NextTrip, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS. Sigma Labs, Inc. Condensed Balance Sheets (Unaudited) June 30, 2021 December 31, 2020 ASSETS Current Assets: Cash $ 14,731,115 $ 3,700,814 Accounts Receivable, net 389,450 331,562 Inventory 846,999 659,651 Prepaid Assets 168,326 90,735 Total Current Assets 16,135,890 4,782,762 Other Assets: Property and Equipment, net 157,490 138,626 Intangible Assets, net 793,465 753,122 Long-Term Prepaid Asset - 26,000 Total Other Assets 950,955 917,748 TOTAL ASSETS $ 17,086,845 $ 5,700,510 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts Payable $ 315,768 $ 128,937 Deferred Revenue 63,569 77,957 Accrued Expenses 184,099 243,815 Total Current Liabilities 563,436 450,709 Long-Term Liabilities: Stock Appreciation Rights 93,525 48,341 CARES Act Deferred Payroll Tax Liability 37,728 37,728 Total Long-Term Liabilities 131,253 86,069 TOTAL LIABILITIES 694,689 536,778 Stockholders’ Equity Preferred Stock, $ 0.001 par; 10,000,000 shares authorized; 465 and 715 issued and outstanding, respectively 1 1 Common Stock, $ 0.001 par; 24,000,000 shares authorized; 10,493,598 and 5,995,320 issued and outstanding, respectively 10,494 5,995 Additional Paid-In Capital 52,058,003 38,262,744 Accumulated Deficit ( 35,676,342 ) ( 33,105,008 ) Total Stockholders’ Equity 16,392,156 5,163,732 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 17,086,845 $ 5,700,510 See accompanying notes to condensed financial statements. 3 Sigma Labs, Inc. Condensed Statements of Operations (Unaudited) 2021 2020 2021 2020 Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 REVENUES $ 144,148 $ 167,688 $ 602,288 $ 389,418 COST OF REVENUE 116,397 57,684 244,728 302,387 GROSS PROFIT (LOSS) 27,751 110,004 357,560 87,031 OPERATING EXPENSES: Salaries & Benefits 985,348 605,295 1,832,520 1,257,492 Stock-Based Compensation 116,441 270,818 233,919 424,989 Operating R&D Costs 280,700 111,647 477,040 165,335 Investor & Public Relations 114,762 97,702 223,103 287,009 Organization Costs 158,529 80,096 236,145 155,675 Legal & Professional Service Fees 244,019 212,496 420,866 397,386 Office Expenses 151,871 78,843 300,096 226,590 Depreciation & Amortization 25,783 17,970 48,814 35,983 Other Operating Expenses 91,198 51,687 177,554 135,736 Total Operating Expenses 2,168,651 1,526,554 3,950,057 3,086,195 LOSS FROM OPERATIONS ( 2,140,900 ) ( 1,416,550 ) ( 3,592,497 ) ( 2,999,164 ) OTHER INCOME (EXPENSE) Interest Income 7,018 31 7,073 882 State Incentives - 151,657 - 151,657 Exchange Rate Gain (Loss) 208 ( 31 ) 158 ( 1,422 ) Interest Expense ( 2,029 ) ( 6,244 ) ( 3,382 ) ( 6,675 ) Loss on Dissolution of Joint Venture - ( 201 ) - ( 201 ) Other Income 290,156 361,700 1,092,441 361,700 Total Other Income (Expense) 295,353 506,912 1,096,290 505,941 LOSS BEFORE PROVISION FOR INCOME TAXES ( 1,845,547 ) ( 909,638 ) ( 2,496,207 ) ( 2,493,223 ) Provision for income Taxes - - - - Net Loss $ ( 1,845,547 ) $ ( 909,638 ) $ ( 2,496,207 ) $ ( 2,493,223 ) Preferred Dividends ( 14,220 ) ( 691,880 ) ( 75,127 ) ( 1,007,127 ) Net Loss Applicable to Common Stockholders $ ( 1,859,767 ) $ ( 1,601,518 ) $ ( 2,571,334 ) $ ( 3,500,350 ) Net Loss per Common Share – Basic and Diluted $ ( 0.18 ) $ ( 0.49 ) $ ( 0.28 ) $ ( 1.48 ) Weighted Average Number of Shares Outstanding – Basic and Diluted 10,493,598 3,256,098 9,149,328 2,359,862 See accompanying notes to condensed financial statements. 4 Sigma Labs, Inc. Statement of Stockholders’ Equity For the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited) For the Three Months Ended June 30, 2021 and June 30, 2020 Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in Capital Accumulated Deficit Total Preferred Stock Common Stock Additional Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in Capital Accumulated Deficit Total Balances, March 31, 2021 465 $ 1 10,493,598 $ 10,494 $ 47,225,812 $ ( 33,816,575 ) $ 13,419,732 Net Loss - - - - - ( 1,845,547 ) ( 1,845,547 ) Extinguishment of Derivative Liability - - - - 4,615,771 - 4,615,771 Preferred Stock Dividends - - - - 14,220 ( 14,220 ) - Securities Issued for Third Party Services - - - - 24,956 - 24,956 Stock Options Awarded to Employees - - - - 116,441 - 116,441 Stock Options Awarded to Directors - - - - 60,803 - 60,803 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 - - 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 - - Issuance of Fractional Shares from Reverse Split, shares Balances, June 30, 2021 465 $ 1 10,493,598 $ 10,494 $ 52,058,003 $ ( 35,676,342 ) $ 16,392,156 Preferred Stock Common Stock Additional Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in Capital Accumulated Deficit Total Balances, March 31, 2020 1,378 $ 2 1,817,834 $ 1,818 $ 29,425,382 $ ( 27,994,426 ) $ 1,432,776 Net Loss - - - - - ( 909,638 ) ( 909,638 ) Common Shares Sold in Public Offering - - 493,027 493 1,499,507 - 1,500,000 Preferred Stock Dividends - - 323,624 323 691,557 ( 691,880 ) - Common Shares issued for Conversion of Preferred Shares ( 2,729 ) ( 2 ) 1,280,360 1,281 ( 1,279 ) - - Preferred Shares issued for Exercise of Preferred Warrants 1,684 1 - - 1,641,899 - 1,641,900 Securities Issued for Third Party Services - - - - 15,306 - 15,306 Stock Options Awarded to Employees - - - - 262,950 - 262,950 Common Shares Awarded to Employees - - 11,517 11 7,859 - 7,870 Offering Costs - - - - ( 391,352 ) - ( 391,352 ) Balances, June 30, 2020 333 $ 1 3,926,362 $ 3,926 $ 33,151,829 $ ( 29,595,944 ) $ 3,559,812 For the Six Months Ended June 30, 2021 and June 30, 2020 Preferred Stock Common Stock Additional Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in Capital Accumulated Deficit Total Balances, December 31, 2020 715 $ 1 5,995,320 $ 5,995 $ 38,262,744 $ ( 33,105,008 ) $ 5,163,732 Net Loss - - - - - ( 2,496,207 ) ( 2,496,207 ) Common Shares Sold in Public Offerings - - 3,901,783 3,902 14,865,997 - 14,869,899 Extinguishment of Derivative Liability - - - - ( 1,092,441 ) - ( 1,092,441 ) Preferred Stock Dividends - - 19,000 19 75,108 ( 75,127 ) - Common Shares issued for Conversion of Preferred Shares ( 250 ) - 100,000 100 ( 100 ) - - Common Shares issued for Exercise of Common Warrants - - 475,995 476 1,135,534 - 1,136,010 Securities Issued for Third Party Services - - 1,500 2 55,935 - 55,937 Stock Options Awarded to Employees - - - - 233,919 - 233,919 Stock Options Awarded to Directors - - - - 122,274 - 122,274 Offering Costs - - - - ( 1,600,967 ) - ( 1,600,967 ) Balances, June 30, 2021 465 $ 1 10,493,598 $ 10,494 $ 52,058,003 $ ( 35,676,342 ) $ 16,392,156 Preferred Stock Common Stock Additional Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in Capital Accumulated Deficit Total Balances, December 31, 2019 - $ - 1,403,759 $ 1,404 $ 26,746,439 $ ( 26,095,594 ) $ 652,249 Net Loss - - - - - ( 2,493,223 ) ( 2,493,223 ) Common Shares Sold in Public Offering - - 493,027 493 1,499,507 - 1,500,000 Preferred Shares Sold in Private Offering 1,973 3 - - 2,099,997 2,100,000 Preferred Stock Dividends - - 410,425 410 1,006,717 ( 1,007,127 ) - Common Shares issued for Conversion of Preferred Shares ( 3,836 ) ( 4 ) 1,601,877 1,602 ( 1,598 ) - - Preferred Shares issued for Exercise of Preferred Warrants 2,196 2 - - 2,141,098 - 2,141,100 Securities Issued for Third Party Services - - 2,500 3 54,921 - 54,924 Stock Options Awarded to Employees - - - 417,120 - 417,120 Common Shares Awarded to Employees - - 11,517 11 7,859 - 7,870 Offering Costs ( 820,228 ) - ( 820,228 ) Issuance of Fractional Shares from Reverse Split - - 3,257 3 ( 3 ) - - Balances, June 30, 2020 333 $ 1 3,926,362 $ 3,926 $ 33,151,829 $ ( 29,595,944 ) $ 3,559,812 See accompanying notes to condensed financial statements. 5 Sigma Labs, Inc. Condensed Statements of Cash Flows (Unaudited) June 30, 2021 June 30, 2020 Six Months Ended June 30, 2021 June 30, 2020 OPERATING ACTIVITIES Net Loss $ ( 2,496,207 ) $ ( 2,493,223 ) Adjustments to reconcile Net Loss to Net Cash used in operating activities: Noncash Expenses: Depreciation and Amortization 48,814 35,983 Gain on Derivative Liability ( 1,092,441 ) - Stock Based Compensation - Employees 233,919 424,989 Stock Based Compensation - Third Party Services 55,937 54,924 Stock Based Compensation - Directors 122,274 - Change in assets and liabilities: Accounts Receivable ( 57,888 ) ( 230,865 ) Inventory ( 187,348 ) 13,078 Prepaid Assets ( 51,591 ) 81,695 Accounts Payable 186,831 ( 431,893 ) Deferred Revenue ( 14,388 ) ( 39,860 ) Accrued Expenses ( 14,531 ) 149,785 NET CASH USED IN OPERATING ACTIVITIES ( 3,266,620 ) ( 2,435,387 ) INVESTING ACTIVITIES Purchase of Property and Equipment ( 52,931 ) ( 11,474 ) Purchase of Intangible Assets ( 55,090 ) ( 87,736 ) Dissolution of Joint Venture - 500 NET CASH USED IN INVESTING ACTIVITIES ( 108,021 ) ( 98,710 ) FINANCING ACTIVITIES Gross Proceeds from Public and Private Issuances of Securities 14,869,899 3,600,000 Less Offering Costs ( 1,600,967 ) ( 820,228 ) Payment of Note Payable - ( 50,000 ) Proceeds from Exercise of Warrants 1,136,010 2,141,100 Deferral of Payroll Taxes under the CARES Act - 22,072 NET CASH PROVIDED BY FINANCING ACTIVITIES 14,404,942 4,892,944 NET CHANGE IN CASH FOR PERIOD 11,030,301 2,358,847 CASH AT BEGINNING OF PERIOD 3,700,814 86,919 CASH AT END OF PERIOD $ 14,731,115 $ 2,445,766 Supplemental Disclosures: Noncash investing and financing activities disclosure: Issuance of Common Shares for Preferred Dividends $ 75,108 $ 1,006,717 Issuance of Securities for services $ 178,209 $ 62,794 Disclosure of cash paid for: Interest $ 3,382 $ 9,359 Income Taxes $ - $ - See accompanying notes to condensed financial statements. 6 SIGMA LABS, INC. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS June 30, 2021 (Unaudited) NOTE 1 - Summary of Significant Accounting Policies Nature 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. Basis of Presentation - The accompanying financial statements have been prepared by the Company in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States of America. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at 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 - Certain amounts in prior-period financial statements have been reclassified for comparative purposes to conform to presentation in the current-period financial statements. Fair Value of Financial Instruments - The Company applies ASC 820, “Fair Value Measurements . ” This guidance defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows: ● Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. ● Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. ● Level 3 - inputs to valuation methodology are unobservable and significant to the fair measurement. 7 The carrying amounts reported in the balance sheets for the cash and cash equivalents, receivables, accounts payable, and accrued liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The Company does not use derivative instruments for hedging of market risk or for trading or speculative purposes. On March 26, 2021, the Company closed an offering in which it issued warrants to purchase an aggregate of 2,190,000 shares of common stock in a private placement concurrently with a registered direct offering (“Registered Offering”) of our common stock The warrants became exercisable on May 24, 2021 , the date the Company obtained stockholder approval to increase its authorized common shares from 12,000,000 to 24,000,000 (“the Initial Exercise Date”) and will expire two years after the Initial Exercise Date. Pursuant 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. The fair value of the warrant liability measured on a recurring basis is as follows: Schedule of Warrant Liability Measured on Recurring Basis June 30, 2021 Date of Issuance March 26, 2021 Fair Value Input Level Fair Value Input Level Derivative Liability - Warrants $ - - $ 5,708,212 Level 3 The following table presents a reconciliation of the derivative liability measured at fair value on a recurring basis using significant unobservable input (Level 3): Schedule of Derivative Liability Measured on a Recurring Basis Using Significant Unobservable Input (Level 3) Warrants Fair Value on Issuance Date $ 5,708,212 Change in Fair Value ( 1,092,441 ) Fair Value on May 24, 2021 4,615,771 Extinguishment of Derivative Liability ( 4,615,771 ) Fair Value on June 30, 2021 $ - Loss Per Share - The computation of loss per share is based on the weighted average number of shares outstanding during the period in accordance with ASC Topic No. 260, “Earnings Per Share.” Shares underlying the Companies 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 Six Months Ended June 30, 2021 2020 Warrants 3,987,931 1,845,722 Preferred Stock Warrants - 2,147,277 Stock Options 853,936 486,720 Preferred Stock 124,483 61,651 Total Underlying Common Shares 4,966,350 4,541,370 8 The 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 Three Months Ended June 30 Six Months Ended June 30 2021 2020 2021 2020 Net Loss per Common Share - Basic and Diluted $ ( 0.18 ) $ ( 0.49 ) $ ( 0.28 ) $ ( 1.48 ) Loss from continuing Operations available to Common stockholders (numerator) $ ( 1,859,767 ) $ ( 1,601,518 ) $ ( 2,571,334 ) $ ( 3,500,350 ) Weighted average number of common shares Outstanding used in loss per share during the Period (denominator) 10,493,598 3,256,098 9,149,328 2,359,862 Recently Enacted Accounting Standards - The FASB established the ASC as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with GAAP. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) issued under authority of federal securities laws are also sources of GAAP for SEC registrants. Accounting 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. NOTE 2 – Inventory At June 30, 2021 and December 31, 2020, the Company’s inventory was comprised of: Schedule of Inventory June 30, 2021 December 31, 2020 Raw Materials $ 290,003 $ 309,305 Work in Process 314,450 175,884 Finished Goods 242,646 174,462 Total Inventory $ 846,999 $ 659,651 NOTE 3 – Deferral of Social Security Tax Payments Pursuant to sections 2302(a)(1) and (a)(2) of the CARES Act, the Company has elected to defer payments of its share of Social Security tax due during the “payroll tax deferral period”. The payroll tax deferral period began on March 27, 2020 and ended on December 31, 2020. 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. 9 NOTE 4 - Derivative Liability On March 26, 2021 (the “Issuance Date”), the Company issued warrants to purchase an aggregate of 2,190,000 shares of common stock to holders in a private placement concurrently with a registered direct offering of 2,190,000 shares of its common stock. The warrants entitle the holders to purchase one share of our common stock at an exercise price equal to $ 4.32 per share commencing on May 24, 2021 and will expire two years from such date. The Company has determined that these warrants are free standing financial instruments that are legally detachable and separately exercisable from the common stock included in the registered direct offering. Management also determined that on the Issuance Date, the Company did not have sufficient authorized and unissued shares to settle the warrants, and as such required classification as a liability pursuant to ASC 815 “Derivative Instruments and Hedging” . In accordance with the accounting guidance, the outstanding warrants were recognized as a warrant liability on the balance sheet and were measured at their inception date fair value and subsequently re-measured at each reporting period with changes being recorded as a component of other income in the statement of operations. At a Special Stockholders Meeting held on May 24, 2021, the Company received approval to increase its authorized common shares from 12,000,000 to 24,000,000 . Pursuant to ASC 815-40-35-8, the Company reclassified the warrant liability to equity as of such date. The fair value of the derivative liability presented below was measured using the Black Scholes valuation model. Significant inputs into the model for the six months ended June 30, 2021 are as follows: Schedule of Fair Value of Derivative Liability Using Black Scholes Valuation Model June 30, 2021 Dividend yield 0.00 % Risk-free interest rate 0.6 %- 0.7 % Expected volatility 121.2 % - 124.0 % Expected life (in years) 2 The warrants outstanding and fair values at each of the respective valuation dates are summarized below: Schedule of Fair Value of Warrant Liability Warrant Liability Warrants Outstanding Fair Value Per Share Fair Value Fair Value at initial measurement date of March 26, 2021 2,190,000 $ 2.61 $ 5,708,212 (Gain) on change in Fair Value of Warrant Liability - $ - ( 1,092,441 ) Fair Value as of May 24, 2021 2,190,000 $ 2.11 4,615,771 Extinguishment of Derivative Liability ( 2,190,000 ) $ 2.11 ( 4,615,771 ) Fair Value as of June 30, 2021 - $ - - The Company has presented the fair value measurement as a Level 3 measurement, relying on unobservable inputs reflecting management’s assumptions. Level 3 measurements, which are not based on quoted prices in active markets, introduce a higher degree of subjectivity and may be more sensitive to fluctuations in stock prices, volatility rates and U.S. Treasury Bond rates and could have a material impact on future fair value measurements. The Company uses the Black Scholes model, based on the adjusted historical volatility rates for fair value measurements through the date of stockholder approval (i.e., May 24, 2021). Management has determined the Black Scholes model to be the most reliable and least volatile determinate of the current fair value of the warrants. It is the Company’s expectation to maximize on all observable market inputs for the warrants and calibrate the model to incorporate relevant observable market data into the fair value measurement at each future measurement date, if applicable. During the six months ended June 30, 2021, the Company recognized a gain of $ 1,092,441 on the change in fair value of the warrants. 10 NOTE 5 - Stockholders’ Equity Common Stock On May 24, 2021, at a Special Stockholders Meeting, our authorized shares of common stock were increased from 12,000,000 to 24,000,000 . In January 2021, the Company closed a public offering of its securities in which it issued 1,711,783 shares of common stock at $ 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 share. In February 2021, the Company issued 263,200 shares of common stock pursuant to the exercise of warrants issued in our January 2020 private placement. In March 2021, the Company issued 119,000 shares of common stock in exchange for the conversion of 250 shares of Series D Convertible Preferred Stock, including 19,000 shares of common stock as in-kind payment of preferred stock dividends. Also in March 2021, the Company issued 191,204 shares of common stock pursuant to the exercise of warrants issued in our April 2020 offering, and 21,591 shares of common stock issued pursuant to the cashless exercise of placement agent warrants. In March 2021, the Company closed a public offering of its securities in which it issued 2,190,000 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. In March 2021, Company issued 1,500 shares of common stock valued at $ 4.99 per share to CorProminence, an investor relations firm previously engaged by the Company as partial compensation for services previously rendered. On April 6, 2020, the Company closed a public offering of equity securities in which it issued 493,027 shares of common stock and pre-funded warrants to purchase up to 22,438 shares of the Company’s common stock. The Company also issued Series A Warrants to purchase an aggregate of 515,465 shares of the Company’s common stock pursuant to a private placement. In connection with this offering, the Company issued Dawson James Securities, Inc., its Placement Agent, a warrant to purchase an aggregate of 41,237 shares of the Company’s Common Stock (which amount is based on the number of Common Shares and shares underlying the Pre-Funded Warrants) at an exercise price of $ 3.64 per share. Net proceeds to the Company after deducting offering expenses were approximately $ 1,230,000 . In the 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. In April 2020, the Company granted 11,517 shares of common stock to employees under the 2013 Equity Incentive Plan. Such shares vested on December 31, 2020. In 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. In 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. 11 Preferred Stock The Company is authorized to issue 10,000,000 shares of preferred stock, $ 0.001 par value. 465 and 333 shares of preferred stock were issued and outstanding at June 30, 2021 and 2020, respectively. In 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”). 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. At 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. Concurrent 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. At 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. Deferred Compensation In 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. At June 30, 2021, there was $ 0 of unrecognized deferred compensation expense to be recognized over the remainder of the year. 12 Stock Options As of June 30, 2021, an aggregate of 890,000 shares of common stock were reserved for issuance under the 2013 Plan. During 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. During 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. The Company generally grants stock options to employees and directors at exercise prices equal to the fair market value of the Company’s stock on the dates 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. Total 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. The 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: Assumptions: Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions 2021 2020 Dividend yield 0.00 0.00 Risk-free interest rate 0.19 - 0.32 % 0.22 - 1.52 % Expected volatility 116.8 - 123.8 % 113.8 - 117.2 % Expected life (in years) 5 5 13 Option activity for the six months ended June 30, 2021 and the year ended December 31, 2020 was as follows: Schedule of Stock Option Activity Weighted Average Weighted Average Exercise Remaining Aggregate Price Contractual Intrinsic Options ($) Life (Yrs.) Value ($) Options outstanding at December 31, 2019 180,912 18.11 5.09 25,988 Granted 579,998 2.55 4.57 - Exercised - - - - Forfeited or cancelled ( 47,900 ) 22.62 - - Options outstanding at December 31, 2020 713,010 5.15 4.40 477,802 Granted 145,487 3.22 4.53 - Exercised - - - - Forfeited or cancelled ( 4,561 ) 4.25 - ( 1,597 ) Options outstanding June 30, 2021 853,936 4.82 4.01 874,803 Options expected to vest in the future as of June 30, 2021 370,127 3.73 4.13 400,686 Options exercisable at June 30, 2021 483,809 5.66 3.91 474,117 Options vested, exercisable, and options expected to vest at June 30, 2021 853,936 874,803 The 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 . At 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. Stock Appreciation Rights On June 23, 2020, the board of directors (the “Board”) of the Company adopted the Sigma Labs, Inc. 2020 Stock Appreciation Rights Plan (the “Plan”). The purposes of the Plan are to: (i) enable the Company to attract and retain the types of employees, consultants and directors (collectively, “Service Providers”) who will contribute to the Company’s long range 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. SARs may be granted to any Service Provider. A SAR is the right to receive an amount equal to the Spread with respect to a share of the Company’s common stock (“Share”) upon the exercise of the SAR. The “Spread” is the difference between the exercise price per share specified in a SAR agreement on the date of grant and the fair market value per share on the date of exercise of the SAR. The exercise price per share will not be less than 100% of the fair market value of a Share 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. 14 On 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 $2.63, which was the closing price of the Company’s common stock on the date of grant. Such SARs expire on the fifth anniversary of the grant date and may be settled only in cash. Additionally, each such SAR will vest and become exercisable in three equal (as closely as possible) installments on each of the first, second and third anniversaries of the grant date, subject, in each case, to the applicable SAR holder being in the continuous employ of the Company on the applicable vesting date, and, in the event of a Change in Control (as defined in the Plan), will become immediately vested and exercisable as long as the applicable holder is in the Company’s employ immediately prior to the Change in Control, and will otherwise be on such other terms set forth in the form of Stock Appreciation Rights Agreement. On November 19, 2020, we granted 13,500 SARs to a consultant as partial compensation for services pursuant to the consulting agreement. The Company recognizes compensation expense and a corresponding liability for the fair value of the SARs over the requisite service period for each SAR award. The SAR’s are revalued at each reporting date in accordance with ASC 718 “Compensation-Stock Compensation”, and any changes in fair value are reflected in income as of the applicable reporting date. There were no SAR awards issued during the first six months of 2021. SARs activity for the six months ended June 30, 2021 was as follows: Schedule of Stock Option Activity Weighted Average Weighted Average Exercise Remaining Aggregate Price Contractual Intrinsic SARs ($) Life (Yrs.) Value ($) SARs outstanding at December 31, 2020 127,679 2.61 4.52 97,919 Granted - - - - Exercised - - - - Forfeited or cancelled - - - - SARs outstanding June 30, 2021 127,679 2.61 4.02 164,312 SARs expected to vest in the future as of June 30, 2021 76,120 2.63 3.98 96,672 SARs exercisable at June 30, 2021 51,559 2.59 4.09 67,640 SARs vested, exercisable, and options expected to vest at June 30, 2021 127,679 2.61 4.02 164,312 The 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. At 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. Warrants Warrant activity for the six months ended June 30, 2021 and 2020 was as follows: Summary of Warrant Activity Weighted Average Weighted Average Exercise Remaining Price Contractual Warrants ($) Life (Yrs.) Warrants outstanding at December 31, 2019 363,727 25.60 3.12 Granted 1,481,995 3.22 5.14 Exercised - - - Forfeited or cancelled - - - Warrants outstanding at June 30, 2020 1,845,722 7.64 4.64 Warrants outstanding at December 31, 2020 1,881,429 7.57 4.16 Granted 2,602,143 4.36 2.14 Exercised ( 495,641 ) 2.59 4.13 Forfeited or cancelled - - - Warrants outstanding at June 30, 2021 3,987,931 6.10 2.61 NOTE 6 - Subsequent Events On July 15, 2021, at the Annual Meeting of Stockholders of the Company, the Company’s stockholders approved an amendment to the 2013 Equity Incentive Plan to increase the number of shares of the Company’s common stock reserved for issuance under the 2013 Equity Incentive Plan by 875,000 shares of our common stock to a total of 1,765,000 shares. 15