What changed in this filing

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Item 1. Financial Statements

2022-04-26 compared with 2021-10-21 · 235 added, 437 removed, 199 unchanged (77% of the section changed)

1 unchanged sentence

Balance Sheets

September 30, 2021

March 31, 2022

December 31, 2021

6 unchanged sentences

Intangible Assets, net

Long-Term Prepaid Asset

Total Other Assets

5 unchanged sentences

Total Current Liabilities

Long-Term Liabilities:

Stock Appreciation Rights

CARES Act Deferred Payroll Tax Liability

Total Long-Term Liabilities

TOTAL LIABILITIES

2 unchanged sentences

10,000,000 shares authorized;

465 and 715 issued and outstanding, respectively

Common Stock, $ 0.001 par;

465 shares issued and outstanding, respectively

Common Stock, $ 0.001

24,000,000 shares authorized;

10,498,802 and 5,995,320 issued and outstanding, respectively

10,498,802 shares issued and outstanding , respectively

Additional Paid-In Capital

7 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

March 31, 2022

March 31, 2021

COST OF REVENUE

2 unchanged sentences

Stock-Based Compensation

Operating R&D Costs

Investor, Public Relations & Marketing

Operations and R&D Costs

Investor & Public Relations

Organization Costs

7 unchanged sentences

( 1,451,595 )

( 6,083,912 )

( 4,210,936 )

OTHER INCOME (EXPENSE)

Interest Income

Gain on Derivative Liability

State Incentives

Exchange Rate Gain (Loss)

Exchange Rate Loss

Interest Expense

Loss on Dissolution of Joint Venture

Total Other Income (Expense)

1 unchanged sentence

( 2,207,395 )

( 1,218,013 )

( 4,987,185 )

( 3,711,236 )

Provision for Income Taxes

1 unchanged sentence

$ ( 650,659 )

$ ( 4,987,185 )

$ ( 3,711,236 )

Preferred Dividends

( 1,744,471 )

Net Loss Applicable to Common Stockholders

1 unchanged sentence

$ ( 711,567 )

$ ( 5,076,532 )

$ ( 5,455,707 )

Net Loss per Common Share - Basic and Diluted

2 unchanged sentences

of Stockholders’ Equity

the Three and Nine Months Ended September 30, 2021 and 2020

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

Balances, June 30, 2021

$ ( 35,676,342 )

Preferred Stock Dividends

Preferred Stock Dividends, shares

Shares Securities Issued to Directors for Services

Securities Issued to Directors for Services, Shares

Securities Issued for Third Party Services

Securities Issued for Third

Party Services, shares

Securities Awarded to Employees

Preferred Shares issued for

Exercise of Preferred Warrants

Preferred Shares issued for

Exercise of Preferred Warrants, shares

Common Shares issued for Conversion

of Preferred Shares

Common Shares issued for Conversion

of Preferred Shares, shares

Common Shares Sold in Public

Common Shares Sold in Public Offering, shares

Preferred Shares Sold in Private Offering

Preferred Shares Sold in Private Offering, shares

Extinguishment of Derivative Liability

Common Shares issued for Exercise of Common Warrants

Common Shares issued for Exercise of Common Warrants, shares

Offering Costs

Issuance of Fractional Shares from Reverse Split

Issuance of Fractional Shares from Reverse Split, shares

Stock Options Awarded to Directors

Securities Issued to Directors

( 2,490,978 )

Balances, September 30, 2021

$ ( 38,181,540 )

Balances, June 30, 2020

$ ( 29,595,944 )

Preferred Stock Dividends

Common Shares issued for Conversion of Preferred Shares

Preferred Shares issued for Exercise of Preferred Warrants

Securities Issued to Directors for Services

Securities Issued for Third Party Services

Securities Awarded to Employees

( 1,218,013 )

Balances, September 30, 2020

$ ( 31,551,301 )

the Nine Months Ended September 30, 2021 and September 30, 2020

The Quarters Ended March 31, 2022 and March 31, 2021

Preferred Stock

Shares Outstanding

Preferred Stock

Shares Outstanding

Paid-in Capital

Accumulated Deficit

Balances, December 31, 2021

$ ( 40,593,180 )

Beginning balance

( 2,207,395 )

Common Shares Sold in Public Offering

Extinguishment of Derivative Liability

( 2,207,395 )

( 1,092,441 )

Preferred Stock Dividends

Common Shares issued for Conversion of Preferred Shares

Common Shares issued for Exercise of Common Warrants

Stock Options Awarded to Directors

Securities Issued for Third Party Services

Securities Awarded to Employees

Offering Costs

( 1,600,967 )

( 4,987,185 )

Preferred Stock Dividends, shares

Common Shares Issued for Third Party Services

Stock Options Awarded to Directors for Services

Stock Options Awarded to Employees

Balances, March 31, 2022

( 42,814,795 )

Balances, September 30, 2021

Preferred Stock

Shares Outstanding

Preferred Stock

Shares Outstanding

Paid-in Capital

Accumulated Deficit

December 31, 2020

$ ( 33,105,008 )

Ending balance

Common Shares Sold in Public Offerings

Derivative Liability Value on Issuance Date

( 5,708,212 )

Balances, December 31, 2019

( 5,708,212 )

Common Shares Sold in Public Offering

Preferred Shares Sold in Private Offering

Common Shares issued for Exercise of Warrants

Preferred Stock Dividends

( 1,744,471 )

Common Shares Issued for Conversion of Preferred Shares

Preferred Shares issued for Exercise of Preferred Warrants

Securities Issued to Directors for Services

Securities Issued for Third Party Services

Securities Awarded to Employees

Common Shares Issued for Third Party Services

Stock Options Awarded to Directors for Services

Stock Options Awarded to Employees

Offering Costs

Issuance of Fractional Shares from Reverse Split

( 1,600,967 )

Balances, September 30, 2020

Balances, March 31, 2021

$ ( 33,816,575 )

1 unchanged sentence

Statements of Cash Flows

Three Months Ended

March 31, 2022

March 31, 2021

OPERATING ACTIVITIES

1 unchanged sentence

$ ( 650,659 )

Adjustments to reconcile Net Loss to Net Cash used

in operating activities:

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

Noncash Expenses:

1 unchanged sentence

Gain on Derivative Liability

( 1,092,441 )

Stock Based Compensation Employees

7 unchanged sentences

Accrued Expenses

Deferral of Payroll Taxes under

the CARES Act

NET CASH USED IN OPERATING ACTIVITIES

4 unchanged sentences

Purchase of Intangible Assets

Dissolution of Joint Venture

NET CASH USED IN INVESTING ACTIVITIES

3 unchanged sentences

( 1,600,967 )

Payment of Note Payable

Proceeds from Exercise of Warrants

NET CASH PROVIDED BY FINANCING

NET CASH PROVIDED BY FINANCING ACTIVITIES

NET CHANGE IN CASH FOR PERIOD

( 2,169,118 )

CASH AT BEGINNING OF PERIOD

3 unchanged sentences

Issuance of Common Shares for Preferred Dividends

Other noncash operating activities disclosure:

Issuance of Securities for Services

3 unchanged sentences

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 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 Business -Sigma Labs, 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 “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

1 unchanged sentence

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

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

and 2020 and for the periods then ended have been made.

recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at March 31, 2022 and

2021 and for the periods then ended have been made.

Certain information and footnote disclosures normally included in financial statements

prepared in accordance with U.S.

generally accepted accounting principles 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 September 30, 2021 and 2020 are not necessarily indicative

of the operating results for the full year.

prepared in accordance with GAAP have been condensed or omitted.

The Company suggests these condensed financial statements be read in

conjunction with the December 31, 2021 audited financial statements and notes thereto included in the Company’s Annual Report on

The results of operations for the periods ended March 31, 2022 and 2021 are not necessarily indicative of the operating results

for the full year.

Reclassification

1 unchanged sentence

in the current-period financial statements.

These reclassifications have no impact on the previously reported results.

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 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.

Value of Financial Instruments - 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

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

1 unchanged sentence

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.

concurrently with a registered direct 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 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:

Schedule of Warrant Liability Measured on Recurring Basis

September 30, 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):

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

Fair Value on Issuance Date

Change in Fair Value

( 1,092,441 )

Fair Value on May 24, 2021

Extinguishment of Derivative Liability

( 4,615,771 )

Fair Value on September 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 September 30, 2021 and 2020, the

For the three months ended March 31, 2021, the

Company recorded a gain of $ 802,285 due to the change in the fair value of the derivative liability as measured on a recurring basis.

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.

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 Company’s outstanding warrants, options

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

At March 31, 2022 and 2021, the

Company had the following common shares underlying these instruments:

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

September 30,

Preferred Stock Warrants

of Antidilutive Securities Excluded from Computation of Earnings Per Share

Three Months Ended March 31,

Stock Options

2 unchanged sentences

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 September 30, 2021 and 2020:

Schedule of Earnings Per Share, Basic and Diluted

Three Months Ended

Nine Months Ended

of dilutive potential common stock for the periods ended March 31, 2022 and 2021:

of Computing Loss Per Share

Three Months Ended March 31

Net Loss per Common Share - Basic and Diluted

Loss from continuing

Operations available to Common stockholders (numerator)

$ ( 2,505,198 )

$ ( 1,955,357 )

$ ( 5,076,532 )

$ ( 5,455,707 )

Loss from continuing Operations available to Common stockholders (numerator)

$ ( 2,505,198 )

$ ( 1,955,357 )

Loss from continuing operations available to common stockholders

$ ( 2,221,615 )

1 unchanged sentence

Weighted 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.

Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions

that affect certain reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the

financial statements, and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from

those estimated by management.

Significant accounting estimates that may materially change in the near future are impairment of long-lived

assets, values of stock compensation awards and stock equivalents granted as offering costs, and allowance for bad debts and inventory

obsolescence.

2 – Inventory

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

Schedule of Inventory

September 30, 2021

March 31, 2022 and December 31, 2021, the Company’s inventory was comprised of:

March 31, 2022

December 31, 2021

3 unchanged sentences

Total Inventory

3 – CARES Act Deferred Payroll Tax Liability

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 ended on December 31,

At September 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 “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.

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 nine months ended September 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:

Schedule of Fair Value of Warrant Liability

Warrant Liability

Warrants Outstanding

Fair Value Per Share

Fair Value at initial measurement date of March 26, 2021

(Gain) on change in Fair Value of Warrant Liability

( 1,092,441 )

Fair Value as of May 24, 2021

Extinguishment of Derivative Liability

( 2,190,000 )

( 4,615,771 )

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

during the “payroll tax deferral period.” The payroll tax deferral period began on March 27, 2020 and ended on December 31,

At March 31, 2022, the total remaining amount of the deferral was $ 37,728 .

Per the terms of the deferral program, such amount is

due by December 31, 2022 , at 0 % interest.

4 - 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.

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

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

payable by the Company.

Pursuant to the Underwriting Agreement, the Company also issued to the Underwriter 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.

5 unchanged sentences

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

Each Warrant became exercisable on

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.

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

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

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

commencing May 24, 2021 , the date the Company obtained 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 public offering, The Placement Agent

Warrants have substantially the same terms as the Warrants, except that the Placement Agent Warrants have an exercise price equal to

1 unchanged sentence

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.

In September 2021, the Company granted 5,204 shares

of common stock to non-executive employees pursuant to the 2013 Equity Incentive Plan.

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 nine months ended September 30, 2020, the Company issued 3,157,427 shares of common stock in exchange for the conversion of 6,109

shares of Series D Convertible Preferred stock, and 749,924 shares of common stock as in-kind payment of preferred stock dividends.

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

Company is authorized to issue 10,000,000

shares of preferred stock, $ 0.001

shares of preferred stock were issued and outstanding

at September 30, 2021 and 2020, respectively.

the Placement Agent warrants to purchase 8.0 % of the number of shares of our Common Stock issued upon such exercise.

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

the Company as partial compensation for services rendered.

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

465 shares of preferred stock were issued

and outstanding at March 31, 2022 and December 31,2021, respectively.

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

1 unchanged sentence

Pursuant to the SPA, the Company issued and sold 1,640 shares of the Company’s

newly created Series D Convertible Preferred Stock (the “Series D Preferred Stock”).

Under the Certificate of Designations

for the Series D Preferred Stock, the Series D Preferred Stock has an initial stated value of $ 1,000 per share (the “Stated Value”).

Dividends accrue at a dividend rate of 9 % per annum (subject to increase upon the occurrence (and during the continuance) of certain

triggering events described therein) and, on a monthly basis, shall be payable in kind by the increase of the Stated Value of the Series

D Preferred Shares by said amount.

The holders of the Series D Preferred Shares will have the right at any time to convert all or a portion

of the Series D Preferred Shares (including, without limitation, accrued and unpaid dividends and make-whole dividends through the third

anniversary of the closing date) into shares of the Company’s Common Stock at the conversion price then in effect, which is $ 2.50

(subject to adjustment for stock splits, dividends, recapitalizations and similar events and full ratchet price protection).

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.

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

September 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 September 30, 2021, including the make-whole dividends, would have resulted in the issuance of 62,832 shares of common

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

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

to 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

The Series E Preferred Stock is initially convertible into 48,544

shares of Common Stock.

September 30, 2021, all of the issued Series E Convertible Preferred Stock were outstanding, which if converted as of September 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 nine months ended September 30, 2021, the Company issued to various employees, directors, and contractors shares

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

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

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

recorded as an increase to stockholders’ equity.

During the nine months ended September 30, 2021 and September 30, 2020, $ 0 and

$ 15,740 , respectively, of the unvested compensation cost related to these issues was recognized.

September 30, 2021, there was no unrecognized deferred compensation expense to be recognized over the remainder of the year.

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

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

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

of September 30, 2021, an aggregate of 335,152 shares of common stock remained available for issuance under the 2013 Plan.

the nine months ended September 30, 2021, the Company granted options to purchase a total of 697,831 shares of common stock to 34 employees,

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

the nine months ended September 30, 2020, the Company granted options to purchase a total of 472,183 shares of common stock to 20 employees,

5 directors and 5 consultants with vesting periods ranging from immediately upon issuance to 3 years beginning July 31, 2020.

newly created Series D Convertible Preferred Stock (the “Series D Preferred Stock”) at an initial stated value of $ 1,000

per share (the “Stated Value”).

Dividends accrue at a 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).

Alternatively, a holder may at any time convert all, or any part, of its Series D Preferred Shares at an alternative

conversion price equal to the lower of the applicable conversion price then in effect, and the greater of (x) $1.80 and (y) 85% of the

average volume weighted average price (“VWAP”) of the Common Stock for a five (5) trading 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 Stock being redeemed .

March 31, 2022, there were 132 shares of Series D Preferred Stock outstanding, which if converted as of March 31, 2022, including the

make-whole dividends, would result in the issuance of 87,267 shares of common stock.

with the Institutional Private Placement, the Company entered into a Securities Purchase Agreement pursuant to which the Company issued

and sold to certain of its directors and the Company’s previously largest shareholder 333 shares of the Company’s newly created

Series E Convertible Preferred Stock (the “Series E Preferred Stock”) at an initial stated value of $ 1,000 per share.

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 Stock by said amount.

The Series E Preferred Stock is initially convertible into 48,544 shares of common stock (subject

to adjustment for stock splits, dividends, recapitalizations and similar events).

March 31, 2022, all of the issued Series E Preferred Stock was outstanding, which if converted as of March 31, 2022, including the make-whole

dividends, would result in the issuance of 61,651 shares of common stock.

of March 31, 2022, an aggregate of 187,762 shares of common stock were reserved for future issuance under the 2013 Plan.

March 2022, the Company granted options to its non-employee directors to purchase up to an aggregate of 56,000 shares of common stock

at a strike price of $ 2.50 .

As of March 31, 2022, 25 % of such grants were fully vested and exercisable, and the remaining 75 % will vest

in equal installments at the end of each of the next three quarters.

the three months ended March 31, 2022, the Company granted four employees options to purchase up to an aggregate of 22,000 shares of

common stock in connection with their employment.

The options have a strike price of $ 2.50 and will vest in equal annual installments

on the first through third anniversaries of the grant dates, provided that the employees remain employed by the Company on such dates.

In addition, in February 2022, the Company granted its President and CEO an option to purchase up to 70,000 shares of common stock in

connection with his employment.

The option has a strike price of $ 2.50 and will vest in equal monthly installments over 36 months beginning

March 2022, provided that the President and CEO remains employed by the Company on such dates.

in March 2022, the Company granted two consultants options to purchase up to an aggregate of 14,000 shares of common stock for services

to be rendered.

The options have a strike price of $ 2.50 , and are fully vested and exercisable as to 50 % of such grants.

The remaining

50 % will vest on June 30, 2022 , provided that the consultants remain as service providers to the Company as of such date.

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 nine months ended September 30, 2021 and 2020 is $ 893,431

and $ 483,208

of which $ 874,176 and $ 467,468

is related to stock options, respectively.

Stock options are typically granted throughout the year and generally vest over a period from one to three

years of service and expire five years from the grant date, 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.

stock-based compensation expense included in the statements of operations for the three months ended March 31, 2022 and 2021 was $ 170,976

and $ 117,477 , respectively, 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

nine months ended September 30, 2021 and 2020:

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

Dividend yield

Risk-free interest rate

three months ended March 31, 2022 and the year ended December 31, 2021:

of Share Based Payments Award Stock Options Valuation Assumptions

interest rate

0.95 - 1.65 %

0.19 - 0.67 %

Expected volatility

106.4 - 110.0

Expected life (in years)

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

Schedule of Stock Option Activity

Weighted Average

117.0 – 124.0 %

life (in years)

activity for the three months ended March 31, 2022 and the year ended December 31, 2021 was as follows:

of Stock Option Activity

Weighted Average Exercise Price ($)

Weighted Average Remaining Contractual Life (Yrs.)

Aggregate Intrinsic Value ($)

Options outstanding at December 31, 2020

2 unchanged sentences

Forfeited or cancelled

Options outstanding September 30, 2021

Options expected to vest in the future as of September 30, 2021

Options exercisable at September 30, 2021

Options vested, exercisable, and options expected to vest at September 30, 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 $ 3.02 closing price of our common stock on September

None of the 2021 option grants have an exercise price currently below $ 3.02 .

September 30, 2021, there was $ 1,544,383 of unrecognized share-based compensation expense related to unvested share options with a weighted

Options outstanding March 31, 2022

Options expected to vest in the future as of March 31, 2022

Options exercisable at March 31, 2022

Options vested, exercisable, and options expected to vest at March 31, 2022

aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the market price of

our common stock for those awards that have an exercise price below the $ 2.04

closing price of our Common Stock on March 31,

At March 31, 2022, no option grants had an exercise price below $ 2.04 .

March 31, 2022, there was $ 1,222,243 of unrecognized share-based compensation expense related to unvested stock options with a weighted

average remaining recognition period of 1.94 years.

9 unchanged sentences

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.

The Plan provides for incentive awards only in the form of stock appreciation rights payable

in cash (“SARs”) and no shares of common stock are 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.

6 unchanged sentences

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

August 11, 2021, the Company granted, pursuant to the Plan, (i) 77,748 SARs to its President and Chief Executive Officer, (ii) 30,313

SARs to its Vice President of Business Development, (iii) 76,304 SARs to its Chief Technology Officer, and (iv) 48,580 SARs to its Chief

Financial Officer.

The exercise price of each such SAR is $ 3.42 , which was the closing price of the Company’s common stock on the

date of 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

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

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.

the exercise price and vesting provisions, and to specify the provisions of the SAR Agreement relating to such grant.

January 3, 2022, the Company granted a total of 12,033 SARs to eleven employees at an exercise price of $ 1.87 , the closing price of the

Company’s common stock on the date of grant.

The SARs expire on the fifth anniversary of the grant date and were fully vested and

exercisable on the date of the grant.

February 16, 2022, the Company granted 30,000 SARs to its President and CEO at an exercise price of $ 2.50 , the closing price of the Company’s

common stock on the date of grant.

The SARs expire on the fifth anniversary of the grant date and will vest equally over 36 months beginning

March 2022, provided that the CEO remains an employee of the Company on such dates.

March 31, 2022, the Company granted 3,000 SARs to a consultant as partial compensation for services pursuant to a consulting agreement.at

an exercise price of $ 2.50 , The SARs expire on the fifth anniversary of the grant date.

As of March 31, 2022, 50 % of such grant was fully

vested and exercisable, and the remaining 50 % will vest on June 30, 2022 , provided that the consultant remains a service provider to

the Company on that date.

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 nine months

ended September 30, 2021 and 2020:

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

Dividend yield

Risk-free interest rate

Expected volatility

Expected life (in years)

activity for the nine months ended September 30, 2021 was as follows:

Schedule of Stock Option Activity

Weighted Average

SARs outstanding at December 31, 2020

Forfeited or cancelled

SARs outstanding September 30, 2021

SARs expected to vest in the future as of September 30, 2021

SARs exercisable at September 30, 2021

SARs vested, exercisable, and options expected to vest at September 30, 2021

The SARs are revalued at each reporting date in accordance with ASC 718 “Compensation-Stock Compensation”,

and any changes in fair value are reflected in the Statement of Operations 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, 2022 and the year ended December 31, 2021:

of Share Based Payments Award Stock Options Valuation Assumptions

interest rate

0.82 - 1.65 %

0.39 - 0.40 %

108.4 %- 119.0 %

life (in years)

activity for the three months ended March 31, 2022 and the year ended December 31, 2021 was as follows:

of Stock Option Activity

Average Exercise Price ($)

Average Remaining Contractual Life (Yrs.)

Intrinsic Value ($)

outstanding at December 31, 2020

outstanding at December 31, 2021

outstanding March 31, 2022

expected to vest in the future as of March 31, 2022

exercisable at March 31, 2022

vested, exercisable, and SARs expected to vest at March 31, 2022

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 $ 3.02 closing price of our common stock on September

None of the 2021 SARs grants have an exercise price currently below $ 3.02 .

September 30, 2021, there was $ 614,947 of unrecognized share-based compensation expense related to unvested SARs with a weighted average

our common stock for those awards that have an exercise price currently below the $ 2.04 closing price of our common stock on March 31,

12,033 of the SARs grants have an exercise price below $ 2.04 .

March 31, 2022, there was $ 660,001 of unrecognized share-based compensation expense related to unvested SARs with a weighted average

remaining recognition period of 2.21 years.

activity for the nine months ended September 30, 2021 and 2020 was as follows:

Summary of Warrant Activity

Weighted Average

activity for the three months ended March 31, 2022 the year ended December 31, 2021 was as follows:

of Warranty Activity

Weighted Average Exercise Price ($)

Weighted Average Remaining Contractual Life (Yrs.)

Warrants outstanding at December 31, 2020

Forfeited or cancelled

Warrants outstanding at September 30, 2020

Warrants outstanding at December 31, 2021

Forfeited or cancelled

Warrants outstanding at September 30, 2021

connection with its March 2021 private placement, the Company issued warrants to purchase 2,190,000 shares of its common stock at an

exercise price of $ 4.32 per share.

Each Warrant became exercisable on May 24, 2021 , the date the Company obtained stockholder approval

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

The Company also

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

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

The Placement Agent Warrants have

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

price per share (or $ 5.55625 per share).

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

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

connection with its January 2021 public offering, the Company issued to the Underwriter or its designee warrants to purchase 136,943

of shares of common stock.

Such warrants have a term of five years from the commencement of sales in the Offering and an exercise price

of $ 3.75 per share.

January 8, 2021, the Company obtained a waiver (“Waiver”) from certain investors (“Investors”) with respect to

certain anti-dilution adjustment provisions of a January 2020 warrant and an April 2020 warrant issued to the Investors.

As consideration

for the Waiver, the Company issued an additional warrant (“Warrant”) to the Investors to purchase an aggregate of 100,000

shares of common stock, each exercisable after six months for a five-year period with an exercise price equal to 115% of the closing

price of the Company’s stock on the date of the waiver.

Warrants outstanding at March 31, 2022

5 - Subsequent Events

2 unchanged sentences

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