Service Fees

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INCOME (EXPENSE)

Bad Debt Expense

Rate Gain (Loss)

on Disposal of Assets

on Dissolution of Joint Venture

Other Income (Expense)

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for Income Taxes

$ (6,320,849 )

$ (5,574,163 )

Loss applicable to Common Stockholders

$ (6,320,849 )

$ (5,589,288 )

Loss per Common Share - Basic and Diluted

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The Years Ended December 31, 2020 and 2019

Shares Outstanding

Paid-in Capital

December 31, 2018

$ (19,774,745 )

issued for services –

net of forfeitures

and warrants sold in public offering, net of offering costs

preferred shares sold

issued for conversion of preferred

Shares issued

from exercise of warrants

issued for note & accrued interest conversion

issued for cashless exchange of warrants

dividends paid upon conversion

based compensation

Balance December

$ (19,774,745 )

issued for services –

net of forfeitures

and warrants sold in public offering, net of offering costs

issued for services

sold in PIPE, net of offering costs

Shares issued

from exercise of warrants

and Warrants Issued in Public Offering

Issued for Exercise of Warrants

Proceeds in Public Offering

issued for cashless exchange of unit purchase options

based compensation

Issued for Cashless Exchange of UPO’s

Sold in Private Placement

Issued to Directors for Services

Issued for Third Party Services

Awarded to Employees

December 31, 2019

$ (26,095,594 )

Shares Sold in Public Offering

Stock Dividends

Shares Issued for Conversion of Preferred Shares

Shares Issued for Conversion of Series D Prefunded Warrants

Shares issued for Exercise of Preferred Warrants

Issued to Directors for Services

Issued for Third Party Services

Awarded to Employees

of Fractional Shares from Reverse Split

December 31, 2020

(33,105,008 )

accompanying notes to financial statements

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of Cash Flows

$ (6,320,849 )

$ (5,574,163 )

to reconcile Net Loss to Net Cash used in operating activities:

and Amortization

Based Compensation

Issued for Third Party Services

on Write-off of Asset

Based Compensation - Employees

Based Compensation - Third Party Services

Based Compensation - Directors

in assets and liabilities:

portion of Stock Appreciation Rights

Term portion of Deferred

Payroll Taxes under the CARES Act

CASH USED IN OPERATING ACTIVITIES

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Received from Notes Receivable

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

Proceeds from issuance of Convertible Preferred and Warrants

Proceeds from issuance of Common Stock and Warrants

of Joint Venture

CASH USED IN INVESTING ACTIVITIES

Proceeds from Public and Private Issuances of Securities

Offering Costs

of Note Payable

from Exercise of Warrants

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investing and financing activities disclosure:

of Convertible Debt for Stock

Stock Issued for Conversion of Series B&C Preferred

Stock Issued for Cashless Exchange of Warrants

Stock Issued for Cashless Exchange of Unit Purchase Options

of Common Shares for Preferred Dividends

of Cash Received for:

of Preferred Stock for Exercise of Preferred Warrants

noncash operating activities disclosure:

of Common Stock and Warrants for services

of Securities for services

of cash paid for:

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refer to Sigma Labs, Inc.

Reverse Stock Split

- Effective February 27, 2020, our Articles of Incorporation were amended to provide for a reverse stock split of the outstanding

shares of our common stock on a 1-for-10 basis (the “Reverse Stock Split”), and a corresponding decrease in the number

of shares of our common stock that we are authorized to issue (the “Share Decrease”).

The effects of the stock split

have been retroactively reflected to all periods presented.

Stock Split - Effective February 27, 2020, our Articles of Incorporation were amended to provide for a reverse stock split

of the outstanding shares of our common stock on a 1-for-10 basis (the “Reverse Stock Split”), and a corresponding

decrease in the number of shares of our common stock that we are authorized to issue (the “Share Decrease”).

of the stock split have been retroactively reflected to all periods presented.

of Presentation –

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cash flows at December 31, 2020 and 2019 and for the periods then ended have been made.

Continuing Operations

Operations –

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

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

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

2019, the Company relied on both public and private offerings to finance the commencement of commercialization by entering test

and evaluation programs with large potential customers, both end-users and OEMs.

On March 15, 2019, the Company closed a public

offering of equity securities resulting in net proceeds of approximately $1,679,230, after deducting placement agent commissions

and other offering expenses payable by the Company.

In May 2019, the Company closed a private placement of equity securities resulting

in net proceeds of approximately $515,000, after deducting placement agent commissions and other offering expenses payable by

In August 2019, the Company closed a public offering of equity securities resulting in net proceeds of approximately

$1,971,000, after deducting placement agent commissions and other offering expenses payable by the Company.

In September 2019,

Aegis Capital Corp.

partially exercised its over-allotment option granted by the Company in the foregoing August 2019 public offering

resulting in net proceeds of $148,800 after deducting placement agent commissions.

The transition

from 2018 and 2019 led into 2020 such that the continuing operations of the Company are no longer dependent upon financing the

cost of product development in the absence of revenues, but rather now upon our abilities to finance our efforts to successfully

ramp up commercialization, thus earning the product validation of both customer licensing and purchases and creating a dynamic

in which public and private offerings facilitate the growth of revenues, thus attracting investor support for continuing investment

even as the revenues begin the reduction of the company’s dependence on capital raises over time.

In January 2020, the

Company closed two private placements of equity securities resulting in net proceeds of approximately $1,711,124

after deducting placement agent commissions and other offering expenses payable by the Company.

As a result, the Company currently has

sufficient cash and working capital to fund operations through the end of the first quarter of 2020 and is anticipating that contracts

may be closed during fiscal 2020 generating additional cash flow in the near-term.

In addition, the Company has access

to public and private markets from which to derive additional financing to sustain operations beyond that term, if required;

however the Company is unable to predict the extent to which the novel coronavirus may affect the financial markets and the Company’s

access to such markets.

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

If we fail to obtain

sufficient funding when needed, we may be forced to delay, scale back or eliminate all or a portion of our commercialization efforts

and operations.

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

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

2020, the Company relied on both public and private offerings to finance the commencement of commercialization by entering

test and evaluation programs with large potential customers, both end-users and OEMs.

In January 2020, we completed two private

placements consisting of shares of our newly created Series D and Series E Preferred Stock, warrants to purchase additional shares

of Series D Preferred Stock and warrants to purchase shares of our Common Stock resulting in net cash proceeds to us of approximately

On March 27, 2020, pursuant to the terms of the Agreement, we forced the exercise of a portion of the warrants to

purchase our Series D Preferred Stock which resulted in net cash proceeds to the Company of $460,000.

On April 6, 2020, the Company

closed an offering of equity securities in which the Company sold and issued to certain institutional investors (a) 493,027 shares

of the Company’s common stock (the “Common Shares”) and pre-funded warrants (the “Pre-funded Warrants”)

to purchase up to 22,438 shares of the Company’s common stock, and (b) Series A Warrants (the “Private Warrants”)

to purchase an aggregate of 515,465 shares of the Company’s common stock pursuant to a private placement resulting in net

proceeds of approximately $1,230,000.

On April 14, 2020 we were granted a loan from BOKF, NA dba Bank of Oklahoma in the aggregate

amount of $361,700, pursuant to the Paycheck Protection Program (the “

) under Division A, Title

I of the Coronavirus Aid, Relief and Economic Security Act (the “

CARES Act ”

), which was enacted March

The Company used the entire loan proceeds to fund payroll expenses, and as such, the loan was forgiven in full on January

During 2020, 6,146 Series D Preferred Warrants were exercised by institutional investors, resulting in net proceeds

to the company of 5,820,998.

In January 2021, the Company closed a public offering of our common stock resulting in net proceeds

of approximately $4,532,444 after deducting underwriting discounts and commissions and other offering expenses payable by the

continuing operations of the Company are no longer solely dependent upon financing the cost of product development in the absence

of revenues, but rather upon our abilities to finance our efforts to successfully ramp up commercialization, thus earning the

product validation of both customer licensing and purchases and creating a dynamic in which public and private offerings facilitate

the growth of revenues.

a result, the Company currently has sufficient cash and working capital to fund operations through the end of 2021 and

is anticipating that contracts may be closed during fiscal 2021 generating additional cash flow in the near-term.

the Company has access to public and private markets from which to derive additional financing to sustain operations beyond that

term, if required;

however, the Company is unable to predict the extent to which the novel coronavirus may affect the financial

markets and the Company’s access to such markets.

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

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

of our commercialization efforts and operations.

Per Share –

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At December 31, 2020 and 2019, the Company had the following common shares underlying these instruments:

Year Ended December 31,

Stock Options

Convertible Note Payable

Total Underlying Common Shares

Ended December 31,

Stock Warrants

Underlying Common Shares

and Equipment –

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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.

values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable.

cash flows and the estimated liquidation value of such long-lived assets and provides for impairment if such undiscounted

cash flows are insufficient to recover the carrying amount of the long-lived assets.

If impairment exists, an adjustment is made

to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value.

Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable.

Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value.

$50,255 of dental patents

were written off in January of 2018, and $23,909 of patents related to PrintRite3D ®

Contour were written off in

December of 2019.

No patents were written

off in 2020, and $23,909 of patents related to PrintRite3D ®

Contour were written off in December of 2019.

Equivalents - The Company considers all highly liquid investments with an original maturity of three months or less at date

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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.

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

first-out (FIFO) method.

and Development –

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the years ended December 31, 2020 and 2019 were $351,404 and $647,994, respectively.

2 - Notes Receivable

On May 1, 2017, the Company made a loan

in the principal amount of $250,000 to Jaguar Precision Machine, LLC, a New Mexico limited liability company (“Jaguar”),

pursuant to a Secured Convertible Promissory Note dated May 1, 2017 delivered by Jaguar to the Company.

The loan bears interest

at the rate of 7% per annum, was originally due and payable in full on August 1, 2018, is secured by certain assets of Jaguar,

and is convertible at the Company’s option into 10% of the outstanding shares of the common stock of Jaguar unless Jaguar

exercises its right under specified circumstances to repay all principal and accrued interest on the loan.

On June 15, 2018, the

Company received a $150,000 payment from Jaguar, $17,803 of which was applied to accumulated interest through that date and $132,197

was applied to the principal balance of the note.

The December 31, 2018 principal balance of the note was $117,803 and the accumulated

interest balance due was $4,110.

During the year ended 2019 payments totaling $45,000 were received.

The payments were

applied first to the accumulated interest balance on the note and then to the remaining principal balance.

On September 5, 2019,

Jaguar paid the promissory note in full, including accrued interest.

2 - Inventory

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Property and Equipment

The following is a summary of property and equipment, less accumulated

depreciation, as of December 31, 2019 and 2018:

following is a summary of property and equipment, less accumulated depreciation, as of December 31, 2020 and 2019:

Ended December 31,

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at that time.

2019, the Company wrote off $23,909 of patent costs related to PrintRite3D ®

Contour, which application was allowed

In addition, $91,863 of costs related to patents issued to us during 2019 were reclassified from provisional patent

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

2020, $70,175 of costs related to patents issued to us during 2020 were reclassified from provisional patent application

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

following is a summary of definite-life intangible assets less accumulated amortization as of December 31, 2020 and 2019, respectively:

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5 - Notes Payable

In April 2018, the Company entered into

an amendment of the remaining $100,000 Secured Convertible Promissory Notes and Warrants which extended the payment

due date to October 18, 2018, deleted the covenant providing for acceleration of the payment due date in the event of a public

offering closing of at least $3,000,000 and required the Company to pay the balance of accrued and unpaid interest as of the effective

date of the amendment.

The Company paid the $8,761 balance of accrued interest to the holder in April 2018.

May 2018 the Holder Converted $50,000 of the Note principal into 2,500 shares of common stock and executed a cashless exercise

of 2,400 of the warrants for an additional 480 shares of common stock.

October 2018, the Note was amended pursuant to which the due date was extended to April 18, 2019.

Under the amendment, Sigma paid

the $3,444 total accrued interest balance as of October 18, 2018 and agreed to make future payment dates of accrued interest on

December 31, 2018 and April 18, 2019.

April 2019, the Note was amended pursuant to which the due date was extended to October 18, 2019.

Under the amendment, Sigma paid

the $2,514 total accrued interest balance through April 18, 2019 and agreed to make future payment dates of accrued interest on

October 19, 2019.

October 2019, the Note was amended pursuant to which the due date was extended to January 3, 2020.

Under the amendment, Sigma

paid the $2,556 total accrued interest balance through October 18, 2019 and agreed to make future payment dates of accrued interest

on January 3, 2020.

December 31, 2019 the Company had the remaining $50,000 Convertible Note outstanding plus accrued interest of $1,028.

January 31, 2020, the Company paid off its Secured Convertible Promissory Note in full in the amount of $56,458, including accrued

interest of $1,458 and a late fee penalty of $5,000.

Paycheck Protection Plan Loan

April 14, 2020, the Company was granted a loan from BOKF, NA dba Bank of Oklahoma in the aggregate amount of $361,700, pursuant

to the Paycheck Protection Program (the “

) under Division A, Title I of the Coronavirus Aid, Relief

and Economic Security Act (the “

CARES Act ”

), which was enacted March 27, 2020.

Under the terms of the

PPP, PPP loans and accrued interest are forgivable after twenty-four weeks as long as the borrower uses the loan proceeds for

eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels.

The amount of loan forgiveness

will be reduced if the borrower terminates employees or reduces salaries during the forgiveness period.

of December 31, 2020, the Company has used the entire loan proceeds to fund its payroll expenses.

As a result, the Company believes

that it has met the PPP eligibility criteria for forgiveness and has concluded that the loan represents, in substance, a government

grant that is expected to be forgiven.

As such, the Company has recognized the entire loan amount as Other Income at December

January 2021, the Company received notice from the lender that the entire amount of the loan had been forgiven.

Deferral of Social Security Tax Payments

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

tax due during the “payroll tax deferral period”.

The payroll tax deferral period began on March 27, 2020 and ended on

December 31, 2020.

At December 31, 2020 the total amount of such deferral was $75,455.

Per the terms of the deferral program,

50% of the deferred amount is due on December 31, 2021, and the remaining 50% is due on December 31, 2022 at 0% interest.

Stockholders’

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of our common stock that we are authorized to issue (the “Share Decrease”).

effects of the stock split have been retroactively reflected to all periods presented.

In January 2019, the Company issued

20,000 shares of common stock to directors valued at $15.00 per share, or $300,000, with such shares to vest ratably over four

quarterly installments, subject in each case to such director’s continuing service as a director.

The effects of the stock split have been

retroactively reflected to all periods presented.

March 27, 2020, at a special shareholders’

meeting, our authorized shares of common stock were increased from 2,250,000

to 8,000,000.

At our annual shareholders’

meeting held on June 15, 2020, our authorized shares of common stock were increased

from 8,000,000 to 12,000,000.

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.

On December 4, 2020, the Company issued 22,438 shares of common stock for the exercise of the pre-funded

the twelve months ended December 31, 2020, the Company issued 3,272,048 shares of common stock in exchange for the conversion

of 7,404 shares of Series D Convertible Preferred stock, and 774,940 shares of common stock as in-kind payment of preferred stock

the twelve months ended December 31, 2020, the Company issued 25,851 shares of common stock for services.

January 2019, the Company issued 20,000 shares of common stock to directors valued at $15.00 per share, or $300,000, with such

shares vesting ratably over four quarterly installments.

in January 2019, the Company issued 8,843 shares of common stock upon the cashless exercise of Unit Purchase Options issued in

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an exercise price of $10.80 resulting in gross cash proceeds of $75,848.

In March 2019, the Company issued 150

shares of common stock valued at $20.00 per share to the Company’s Vice President of Business Development in connection

with his achievement of performance milestones, with such shares vesting immediately.

March 2019, the Company issued 150 shares of common stock valued at $20.00 per share to the Company’s Vice President of

Business Development in connection with his achievement of performance milestones, with such shares vesting immediately.

in March 2019, the Company closed a public offering of equity securities in which it issued 140,080 shares of common stock and

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in net proceeds of approximately $1,971,000, after deducting commissions and other offering expenses payable by the Company.

On August 15, 2019, the Company issued

2,500 shares of common stock valued at $6.84 per share to MHZCI, LLC, an investor relations firm engaged by the Company,

as partial compensation for services to be rendered.

August 15, 2019, the Company issued 2,500 shares of common stock valued at $6.84 per share to MHZCI, LLC, an investor relations

firm engaged by the Company, as partial compensation for services to be rendered.

September 13, 2019, Aegis Capital Corp.

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deducting commissions.

During 2018, the Company issued 20,000

shares of common stock valued at $12.80 per share as compensation for serviced, totaling $256,264.

May 2018, we issued an aggregate of 100,000 shares of common stock upon conversion of the 1,000 shares of Series B Preferred Stock

issued in April 2018 (as described below under “Preferred Stock”).

May 2018, the Company issued 2,980 shares of common stock as the result of a conversion of the $50,000 principal balance

of Notes Payable and the cashless exercise of 2,400 warrants.

June 2018, as part of its public offering of equity securities described in Note 1, the Company issued 350 shares of Series C

convertible preferred stock, 204,000 shares of common stock, and warrants to purchase a total of 71,700 shares of common stock

(including the warrants described under “Preferred Stock”

below that were issued on June 26, 2018).

Each warrant has

an initial price of $10.80 per share.

The net proceeds to the Company were approximately $2,068,900 after commissions and other

offering expenses.

The Company also issued to Dawson James Securities, Inc., its placement agent in the public offering, a Unit

Purchase Option to acquire up to 19,120 Units, at an exercise price of $12.50 per Unit, consisting of 19,120 shares of common

stock and warrants to purchase up to 5,736 shares of common stock at an exercise price of $10.80 as compensation.

August and October 2018, the Company issued 35,000 shares of common stock upon conversion of 350 shares of Series C Preferred

Stock issued in June 2018 (as described below under “Preferred Stock”).

October and December 2018, the Company issued 17,790 shares of common stock as the result of the exercise of warrants resulting

in cash proceeds of $192,132.

previous years and 2019, the Company issued to various employees, directors, and contractors shares of the Company’s common

2020 and 2019, 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”).

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cost related to these issues was recognized.

of December 31, 2019, and 2018, the balance of unvested compensation to be recognized was $0 and $21,355, respectively, and is

recorded as prepaid stock compensation as of those dates.

Company is authorized to issue 10,000,000 shares of preferred stock, $0.001 par value.

No shares of preferred stock were issued

and outstanding at December 31, 2019 or 2018.

April 2018, the Company issued 1,000 shares of the Company’s newly-created non-voting Series B Convertible Preferred Stock,

which were convertible into 100,000 shares of common stock and warrants to purchase an aggregate of 75,000 shares of the Company’s

common stock, for an aggregate purchase price of $1,000,000.

The Series B Convertible Preferred Stock was fully converted into

shares of common stock during 2018.

The warrants have an initial exercise price of $14.70 per share, the closing price of

the Company’s common stock reported on The NASDAQ Capital Market on April 6, 2018, subject to adjustment in certain circumstances.

The net proceeds to the Company were approximately $877,500 after commissions and other offering expenses.

The Company also issued

to Dawson James Securities, Inc., its placement agent in the foregoing private placement, warrants to purchase up to 14,000 shares

of common stock, at an exercise price of $14.70 per share, as compensation.

The warrants issued pursuant to this transaction

are unexercised as of December 31, 2019.

June 2018, as part of the public offering described in Note 1, the Company issued 350 shares of the Company’s newly-created

non-voting Series C Convertible Preferred Stock, which were convertible into 35,000 shares of common stock, and warrants to purchase

an aggregate of 10,500 shares of the Company’s common stock.

The warrants have an initial exercise price of $10.80 per share,

11% above the closing price of the Company’s common stock reported on The NASDAQ Capital Market on June 26, 2018, subject

to adjustment in certain circumstances.

July 2019, at the Annual Meeting of Stockholders of the Company, the Company’s stockholders approved an amendment to the

2013 Plan to increase the number of shares of the Company’s common stock reserved for issuance under the 2013 Plan by 75,000

715 and 0 shares of

preferred stock were issued and outstanding at December 31, 2020 and 2019, respectively.

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

(the “Institutional Private Placement”).

Pursuant to the SPA, 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 an initial stated value of $1,000 per share (the “Stated

Value”).

Dividends accrue at a dividend rate of 9% per annum (subject to increase upon the occurrence (and during the continuance)

of certain triggering events described therein) and, on a monthly basis, shall be payable in kind by the increase of the 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).

In addition, 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 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 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 being redeemed.

December 31, 2020 there were 382 shares of Series D Convertible Preferred stock outstanding, which if converted as of December

31, 2020, including the make-whole dividends, would have resulted in the issuance of 181,374 shares of common stock.

with the Institutional Private Placement, the Company entered into a Securities Purchase Agreement (the “SPA”) with

certain of its directors and the Company’s largest shareholder (the “Other Private Placement”).

the SPA, the Company issued and sold 333 shares of the Company’s newly created Series E Convertible Preferred Stock (the

“Series E Preferred Stock”).

Dividends accrue at a dividend rate of 9% per annum and, on a monthly basis, shall be

payable in kind by the increase of the Stated Value of the Series E Preferred Shares by said amount.

The Series E Preferred Stock

is initially convertible into 48,544 shares of Common Stock.

December 31, 2020, all of the issued Series E Convertible Preferred Stock were outstanding, which if converted as of December

31, 2020, including the make-whole dividends, would have resulted in the issuance of 61,651 shares of common stock.

June 15, 2020, at the Annual Meeting of Stockholders of the Company, the Company’s stockholders approved an amendment to

the 2013 Plan to increase the number of shares of the Company’s common stock reserved for issuance under the 2013 Plan by

650,000 shares of our common stock to a total of 890,000 shares.

As of December 31, 2019, an aggregate of 8,211 shares of common stock

were reserved for issuance under the 2013 Plan.

During 2019, the Company granted a total

of 100,326 options to 22 employees and 2 consultants with vesting periods ranging from immediately/upon issue to 4 years beginning

January 1, 2019.

In 2019, 38,143 options vested and $494,240 of compensation cost was recognized during the year.

December 31, 2019, there were options to purchase 180,903 shares issued and outstanding under the 2013 Plan.

Of this amount, there

are vested options exercisable for 88,163 shares of common stock.

As of December 31, 2020, there were 152,753 shares available

for issuance under the 2013 Plan.

2020, the Company granted a total of 579,998 options to 19 employees, 4 directors, and 5 consultants with

vesting periods ranging from immediately upon issue to three years beginning May 1, 2020.

In 2020, 294,373

options vested and $854,217 of compensation cost was recognized during the year.

As of December 31, 2020, there were

options to purchase 663,010 shares issued and outstanding under the 2013 Plan.

Of this amount, there are vested options

exercisable for 349,642 shares of common stock.

No options were exercised during the year ended December 31, 2020.

2018, the Company granted a total of 53,433 options to 18 employees and 1 consultant with vesting periods ranging from immediately/upon

issue to 4 years beginning February 2018.

In 2018, 41,549 options vested and $868,015 of compensation cost was recognized during

As of December 31, 2018, there were options to purchase 82,627 shares issued and outstanding under the 2013 Plan.

2019, the Company granted a total of 100,326 options to 22 employees and 2 consultants with vesting periods ranging from immediately

upon issue to 4 years beginning January 1, 2019.

In 2019, 38,143 options vested and $494,240 of compensation cost was recognized

during the year.

As of December 31, 2019, there were options to purchase 180,903 shares issued and outstanding under the 2013

Of this amount, there are vested options exercisable for 88,163 shares of common stock.

No options were exercised during the year

ended December 31, 2018.

No options were exercised during

the year ended December 31, 2019.

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

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share-based compensation expense included in the statements of operations for the years ended December 31, 2020 and 2019 is $596,842,

of which $494,240 is related to stock options, and $1,145,530, of which $868,015 is related to stock options, respectively.

There was no capitalized share-based compensation cost as of December 31, 2019 and 2018, and there were no recognized tax benefits

during the years ended December 31, 2019 and 2018.

of which $573,232 is related to stock options, and $497,240, of which $ 494,740 is related to stock options,

respectively.

There was no capitalized share-based compensation cost as of December 31, 2020 and 2019, and there were no recognized

tax benefits during the years ended December 31, 2020 and 2019.

estimate the value of an award, the Company uses the Black-Scholes option-pricing model.

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interest rate

105.2-112.1 %

104.9-137.3 %

life (in years)

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

of our common stock for those awards that have an exercise price currently below the $3.38 closing price of our Common

Stock on December 31, 2020.

All of the 2020 option grants have an exercise price currently below $3.38.

December 31, 2020, there was $1,029,056 of unrecognized share-based compensation expense related to unvested share options

with a weighted average remaining recognition period of 2.90 years.

Appreciation Rights

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 success;

(ii) provide incentives that align the interests of Service Providers with those of the shareholders of the

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 shares of common stock were reserved in connection

with the adoption of the Plan since no shares will be issued pursuant to the Plan.

may be granted to any Service Provider.

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

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

The “Spread”

is the difference

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

the date of exercise of the SAR.

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

the date of grant of the SAR.

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

and conditions of each SAR, including, without limitation, the exercise price and medium of payment and vesting provisions, and

to specify the provisions of the SAR Agreement relating to such grant.

June 23, 2020, the Company granted, pursuant to the Plan, (i) 60,094 SARs to its President and Chief Executive Officer, (ii) 12,019

SARs 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 exercise price of each such SAR is $2.63, which was the closing price of the Company’s

common stock on the date of grant.

Such 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 immediately 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.

On November 19, 2020, we granted 13,500 SARs to a consultant as partial compensation for services pursuant to the consulting agreement.

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 are revalued at each reporting date in accordance with ASC 718 “Compensation-Stock

Compensation”, and any changes in fair value are reflected in income as of the applicable reporting date.

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

months ended December 31, 2020:

interest rate

life (in years)

activity for the twelve months ended December 31, 2020 was as follows:

outstanding at December 31, 2019

outstanding December 31, 2020

expected to vest in the future as of December 31, 2020

exercisable at December 31, 2020

vested, exercisable, and options expected to vest at December 31, 2020

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

of our common stock for those awards that have an exercise price currently below the $3.38 closing price of our common stock on

December 31, 2020.

Six of the 2019 option grants have an exercise price currently below $9.82.

December 31, 2019, there was $793,796 of unrecognized share-based compensation expense related to unvested share options with

a weighted average remaining recognition period of 4.88 years.

At December 31, 2019, the Company had

outstanding warrants to purchase a total of 363,727 shares of common stock;

162,150 warrants at an exercise price of $40.00 per

share, which if not exercised, will expire on February 21, 2022, 89,000 warrants at an exercise price of $14.70 per share, which

if not exercised, will expire on October 07, 2023, 46,887 warrants at an exercise price of $10.80 per share, which if not exercised,

will expire on June 26, 2023, 42,024 warrants at an exercise price of $16.10 per share, which if not exercised, will expire on

March 15, 2024, 20,000 warrants with an exercise price of $15.60 per share, which if not exercised, will expire on May 7,

2024, 2,000 warrants with an exercise price of $17.50 per share, which if not exercised, will expire on May 7, 2024, and

1,666 warrants with an exercise price of $0.10, which if not exercised, will expire on November 18, 2022.

All of the 2020 SARs grants have an exercise price currently below $3.38.

December 31, 2020, there was $216,149 of unrecognized share-based compensation expense related to unvested SARs with a weighted

average remaining recognition period of 2.48 years.

December 31, 2020, the Company had outstanding warrants to purchase a total of 1,881,429 shares of common stock.

warrants have exercise prices that range from $0.10 to $40.00, which if not exercised, will expire between February 21, 2022 and

December 9, 2025.

activity for the year ended December 31, 2020 and 2019 was as follows:

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outstanding at December 31, 2020

connection with its January 2020 private placement, the Company issued 6,156 warrants to purchase its Series D Preferred Stock

(the Preferred Warrants”).

As of December 31, 2020, there were 10 Preferred Warrants outstanding, which if exercised would

result in the issuance of 10 shares of Series D Convertible Preferred Stock.

The Series D Convertible Preferred stock, including

make-whole dividends, was convertible into 4,748 shares of common stock on December 31, 2020.

Company accounts for income taxes in accordance with ASC Topic No.

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be applied against future taxable income and which expire in various years through 2040.

However, if certain substantial changes

in the Company’s ownership should occur, there could be an annual limitation on the amount of net operating loss carryforward

which can be utilized.

The amount of and ultimate realization of the benefits from the operating loss carryforwards for income

tax purposes is dependent, in part, upon the tax laws in effect, the future earnings of the Company and other future events, the

effects of which cannot be determined.

Because of the uncertainty surrounding the realization of the loss carryforwards, the Company

has established a valuation allowance equal to the tax effect of the loss carryforwards and other temporary differences of approximately

$3,037,800 and $2,123,700 at December 31, 2019 and 2018, respectively, and, therefore, no deferred tax asset has been recognized

for the loss carryforwards.

However, if certain substantial

changes in the Company’s ownership should occur, there could be an annual limitation on the amount of net operating loss

carryforward which can be utilized.

The amount of and ultimate realization of the benefits from the operating loss carryforwards

for income tax purposes is dependent, in part, upon the tax laws in effect, the future earnings of the Company and other future

events, the effects of which cannot be determined.

Because of the uncertainty surrounding the realization of the loss carryforwards,

the Company has established a valuation allowance equal to the tax effect of the loss carryforwards and other temporary differences

of approximately $4,170,100 and $3,037,800 at December 31, 2020 and 2019, respectively, and, therefore, no deferred tax

asset has been recognized for the loss carryforwards.

tax assets are comprised of the following:

6 unchanged sentences

& Entertainment

on Asset Disposal

in valuation allowance

4 unchanged sentences

Ended December 31

from continuing

stockholders (numerator)

from continuing Operations available to Common stockholders (numerator)

$ (7,009,414 )

$ (6,320,849 )

Weighted average

common shares

in loss per share during

Period (denominator)

loss per share was not presented as the Company’s outstanding warrants, stock options and note conversion features common

equivalent shares for the periods presented would have had an anti-dilutive effect.

At December 31, 2019, the Company had outstanding

363,727 warrants which could be converted to 363,727 shares of common stock, a $50,000 note payable convertible into 2,500 shares

of common stock, and 180,903 stock options exercisable for 180,903 shares of common stock resulting in a potential total

additional 475,130 common stock shares outstanding in the future.

At December 31, 2018, the Company had outstanding 305,050 warrants

which could be converted to 305,060 shares of common stock, a $50,000 note payable convertible into 2,500 shares of common stock,

and 82,627 stock options exercisable for 82,627 shares of common stock resulting in a potential total additional 390,187 common

stock shares outstanding in the future.

average number of common shares Outstanding used in loss per share during the Period (denominator)

loss per share was not presented as the Company’s outstanding common and preferred warrants, stock options and preferred

stock common equivalent shares for the periods presented would have had an anti-dilutive effect.

At December 31, 2020, the

Company had outstanding 1,881,429 common warrants which could be converted to 1,881,429 shares of common stock,

and 713,010 stock options exercisable for 713,010 shares of common stock, 10 Series D Preferred Warrants exercisable

for 10 shares of Series D Preferred Stock, which in turn, are convertible into 4,748 shares of common stock, and 715 shares of

preferred stock, which could be converted into 243,024 shares of common stock, resulting in a potential total additional 2,842,211

common stock shares outstanding in the future.

At December 31, 2019, the Company had outstanding 363,728 warrants which

could be converted to 363,728 shares of common stock, a $50,000 note payable convertible into 2,500 shares of common stock,

and 180,903 stock options exercisable for 180,903 shares of common stock resulting in a potential total additional 547,131

common stock shares outstanding in the future.

Commitments and Contingencies

20 unchanged sentences

was not consolidated, but rather was accounted for on the equity method of recording investments.

There were no operating activities

during the fiscal 2017 and net operations resulted in a loss on the investment of $105 in fiscal 2016.

The Company and Arete agreed

in 2017 to terminate the Joint Venture and are in the process of paying final costs.

The remaining cash asset of the company will

be distributed to the former partners in 2020.

The Company and Arete terminated

the Joint Venture in 2020 and distributed the remaining cash to the former partners.

14 - Defined Contribution Plan

In 2014, the Company adopted a

qualified 401(K) plan (“the Plan”), in which all employees over the age of 21 may participate.

has elected to match 100% of each participant’s contribution up to 3% of salary, and 50% of the next 2% of salary contributed.

The costs of matching contributions were $45,080 in 2019 and $51,415 in 2018.

2014, the Company adopted a qualified 401(K) plan (“the Plan”), in which all employees over the age of 21 may participate.

The Company makes a Safe Harbor contribution match of 100% of each participant’s contribution up to 3% of

salary, and 50% of the next 2% of salary contributed.

The costs of matching contributions were $55,321 in 2020 and $45,080

Related Party Transactions

On June 17, 2019, our Former Chief

Financial Officer, Nannette Toups submitted notice to the Company of her resignation effective August 15, 2019.

12, 2019, Ms.

Toups Separation Agreement was amended to change her Effective Date to September 15, 2019.

Effective September 15,

2019 the Company entered into a one-year Consulting Agreement with Ms.

Toups as an independent contractor to provide non-exclusive

consulting services to the Company on as an-needed basis at the rate of $100 per hour.

The agreement provides that as long as

the Consulting Agreement remains in effect, the stock options of the Company held by Ms.

Toups shall remain exercisable and continue

to vest in accordance with the terms of the Consultants existing stock options agreements of the Company.

Through December 31,

Toups has accrued $4,000 in fees for services rendered under the Consulting Agreement.

of December 31, 2020, there are no related party transactions.

Subsequent Events

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

(the “Institutional Private Placement”).

Pursuant to the SPA, the Company issued and sold 1,640 shares of the Company’s

Series D Convertible Preferred Stock (the “Series D Preferred Stock”), warrants to purchase 779,600 shares of the

Company’s Common Stock (the “Common Warrants”) and warrants to purchase 6,156 shares of the Series D Preferred

Stock (the “Preferred Warrants”) for a total gross purchase price of $1,600,000.

The Series D Preferred Stock is initially

convertible into 164,000 shares of Common Stock, the Preferred Warrants have an initial exercise price of $975.00 per share, and

the Common Warrants have an initial exercise price of $10.00 per share.

Concurrent with the Institutional Private Placement, the

Company entered into a Securities Purchase Agreement (the “SPA”) with certain of its directors and the Company’s

largest shareholder (the “Other Private Placement”).

Pursuant to the SPA, the Company issued and sold 333.33 shares

of the Company’s Series E Convertible Preferred Stock (the “Series E Preferred Stock”), and Class A Warrants

to purchase 48,544 shares of the Company’s Common Stock (the “Common Warrants”) for a total gross purchase price

The Series E Preferred Stock is initially convertible into 48,544 shares of Common Stock, and the Class A Warrants

have an initial exercise price of $11.30 per share.

Sigma also issued Dawson James Securities, Inc., its placement agent in the

foregoing private placement, warrants to purchase up to 17,004 shares of Common Stock, at an initial exercise price of $11.30

per share as partial compensation.

Total net proceeds from the private placements were approximately $1,711,124, after deducting

placement commissions and other offering expenses payable by the Company.

On January 31, 2020, the Company paid

off its Secured Convertible Promissory Note in full in the amount of $56,458, including accrued interest of $1,458 and a late

fee penalty of $5,000.

February 27, 2020, our Amended and Restated Articles of Incorporation were amended pursuant to a Certificate of Change Pursuant

to Nevada Revised Statutes 78.209 (the “Certificate of Change”) filed with the Nevada Secretary of State.

The Certificate

of Change provided for both a reverse stock split of the outstanding shares of our common stock on a 1-for-10 basis (the “Reverse

Stock Split”), and a corresponding decrease in the number of shares of our common stock that we are authorized to issue

(the “Share Decrease”).

a result of the Reverse Stock Split, the number of issued and outstanding shares of our common stock decreased from 14,500,823

pre-Reverse Stock Split shares to 1,450,082 post-Reverse Stock Split shares (after adjustment for any fractional shares).

to the Share Decrease, the number of authorized shares of our common stock decreased from 22,500,000 to 2,500,000 shares of common

stock, $0.001 par value per share.

February and March of 2021, the Company issued 454,404 shares of common stock upon the exercise of warrants with an exercise price

of $2.50 per share, resulting in net cash proceeds to the Company of $1,136,010.

March of 2021, the Company issued 119,000 shares of common stock pursuant to the conversion of 250 Series D Preferred shares.

January 13, 2021, we were notified by our bank, BOKF, NA dba Bank of Oklahoma, that the SBA had forgiven 100% of our PPP loan

January 8, 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with H.C.

(the “Underwriter”), which provided for the issuance and sale by the Company in an underwritten public offering

and the purchase by the Underwriter of 1,488,507 shares of the Company’s common stock, $0.001 par value per share.

closed on January 12, 2021.

to the terms and conditions contained in the Underwriting Agreement, the shares were sold to the Underwriter at a public offering

price of $3.00 per share, less underwriting discounts and commissions.

The Company also granted the Underwriters a 30-day option

to purchase up to 223,276 additional shares of the Company’s common stock on the same terms and conditions.

The Underwriter

fully exercised such option to purchase up to 223,276 additional shares of the Company’s common stock, for an aggregate

of 1,711,783 shares of Common Stock.

Pursuant to the Underwriting Agreement, we have also issued to the Underwriter or its designee

warrants to purchase a number of shares equal to 8% of the aggregate number of shares of common stock sold in the Offering, including

shares issued upon exercise of the option to purchase additional shares (the “Underwriter Warrants”).

The Underwriter

Warrants have a term of five years from the commencement of sales in the Offering and an exercise price of $3.75 per share.

net offering proceeds to the Company from the Offering are approximately $3,919,552 (or approximately $4,532,444 taking into account

the Underwriter’s exercise of its option to purchase additional shares in full), after deducting underwriting discounts

and commissions and other estimated offering expenses.

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.

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.

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

What changed 10-K

Item 9A. Controls and Procedures