What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-07-22 compared with 2021-04-22 · 463 added, 695 removed, 63 unchanged (95% of the section changed)

1 unchanged sentence

Balance Sheets

March 31, 2021

December 31, 2020

Receivable, net

Current Assets

Accounts Receivable, net

Prepaid Assets

Total Current Assets

Other Assets:

Property and Equipment, net

Intangible Assets, net

Long-Term Prepaid Asset

Total Other Assets

LIABILITIES AND STOCKHOLDERS’

and Equipment, net

Prepaid Asset

AND STOCKHOLDERS’ EQUITY

Current Liabilities

Accounts Payable

Deferred Revenue

Accrued Expenses

Derivative Liability

Total Current Liabilities

Appreciation Rights

Act Deferred Payroll Tax Liability

Long-Term Liabilities

Stock Appreciation Rights

CARES Act Deferred Payroll Taxes

Total Long-Term Liabilities

TOTAL LIABILITIES

Stockholders’

Preferred Stock, $0.001 par;

Stockholders’

Stock, $ 0.001 par;

10,000,000 shares authorized;

465 and 715 issued and outstanding, respectively

Common Stock, $0.001 par;

Stock, $ 0.001 par;

24,000,000 shares authorized;

10,493,598 and 5,995,320 issued and outstanding, respectively

Additional Paid-In Capital

Accumulated Deficit

Paid-In Capital

( 35,676,342 )

( 33,105,008 )

Total Stockholders’

TOTAL LIABILITIES AND STOCKHOLDERS’

Stockholders’ Equity

LIABILITIES AND STOCKHOLDERS’ EQUITY

accompanying notes to condensed financial statements.

Statements of Operations

Three Months Ended

March 31, 2021

March 31, 2020

COST OF REVENUE

PROFIT (LOSS)

& Public Relations

& Professional Service Fees

& Amortization

Operating Expenses

Salaries & Benefits

Stock-Based Compensation

Operating R&D Costs

Investor & Public Relations

Organization Costs

Legal & Professional Service Fees

Office Expenses

Depreciation & Amortization

Other Operating Expenses

Total Operating Expenses

LOSS FROM OPERATIONS

Operating Expenses

FROM OPERATIONS

( 2,140,900 )

( 1,416,550 )

( 3,592,497 )

( 2,999,164 )

INCOME (EXPENSE)

Rate Gain (Loss)

on Dissolution of Joint Venture

Other Income (Expense)

Interest Income

Gain on Derivative Liability

Exchange Rate Loss

Interest Expense

Total Other Income (Expense)

LOSS BEFORE PROVISION FOR INCOME TAXES

Provision for Income Taxes

BEFORE PROVISION FOR INCOME TAXES

( 1,845,547 )

Preferred Dividends

Net Loss Applicable to Common Stockholders

( 2,496,207 )

Net Loss per Common Share - Basic and Diluted

Weighted Average Number of Shares Outstanding - Basic and Diluted

( 2,493,223 )

for income Taxes

$ ( 1,845,547 )

$ ( 909,638 )

$ ( 2,496,207 )

$ ( 2,493,223 )

( 1,007,127 )

Loss Applicable to Common Stockholders

$ ( 1,859,767 )

$ ( 1,601,518 )

$ ( 2,571,334 )

$ ( 3,500,350 )

Loss per Common Share – Basic and Diluted

Average Number of Shares Outstanding – Basic and Diluted

accompanying notes to condensed financial statements.

of Stockholders’

The Quarters Ended March 31, 2021 and March 31, 2020

December 31, 2020

of Stockholders’ Equity

the Three and Six Months Ended June 30, 2021 and 2020

the Three Months Ended June 30, 2021 and June 30, 2020

March 31, 2021

$ ( 33,816,575 )

Common Shares Sold in Public Offerings

Derivative Liability Value on Issuance date

Common Shares issued for Exercise of Warrants

Preferred Stock Dividends

Common Shares Issued for Conversion of Preferred Shares

Common Shares Issued for Third Party Services

Stock Options Issued to Directors for Services

Stock Options Awarded to Employees

Offering Costs

Balances, March 31, 2021

( 1,845,547 )

Balances, December 31, 2019

( 1,845,547 )

Preferred Shares Sold in Private Offering

Preferred Stock Dividends

Extinguishment

of Derivative Liability

Stock Dividends

Issued for Third Party Services

Options Awarded to Employees

Options Awarded to Directors

Common Shares Sold in Public Offerings

Common Shares Sold in Public Offerings, shares

Common Shares Issued for Conversion of Preferred Shares

Common Shares Issued for Conversion of

Preferred Shares, shares

Preferred Shares issued for Exercise of Preferred Warrants

Securities Issued for Third Party Services

Stock Options Awarded to Employees

Preferred Shares issued for Exercise of

Preferred Warrants, shares

Common Shares Awarded to Employees

Common Shares Awarded to Employees, shares

Common Shares issued for Exercise of Common Warrants

Common Shares issued for Exercise of

Common Warrants, shares

Offering Costs

Preferred Shares Sold in Private Offering

Preferred Shares Sold in Private

Offering, shares

Issuance of Fractional Shares from Reverse Split

Balances, March 31, 2020

Issuance of Fractional Shares from

Reverse Split, shares

June 30, 2021

$ ( 35,676,342 )

March 31, 2020

$ ( 27,994,426 )

Shares Sold in Public Offering

Stock Dividends

Shares issued for Conversion of Preferred Shares

Shares issued for Exercise of Preferred Warrants

Issued for Third Party Services

Options Awarded to Employees

Shares Awarded to Employees

June 30, 2020

$ ( 29,595,944 )

the Six Months Ended June 30, 2021 and June 30, 2020

December 31, 2020

Shares Sold in Public Offerings

Extinguishment

of Derivative Liability

Stock Dividends

Shares issued for Conversion of Preferred Shares

Shares issued for Exercise of Common Warrants

Issued for Third Party Services

Options Awarded to Employees

Options Awarded to Directors

June 30, 2021

December 31, 2019

$ ( 26,095,594 )

( 2,493,223 )

Shares Sold in Public Offering

Shares Sold in Private Offering

Stock Dividends

( 1,007,127 )

Shares issued for Conversion of Preferred Shares

Shares issued for Exercise of Preferred Warrants

Issued for Third Party Services

Options Awarded to Employees

Shares Awarded to Employees

of Fractional Shares from Reverse Split

June 30, 2020

$ ( 29,595,944 )

accompanying notes to condensed financial statements.

Statements of Cash Flows

Three Months Ended

March 31, 2021

March 31, 2020

OPERATING ACTIVITIES

$ ( 2,496,207 )

Adjustments to reconcile Net Loss to Net Cash used in operating activities:

Noncash Expenses:

Depreciation and Amortization

Gain on Derivative Liability

Stock Based Compensation Employees

Stock Based Compensation –

Third Party Services

Stock Based Compensation - Directors

Change in assets and liabilities:

Accounts Receivable

Prepaid Assets

Accounts Payable

Deferred Revenue

Accrued Expenses

Long-term portion of Stock Appreciation Rights

NET CASH USED IN OPERATING ACTIVITIES

INVESTING ACTIVITIES

Purchase of Property and Equipment

Purchase of Intangible Assets

NET CASH USED IN INVESTING ACTIVITIES

FINANCING ACTIVITIES

Gross Proceeds from Public and Private Issuances of Securities

Less Offering Costs

Payment of Note Payable

Proceeds from Exercise of Warrants

NET CASH PROVIDED BY FINANCING ACTIVITIES

NET CHANGE IN CASH FOR PERIOD

CASH AT BEGINNING OF PERIOD

CASH AT END OF PERIOD

Supplemental Disclosures:

Noncash investing and financing activities disclosure:

$ ( 2,493,223 )

to reconcile Net Loss to Net Cash used in operating activities:

and Amortization

on Derivative Liability

( 1,092,441 )

Based Compensation - Employees

Based Compensation - Third Party Services

Based Compensation - Directors

in assets and liabilities:

CASH USED IN OPERATING ACTIVITIES

( 3,266,620 )

( 2,435,387 )

of Property and Equipment

of Intangible Assets

of Joint Venture

CASH USED IN INVESTING ACTIVITIES

Proceeds from Public and Private Issuances of Securities

Offering Costs

( 1,600,967 )

of Note Payable

Proceeds from Exercise

of Payroll Taxes under the CARES Act

CASH PROVIDED BY FINANCING ACTIVITIES

CHANGE IN CASH FOR PERIOD

AT BEGINNING OF PERIOD

AT END OF PERIOD

investing and financing activities disclosure:

of Common Shares for Preferred Dividends

Other noncash operating activities disclosure:

of Securities for services

Disclosure of cash paid for:

of cash paid for:

accompanying notes to condensed financial statements.

1 unchanged sentence

1 - Summary of Significant Accounting Policies

of Business -Sigma Labs, Inc., formerly named Framewaves, Inc., a Nevada corporation, was founded by a group of scientists,

engineers and businessmen to develop and commercialize novel and unique manufacturing and materials technologies.

Sigma believes

that some of these technologies will fundamentally redefine conventional quality assurance and process control practices by embedding

them into the manufacturing processes in real time, enabling process intervention and ultimately leading to closed loop process

The Company anticipates that its core technologies will allow its clientele to combine advanced manufacturing quality

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

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

The terms the “Company,”

“Sigma,”

“we,”

“us”

and “our”

of Business -Sigma Labs, Inc., formerly named Framewaves, Inc., a Nevada corporation, was founded by a group of scientists, engineers

and businessmen to develop and commercialize novel and unique manufacturing and materials technologies.

Sigma believes that some of these

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

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

The Company anticipates

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

with novel materials to achieve breakthrough product potential in many industries including aerospace, defense, oil and gas, bio-medical,

and power generation.

The terms the “Company,” “Sigma,” “we,” “us” and “our”

refer to Sigma Labs, Inc.

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

Accounting Principles (“GAAP”) in the United States of America.

In the opinion of management, all adjustments (which

include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash

flows at March 31, 2021 and 2020 and for the periods then ended have been made.

Certain information and footnote disclosures normally

included in financial statements prepared in accordance with U.S.

generally accepted accounting principles have been condensed

The Company suggests these condensed financial statements be read in conjunction with the December 31, 2020 audited

financial statements and notes thereto included in the Company’s Form 10-K.

The results of operations for the periods ended

March 31, 2021 and 2020 are not necessarily indicative of the operating results for the full year.

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

Principles (“GAAP”) in the United States of America.

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

recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at June 30, 2021 and

2020 and for the periods then ended have been made.

Certain information and footnote disclosures normally included in financial statements

prepared in accordance with U.S.

generally accepted accounting principles have been condensed or omitted.

The Company suggests these

condensed financial statements be read in conjunction with the December 31, 2020 audited financial statements and notes thereto included

in the Company’s Form 10-K.

The results of operations for the periods ended June 30, 2021 and 2020 are not necessarily indicative

of the operating results for the full year.

Reclassification

1 unchanged sentence

in the current-period financial statements.

Value of Financial Instruments - The Company applies ASC 820, “Fair Value Measurements .

This guidance

defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure

requirements for fair value measures.

Value of Financial Instruments - The Company applies ASC 820, “Fair Value Measurements .

” This guidance defines

fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements

for fair value measures.

The three levels are defined as follows:

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

2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs

that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial

2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that

are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

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

carrying amounts reported in the balance sheets for the cash and cash equivalents, receivables, accounts payable, and accrued

liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time

between the origination of such instruments and their expected realization and their current market rate of interest.

carrying amounts reported in the balance sheets for the cash and cash equivalents, receivables, accounts payable, and accrued liabilities

each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination

of such instruments and their expected realization and their current market rate of interest.

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

The derivative

warrant liability at March 31, 2021 results from the issuance of warrants to purchase an aggregate of 2,190,000 shares of common

stock issued in a private placement which closed concurrently with a registered direct offering of our common stock on March 26,

The warrants will be exercisable commencing on the date the Company obtains stockholder approval to increase its authorized

common shares from 12,000,000 to 24,000,000 (“the Initial Exercise Date”) and will expire two years after the initial

exercise date.

to ASC 815-40-25-10, because the Company does not currently have sufficient authorized and unissued shares of common stock available

to settle the warrants, such warrants are accounted for as a derivative liability until such time as the Company receives the

foregoing stockholder approval to increase its authorized shares.

The Company has called a Special Stockholders’

(“the Special Meeting”) to be held on May 24, 2021 where it will seek such approval.

Upon receiving approval,

the Company will reclassify the warrant liability to equity pursuant to ASC 815.40.35.8.

However, there can be no guarantee that

such approval will be received, and in the event that stockholder approval is not received, the Company will continue to

account for the outstanding warrants as a liability.

In addition, the Company will be required to call a meeting of stockholders

every 75 days after the Special Meeting to seek approval of the increase in authorized shares to not be in breach of the Securities

Purchase Agreement.

On March 26, 2021, the

Company closed an offering in which it issued warrants to purchase an aggregate of 2,190,000 shares of common stock in a private placement

concurrently with a registered direct offering (“Registered Offering”) of our common stock The warrants became exercisable on May 24, 2021 , the date the Company

obtained stockholder approval to increase its authorized common shares from 12,000,000 to 24,000,000 (“the Initial Exercise Date”)

and will expire two years after the Initial Exercise Date.

to ASC 815-40-25-10, because the Company did not have sufficient authorized and unissued shares of common stock available to settle the

warrants at the issue date, such warrants were accounted for as a derivative liability.

On May 24, 2021, upon receiving shareholder approval

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

fair value of the warrant liability measured on a recurring basis is as follows:

March 31, 2021

Date of Issuance March 26, 2021

Derivative liability - Warrants

following table presents a reconciliation of the derivative liability measured at fair value on a recurring basis using significant

unobservable input (Level 3):

Fair Value on Issuance Date

Change in fair value

Fair value on March 31, 2021

Per Share –

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

period in accordance with ASC Topic No.

260, “Earnings Per Share.”

Shares underlying the Companies outstanding warrants,

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

At March 31, 2021

and 2020, the Company had the following common shares underlying these instruments:

Three Months Ended March 31,

Preferred Stock Warrants

Stock Options

Preferred Stock

Total Underlying Common Shares

following data shows the amounts used in computing loss per share and the effect on income and the weighted average number of

shares of dilutive potential common stock for the periods ended March 31, 2021 and 2020:

Three Months Ended March 31

Net Loss per Common Share - Basic and Diluted

Loss from continuing

Operations available to

Common stockholders (numerator)

Schedule of Warrant Liability Measured on Recurring Basis

of Issuance March 26, 2021

Liability - Warrants

following table presents a reconciliation of the derivative liability measured at fair value on a recurring basis using significant unobservable

input (Level 3):

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

Value on Issuance Date

in Fair Value

( 1,092,441 )

Weighted average number of common shares Outstanding used in loss per share during the Period (denominator)

Estimates - The preparation of financial statements in conformity with generally accepted accounting principles in the United

States requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, the

disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues

and expenses during the reporting period.

Fair Value on May

Extinguishment

of Derivative Liability

( 4,615,771 )

Value on June 30, 2021

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

accordance with ASC Topic No.

260, “Earnings Per Share.” Shares underlying the Companies outstanding warrants, options and

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

At June 30, 2021 and 2020, the Company

had the following common shares underlying these instruments:

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

Months Ended June 30,

Stock Warrants

Underlying Common Shares

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

of dilutive potential common stock for the periods ended June 30, 2021 and 2020:

Schedule of Earnings Per Share, Basic and Diluted

Months Ended June 30

Loss per Common Share - Basic and Diluted

from continuing

available to Common stockholders (numerator)

$ ( 1,859,767 )

$ ( 1,601,518 )

$ ( 2,571,334 )

$ ( 3,500,350 )

average number of common shares Outstanding used in loss per share during the Period (denominator)

Enacted Accounting Standards - The FASB established the ASC as the source of authoritative accounting principles recognized by the

FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with GAAP.

Rules and interpretive

releases of the Securities and Exchange Commission (“SEC”) issued under authority of federal securities laws are also sources

of GAAP for SEC registrants.

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

requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, the disclosures

of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during

the reporting period.

Actual results could differ from those estimated by management.

Significant accounting

estimates that may materially change in the near future are impairment of long-lived assets, values of stock compensation awards

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

March 31, 2021 and December 31, 2020, the Company’s inventory was comprised of:

March 31, 2021

December 31, 2020

Raw Materials

Work in Process

Finished Goods

Total Inventory

Significant accounting estimates that may materially

change in the near future are impairment of long-lived assets, values of stock compensation awards and stock equivalents granted as offering

costs, and allowance for bad debts and inventory obsolescence.

2 – Inventory

June 30, 2021 and December 31, 2020, the Company’s inventory was comprised of:

Schedule of Inventory

3 – 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 ends

December 31, 2020.

At March 31, 2021, 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.

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

during the “payroll tax deferral period”.

The payroll tax deferral period began on March 27, 2020 and ended on December 31,

At June 30, 2021, 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.

4 - Derivative Liability

March 26, 2021, the Company issued warrants to purchase an aggregate of 2,190,000 shares of common stock to holders in a private

placement concurrently with a registered direct offering of 2,190,000 shares of its common stock.

The warrants entitle the holders

to purchase one share of our common stock at an exercise price equal to $4.32 per share commencing on the date the Company receives

stockholder approval to increase its authorized common shares from 12,000,000 to 24,000,000 (the “Initial Exercise

Date”) and will expire two years from the Initial Exercise Date.

The Company determined that these warrants are free standing

financial instruments that are legally detachable and separately exercisable from the common stock included in the registered

direct offering.

Management also determined that the Company currently does not have sufficient authorized and unissued shares

to settle the warrants, and as such required classification as a liability pursuant to ASC 815 “Derivative Instruments

and Hedging”

In accordance with the accounting guidance, the outstanding warrants are recognized as a warrant liability

on the balance sheet and are measured at their inception date fair value and subsequently re-measured at each reporting period

March 26, 2021 (the “Issuance Date”), the Company issued warrants to purchase an aggregate of 2,190,000 shares of common

stock to holders in a private placement concurrently with a registered direct offering of 2,190,000 shares of its common stock.

entitle the holders to purchase one share of our common stock at an exercise price equal to $ 4.32 per share commencing on May 24, 2021

and will expire two years from such date.

The Company has determined that these

warrants are free standing financial instruments that are legally detachable and separately exercisable from the common stock included

in the registered direct offering.

Management also determined that on the Issuance Date, the Company did not have sufficient authorized

and unissued shares to settle the warrants, and as such required classification as a liability pursuant to ASC 815 “Derivative

Instruments and Hedging” .

In accordance with the accounting guidance, the outstanding warrants were recognized as a warrant

liability on the balance sheet and were measured at their inception date fair value and subsequently re-measured at each reporting period

with changes being recorded as a component of other income in the statement of operations.

Company has called a Special Stockholders’

Meeting (the “Special Meeting”) for May 24, 2021, where it will

seek stockholder approval to increase its authorized shares.

Upon such approval, the Company will reclassify the warrant liability

to equity pursuant to ASC 815-40-35-8.

However, in the event that the Company does not receive stockholder approval to increase

its authorized shares, the Company will continue to account for the outstanding warrants as a derivative liability and will be

required to call a meeting of stockholders every 75 days after the Special Meeting to seek approval of the increase in authorized

shares to not be in breach of the Securities Purchase Agreement.

a Special Stockholders Meeting held on May 24, 2021, the Company received approval to increase its authorized common shares from 12,000,000

to 24,000,000 .

Pursuant to ASC 815-40-35-8, the Company reclassified the warrant liability

to equity as of such date.

fair value of the derivative liability presented below was measured using the Black Scholes valuation model.

Significant inputs

into the model for the three months ended March 31, 2021 are as follows:

March 31, 2021

Dividend yield

Risk-free interest rate

Expected volatility

121.2 % - 121.7 %

Expected life (in years)

Significant inputs into

the model for the six months ended June 30, 2021 are as follows:

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

interest rate

life (in years)

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

Warrant Liability

Fair Value at initial measurement date of March 26, 2021

(Gain) on change in Fair Value of warrant liability

Fair Value as of March 31, 2021

Company has presented the fair value measurement as a Level 3 measurement, relying on unobservable inputs reflecting management’s

Schedule of Fair Value of Warrant Liability

Value Per Share

Value at initial measurement date of March 26, 2021

on change in Fair Value of Warrant Liability

( 1,092,441 )

Fair Value as of

Extinguishment

of Derivative Liability

( 2,190,000 )

( 4,615,771 )

Value as of June 30, 2021

Company has presented the fair value measurement as a Level 3 measurement, relying on unobservable inputs reflecting management’s

Level 3 measurements, which are not based on quoted prices in active markets, introduce a higher degree of subjectivity

and may be more sensitive to fluctuations in stock prices, volatility rates and U.S.

Treasury Bond rates and could have a material

impact on future fair value measurements.

Company uses the Black Scholes model, based on the adjusted historical volatility rates for fair value measurements through

the date of Shareholder Approval.

Management has determined the Black Scholes model to be the most reliable and least volatile

determinate of the current fair value of the warrants.

It is the Company’s expectation to maximize on all observable market

inputs for the warrants and calibrate the model to incorporate relevant observable market data into the fair value measurement

at each future measurement date, if applicable.

the three months ended March 31, 2021, the company recognized a gain of $802,285 on the change in fair value of warrants.

5 - Stockholders’

January 2021, the Company closed a public offering of its securities in which it issued 1,711,783 shares of common stock at $3.00

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

expenses payable by the Company.

Pursuant to the Underwriting Agreement, the Company also issued to the Underwriter or its designee

warrants to purchase 136,943 shares of common stock.

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

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

private placement.

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

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

Also in March 2021,

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

21,591 shares of common stock issued pursuant to the cashless exercise of placement agent warrants.

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

per share, resulting in net proceeds to the Company of approximately $8,736,487 after deducting placement agent commissions

and other offering costs payable by the Company.

Pursuant to the Purchase Agreement, the purchasers severally agreed to

vote the shares of common stock purchased under the Purchase Agreement in favor of any resolution presented to the stockholders

of the Company for the purpose of obtaining approval of an increase in the authorized shares of the Company’s Common Stock

from 12,000,000 to 24,000,000 shares (“Stockholder Approval”).

In a concurrent private placement under the Purchase

Agreement, the Company issued to the purchasers warrants to purchase an aggregate of 2,190,000 shares of Common Stock at

an exercise price of $4.32 per share.

Each Warrant will be exercisable commencing on the date the Company obtains Stockholder

Approval and will expire two years after the initial exercise date.

The Company also issued to designees of the Placement Agent

warrants to purchase up to 175,200 shares of Common Stock (the “Placement Agent Warrants”) constituting 8% of the

aggregate number of shares of Common Stock sold in the Registered Offering, The Placement Agent Warrants have substantially the

same terms as the Warrants, except that the Placement Agent Warrants have an exercise price equal to 125% of the offering price

per share (or $5.55625 per share).

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

warrants to purchase 8.0% of the number of shares of our Common Stock issued upon the cash exercise of the Warrants.

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

firm previously engaged by the Company as partial compensation for services previously rendered.

the first quarter of 2020, the Company issued 408,318 shares of common stock in exchange for the conversion of 1,107 shares of

Series D Convertible Preferred stock, including 86,801 shares of common stock as in-kind payment of preferred stock dividends.

February 2020, the Company issued 2,500 shares of common stock valued at $8.70 per share to MHZCI, LLC, an investor relations

firm engaged by the Company, as partial compensation for services to be rendered.

Treasury Bond rates and could have a material impact

on future fair value measurements.

Company uses the Black Scholes model, based on the adjusted historical volatility rates for fair value measurements through the date

of stockholder approval (i.e., May 24, 2021).

Management has determined the Black Scholes model to be the most reliable and least volatile determinate of

the current fair value of the warrants.

It is the Company’s expectation to maximize on all observable market inputs for the warrants

and calibrate the model to incorporate relevant observable market data into the fair value measurement at each future measurement date,

if applicable.

the six months ended June 30, 2021, the Company recognized a gain of $ 1,092,441

on the change in fair value of the warrants.

5 - Stockholders’ Equity

May 24, 2021, at a Special Stockholders Meeting, our authorized shares of common stock were increased from 12,000,000 to 24,000,000 .

January 2021, the Company closed a public offering of its securities in which it issued 1,711,783

shares of common stock at $ 3.00

per share, resulting in net proceeds of approximately

$ 4,532,445 after

deducting underwriting commissions and other offering expenses payable by the Company.

Pursuant to the Underwriting Agreement, the Company

also issued to the Underwriter or its designee warrants to purchase 136,943 shares of common stock.

Such warrants have a term of five

years and an exercise price of $ 3.75

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

March 2021, the Company issued 119,000

shares of common stock in exchange for the conversion

shares of Series D Convertible Preferred Stock,

including 19,000

shares of common stock as in-kind payment of

preferred stock dividends.

Also in March 2021, the Company issued 191,204

shares of common stock pursuant to the exercise

of warrants issued in our April 2020 offering, and 21,591

shares of common stock issued pursuant to the

cashless exercise of placement agent warrants.

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

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

costs payable by the Company.

In a concurrent private placement under the Purchase Agreement, the Company issued to the purchasers warrants to purchase

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

Each Warrant became exercisable on May 24,

2021 , the date the Company obtained stockholder approval of an increase in the authorized shares of the Company’s Common Stock and will expire two years from such date.

The Company also issued to designees

of the Placement Agent warrants to purchase up to 175,200 shares of Common Stock (the “Placement Agent Warrants”) constituting

8 % of the aggregate number of shares of Common Stock sold in the Registered Offering.

The Placement Agent Warrants have substantially

the same terms as the Warrants, except that the Placement Agent Warrants have an exercise price equal to 125 % of the offering price per

share (or $ 5.55625 per share).

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

purchase 8.0 % of the number of shares of our Common Stock issued upon the cash exercise of the Warrants.

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

engaged by the Company as partial compensation for services previously rendered.

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 .

the second quarter of 2020, the Company issued 1,603,984 shares of common stock in exchange for the conversion of 1,684 shares of Series

D Convertible Preferred stock, including 323,624 shares of common stock as in-kind payment of preferred stock dividends.

April 2020, the Company granted 11,517 shares of common stock to employees under the 2013 Equity Incentive Plan.

Such shares vested on December

the first quarter of 2020, the Company issued 408,318 shares of common stock in exchange for the conversion of 1,107 shares of Series

D Convertible Preferred stock, including 86,801 shares of common stock as in-kind payment of preferred stock dividends.

February 2020, the Company issued 2,500 shares of common stock valued at $ 8.70 per share to MHZCI, LLC, an investor relations firm engaged

by the Company, as partial compensation for services to be rendered.

Company is authorized to issue 10,000,000 shares of preferred stock, $ 0.001 par value.

465 and 1,378 shares of preferred stock

were issued and outstanding at March 31, 2021 and 2020, 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 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

March 31, 2021 there were 132 shares of Series D Convertible Preferred stock outstanding, which if converted at the Conversion

Price of $2.50 as of March 31, 2021, including the make-whole dividends, would result in the issuance of 62,832 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,

March 31, 2021, all of the issued Series E Convertible Preferred Stock was outstanding, which if converted as of March 31, 2021,

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

of March 31, 2021, an aggregate of 9,681 shares of common stock were reserved for future issuance under the 2013

January 2021, the Company granted options to purchase 96,000

shares of common stock to its directors and an option to purchase 24,000 shares of common stock to a consultant as partial compensation

for services to be rendered.

The options have a strike price of $3.13 and vest equally over twelve months beginning January 2021.

During the three months ended March 31,

2021, the Company granted five employees options to purchase up to 20,500 shares of common stock in connection

with their employment.

The options have strike prices equal to the closing price of our common stock on each of the grant dates,

and will vest in equal installments on the first through third anniversaries of the grant dates, provided that the

employees remain employed by the Company on such dates.

January 2021, the Company granted a consultant an option

to purchase 1,000 shares of common stock for services to be rendered.

The option has a strike price of $3.52 and will vest on

June 30, 2021, provided that the consultant remains a service provider to the Company as of such date,

2021, the Company granted a consultant an option to purchase 1,572 shares of common stock for services rendered.

has a strike price of $3.66 and is fully vested.

the three months ended March 31, 2020, the Company granted options to purchase 8,100 shares of common stock to Iron Dome Ventures,

LLC as partial compensation for investor relations services to be rendered.

The option vests equally over nine months beginning

February 2020.

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

465 and 333 shares of preferred stock were issued

and outstanding at June 30, 2021 and 2020, respectively.

January 2020, the Company entered into a Securities Purchase Agreement (the “Institutional SPA”) with certain

institutional investors (the “Institutional Private Placement”).

Pursuant to the Institutional 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”).

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).

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.

June 30, 2021 there were 132 shares of Series D Convertible Preferred stock outstanding, which if converted at the Conversion Price of

$ 2.50 as of June 30, 2021, including the make-whole dividends, would result in the issuance of 62,832 shares of common stock.

with the Institutional Private Placement, the Company entered into a Securities Purchase Agreement (the “Other SPA”) with certain

of its directors and the Company’s previously largest shareholder (the “Other Private Placement”).

Pursuant to the Other 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.

June 30, 2021, all of the issued Series E Convertible Preferred Stock were outstanding, which if converted as of June 30, 2021, including

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

previous years and in the six months ended June 30, 2021, the Company issued to various employees, directors, and contractors shares

of the Company’s common stock, subject to restrictions, pursuant to the 2013 Equity Incentive Plan (the “2013 Plan”).

Such shares are valued at the fair value at the date of issue.

The fair value is expensed as compensation over the vesting period and

recorded as an increase to stockholders’ equity.

During the six months ended June 30, 2021 and June 30, 2020, $ 0 and $ 7,870 , respectively,

of the unvested compensation cost related to these issues was recognized.

June 30, 2021, there was $ 0 of unrecognized deferred compensation expense to be recognized over the remainder of the year.

of June 30, 2021, an aggregate of 890,000 shares of common stock were reserved for issuance under the 2013 Plan.

the six months ended June 30, 2021, the Company granted options to purchase a total of 145,487 shares of common stock to 5 employees,

4 directors and 3 consultants with vesting periods ranging from immediately upon issuance to 3 years beginning January 4, 2021.

the six months ended June 30, 2020, the Company granted options to purchase a total of 335,183 shares of common stock to 19 employees

and 4 consultants with vesting periods ranging from immediately upon issuance to 3 years beginning June 15, 2020.

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

stock on the dates of grant.

Stock options are typically granted throughout the year and generally vest over four years of service

and expire five years from the date of the award, unless otherwise specified.

The Company recognizes compensation expense for

the fair value of the stock options over the requisite service period for each stock option award.

share-based compensation expense included in the statements of operations for the three months ended March 31, 2021 and 2020 is

$117,477 and $154,170, all of which is related to stock options.

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

the three months ended March 31, 2021 and the year ended December 31, 2020:

Dividend yield

Risk-free interest rate

Expected volatility

Stock options are typically granted throughout the year and generally vest over four years of service and

expire five years from the date of the award, unless otherwise specified.

The Company recognizes compensation expense for the fair value

of the stock options over the requisite service period for each stock option award.

share-based compensation expense included in the statements of operations for the six months ended June 30, 2021 and 2020 is $ 233,919

and $ 424,989 of which $ 233,919 and $ 417,119 is related to stock options, respectively.

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

six months ended June 30, 2021 and 2020:

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

interest rate

116.8 - 123.8

113.8 - 117.2

Expected life (in years)

activity for the three months ended March 31, 2021 and the year ended December 31, 2020 was as follows:

Weighted Average Exercise Price ($)

Weighted Average Remaining Contractual Life (Yrs.)

Aggregate Intrinsic Value ($)

Options outstanding at December 31, 2019

Forfeited or cancelled

Options outstanding at December 31, 2020

Forfeited or cancelled

Options outstanding March 31, 2021

Options expected to vest in the future as of March 31, 2021

Options exercisable at March 31, 2021

Options vested, exercisable, and options expected to vest at March 31, 2021

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 $3.72 closing price of our Common Stock on

March 31, 2021.

At March 31, 2021, 718,070 option grants have an exercise price currently below $3.72.

March 31, 2021, there was $1,198,573 of unrecognized share-based compensation expense related to unvested share options with a

weighted average remaining recognition period of 2.84 years.

life (in years)

activity for the six months ended June 30, 2021 and the year ended December 31, 2020 was as follows:

Schedule of Stock Option Activity

outstanding at December 31, 2019

outstanding at December 31, 2020

outstanding June 30, 2021

expected to vest in the future as of June 30, 2021

exercisable at June 30, 2021

vested, exercisable, and options expected to vest at June 30, 2021

aggregate intrinsic value at June 30, 2021 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 $3.90 closing price of our common stock

on June 30, 2021.

All of the 2021 option grants have an exercise price currently below $ 3.90 .

June 30, 2021, there was $ 987,899 of unrecognized share-based compensation expense related to unvested share options with a weighted

average remaining recognition period of 1.70 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”).

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.

(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;

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.

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

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

The “Spread” is the difference between the exercise price

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

exercise price per share will not be less than 100% of the fair market value of a Share on the date of grant of the SAR.

The administrator

of the Plan will have the authority to, among other things, prescribe the terms and conditions of each SAR, including, without limitation,

the exercise price and medium of payment and vesting provisions, and to specify the provisions of the SAR Agreement relating to such

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

The exercise price of each such SAR is $2.63, which was the closing price of the Company’s common stock on the date

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 three

months ended March 31, 2021 and the year ended December 31, 2020:

interest rate

life (in years)

activity for the three months ended March 31, 2021 and the year ended December 31, 2020 was as follows:

Average Exercise Price ($)

Average Remaining Contractual Life (Yrs.)

Intrinsic Value ($)

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.

November 19, 2020, we granted 13,500 SARs to a consultant as partial compensation for services pursuant to the consulting

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.

were no SAR awards issued during the first six months of 2021.

activity for the six months ended June 30, 2021 was as follows:

Schedule of Stock Option Activity

outstanding at December 31, 2020

outstanding June 30, 2021

expected to vest in the future as of June 30, 2021

exercisable at June 30, 2021

vested, exercisable, and options expected to vest at June 30, 2021

aggregate intrinsic value at June 30, 2021 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 $ 3.90 closing price of our common stock

on June 30, 2021.

June 30, 2021, there was $ 155,361 of unrecognized share-based compensation expense related to unvested SARs with a weighted average remaining

recognition period of 1.98 years.

activity for the six months ended June 30, 2021 and 2020 was as follows:

Summary of Warrant Activity

outstanding at December 31, 2019

outstanding March 31, 2021

expected to vest in the future as of March 31, 2021

exercisable at March 31, 2021

vested, exercisable, and SARs expected to vest at March 31, 2021

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 $3.72 closing price of our common stock on

March 31, 2021.

All of the SARs grants have an exercise price currently below $3.72.

March 31, 2021, there was $180,108 of unrecognized share-based compensation expense related to unvested SARs with a weighted average

remaining recognition period of 2.23 years.

activity for the three months ended March 31, 2021 the year ended December 31, 2020 was as follows:

Weighted Average Exercise Price ($)

Weighted Average Remaining Contractual Life (Yrs.)

Warrants outstanding at December 31, 2019

Forfeited or cancelled

Warrants outstanding at December 31, 2020

Forfeited or cancelled

Warrants outstanding at March 31, 2021

outstanding at June 30, 2020

Warrants outstanding

at December 31, 2020

outstanding at June 30, 2021

6 - Subsequent Events

Company performed an evaluation of subsequent events through the date of filing of these condensed financial statements with the

There were no material subsequent events which affected, or could affect, the amounts or disclosures in the condensed financial

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

Forward-looking

Quarterly Report, including any documents which may be incorporated by reference into this Report, contains “Forward-Looking

Statements.”

All statements other than statements of historical fact are “Forward-Looking Statements”

of these provisions, including but not limited to, statements regarding our expectations about development and commercialization

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

items, any statements of the plans and objectives of management for future operations, any statements concerning proposed new

products or services, any statements regarding future economic conditions or performance, and any statements of assumptions underlying

any of the foregoing.

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

information available to us as of such date.

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

In some cases, Forward-Looking

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

“will,”

“expects,”

“plans,”

“anticipates,”

“intends,”

“believes,”

“estimates,”

“potential,”

“continue,”

or the negative thereof or other comparable terminology.

Although we believe that the expectations reflected

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

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

in the Forward-Looking Statements.

Future financial condition and results of operations, as well as any Forward-Looking Statements

are subject to inherent risks and uncertainties, including any other factors referred to in our press releases and reports filed

with the Securities and Exchange Commission (“SEC”).

All subsequent Forward-Looking Statements attributable to the

Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements.

Additional factors

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

in our Annual

Report on Form 10-K for the year ended December 31, 2020 and elsewhere in this report.

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

On September 27,

2010, we changed our name from Framewaves Inc.

to Sigma Labs, Inc.

We commenced our current business operations in 2010.

principal executive offices are located at 3900 Paseo del Sol, Santa Fe, New Mexico 87507, and our telephone number is (505) 438-2576.

Our website address is www.sigmalabsinc.com .

The Company’s annual reports, quarterly reports, current reports on Form 8-K

and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange

Act”), and other information related to the Company, are available, free of charge, on that website as soon as we electronically

file those documents with, or otherwise furnish them to, the SEC.

The Company’s website and the information contained therein,

or connected thereto, are not and are not intended to be incorporated into this Quarterly Report on Form 10-Q.

Accounting Policies

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

to make estimates and assumptions that affect the reported amounts in the accompanying consolidated financial statements and related

These estimates and assumptions have a significant impact on our consolidated financial statements.

Actual results could differ

materially from those estimates.

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

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

Our significant accounting policies are disclosed

in Note 1 to the Financial Statements included in this Quarterly Report on Form 10-Q.

However, we do not believe that there are any alternative

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

of Operations

generate revenues through PrintRite3D®

hardware and CAI software licensing of our PrintRite3D®

technology to customers

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

Additionally, we generate revenues from our contract manufacturing activities in metal additive manufacturing (AM).

ability to generate revenues in the future will depend on our ability to further commercialize and increase market presence of

our PrintRite3D®

technologies, and it will depend on whether key prospective customers continue to move from AM metal prototyping

to production.

During the three months

ended March 31, 2021, we recognized revenue of $458,140, as compared to $221,730 in revenue recognized during the

same period in 2020, an increase of $236,410.

The increase is primarily due to increased PrintRite3D®

of $277,300 in the first quarter of 2021, partially offset by lower revenues of $52,200 from our Rapid Test and Evaluation

(“RTE”) program.

Our Cost of Revenue for

the three months ended March 31, 2021 and 2020 was $128,331 and $244,703, respectively, a decrease of $116,372.

The decreased cost is primarily attributable to a credit of $43,952 related to a customer exchange of a PrintRite3D

unit sold in December 2020, lower build costs as a result of engineering enhancements of our PrintRite3D units, and lower costs

of supporting legacy RTE programs.

Sigma’s

total operating expenses for the three months ended March 31, 2021 were $1,781,404 as compared to $1,559,641 for

the same period in 2020, an increase of $221,763.

and Benefits costs were $847,171 for the three months ended March 31, 2021 compared to $652,197 for the same period in

2020, an increase of $194,974.

This increase is due to an increase of nine full-time equivalent employees

between the two periods.

Stock-based Compensation

was $117,477 for the three months ended March 31, 2021 compared to $154,171 for the same period in 2020, a $36,694,

or 24%, decrease.

This decrease is primarily a result of stock options granted to our CEO vesting

in the first quarter of 2020 with no such vesting in the first quarter of 2021, partially offset by stock option grants to four

new employees during the three months ended March 31, 2021.

Operating and Research

and Development expenditures of $196,340 were incurred during the three months ended March 31, 2021 compared to $53,689

in the same period of 2020, a $142,651 increase.

The increase is due to development costs incurred in connection

with PrintRite3D version 7.0 of $48,171, purchases of lab supplies of $36,474, of which metal powder purchases totaled $14,470,

write-off of $36,111 in obsolete inventory, and $20,000 incurred in connection with a simulation project.

Investor & Public

Relations expenses of $108,341 were incurred during the three months ended March 31, 2021, as compared to $215,441

incurred during the same period in 2020.

The decrease of $107,100 is primarily due to a decrease in trade

show expenses of $29,902, lower advertising expenses of $50,583, and $22,165 in expenses incurred in the first quarter

of 2020 in connection with a special meeting of shareholders.

Organization costs

incurred in the three months ended March 31, 2021 were $77,616 compared to $49,444 incurred during the same period in 2020.

increase of $28,172 is due to an increase in non-employee director’s compensation of $44,958, partially offset by lower

shareholder’s services expenses of $16,786.

Legal & Professional

fees incurred in the three months ended March 31, 2021 were $176,847 compared to $184,891 incurred during the same

period in 2020, a decrease of $8,044.

This decrease is primarily a result of a decrease in legal expenses

of $77,339 due to expenses incurred during the first quarter of 2020 in connection with our January 2020 private

offering, Nasdaq related matters, and our February 27, 2020 reverse stock split.

This decrease was partially

offset by increased recruiting expenses of $26,667 related to new hires, an increase in consulting expenses of $33,310, and

increases in accounting and IT support expenses of $3,031 and $3,500 respectively.

Office expenses for

the three months ended March 31, 2021 totaled $148,225 as compared to $147,747 for the same period in 2020.

Increases in payroll

service fees of $7,317, postage & shipping of $11,109, office supplies of $20,888, dues & subscriptions of $7,586, and

other miscellaneous expense increases of $3,805 were offset by a decrease in travel expenses of $49,398.

Other operating

expenses were $86,356 for the three months ended March 31, 2021, as compared to $84,049 for the same period in 2020.

increase is primarily due to an increase in our insurance policy premiums for 2021 of $10,376, mostly offset by lower bank

service fees and SEC filing fees during the period.

In the three months

ended March 31, 2021, our net other income & expense was net income of $800,936 compared to net other expense

of $971 in 2020.

The 2021 net positive contribution is primarily due to an unrealized gain of $802,285 from the March

31, 2021 revaluation of the derivative liability resulting from our private placement of warrants to purchase 2,190,000

shares of common stock in the first quarter of 2021.

Sigma’s net loss

applicable to common stockholders for the three months ended March 31, 2021 totaled $711,567 as compared to $1,898,832

for the same period of 2020, a $1,187,265 decrease.

The first quarter 2021 net operating loss contributed $131,019

to the loss decrease, the increase in other income contributed $801,907, and a decrease in preferred

dividends contributed $254,339.

and Capital Resources

As of March 31, 2021,

we had $16,843,201 in cash and working capital of $12,634,299, as compared with $3,700,814 in cash and working capital

of $ 4,332,053 as of December 31, 2020.

major sources of funding have been proceeds from public and private offerings of our equity securities (both common stock and preferred

stock), and from warrant exercises.

March 26, 2021, the Company closed a public offering of its securities in which it issued 2,190,000 shares of common stock at

$4.445 per share, resulting in net proceeds to the Company of approximately $8,736,487 after deducting placement agent

commissions and other offering costs payable by the Company.

Pursuant to the Purchase Agreement, the purchasers severally

agreed to vote the shares of common stock purchased under the Purchase Agreement in favor of any resolution presented to

the stockholders of the Company for the purpose of obtaining approval of an increase in the authorized shares of the Company’s

Common Stock from 12,000,000 to 24,000,000 shares (“Stockholder Approval”).

In a concurrent private placement under

the Purchase Agreement, the Company issued to the purchasers warrants to purchase an aggregate of 2,190,000 shares of Common

Stock at an exercise price of $4.32 per share.

Each Warrant will be exercisable commencing on the date the Company obtains Stockholder

Approval and will expire two years after the initial exercise date.

January 12, 2021, the Company closed a public offering of common stock in which it issued 1,711,783 shares of common stock

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

expenses payable by the Company.

During the first

quarter of 2021, the Company received net cash proceeds of $1,136,010 from the exercise of outstanding warrants.

believe that our existing cash on hand will be sufficient to fund our anticipated operating costs and capital expenditure requirements

through 2022.

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

than we expect.

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

to estimate the exact amount of our working capital requirements.

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

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

our patent claims and other intellectual property rights;

effect of competing technological and market developments;

revenue from the sales of our existing and future products;

cost of operating as a public company.

2021, we expect to sustain our operations and our commercialization and marketing efforts with our cash reserves and revenues

generated from sales of our PrintRite3D®

We expect that continued enhancements of our IPQA®-enabled PrintRite3D®

technology will enable us to further commercialize this technology into the AM metal market in 2021.

To support the commercialization

of our PrintRite3D®

technology, we plan to continue funding our development activities and operating expenses by licensing

our PrintRite3D®

systems and supporting field services, as applicable, and providing PrintRite3D®-enabled engineering

consulting services concerning our areas of expertise (materials and manufacturing quality assurance and process control technologies).

The outbreak of the novel coronavirus (COVID-19) has evolved into

a global pandemic.

spread of the coronavirus, which has caused a broad impact globally, including restrictions on travel and quarantine policies

put in place by businesses and governments, may have a material economic effect on our business.

To-date, the outbreak has not

had a material adverse impact on our operations, though we have experienced delays in certain customer purchase orders.

the Company believes that such purchase orders will ultimately be realized, it is impossible to predict the timing.

future impact of the outbreak is highly uncertain and cannot be predicted and there is no assurance that the outbreak will not

have a material adverse impact on our business and the future results of the Company.

However, due to the need to have more flexibility in supply chains with the ability to respond quickly to shortages in

parts or products, we believe that the crisis will eventually accelerate the adoption of 3D printing, which would be a positive

trend for the Company.

Cash Used in Operating Activities

Net cash used in operating

activities during the three months ended March 31, 2021 decreased to $1,240,586 from $1,525,696 during the same

period in 2020, a $285,110 decrease.

Contributing to this decrease were decreases in net loss of $932,926, accounts

receivable of $7,397, and deferred revenue of $43,790, and increases in depreciation and amortization of $5,019, total stock-based

compensation of $16,140, accounts payable and accrued expenses of $325,706 and long-term stock appreciation rights

expense of $45,184.

These decreases in cash usage were partially offset by the unrealized gain on the derivative

liability of $802,285 and increases in inventory and prepaid expenses of $181,044 and $107,724 respectively.

Cash Used in Investing Activities

Net cash used by investing

activities during the three months ended March 31, 2021 was $21,969, which compares to $50,529 of cash used by investing

activities during the same period of 2020, a decrease of $28,560.

The decrease results from lower purchases of fixed

assets and lower patent costs during the first quarter of 2021.

Cash Provided by Financing Activities

Cash provided by financing

activities during the three months ended March 31, 2021 increased to $14,404,942 from $2,120,324 during the same period

in 2020 due to the receipt of $14,869,899 of proceeds less $1,600,967 of offering costs in connection with our January

and March 2021 public and private offerings.

The exercise of outstanding warrants during the three months ended

March 31, 2021 provided an additional $1,136,010 in cash proceeds.

Cash provided by financing activities during the same period

in 2020 resulted from the receipt of $2,100,000 in proceeds less $428,876 of offering costs in connection

with our January 2020 private offering, partially offset by the payment of the remaining outstanding principal balance

on our convertible note payable of $50,000.

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

from existing and future PrintRite3D®-proof-of-concept contracts, follow-on contracts resulting from successful proof-of-concept

engagements, possible strategic partnerships, and by obtaining additional capital from the sale of securities or by borrowing funds from

lenders to fulfill our business plans.

If we issue additional equity or debt securities, stockholders may experience additional dilution

or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock.

is no assurance that we will be successful in obtaining additional funding.

The Company is unable to predict the effect that the COVID-19

outbreak may have on its access to the financing markets.

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

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

have no credit lines as of April 22, 2021, nor have we ever had a credit line since our inception.

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

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

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

July 15, 2021, at the Annual Meeting of Stockholders of the Company, the Company’s stockholders approved an amendment to the 2013

Equity Incentive Plan to increase the number of shares of the Company’s common stock reserved for issuance under the 2013 Equity Incentive Plan

by 875,000 shares of our common stock to a total of 1,765,000 shares.

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

What changed 10-Q

Item 1. Financial Statements