What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-03-30 compared with 2022-03-24 · 1342 added, 1204 removed, 1160 unchanged (69% of the section changed)

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similar functions, as appropriate to allow timely decisions regarding required disclosure.

upon an evaluation of the effectiveness of our disclosure controls and procedures performed by our management, with the participation

of our Chief Executive Officer, and Chief Financial Officer (Principal Financial and Accounting Officer), as of the end of the period

covered by this annual report, our management concluded that our disclosure controls and procedures are effective at a reasonable assurance

level in ensuring that information required to be disclosed by us in our reports is recorded, processed, summarized and reported within

the required time periods.

The foregoing conclusion is based, in part, on the fact that we are a small public company with limited revenues and employees.

Report on Internal Control Over Financial Reporting

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Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on management’s evaluation under

Based on its evaluation under

the framework, management has concluded that our internal control over financial reporting was effective as of December 31, 2022.

continuously seek to improve and strengthen our control processes to ensure that all of our controls and procedures are adequate and

continuously seek to improve and strengthen our control processes to ensure that our controls and procedures are adequate and

Any failure to implement and maintain improvements in the controls over our financial reporting could cause us to fail to

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This Report does not include an

attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.

report was not subject to attestation by our registered public accounting firm pursuant to SEC rules applicable to smaller reporting companies.

attestation report of the Company’s registered independent public accounting firm regarding internal control over financial reporting,

which is not required for smaller reporting companies.

in Internal Control Over Financial Reporting

were no changes in our internal control over financial reporting during the fourth quarter of the year ended December 31, 2021

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

were no changes in our internal control over financial reporting during the fourth quarter of the year ended December 31, 2022 that have

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

OTHER INFORMATION

REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not Applicable.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

following table sets forth the name, age and position of each of our executive officers as of March 29, 2023:

Executive Officer

Jacob Brunsberg

President and Chief Executive Officer

Financial Officer, Treasurer and Corporate Secretary

President of Business Development

Technology Officer

and Chief Operating Officer

Mark Ruport served as

Executive Chairman from December 3, 2019 until April 30, 2020 and became our President and Chief Executive Officer on April 30, 2020.

On February 16, 2022, Mr.

Ruport resigned as President but continues to be our Chief Executive Officer.

Additional information

regarding Mr.

Ruport is set forth below under “Board of Directors and Corporate Governance.”

Manager, European Operations

Jacob Brunsberg was

appointed Senior Vice-President of Product Management and Strategic Relationships on September 20, 2021.

On February 16, 2022, he was

named President and Chief Operating Officer, and on April 1, 2022 he was named President and Chief Executive Officer.

Prior to joining

the Company, Mr.

Brunsberg was a P&L leader for General Electric’s Binder Jet Technology unit, with management responsibility

for strategy, development, commercialization, and overall business performance.

From 2017 to 2019 he served as Sr.

Managing Director

of the Central Region, tasked with helping establish the US sales infrastructure for post-acquisition integration of several additive

manufacturing technology companies including Concept Laser, Arcam and GEonX into the newly formed GE Additive business entity.

Brunsberg worked for the American Roller Company in sales leadership and product marketing positions, responsible for the

development and oversight of growth strategies, focused on advanced welding, cladding, thermal spray, and powder metallurgy technologies

across a number of industrial markets.

Brunsberg holds a Bachelor of Science degree in Material Science and Engineering from the

University of Wisconsin-Madison

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

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from Georgetown University in 1982.

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

June 29, 2018, and had his title changed to Chief Technology Officer of the Company on October 18, 2018.

Beckett has over 20 years

of experience in the semiconductor industry, including since 1997 with Intel Corporation at which he held various technical and managerial

positions, including process engineer of ion implant charged particle systems, chemical vapor deposition systems, and, since 2008, engineering

manager of multiple engineering groups such as rapid thermal anneal, defect metrology equipment and fab environment micro contamination.

Beckett’s expertise is in process engineering for advanced manufacturing technology, including statistical process control

for fabrication of semiconductor devices.

Beckett serves as an independent director and board member of M&T Foundation, San Diego,

Beckett earned a B.

in Mechanical Engineering from University of Limerick, Ireland.

Fisher was appointed as Vice President of Business Development of Sigma on August 10, 2015 and leads the PrintRite3D® Operating

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in Mechanical Engineering Technology from the University of Akron as well as an MBA from Kent State University.

Brunsberg was appointed Senior Vice-President of Product Management and Strategic Relationships on September 20, 2021, and

on February 16, 2022, he was named President and Chief Operating Officer.

Kuehr was appointed as General Manager of Sigma’s European Operations in September 2022.

In this role, Stephan leads the European

region with responsibility for all direct and channel revenue activities, including management of the worldwide OEM and independent software

vendor (ISV) network programs.

Prior to joining Sigma Additive Solutions, Stephan spent the past 10 years in additive manufacturing as

CEO and co-founder of 3YOURMIND, a leading manufacturing execution system (MES) software provider based in Berlin, Germany.

In this position,

he set up an international sales organization and led the company’s funding, budget, structure and development efforts.

3YOURMIND, Stephan held leading positions in sales and operations with Vestas Wind Systems.

Stephan Kuehr holds a Master’s Degree

in Physics and Business from Ulm University, Germany and Lund University, Sweden.

of Directors and Corporate Governance

following table sets forth the names, ages as of March 29, 2023, and certain other information regarding our directors:

of the Board and Director

Executive Officer and Director

Battinelli(1)

Member of our Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee.

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

Effective April 30, 2020, Mr.

Ruport became

our President and Chief Executive Officer.

On February 16, 2022, Mr.

Ruport resigned as President, and effective April 1, 2022 he

resigned as Chief Executive Officer.

Ruport remains a director on the Board of Directors and was appointed Chairman effective

April 1, 2022.

Ruport has more than 30 years of public and private company experience in the software sector.

Prior to joining

Sigma Additive Solutions, Mr.

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

provides strategic consulting services to early and mid-stage portfolio software companies.

Ruport also served from 2014 to 2017

as the Executive Chairman of the Board of Directors of Content Analyst Company, a leading developer of advanced analytics software

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

From 2005 to 2009, Mr.

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

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

Prior to Configuresoft, Mr.

served from 2004 to 2005 as the Executive Vice President of Worldwide Operations at Stellent, Inc., which was subsequently acquired

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

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

Stellent, Inc.

From 1990 to 1994, Mr.

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

software company.

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

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

enterprise resource planning company later acquired by Computer Associates, Inc.

Ruport received his Bachelor of Science degree

and MBA from Bowling Green State University.Mr.

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

State University.

Board of Directors believes that Mr.

Ruport is qualified to serve as a member of the board because of his extensive experience in management

and leadership in the technology industry.

Brunsberg was appointed to our Board of Directors on April 1, 2022.

He was appointed Senior Vice-President of Product Management

and Strategic Relationships on September 20, 2021, on February 16, 2022, he was named President and Chief Operating Officer, and on April

1, 2022, he was named President and Chief Executive Officer.

Prior to joining the Company, Mr.

Brunsberg was a P&L

leader for General Electric’s Binder Jet Technology unit, with management responsibility for strategy, development, commercialization,

and overall business performance.

Brunsberg was a P&L leader for General

Electric’s Binder Jet Technology unit, with management responsibility for strategy, development, commercialization, and overall

business performance.

From 2017 to 2019 he served as Sr.

Managing Director of the Central Region, tasked with helping establish

the US sales infrastructure for post-acquisition integration of several additive manufacturing technology companies including Concept

Laser, Arcam and GEonX into the newly formed GE Additive business entity.

Managing Director of the Central Region, tasked with helping establish the US

sales infrastructure for post-acquisition integration of several additive manufacturing technology companies including Concept Laser,

Arcam and GEonX into the newly formed GE Additive business entity.

Prior to GE, Mr.

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of Science degree in Material Science and Engineering from the University of Wisconsin-Madison.

OF DIRECTORS AND CORPORATE GOVERNANCE

following table sets forth the names, ages as of March 23, 2022, and certain other information regarding our directors:

of the Board and Director

Chief Executive Officer

Battinelli(1)

Member of our Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee.

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

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

as our President on October 10, 2018.

Effective April 30, 2020, Mr.

Rice resigned from his position as President and Chief Executive

Rice has extensive

experience in business operations.

Rice founded ASiQ, LLC, a firm specializing in operations management services ranging

from launching successful startups and executing business turnarounds to financings, crisis management and the repositioning of enterprises

for sale at optimum market prices.

Rice presently serves as ASiQ’s CEO and President.

He also served as CEO of Coca-Cola Bottling

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

From 2010 to 2012, Mr.

Rice served as Director and Contracts Officer

of Detector Networks International.

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

venture capital, and financial structuring and strategies.

He has also served on a number of boards.

Since 2005, Mr.

Rice has served

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

Since 2016, Mr.

Rice has served

as Director of Akal Security, Inc.

He was also a Director of Detector Networks International from 2010-2012, where he successfully negotiated

the principal component of a business turnaround for the company.

Rice is an honors graduate of Harvard College.

Board of Directors believes that Mr.

Rice is qualified to serve as a member of the board because of his broad and deep experience in

improving business operations, engineering financial structures that support ongoing needs of operating companies, and building investor

and shareholder values.

Brunsberg is qualified to serve as a member of the board because of his extensive experience in

the additive manufacturing industry.

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

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of business acquisitions and sales, as well as his background and extensive company management and integration experience.

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

Effective April 30, 2020, Mr.

Ruport became

our President and Chief Executive Officer and, as of February 16, 2022, no longer serves as President.

Ruport remains a director

on the Board of Directors but no longer serves as Executive Chairman.

Ruport brings more than 30 years of public and private company

experience in the software sector to his position at Sigma Labs.

Prior to joining Sigma Labs, Mr.

Ruport served since 2010 as the President

of Step Function Consulting, LLC, a consulting firm that provides strategic consulting services to early and mid-stage portfolio software

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

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

from 2012 to 2013.

From 2005 to 2009, Mr.

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

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

Configuresoft, Mr.

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

subsequently acquired by Oracle, Inc., and from 1995 to 2005 as the President, Chief Executive Officer and Chairman of the Board of Directors

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

Stellent, Inc.

From 1990 to 1994, Mr.

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

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

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

planning company later acquired by Computer Associates, Inc.

Ruport received his Bachelor of Science degree and MBA from Bowling

Green State University.Mr.

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

Board of Directors believes that Mr.

Ruport is qualified to serve as a member of the board because of his extensive experience in management

and leadership in the technology industry.

Duitch was appointed to our Board of Directors on August 8, 2017.

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Inc., and from 2017 to the present, as a director and Chairman of the Compensation Committee with iQ3 Connect, Inc.

also currently serves as Chairman, Board of Managers, Massachusetts Materials Technologies LLC.

currently serves as Chairman, Board of Managers, Massachusetts Materials Technologies LLC.

2005 to 2017, Mr.

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

Rice is not considered

an independent director.

Ruport is not

considered an independent director.

As a result of his April 1, 2022 appointment as Chief Executive Officer, Mr.

Ruport is also not considered

an independent director.

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

Summers, constituting a majority of our directors, are “independent” as that term is defined under Rule 5605(a)(2) of the

NASDAQ marketplace rules.

Brunsberg is also not

considered an independent director.

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

and Kent Summers, constituting a majority of our directors, are “independent” as that term is defined under Rule 5605(a)(2)

of the Nasdaq marketplace rules.

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

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Our directors are classified as follows:

Class I directors are John Rice and Mark Ruport, with terms expiring at our 2024 annual meeting of stockholders;

Class II director is Salvatore Battinelli, with a term expiring at our 2022 annual meeting of stockholders;

Class I director is Mark Ruport, with a term expiring at our 2024 annual meeting of stockholders;

Class II directors are Salvatore Battinelli and Jacob Brunsberg, with terms expiring at our 2025 annual meeting of stockholders;

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

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Structure of the Board

directors may be removed with or without cause at any meeting of stockholders by the affirmative vote of the holders of at least two-thirds

of our outstanding voting stock entitled to vote in the election of directors.

Our amended and restated bylaws provide our Board of Directors

with flexibility in its discretion to combine or separate the positions of Chairman of the Board and Chief Executive Officer, if we elect

to appoint a Chairman of the Board.

Our Board of Directors believes it is important to select the Company’s Chairman and Chief

Executive Officer in the manner it considers in the best interests of the Company at any given time.

Our Board of Directors believes

that the Chairman and Chief Executive Officer positions may be filled by one individual or by two different individuals, as determined

by our Board of Directors based on circumstances then in existence.

August 19, 2017, our Board of Directors appointed Mr.

Rice as Chairman of the Board.

director or our Board of Directors as a whole may be removed with or without cause at any meeting of stockholders by the affirmative vote of the holders of at least

two-thirds of our outstanding voting stock entitled to vote in the election of directors.

Our amended and restated bylaws provide

our Board of Directors with flexibility in its discretion to combine or separate the positions of Chairman of the Board and Chief

Executive Officer.

Our Board of Directors believes it is important to select the

Company’s Chairman and Chief Executive Officer in the manner it considers in the best interests of the Company at any given

Our Board of Directors believes that the Chairman and Chief Executive Officer positions may be filled by one individual or by

two different individuals, as determined by our Board of Directors based on circumstances then in existence.

April 1, 2022, our Board of Directors appointed Mr.

Ruport as Chairman of the Board.

The Chairman of the Board presides at all meetings

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Meetings and Committees

our fiscal year ended December 31, 2021, the Board of Directors held eight meetings, and each director attended at least 75% of the aggregate

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

number of meetings held by all committees of our Board of Directors on which he served during the periods that he served.

our fiscal year ended December 31, 2022, the Board of Directors held fourteen meetings, and each director attended at least 75% of the

aggregate of (i) the total number of meetings of our Board of Directors held during the period he was a director and (ii)

the total number of meetings held by all committees of our Board of Directors on which he served during the periods that he served.

we do not have a formal policy regarding attendance by members of our Board of Directors at annual meetings of stockholders, we encourage,

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Each of our then current directors attended our 2022 Annual Meeting of Stockholders.

Board has established three standing committees-audit, compensation, and nominating and corporate governance-each of which operates

under a written charter that has been approved by our board.

Until February 15, 2017, when our common stock became listed on The Nasdaq

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

Each committee charter

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

The reference to our website address does not constitute

incorporation by reference of the information contained at or available through our website, and you should not consider it to be a part

of this Annual Report.

Board of Directors has established three standing committees-audit, compensation, and nominating and corporate governance, each of

which operates under a written charter that has been approved by our Board of Directors.

Each committee charter has been posted on the Investors

section of our website at www.sigmaadditive.com.

The reference to our website address does not constitute incorporation by reference

of the information contained at or available through our website, and you should not consider it to be a part of this Annual

Audit Committee’s responsibilities include:

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our CEO’s compensation;

and approving, or making recommendations to our board with respect to, the compensation of our other executive officers;

and approving, or making recommendations to our Board of Directors with respect to the compensation of our other executive

an evaluation of our senior executives;

and administering our equity incentive plans;

and making recommendations to our board with respect to director compensation;

and making recommendations to our Board of Directors with respect to director compensation;

and discussing annually with management our “Compensation Discussion and Analysis” when it is required by SEC rules to

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Duitch, Battinelli and Summers, and Mr.

Battinelli serves as the chairperson of the

Our board has determined that each of Messrs.

Duitch, Battinelli and Summers is independent under the applicable Nasdaq rules

and regulations and is a “non-employee director” as defined in Rule 16b-3 promulgated under the Securities Exchange Act of

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

Battinelli serves as the chairperson of

the committee.

Our Board of Directors has determined that each of Messrs.

Duitch, Battinelli and Summers is independent under the

applicable Nasdaq rules and regulations and is a “non-employee director” as defined in Rule 16b-3 promulgated under the

Exchange Act.

and Corporate Governance Committee

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an annual evaluation of the board.

The members of our Nominating

and Corporate Governance Committee are Messrs.

members of our Nominating and Corporate Governance Committee are Messrs.

Duitch, Battinelli and Summers, and Mr.

Duitch serves as the chairperson of the committee.

Our board has determined that each of Messrs.

Duitch, Battinelli and Summers is independent under the applicable NASDAQ rules and regulations.

Duitch serves as the

chairperson of the committee.

Our Board of Directors has determined that each of Messrs.

Duitch, Battinelli and Summers is independent

under the applicable Nasdaq rules and regulations.

of Ethics and Business Conduct

The Company has a code of ethics

that applies to all employees, including the Company’s principal executive officer, principal financial officer, and principal

accounting officer, as well as to the members of the Board of Directors.

The code is available at www.sigmalabsinc.com.

The Company intends

to disclose any changes in, or waivers from, this code by posting such information on the same website or by filing a Form 8-K, in each

case to the extent such disclosure is required by rules of the SEC or Nasdaq.

The reference to our website address does not constitute

incorporation by reference of the information contained at or available through our website, and you should not consider it to be a part

of this report.

Company has a code of ethics that applies to all employees, including the Company’s principal executive officer, principal financial

officer, and principal accounting officer, as well as to the members of the Board of Directors.

The code is available on our website

at www.sigmaadditive.com.

The Company intends to disclose any changes in, or waivers from, this code by posting such information on the

same website or by filing a Form 8-K, in each case to the extent such disclosure is required by rules of the SEC or Nasdaq.

The reference

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

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

Considerations

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Section 16(a) Reports

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

than 10% of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the

Securities and Exchange Commission (“SEC”).

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

than 10% of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the SEC.

Executive officers, directors and greater than 10% stockholders are required

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Company believes that during the fiscal year ended December 31, 2022, its executive officers, directors and greater than 10% stockholders

complied with the filing requirements under Section 16(a).

timely filed all reports under Section 16(a).

EXECUTIVE COMPENSATION

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Directors on its discussions, decisions and other actions.

Typically, our Chief Executive Officer makes recommendations to our Compensation

Committee and is involved in the determination of compensation for the respective executive officers that report to him.

Our Chief Executive

Officer does not determine his own compensation.

Our Chief Executive Officer makes recommendations to our Compensation Committee regarding

short- and long-term compensation for all executive officers based on our results, an individual executive officer’s contribution

toward these results and performance toward individual goal achievement.

Our Compensation Committee then reviews the recommendations

and other data and makes decisions (or makes recommendations to the Board) as to total compensation for each executive officer as well

as each individual compensation component.

Typically, our Chief Executive Officer makes recommendations to our

Compensation Committee and is involved in the determination of compensation for the respective executive officers that report to

Our Chief Executive Officer does not determine his own compensation.

Our Chief Executive Officer makes recommendations to our

Compensation Committee regarding short- and long-term compensation for all executive officers based on our results, an individual

executive officer’s contribution toward these results and performance toward individual goal achievement.

Our Compensation

Committee then reviews the recommendations and other data and makes decisions (or makes recommendations to the Board) as to total

compensation for each executive officer as well as each individual compensation component.

following table sets forth compensation for services rendered in all capacities to the Company:

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Compensation Table

and Principal Position

Awards ($) (5)

Awards ($) (6)

Other Compensation ($)

Ruport - Chief

Officer and Director

Beckett - Chief Technology Officer

Orzechowski - Chief Financial Officer

Name and Principal Position

Salary ($) (1)

Bonus ($) (1)

Stock Awards ($)

Option Awards ($) (3)

All Other Compensation ($)

Jacob Brunsberg – Chief Executive Officer and Director

Mark Ruport – Former Chief Executive Officer and Current Chairman

Darren Beckett - Chief Technology Officer

Frank Orzechowski - Chief Financial Officer

amounts paid or accrued.

January 24, 2022, the Compensation Committee granted Messrs.

Ruport, Beckett, and Orzechowski performance bonuses of $208,333, $25,800,

and $26,500 respectively, for the fiscal year ended December 31, 2021 in accordance with the provisions of their incentive compensation

February 25, 2021, the Compensation Committee granted Mr.

Ruport a $50,000 performance bonus for the fiscal year ended December 31,

In October 2020, the Compensation Committee granted Mr.

Beckett a performance bonus of $10,000.

In December 2020, Mr.

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

Orzechowski was granted a performance bonus of $15,500.

April 10, 2020 Messrs.

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

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

The shares fully vested on December 31, 2020.

Brunsberg, Ruport, Beckett, and Orzechowski performance bonuses of $19,876,

$208,333, $25,800, and $26,500 respectively, for the fiscal year ended December 31, 2021 in accordance with the provisions of their

incentive compensation plans.

option awards and stock appreciation rights awards.

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

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

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

The Fair Value of option and SARs awards are calculated in accordance with FASB ASC Topic 718.

The amount recognized for all

awards is calculated using the Black Scholes pricing model.

Stock appreciation rights awards are only payable in cash.

As such, no shares

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

The Fair Value of

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

The amount recognized for all awards is calculated using

the Black Scholes pricing model.

February 16, 2022, we granted Mr.

Brunsberg an option to purchase up to 70,000 shares of our common stock under our 2013 Equity Incentive

Plan in connection with his employment arrangement.

The option has an exercise price of $2.50 and vests in equal monthly installments

over three years.

As of December 31, 2022, 19,443 shares were vested and exercisable.

The option had a grant date fair value of $117,719.

Also on February 16, 2022, we granted Mr.

Brunsberg 30,000 SARs under our 2020 Stock Appreciation Rights Plan.

The SARs have an exercise

price of $2.50 and vests in equal monthly installments over three years.

As of December 31, 2022, 8,330 SARs were fully vested and

The SARs had a grant date fair value of $50,451.

On July 1, 2022, we granted Mr.

Brunsberg an option to purchase up

to 49,800 shares of common stock.

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

25%, on the date of the grant,

and the remaining 75% in equal monthly installments over the subsequent thirty-six months.

As of December 31, 2022, 17,635 shares

were vested and exercisable.

The option had a grant date fair value of $46,367.

Also on July 1, 2022, we granted Mr.

option to purchase up to 15,200 shares of common stock.

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

the date of the grant, and the remaining 75% in equal monthly installments over the subsequent thirty-six months.

As of December

31, 2022, 5,372 shares were vested and exercisable.

The option had a grant date fair value of $14,152.

Additionally, on July 1, 2022

we granted Mr.

Brunsberg 194,940 SARs.

The SARS have an exercise price of $2.50 and vests as follows:

25% on the date of the grant,

and the remaining 75% in equal monthly installments over the subsequent thirty-six months.

As of December 31, 2022, 69,040 SARs were

vested and exercisable.

The SARs had a grant date fair value of $181,503.

Last, on July 1, 2022, we granted Mr.

Brunsberg 181,947

SARs in connection with his employment retention agreement.

The SARs have an exercise price of $1.30 and will vest and become exercisable

on March 15, 2025 if Mr.

Brunsberg remains an employee of the Company on that date.

The SARs had a grant date fair value of $187,530.

September 20, 2021, we granted Mr.

Brunsberg an option to purchase up to 100,000 shares of our common stock under our 2013 Equity

Incentive Plan in connection with his employment arrangement.

The option has an exercise price of $3.18 and is fully vested and exercisable.

The option had a grant date fair value of $264,352.

July 1, 2022, the Company granted Mr.

Ruport an option to purchase up to 19,242 shares of our common stock under our 2013 Equity

Incentive Plan in connection with his employment arrangement.

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

on the date of the grant, and the remaining 75% in equal monthly installments over the subsequent thirty-six months.

As of December

31, 2022, 6,815 shares were vested and exercisable.

The option had a grant date fair value of $17,916.

Also on July 1, 2022, the

Company granted Mr.

Ruport an option to purchase up to 5,874 shares of our common stock.

The option has an exercise price of $2.50

and vests as follows:

25%, on the date of the grant, and the remaining 75% in equal monthly installments over the subsequent thirty-six

As of December 31, 2022, 2,078 shares were fully vested and exercisable.

The option had a grant date fair value of $5,469.

Last, on July 1, 2022 the Company granted Mr.

Ruport 25,117 SARs.

The SARs have an exercise price of $2.50 and vest as follows:

on the date of the grant, and the remaining 75% in equal monthly installments over the subsequent thirty-six months.

As of December

31, 2022, 8,914 SARs were fully vested and exercisable.

The SARs had a grant date fair value of $23,386.

August 11, 2021, we granted Mr.

11 unchanged sentences

second, and third anniversaries of the grant date.

The SAR’s had an aggregate grant date fair value of $221,196.

May 28, 2020, we granted Mr.

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

in connection with his employment arrangement.

As of December 31, 2022, 25,916 SARs were fully vested and exercisable.

had an aggregate grant date fair value of $221,196.

July 1, 2022, we granted Mr.

Beckett an option to purchase up to 15,849 shares of our common stock under our 2013 Equity Incentive

Plan in connection with his employment arrangement.

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

25%, or 29,164 shares

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

next three years.

As of December 31, 2021, 72,904 shares were vested and exercisable.

The option had an aggregate grant date fair

value of $254,474.

On November 24, 2020, we granted Mr.

Ruport and option to purchase 114,915 shares of our common stock under our

2013 Equity Incentive Plan in connection with his employment arrangement.

The option has an exercise price of $2.55 and vests over

three years in equal monthly installments beginning one month from the grant date.

As of December 31, 2021, 41,496 shares were fully

25% on the date

of the grant, and the remaining 75% in equal monthly installments over the subsequent thirty-six months.

As of December 31, 2022,

5,603 shares were vested and exercisable.

The option had a grant date fair value of $14,757.

Also on July 1, 2022, we granted Mr.

Beckett an option to purchase up to 51,927 shares of our common stock with an exercise price of $2.50 and vests as follows:

the date of the grant, and the remaining 75% in equal monthly installments over the subsequent thirty-six months.

As of December

31, 2022, 18,392 shares were fully vested and exercisable.

The option had a grant date fair value of $48,348.

Additionally, on July

1, 2022 we granted Mr.

Beckett 16,944 SARs with an exercise price of $2.50 and vests as follows:

25% on the date of the grant, and

the remaining 75% in equal monthly installments over the subsequent thirty-six months.

As of December 31, 2022, 6,001 SARs were fully

vested and exercisable.

The option had an aggregate grant date fair value of $236,519.

On June 23, 2020, pursuant to our 2020 Stock

Appreciation Rights Plan, we granted Mr.

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

The SAR’s have an exercise

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

of the grant date.

As of December 31, 2021, 20,031 SARs were vested and exercisable.

The SAR’s had an aggregate grant date

fair value of $127,987.

The SARs had a grant date fair value of $15,776.

Last, on July 1, 2022, we granted Mr.

Beckett 97,038 SARs

in connection with his employment retention agreement.

The SARs have an exercise price of $1.30 and will vest and become exercisable

on March 15, 2025 if Mr.

Beckett remains an employee of the Company on that date.

The SARs had a grant date fair value of $100,015.

August 11, 2021, we granted Mr.

11 unchanged sentences

on each of the first, second, and third anniversaries of the grant date.

As of December 31, 2022, 25,435 SARs were vested and exercisable.

The SAR’s had an aggregate grant date fair value of $217,088.

May 28, 2020, we granted Mr.

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

in connection with his employment arrangement.

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

or 11,665 shares vested and became exercisable on June 15, 2020, and the remaining 34,996 shares will vest in equal monthly installments

over the next three years.

On July 1, 2022, we granted Mr.

Orzechowski an option to purchase up to 15,924 shares of our common stock under our 2013 Equity Incentive Plan in connection with his employment arrangement.

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

25% on the date of the grant, and the remaining 75% in equal monthly installments over the subsequent thirty-six months.

As of December 31, 2022, 5,627 shares were vested and exercisable.

The option had a grant date fair value of $14,826.

Also on July 1, 2022, we granted Mr.

Orzechowski an option to purchase up to 52,170 shares of our common stock with an exercise price of $2.50 and vests as follows:

25% on the date of the grant, and the remaining 75% in equal monthly installments over the subsequent thirty-six months.

As of December 31, 2022, 18,477 shares were fully vested and exercisable.

The option had an aggregate

grant date fair value of $101,788.

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

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

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

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

As of December 31, 2021, 8,013

SARs were vested and exercisable.

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

August 11, 2021, we granted Mr.

Orzechowski an option to purchase 48,580 shares of our common stock under our 2013 Equity Incentive

Plan in connection with his employment arrangement.

The option had a grant date fair value of $48,574.

Additionally, on July 1, 2022 we granted Mr.

Orzechowski 69,470 SARs with an exercise price of $2.50 and vests as follows:

25% on the date of the grant, and the remaining 75% in equal monthly installments over the subsequent thirty-six months.

As of December 31, 2022, 24,603 SARs were fully vested and exercisable.

The SARs had a grant date fair value of $64,682.

Last, on July 1, 2022, we granted Mr.

Orzechowski 97,038 SARs in connection with his employment retention agreement.

The SARs have an exercise price of $1.30 and will vest and become exercisable on March 15, 2025 if Mr.

Orzechowski remains an employee of the Company on that date.

The SARs had a grant date fair value of $100,015.

On August 11, 2021, we granted Mr.

Orzechowski an option to purchase 48,580 shares of our common stock under our 2013 Equity Incentive Plan in connection with his employment arrangement.

The option has an exercise price of $3.42 and vests as follows:

25%, or 12,145

shares vested and became exercisable on August 11, 2021, and the remaining 36,435 shares will vest in equal monthly installments

over the next three years.

25%, or 12,145 shares vested and became exercisable on August 11, 2021, and the remaining 36,435 shares will vest in equal monthly installments over the next three years.

As of December 31, 2022, 28,337 shares were vested and exercisable.

The option had a grant date fair value

The option had a grant date fair value of $138,212.

On August 11, 2021, pursuant to our 2020 Stock Appreciation Rights Plan, we granted Mr.

Orzechowski 48,580 Stock Appreciation

Rights (“SAR’s).

The SAR’s have an exercise price of $3.42 and will vest and become exercisable in three equal

installments on each of the first, second, and third anniversaries of the grant date.

The SAR’s had an aggregate grant date

fair value of $138,212.

May 28, 2020, we granted Mr.

Orzechowski an option to purchase 34,996 shares of our common stock under our 2013 Equity Incentive

Plan in connection with his employment arrangement.

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

25%, or 8,749 shares vested and became exercisable on June 15, 2020, and the remaining 26,247 shares will vest in equal monthly installments

over the next three years.

As of December 31, 2021, 21,871 shares were fully vested and exercisable.

The option had an aggregate

grant date fair value of $76,342.

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

18,028 Stock Appreciation Rights (“SAR’s).

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

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

As of December 31, 2021, 6,009

SARs were vested and exercisable.

Orzechowski 48,580 Stock Appreciation Rights (“SAR’s).

The SAR’s have an exercise price of $3.42 and will vest and become exercisable in three equal installments on each of the first, second, and third anniversaries of the grant date.

As of December 31, 2022, 16,193 SARs were vested and exercisable.

The SAR’s had an aggregate grant date fair value of $138,212.

Executive Officer Employment Agreements

September 7, 2021, we entered into an “at-will’ employment letter agreement with Jacob Brunsberg, effective as of September

20, 2021 (the “effective date”), pursuant to which Mr.

Brunsberg agreed to serve as Senior Vice-President, Product Management

and Strategic Relationships on an “at-will” basis.

As of February 16, 2022, Mr.

Brunsberg was appointed President and Chief

Operating Officer, and as of April 1, 2022, Mr.

Brunsberg was appointed President, Chief Executive Officer, and Principal Executive Officer

of the Company.

Additionally, Mr.

Brunsberg was appointed to serve as a member of our Board of Directors, effective as of April 1, 2022,

with a term expiring at the 2025 annual meeting of stockholders.

the employment letter agreement.

Brunsberg is entitled to (i) an annual base salary of $200,000, which was increased to $250,000

effective February 16, 2022, and (ii) all benefits that we elect in our sole discretion to provide from time to time to our other executive

officers,, and received a grant of a five-year stock option to purchase up to 100,000 shares of common stock of the Company, which has

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

in full on the effective date.

The option is on such other terms and provisions as are contained in the Company’s standard form

nonqualified stock option agreement.

Additionally,

during the term of his employment, Mr.

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

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

However, the decision to

provide any such bonuses and the amount and terms of any such bonuses is in the sole discretion of the Board of Directors.

24, 2022, Mr.

Brunsberg was awarded a performance bonus of $19,876 for 2021.

December 3, 2019, we entered into an “at-will’ employment letter agreement with Mark Ruport, effective as of December 3,

8 unchanged sentences

On February 16, 2022, Mr.

resigned as President, and continues to serve as Chief Executive Officer and as a member of the Board of Directors.

the employment letter agreement, Mr.

Ruport is entitled to (i) an annual base salary of $155,000, which was increased to $250,000 effective

January 1, 2021, and in connection with his resignation as President was decreased to $200,000 effective February 16, 2022 (such base

salary is not subject to decrease, but may be increased in the discretion of the Company’s Compensation Committee of the Board

of Directors based on annual or special case assessments of Mr.

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

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

stock option to purchase up to 10,000 shares of common stock of the Company, which has an exercise price equal to the closing price of

the Company’s common stock on the effective date, and vested and became exercisable in full on the first month’s anniversary

of the effective date, and (2) a five-year stock option to purchase up to 40,000 shares of common stock of the Company, which has an

exercise price equal to the closing price of the Company’s common stock on the effective date, and will vest and become exercisable

in equal (as closely as possible) monthly installments over three years from the effective date, provided, in each case, that Mr.

remains an employee of the Company through such vesting date.

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

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

portion of the options as of the date of such Change of Control will immediately and automatically vest;

provided, however, that, the

options may be assumed or, in the discretion of the Board of Directors, an equivalent option may be substituted by an applicable successor

corporation or any subsidiary of the successor corporation in connection with a Change of Control), and (y) in the event that the Board

of Directors determines that Mr.

Ruport is unable to perform his duties due to an accident, illness or other event or condition which

physically or mentally incapacitates him for a period of 45 consecutive days (“Disability”), if he ceases to be employed

by the Company as a result of a Disability, the options will continue to vest and remain exercisable for the 5-year term of the options

in accordance with the terms of the option agreements.

Additionally,

during the term of his employment, Mr.

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

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

However, the decision to

provide any such bonuses and the amount and terms of any such bonuses is in the sole discretion of the Board of Directors.

24, 2022, Mr.

Ruport was awarded a performance bonus of $208,333 for 2021.

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

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

On October 18, 2018, his title was changed from Vice

President of Engineering to Chief Technology Officer of the Company.

On October 18, 2018, the Company also increased the annual base

salary of Mr.

Beckett from $135,000 to $180,000, effective retroactive to September 16, 2018, and granted Mr.

Beckett an option to purchase

2,000 shares of common stock under the 2013 Plan at an exercise price of $12.10 per share.

The option has a term of five years and vests

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

Beckett being in the continuous employ

of the Company on the applicable vesting date.

resigned as President, and effective April 1, 2022, Mr.

Ruport resigned as Chief Executive Officer.

Ruport remained an employee of

the Company until September 30, 2022.

Ruport remains a member of our Board of Directors and was appointed Chairman of our Board

effective April 1, 2022.

Beckett served as an employee of the Company from September 25, 2017, until March 1, 2023 pursuant to an “at will”

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

On October 18, 2018, his

title was changed from Vice President of Engineering to Chief Technology Officer of the Company.

On October 18, 2018, the Company

also increased the annual base salary of Mr.

Beckett from $135,000 to $180,000, effective retroactive to September 16, 2018, and

Beckett an option to purchase 2,000 shares of common stock under the 2013 Plan at an exercise price of $12.10 per share.

The option has a term of five years and vests in equal annual installments over four years from the date of grant subject, in each

Beckett being in the continuous employ of the Company on the applicable vesting date.

Under the agreement, Mr.

Beckett is eligible to receive medical and dental benefits, life

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

and 401K plan.

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

Beckett was granted an option to purchase up to 1,500 shares

of our common stock with an exercise price equal to $19.20 per share.

is eligible to receive medical and dental benefits, life insurance, short and long-term disability coverage, and to participate in

the Company’s Section 125 cafeteria plan, vision plan and 401K plan.

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

Beckett was granted an option to purchase up to 1,500 shares of our common stock with an exercise price equal to $19.20 per

Such option is fully vested and exercisable at December 31, 2022.

19 unchanged sentences

Equity Awards at 2022 Fiscal Year-End

following table sets forth outstanding equity awards issued under or outside of our 2013 Equity Incentive Plan and 2020

Stock Appreciation Rights Plan as of December 31, 2021 that are held by our named executive officers.

of securities underlying unexercised options (#) exercisable

of securities underlying unexercised options (#) unexercisable

The following table sets forth

outstanding stock options granted under or outside of our 2013 Equity Incentive Plan and SARs under our 2020 Stock Appreciation Rights

Plan that are held by our named executive officers as of December 31, 2022:

unexercisable

Brunsberg (2)

Orzechowski (5)

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

The Plan only provides for incentive awards that are only made

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

No shares of common stock were reserved in connection

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

Awards issued under the Plan are included in the

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

Ruport, the Company’s Chief Executive Officer, the Company granted

Ruport (i) an option to purchase 10,000 shares of our common stock with an exercise price of $11.20, which fully vested and became

exercisable on January 3,2020;

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

which will vest and become exercisable in equal monthly installments over three years from the date of grant.

The Plan provides for incentive awards in the

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

No shares of common stock were reserved in connection with the

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

Awards issued under the Plan are included in the table.

On September 20, 2021, in conjunction with the hiring of Jacob Brunsberg, the Company’s current President and Chief Executive Officer,

the Company granted to Mr.

Brunsberg an option to purchase 100,000 shares of our common stock with an exercise price of $3.18, which

was fully vested and exercisable on the date of the grant.

On February 16, 2022, the Company granted an option to Mr.

purchase up to 70,000 shares of common stock with an exercise price of $2.50, which will vest in equal monthly installments over three

As of December 31, 2022, 19,443 shares were fully vested and exercisable.

Also on February 16, 2022, the Company granted 30,000

Brunsberg, with an exercise price of $2.50, which will vest in equal monthly installments over three years.

As of December

a total of 27,025 shares were vested and exercisable.

On May 28, 2020, we granted Mr.

Ruport an option to purchase 116,654 shares of

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

The option has an exercise price

of $2.50 and vests as follows:

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

in equal monthly installments over the next three years.

As of December 31, 2021, a total of 72,904 shares were vested and exercisable.

On November 24, 2020, we granted Mr.

31, 2022, 8,330 SARs were fully vested and exercisable.

On July 1, 2022, we granted Mr.

Brunsberg an option to purchase up to 15,200

shares of our common stock with an exercise price of $2.50.

4,104 shares were fully vested and exercisable on the date of the grant,

and the remaining 11,096 shares will vest in equal monthly installments over the next three years.

As of December 31, 2022, 5,372 shares

were fully vested and exercisable.

Also on July 1, 2022, we granted Mr.

Brunsberg an option to purchase up to 49,800 shares of our common

stock with an exercise price of $2.50.

12,450 shares were fully vested and exercisable on the date of the grant, and the remaining 37,350

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

As of December 31, 2022, 17,635 shares were fully vested and

Additionally, on July 1, 2022 we granted Mr.

Brunsberg 194,940 SARs with an exercise price of $2.50.

48,735 SARs were fully

vested and exercisable on the date of the grant, and the remaining 146,205 SARs will vest in equal monthly installments over the next

As of December 31, 2022, 69,040 SARs were fully vested and exercisable.

Last, on July 1, 2022, we granted Mr.

181,947 SARs in connection with his employment retention agreement.

The SARs have an exercise price of $1.30 and will vest and become

exercisable on March 15, 2025 if Mr.

Brunsberg remains an employee of the Company on that date.

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

Ruport, the Company’s former President and Chief Executive

Officer, the Company granted to Mr.

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

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

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

common stock, with an exercise price of $11.20, which became fully vested and exercisable as of December 31, 2022.

On May 28, 2020,

we granted Mr.

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

with his employment arrangement.

The option has an exercise price of $2.50 and as of December 31, 2022 102,064 shares were fully

vested and exercisable, and the remaining 14,590 shares will vest in equal monthly installments over the next six months.

November 24, 2020, we granted Mr.

Ruport an option to purchase up to 114,915 shares of our common stock.

3 unchanged sentences

2022, 79,800 shares were vested and exercisable.

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

The SARs have an exercise price of $2.63 and will vest and become exercisable in three equal installments on each of the

first, second, and third anniversaries of the grant date.

As of December 31, 2021, 20,031 SARs were vested and exercisable.

11, 2021, we granted Mr.

Ruport an option to purchase 51,832 shares of our common stock under our 2013 Equity Incentive Plan in connection

with his employment arrangement.

The option has an exercise price of $3.42 and vests as follows:

12,958 shares vested and became exercisable

on August 11, 2021, and the remaining 38,874 shares will vest in equal monthly installments over the next three years.

As of December

31, 2021, a total of 17,278 shares were vested and exercisable.

On August 11, 2021, pursuant to our 2020 Stock Appreciation Rights Plan,

we granted Mr.

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

Ruport 60,094 SARs.

The SARs have an exercise price of $3.42 and will vest and become exercisable in three equal installments

on each of the first, second, and third anniversaries of the grant date.

The SARs have an exercise price of $2.63 and will vest and become exercisable in three equal installments on

each of the first, second, and third anniversaries of the grant date.

As of December 31, 2022, 40,062 SARs were vested and

On August 11, 2021, we granted Mr.

Ruport an option to purchase 51,832 shares of our common stock under our 2013 Equity

Incentive Plan in connection with his employment arrangement.

The option has an exercise price of $3.42 and as of December 31, 2022,

30,238 shares were fully vested and exercisable, and the remaining 21,594 shares will vest in equal monthly installments over the

next twenty months.

On August 11, 2021, pursuant to our 2020 Stock Appreciation Rights Plan, we granted Mr.

Ruport 77,748 SARs.

SARs have an exercise price of $3.42 and will vest and become exercisable in three equal installments on each of the first, second,

and third anniversaries of the grant date.

As of December 31, 2022, 25,916 SARs were fully vested and exercisable.

On July 1, 2022,

the Company granted Mr.

Ruport an option to purchase up to 5,874 shares of our common stock with an exercise price of $2.50.

shares were fully vested and exercisable on the date of the grant, and the remaining 4288 shares will vest in equal monthly

installments over the next three years.

As of December 31, 2022, 2,078 shares were fully vested and exercisable.

Also on July 1,

2022, the Company granted Mr.

Ruport an option to purchase up to 19,242 shares of our common stock with an exercise price of $2.50.

4,810 shares were fully vested and exercisable on the date of the grant, and the remaining 14,432 shares will vest in equal monthly

installments over the next three years.

As of December 31, 2022, 6,815 shares were fully vested and exercisable.

Additionally, on

July 1, 2022 the Company granted Mr.

Ruport 25,117 SARs.

The SARs have an exercise price of $2.50.

6,279 SARs were fully vested and

exercisable on the date of the grant, and the remaining 18,838 SARs will vest in equal monthly installments over the next three

As of December 31, 2022, 8,894 SARs were fully vested and exercisable.

On February 26, 2018 we granted Mr.

1 unchanged sentence

Plan in connection with his employment arrangement.

The option has an exercise price per share equal to $15.60 and is vested as to 675

The remaining 825 shares will vest and become exercisable on February 26, 2022.

On October 18, 2018, we granted Mr.

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

The option has an exercise price per share equal to $12.10 and is vested as

to 900 shares.

The 1,100 remaining shares will vest and become exercisable on September 16, 2022.

The option has an exercise price per share equal to $15.60 and is fully vested and

On October 18, 2018, we granted Mr.

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

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

The option is fully vested and exercisable.

On January 1, 2019,

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

The option has

an exercise price per share equal to $12.10 and is fully vested and exercisable.

On January 1, 2019, we granted Mr.

Beckett an option

to purchase up to 375 shares of our common stock under our 2013 Equity Incentive Plan in connection with his employment arrangement.

The option has an exercise price per share equal to $15.00, and vests in equal installments on the first through the fourth anniversaries

of the grant.

As of December 31, 2022, 282 shares are vested and exercisable.

On July 18, 2019, we granted Mr.

Beckett an option to purchase

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

The option has

an exercise price per share equal to $12.40.

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

the fourth anniversaries of the date of grant.

As of December 31, 2022, the option was vested as to 375 shares.

On October 11, 2019,

we granted Mr.

1 unchanged sentence

with his employment arrangement.

The option has an exercise price per share equal to $15.00, and vests in equal installments on the first

through the fourth anniversaries of the grant.

As of December 31, 2021, 188 shares are vested and exercisable.

On July 18, 2019, we granted

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

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

The option vests and will become exercisable in equal installments

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

As of December 31, 2021, the option was vested as to 250 shares.

On October 11, 2019, we granted Mr.

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

Plan in connection with his employment arrangement.

The option has an exercise price per share equal to $6.70 and is fully vested and

On May 28, 2020, we granted Mr.

The option has an exercise price per share equal to $6.70 and is fully vested and exercisable.

28, 2020, we granted Mr.

Beckett an option to purchase 46,661 shares of our common stock.

The option has an exercise

price per share equal to $2.50 and vests as follows:

11,665 shares vested and became exercisable on June 15, 2020, and the remaining

34,996 shares will vest in equal monthly installments over the next three years.

As of December 31, 2021, a total of 29,161 shares were

vested and exercisable.

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

The option has an exercise price per share

equal to $2.50 and as of December 31, 2022, 40,825 shares were fully vested and exercisable.

The remaining 5,836 shares will vest in

equal monthly installments over the next six months.

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

Beckett 24,038 SARs.

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

third anniversaries of the grant date.

The SARs have an exercise price of $2.63 and will vest and become exercisable in three equal installments on

each of the first, second, and third anniversaries of the grant date.

As of December 31, 2022, 16,026 SARs were vested and exercisable.

On August 11, 2021, we granted

Beckett an option to purchase 50,869 shares of our common stock under our 2013 Equity Incentive Plan in connection with his employment

The option has an exercise price of $3.42 and vests as follows:

12,718 shares vested and became exercisable on August 11,

2021, and the remaining 38,151 shares will vest in equal monthly installments over the next three years.

As of December 31, 2021, a total

of 16,957 shares were vested and exercisable.

On August 11, 2021, pursuant to our 2020 Stock Appreciation Rights Plan, we granted Mr.

On August 11, 2021, we granted Mr.

Beckett an option to purchase 50,869 shares of our common stock under our 2013 Equity Incentive Plan

in connection with his employment arrangement.

The option has an exercise price of $3.42 and as of December 31, 2022, 29,677 shares were

fully vested and exercisable, and the remaining 21,192 shares will vest in equal monthly installments over the next twenty months.

August 11, 2021, pursuant to our 2020 Stock Appreciation Rights Plan, we granted Mr.

Beckett 76,304 SARs.

The SARs have an exercise price of $3.42 and will vest and become exercisable in three equal installments on each

of the first, second, and third anniversaries of the grant date.

The SARs have an exercise price

of $3.42 and will vest and become exercisable in three equal installments on each of the first, second, and third anniversaries of the

As of December 31, 2022, 25,435 shares were fully vested and exercisable.

On July 1, 2022, we granted Mr.

Beckett an option

to purchase up to 15,849 shares of our common stock with an exercise price of $2.50.

4,279 shares were fully vested and exercisable on

the date of the grant, and the remaining 10,246 shares will vest in equal monthly installments over the next three years.

As of December

31, 2022, 5,603 shares were fully vested and exercisable.

Also on July 1, 2022, we granted Mr.

Beckett an option to purchase up to 51,927

shares of our common stock with an exercise price of $2.50.

12,982 shares were fully vested and exercisable on the date of the grant,

and the remaining 38,945 shares will vest in equal monthly installments over the next three years.

As of December 31, 2022, 18,392 shares

were fully vested and exercisable.

Additionally, on July 1, 2022 we granted Mr.

Beckett 16,944 SARs with an exercise price of $2.50.

4,236 SARs were fully vested and exercisable on the date of the grant, and the remaining 12,708 SARs will vest in equal monthly installments

over the next three years.

As of December 31, 2022, 6,001 SARs were fully vested and exercisable.

Last, on July 1, 2022, we granted Mr.

Beckett 97,038 SARs in connection with his employment retention agreement.

The SARs have an exercise price of $1.30 and will vest and

become exercisable on March 15, 2025 if Mr.

Beckett remains an employee of the Company on that date.

On July 1, 2019, in conjunction with the hiring of Frank Orzechowski, the Financial Officer, the Company granted to Mr.

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an option to purchase 250 shares of our common stock with an exercise price of $14.00, which fully vested and became exercisable on July

and (ii) an option to purchase up to 6,000 shares of our common stock, with an exercise price of $14.00, which will vest and

become exercisable as follows:

387 shares became vested and exercisable on July 1, 2020;

900 shares became vested and exercisable on

July 1, 2021;

1,413 shares will vest and become exercisable on July 1, 2022, and the remaining 3,300 shares will vest and become exercisable

on July 1, 2023.

As of December 31, 2021, a total of 1,287 shares were vested and exercisable.

and (ii) an option to purchase up to 6,000 shares of our common stock, with an exercise price of $14.00.

As of December 31,

2022, 2,700 shares were fully vested and exercisable, and the remaining 3,300 shares will vest and become exercisable on July 1, 2023.

On May 28, 2020, we granted Mr.

an option to purchase 34,996 shares of our common stock under our 2013 Equity Incentive Plan in connection with his employment arrangement.

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

8,749 shares vested and became exercisable on June 15, 2020, and the

remaining 26,247 shares will vest in equal monthly installments over the next three years.

As of December 31, 2021, a total of 21,871

shares were vested and exercisable.

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

The SARs have an exercise price of $2.63 and will vest and become exercisable in three equal installments on each of the

first, second, and third anniversaries of the grant date.

Orzechowski an option to purchase 34,996 shares of our common stock under our 2013 Equity Incentive

Plan in connection with his employment arrangement.

The option has an exercise price of $2.50.

As of December 31, 2022, 30,619 shares

were fully vested and exercisable, and the remaining 4,377 shares will vest in equal monthly installments over the next six months.

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

Orzechowski 18,028 SARs.

The SARs have an exercise

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

of the grant date.

As of December 31, 2022, 12,018 SARs were vested and exercisable.

11, 2021, we granted Mr.

Orzechowski an option to purchase 48,580 shares of our common stock under our 2013 Equity Incentive Plan in

connection with his employment arrangement.

The option has an exercise price of $3.42 and vests as follows:

12,145 shares vested and

became exercisable on August 11, 2021, and the remaining 36,435 shares will vest in equal monthly installments over the next three years.

As of December 31, 2021, a total of 16,193 shares were vested and exercisable.

On August 11, 2021, we granted Mr.

Orzechowski an

option to purchase 48,580 shares of our common stock under our 2013 Equity Incentive Plan in connection with his employment arrangement.

The option has an exercise price of $3.42 and as of December 31, 2022, 28,337 shares were fully vested and exercisable, and the remaining

20,243 shares will vest in equal monthly installments over the next twenty months.

On August 11, 2021, pursuant to our 2020 Stock Appreciation

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

As of December 31, 2022, 16,193 SARs

were fully vested and exercisable.

On July 1, 2022, we granted Mr.

Orzechowski an option to purchase up to 15,924 shares of our common

stock with an exercise price of $2.50.

4,299 shares were fully vested and exercisable on the date of the grant, and the remaining 11,625

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

As of December 31, 2022, 5,627 shares were fully vested and

Also on July 1, 2022, we granted Mr.

Orzechowski an option to purchase up to 52,170 shares of our common stock with an exercise

price of $2.50.

13,042 shares were fully vested and exercisable on the date of the grant, and the remaining 39,128 shares will vest in

equal monthly installments over the next three years.

As of December 31, 2022, 18,477 shares were fully vested and exercisable.

Additionally,

on July 1, 2022 we granted Mr.

Orzechowski 69,470 SARs with an exercise price of $2.50.

17,368 SARs were fully vested and exercisable

on the date of the grant, and the remaining 52,102 SARs will vest in equal monthly installments over the next three years.

As of December

31, 2022, 24,603 SARs were fully vested and exercisable.

Last, on July 1, 2022, we granted Mr.

Orzechowski 97,038 SARs in connection

with his employment retention agreement.

The SARs have an exercise price of $1.30 and will vest and become exercisable on March 15, 2025

Orzechowski remains an employee of the Company on that date.

Payments Upon Termination or Change-in-Control

July 1, 2022, our Board of Directors, upon the recommendation of the Compensation Committee, adopted retention bonus and change in control

plans for certain of our named executive officers as described below.

retention bonus plan consists of the award of retention bonuses to Mr.

Brunsberg, and Mr.

Orzechowski as an incentive to remain in our

employ through the end of the retention period.

The retention bonus amount for Mr.

Brunsberg is $375,000, which is equal to 150% of his

base salary in effect on July 1, 2022, and the retention bonus amount for Mr.

Orzechowski is $200,000, which is equal to 100% of his

base salary in effect on July 1, 2022.

The retention bonuses are payable 50% in cash and 50% in SARs for each executive.

SARs will have an exercise price of $1.30 ( i.e ., the closing price of our common stock on the grant date) and will vest, in full,

on March 15, 2025, subject to the executive remaining in our continuous employ through such date.

cash component of the retention bonuses will be paid upon the end of the retention period coinciding with the filing of the

Company’s 2024 Annual Report on Form 10-K, subject to the executive’s continuous employment by the Company through the

In the event of a “change in control” of the Company prior to such filing, the executives would be entitled

to payment in cash of a pro rata portion of their total respective bonuses.

The balance of the retention bonuses would terminate .

a change in control had occurred on December 31, 2022, the amount of retention bonuses payable to Mr.

Brunsberg and Mr.

would have been $67,164 and $35,821, respectively.

in Control Plan

change in control plan adopted on July 1, 2022, as modified by our Board of Directors on January 24, 2023, provides that following a

“Change in Control” of the Company, Messrs.

Brunsberg and Orzechowski each would be entitled to a cash payment equal to

two times his base annual salary in effect on July 1, 2022 ( i.e ., $500,000 for Mr.

Brunsberg and $400,000 for Mr.

Orzechowski),

less any base salary payments received between the date of the “change in control” and the termination date, if his employment

is terminated by the Company without “cause” or the executive resigns for “Good Reason” within two years following

the “Change in Control”.

For purposes of the plan, “Change in Control” means:

(i) a liquidation or dissolution

of the Company;

(ii) a merger or consolidation of the Company with or into another corporation or entity (other than a merger with a

wholly owned subsidiary);

(iii) a sale of all or substantially all of the assets of the Company;

or (iv) a purchase or other acquisition

of more than 50% of the outstanding stock of the Company by one person or by more than one person acting in concert.

“Good Reason”

(i) a reduction in the executive’s annual base salary as in effect on the date immediately prior to the Change in Control

or a failure to make any scheduled base salary payment within fifteen days after its due date, unless the Company’s Board of Directors

determines in good faith that such base salary reduction is more than offset by the aggregate value of any new compensation plans or

other employment-related benefits that are provided to the Executive after the Change in Control;

(ii) the Company’s requirement

that the executive perform his employment duties at an office that is more than 25 miles from the Company’s office at which the

executive was principally employed on the date immediately prior to the Change in Control;

(iii) a change or diminution in executive’s

employment duties that is materially inconsistent with the duties usually associated with their position at a corporation;

failure by the Company to continue for the benefit of the executive any material compensation plan in which the executive participated

on the date immediately prior to the Change in Control, unless the discontinuation of such plan was outside the Company’s reasonable

control or unless the Company discontinues such plan for all of its executive officers.

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

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Equity Incentive Plan

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

our operations and increase our profitability, (2) encourage selected employees, officers, directors, consultants and advisers to accept

or continue employment or association with us, and (3) increase the interest of selected employees, officers, directors, consultants

and advisers in our welfare through participation in the growth in value of our common stock.

All of our current employees, directors

and consultants are eligible to participate in the 2013 Plan.

Board of Directors adopted the 2013 Plan, which terminated on March 15, 2023, to (1) encourage selected employees, officers, directors,

consultants and advisers to improve our operations and increase our profitability, (2) encourage selected employees, officers, directors,

consultants and advisers to accept or continue employment or association with us, and (3) increase the interest of selected employees,

officers, directors, consultants and advisers in our welfare through participation in the growth in value of our common stock.

our current employees, officers, directors and consultants were eligible to participate in the 2013 Plan.

Administration

2013 Plan is to be administered by the Board or by a committee to which administration of the Plan, or of part of thereof, is delegated

2013 Plan is administered by the Board or by a committee to which administration of the Plan, or of part of thereof, is delegated

by the Board.

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advisable for the administration of the 2013 Plan or of any award under the 2013 Plan.

the Board nor any committee of the Board to which administration of the 2013 Plan is delegated will provide advice to participants about

whether or not to accept or exercise their awards.

Each participant must make his or her own decision about whether or not to accept

or exercise an award.

2013 Plan is not subject to the Employee Retirement Income Security Act of 1974 and is not a qualified pension, profit sharing or bonus

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Subject to the 2013 Plan

As of March 23, 2022, there

were 1,473,297 shares previously issued or subject to outstanding awards under the 2013 Plan and 262,262 shares were available for future issuance

under the 2013 Plan.

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

stock not acquired pursuant to such awards will again become available for issuance under the 2013 Plan.

If shares of common stock issued

pursuant to awards under the 2013 Plan are forfeited to or repurchased by us, the forfeited or repurchased stock will again become available

for issuance under the 2013 Plan.

shares of common stock subject to an award are not delivered to a participant because such shares are withheld for payment of taxes incurred

in connection with the exercise of an Option, or the issuance of shares under a Stock Award, or the award is exercised through a reduction

of shares subject to the award (“net exercised”), then the number of shares that are not delivered will not again be available

for issuance under the 2013 Plan.

In addition, if the exercise price of any award is satisfied by the tender of shares of common stock

to us (whether by actual delivery or attestation), the shares tendered will not again be available for issuance under the 2013 Plan.

directors, employees, consultants and advisors of the Company and its subsidiaries are eligible to receive awards under the 2013 Plan.

Incentive Options may only be granted under the 2013 Plan to a person who is a full-time officer or employee of the Company or a subsidiary.

The Administrator will determine from time-to-time which directors, employees, consultants and advisers will be granted awards under

the 2013 Plan.

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

exercise price for a Non-Qualified Option or an Incentive Option may not be less than 100% of the fair market value of the Common Stock

on the date of the grant of the Non-Qualified Option or Incentive Option.

With respect to an Option holder who owns stock possessing

more than 10% of the total voting power of all classes of our stock, the exercise price for an Incentive Option may not be less than

110% of the fair market value of the Common Stock on the date of the grant of the Incentive Option.

The base value of a Stock Appreciation

Right shall also be no less than 100% of the Common Stock on the date of the grant of the Stock Appreciation Right.

The 2013 Plan does

not specify a minimum exercise price for Stock Awards.

As of March 29, 2023, there were

2,014,659 shares previously issued or subject to outstanding awards under the 2013 Plan.

The plan expired on March 15, 2023 and therefore

there are no shares available for future issuance under the 2013 Plan.

Option, Stock Appreciation Right or Stock Award will become exercisable or non-forfeitable (that is, “vest”) under conditions

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Except as otherwise provided in the relevant agreement, an Option or Stock Appreciation Right ceases to be exercisable

ninety days after the termination of the holder’s employment with us.

ninety days after the termination of the holder’s service with us.

otherwise determined by the Administrator, Options are not transferable except by will or the laws of descent and distribution.

Price Payment

otherwise determined by the Administrator, the purchase price of common stock acquired under the 2013 Plan is payable by cash

or check at the time of an Option exercise or acquisition of a Stock Award.

The Company does not charge participants any fees or commissions

in connection with their acquisition of common stock under the 2013 Plan.

The Administrator also has discretion to accept the

following types of payment from participants:

otherwise determined by the Administrator, the purchase price of common stock acquired under the 2013 Plan is payable by cash or check

at the time of an Option exercise or acquisition of a Stock Award.

The Company does not charge participants any fees or commissions in

connection with their acquisition of common stock under the 2013 Plan.

The Administrator also has discretion to accept the following

types of payment from participants:

secured or unsecured promissory note, provided that this method of payment is not available to a participant who is a director or

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Law Compliance

of common stock will not be issued pursuant to the exercise of an Option or the receipt of a Stock Award unless the Administrator

determines that the exercise of the Option or receipt of the Stock Award and the issuance and delivery of such shares will comply with

all relevant provisions of law, including, without limitation, the Securities Act of 1933 (the “Securities Act”), applicable

state and foreign securities laws and the requirements of any stock exchange on which our Common Stock is traded.

of common stock will not be issued pursuant to the exercise of an Option or the receipt of a Stock Award unless the Administrator determines

that the exercise of the Option or receipt of the Stock Award and the issuance and delivery of such shares will comply with all relevant

provisions of law, including, without limitation, the Securities Act of 1933 (the “Securities Act”), applicable state and

foreign securities laws and the requirements of any stock exchange on which our common stock is traded.

of Certain Corporate Transactions

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of each outstanding Option and (if applicable) Stock Award.

or Termination of the Plan

Board of Directors may at any time amend, discontinue or terminate the 2013 Plan.

With specified exceptions, no amendment, suspension

or termination of the Plan may adversely affect outstanding Options or Stock Appreciation Rights or the terms that are applicable to

outstanding Stock Awards.

No amendment, suspension or termination of the Plan requires stockholder approval unless such approval is required

under applicable law or under the rules of any stock exchange on which our Common Stock is traded.

Unless terminated earlier by the Board

of Directors, the 2013 Plan will terminate automatically on March 15, 2023, which is the tenth anniversary of the date of the 2013 Plan’s

adoption by the Board.

Termination of the Plan

2013 Plan terminated automatically on March 15, 2023, which was the tenth anniversary of the date of the 2013 Plan’s adoption by

our Board of Directors.

Stock Appreciation Rights Plan

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

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

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

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

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

Our Compensation Committee intends to evaluate our director compensation program and determine whether any changes should be

recommended to the Board.

Our Compensation Committee intends to evaluate our director compensation program and determine whether any changes should be recommended

to the Board.

following table sets forth certain information concerning the compensation paid to non-employee directors in 2022 for their services

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The compensation of Mr.

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

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

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

Our non-employee directors do not receive fringe or other

Battinelli (2)

Our non-employee directors do not receive fringe or

other benefits.

Earned or Paid in Cash ($)

Option Awards ($) (6)

John Rice (2)

Salvatore Battinelli (3)

Dennis Duitch (4)

Kent Summers (5)

fees shown were paid to Mr.

Ruport for services as a non-employee director from October 1, 2022 through December 31, 2022.

1, 2022, the Company granted Mr.

Ruport an option to purchase up to 3,500 shares of the Company’s common stock in connection

with his service as a director.

The exercise price of the option is equal to $2.50 per share, is fully vested, and had a grant date

fair value of $1,871.

The compensation of Mr.

Ruport for the period January 1, 2022 through September 30, 2022, during which time

he served as President and Chief Executive Officer from January 1, 2022 through March 31, 2022, in addition to his service as a director,

is described in the Summary Compensation Table of Executive Officers

fees shown were paid to Mr.

Rice for services as a director.

On January 4, 2021, the Company granted Mr.

On March 31, 2022, the Company granted Mr.

Rice an option to purchase

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is equal to $2.50 per share, is fully vested, and had a grant date fair value of $21,721.

Rice resigned from the Board of Directors

on September 16, 2022.

fees shown were paid to Mr.

Battinelli for services as a director.

On January 4, 2021, the Company granted Mr.

On March 31, 2022, the Company granted Mr.

Battinelli an option

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Duitch for services as a director.

On January 4, 2021, the Company granted Mr.

On March 31, 2022, the Company granted Mr.

Duitch an option to purchase

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Summers for services as a director.

On July 31, 2020, the Company granted Mr.

On March 31, 2022, the Company granted Mr.

Summers an option to purchase

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

following table sets forth certain information regarding beneficial ownership of our common stock as of March 23, 2022 (a) by

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

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

following table sets forth certain information regarding beneficial ownership of our common stock as of March 29, 2023 (a) by each person

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

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

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

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shares of our common stock outstanding on March 29, 2023.

In computing the number of shares beneficially owned by a person and

the percentage ownership of that person, shares of common stock subject to stock options, warrants or other rights held by such person

that are currently convertible or exercisable or will become convertible or exercisable within 60 days of March 23, 2022 are considered

outstanding, although these shares are not considered outstanding for purposes of computing the percentage ownership of any other person.

We believe, based

on information provided to us, that each of the stockholders listed below has sole voting and investment power with respect to the shares

beneficially owned by the stockholder unless noted otherwise, subject to community property laws where applicable.

of Beneficial Owner

of Shares Beneficially Owned

Executive Officers and Directors:

Orzechowski (3)

Battinelli (5)

executive officers and directors as a group (9 persons) (8)

In computing the number of shares beneficially owned by a person and the percentage

ownership of that person, shares of common stock subject to stock options, warrants or other rights held by such person that are currently

convertible or exercisable or will become convertible or exercisable within 60 days of March 29, 2023 are considered outstanding, although

these shares are not considered outstanding for purposes of computing the percentage ownership of any other person.

believe, based on information provided to us, that each of the stockholders listed below has sole voting and investment power with respect

to the shares beneficially owned by the stockholder unless noted otherwise, subject to community property laws where applicable.

Name of Beneficial Owner

Number of Shares Beneficially Owned

Percentage of Shares Beneficially Owned (1)

Named Executive Officers and Directors:

Jacob Brunsberg (2)

Frank Orzechowski (3)

Mark Ruport (4)

Salvatore Battinelli (5)

Dennis Duitch (6)

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

5% Beneficial Holders:

Investment Company, Inc.

Includes 132,548 shares issuable upon the exercise of

stock options.

Includes (a) 204,426 shares issuable upon the exercise of stock

(b) 6,166 shares issuable upon the conversion of the shares of the Company’s Series E Preferred Stock;

Includes 48,306 shares issuable upon the exercise of stock options.

Includes 65,710 shares issuable upon the exercise of stock options.

Includes (a) 75,000 shares issuable upon the exercise of stock

options, (b) 3,082 shares issuable upon the conversion of shares of the Company’s Series E Preferred Stock, and (c)

2,428 shares issuable upon exercise of Class A Warrants.

Includes 75,000 shares issuable upon the exercise of stock options.

Includes (a) 819,733 shares issuable upon the exercise

of stock options, (b) and 9,248 shares issuable upon the conversion of the shares of the Company’s Series E Preferred

Stock, and (c) 7,283 shares issuable upon exercise of Class A Warrants.

AWM Investment Company, Inc.

is the investment advisor to Special Situations

Technology Fund.

(“Tech”) and Special Situations Technology Fund II (“Tech II”) and holds sole voting

and investment power over 105,089 shares and 90,029 warrants to purchase shares held by Tech, and 592,696 shares and 507,757 warrants

to purchase shares held by Tech II.

Such warrants may only be exercised to the extent that the total number of shares then beneficially

owned does not exceed 9.9% of the outstanding shares.

AWM Investment Company, Inc.’s address is c/o Special Situations Funds,

527 Madison Avenue, Suite 2600, New York, NY 10022.

on 10,772,713 shares outstanding at March 29, 2023.

220,622 shares issuable upon the exercise of stock options.

143,752 shares issuable upon the exercise of stock options.

(a) 313,899 shares issuable upon the exercise of stock options;

(b) 6,166 shares issuable upon the conversion of the shares of the

Company’s Series E Preferred Stock;

and (c) 4,855 shares issuable upon exercise of Class A Warrants.

(a) 92,274 shares issuable upon the exercise of stock options, (b) 3,082 shares issuable upon the conversion of shares of the Company’s

Series E Preferred Stock, and (c) 2,428 shares issuable upon exercise of Class A Warrants.

92,274 shares issuable upon the exercise of stock options.

(a) 1,076,794 shares issuable upon the exercise of stock options, (b) 9,248 shares issuable upon the conversion of the shares of

the Company’s Series E Preferred Stock, and (c) 7,283 shares issuable upon exercise of Class A Warrants.

Investment Company, Inc.

is the investment advisor to Special Situations Technology Fund.

(“Tech”) and Special Situations

Technology Fund II (“Tech II”) and holds sole voting and investment power over 105,089 shares and 90,029 warrants to

purchase shares held by Tech, and 592,696 shares and 507,756 warrants to purchase shares held by Tech II.

Such warrants may only

be exercised to the extent that the total number of shares then beneficially owned does not exceed 9.99% of the outstanding shares.

AWM Investment Company, Inc.’s address is c/o Special Situations Funds, 527 Madison Avenue, Suite 2600, New York, NY 10022.

Compensation Plan Information

following table provides certain information with respect to our equity compensation plans as of December 31, 2022.

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

Outstanding Options,

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

Plan Category

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

Exercise Price

of Outstanding Options,

Warrants and Rights

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

2013 Equity Incentive Plan (1)

compensation plans not approved by security holders (2)

Executive Officer Inducement Options (3)

Equity compensation plans not approved by security holders (2)

Chief Executive Officer Inducement Options (3)

On March 15, 2013, the Company’s Board of Directors approved the Company’s 2013 Equity Incentive Plan.

Equity Incentive Plan was approved by our stockholders on October 10, 2013.

On July 15, 2021, an amendment to our 2013 Equity Incentive

The 2013 Equity

Incentive Plan was approved by our stockholders on October 10, 2013.

On August 9, 2022, an amendment to our 2013 Equity Incentive

Plan was approved by our stockholders to increase the number of shares of our common stock subject to the 2013 Equity Incentive Plan

to 2,265,000.

The Plan automatically expired on March 15, 2023, which was the tenth anniversary of the adoption of the Plan by

the Company’s Board of Directors.

On June 23, 2020, our Board of Directors adopted the Sigma Labs, Inc.

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The Plan only provides for incentive

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

No shares of common stock were

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

As of December 31, 2021, the

Company has awarded 370,624 SARs pursuant to the Plan.

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

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.

As of December 31, 2022, the Company had awarded 1,157,787

SARs pursuant to the Plan.

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

Ruport, the Company’s Chief Executive Officer, the

Company granted to Mr.

Ruport (i) an option to purchase 10,000 shares of our common stock with an exercise price of $11.20, which fully

vested and became exercisable on January 3,2020;

and (ii) an option to purchase up to 40,000 shares of our common stock, with an exercise

price of $11.20, which will vest and become exercisable in equal monthly installments over three years from the date of grant.

December 31, 2021, a total of 27,025 shares were vested and exercisable.

Ruport, the Company’s former President and Chief Executive Officer,

the Company granted to Mr.

Ruport (i) an option to purchase 10,000 shares of our common stock with an exercise price of $11.20, which

fully vested and became exercisable on January 3, 2020;

and (ii) an option to purchase up to 40,000 shares of our common stock, with

an exercise price of $11.20, which fully vested and became exercisable on December 3, 2022.

In accordance with Nasdaq Listing Rule 5635(c)(4),

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Ruport as an inducement award outside of the 2013 Equity Incentive Plan.

Equity Compensation

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

Wainwright & Co., for which compensation has been paid with

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

up to 136,943 shares of common stock at an exercise price of $3.75 per share.

On March 22, 2021, we entered into an amendment to the

underwriting agreement with H.C.

Wainwright & Co., for which compensation has been paid with equity securities that have been previously

disclosed in our filings with the SEC, including warrants issued in March 2021 to purchase up to 175,200 shares of common stock at an

exercise price of $5.55625 per share.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

following summarizes transactions by us since the beginning of the Company’s last fiscal year, and any proposed transactions

in which any of our directors, director nominees, executive officers or, to our knowledge, beneficial owners of more than 5% of our

capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest,

other than equity and other compensation, termination, change in control and other arrangements, which are described under “Executive

Compensation” and “Director Compensation” above.

as described below in this section, since the beginning of our last fiscal year, there has not been, nor is there currently proposed,

any transaction or series of similar transactions to which we were a party other than equity and other compensation, termination, change

in control and other arrangements, which are described under “Executive Compensation” and “Director Compensation”

which the amount involved exceeds the lesser of $120,000 or 1% of the average of our total

assets at year-end for the last two completed fiscal years;

which any director, executive officer, or other stockholder of more than 5% of our common

stock or any member of their immediate family had or will have a direct or indirect material

with Directors and Officers

have entered into an “at will” employment agreement, effective as of September 20, 2021, with Jacob Brunsberg under

which he was engaged to serve as our Senior Vice President of Product Management and Strategic Relationships.

On February 16,

Brunsberg’s employment agreement was amended in connection with his appointment as President and Chief Operating

Officer of the Company to increase his annual base salary from $200,000 to $250,000.

In addition, on February 16,

Brunsberg was granted a stock option to purchase up to 70,000 shares of common stock of the Company, at an exercise price

equal to $2.50 per share under the 2013 Equity Incentive Plan, and 30,000 stock appreciation rights (“SARs”) under the

2020 Stock Appreciation Rights Plan, at an exercise price of $2.50 each.

Both the option and the SARs vest in equal (as closely as

possible) monthly installments over thirty-six months from the grant date, have five year-terms and are on such other terms and

conditions as set forth in the Company’s respective forms of standard agreement.

Pursuant to the employment

agreement, Mr.

Brunsberg was previously granted a stock option to purchase up to 100,000 shares of common stock of the

Company, at an exercise price equal to $3.18 per share, which was the closing market price of the Company’s common stock on

September 20, 2021 (i.e., the date of grant), under the 2013 Equity Incentive Plan.

Such option is fully vested and exercisable.

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

option agreement, Further, Mr.

Brunsberg is eligible to participate in the Company’s 2013 Equity Incentive Plan and 2020 Stock

Appreciation Rights Plan and is eligible to receive medical and dental benefits, life insurance, short and long-term disability

coverage, and to parti cipate in the Company’s Section 125

cafeteria plan, vision plan and 401K plan.

have entered into an “at will” employment agreement, effective as of August 10, 2015, with Ronald Fisher under which he was

engaged to serve as our Vice President of Business Development.

Fisher is entitled to receive an annual base salary of $180,000.

Pursuant to the employment agreement, Mr.

Fisher also was granted, as a signing bonus, (i) a stock option to purchase up to 2,375 shares

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

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

Such option is fully vested and exercisable.

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

option agreement, and (ii) 125 shares of common stock of the Company with a value equal to the closing price of our common stock on the

date of grant and is on such other terms and provisions as are contained in Sigma Labs’ standard form of restricted stock letter

agreement under the Plan.

Such shares are fully vested.

Additionally, the Company granted Mr.

Fisher under the 2013 Plan, effective as

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

Such option has an exercise price equal

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

Fisher is eligible to

participate in the Company’s 2013 Equity Incentive Plan and Stock Appreciation Rights Plan and is eligible to receive medical and

dental benefits, life insurance, short and long-term disability coverage, and to participate in the Company’s Section 125 cafeteria

plan, vision plan and 401K plan.

September 18, 2017, we and Mr.

Fisher entered into Amendment No.

Fisher’s employment agreement, effective August 10, 2015,

pursuant to which, effective as of February 11, 2017, item 2, entitled “Performance Bonuses,” of Exhibit A of Mr.

employment agreement was deleted in its entirety and replaced with the new item 2 that was set forth in the amendment to employment agreement.

Such amendment provided that Mr.

Fisher would become entitled to receive performance-based stock and cash bonuses if certain milestones

were satisfied by February 11, 2018, so long as Mr.

Fisher remained an employee of the Company as of the date the applicable milestone

was satisfied.

On February 21, 2018, the Company and Mr.

Fisher entered into Amendment No.

Fisher’s employment agreement,

pursuant to which the foregoing February 11, 2018 date was extended to December 31, 2018.

On January 10, 2019, the Company granted Mr.

Fisher an option to purchase up to 1,184 shares of common stock in exchange for the cancellation of his accrued but unpaid vacation balance

at December 31, 2018.

On March 7, 2019, the Company issued 150 shares of common stock under the 2013 Plan to Mr.

Fisher connected with

the satisfaction of a performance milestone.

January 27, 2020, the Company entered into a Securities Purchase Agreement (the “SPA”) with Mark K.

Ruport, Salvatore Battinelli

and Frank Garofalo, a former director, and Carl Schwartz, who was the Company’s largest shareholder.

Pursuant to the SPA, the Company

issued and sold 333.33 shares of the Company’s Series E Convertible Preferred Stock (the “Series E Preferred Stock”),

and 5½ year Class A Warrants to purchase 48,544 shares of the Company’s common stock (the “Class A Warrants”)

for a total gross purchase price of $500,000.

Upon any liquidation, dissolution or winding-up of the Company, the holders of Series E

Preferred Stock will be entitled to receive out of the assets of the Company an amount equal to the stated value of the Series E Preferred

Stock, plus any accrued and unpaid dividends thereon and any other fees or liquidated damages then due and owing thereon under the Certificate

of Designation, for each share of Series E Preferred Stock before any distribution or payment may be made to the holders of any junior

securities, but after distribution or payment to holders of the Series D Preferred Stock and any other senior securities;

assets of the Company are insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of Series

E Preferred Stock are to be ratably distributed among such holders in accordance with the respective amounts that would be payable on

such shares if all amounts payable thereon were paid in full.

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

of common stock (61,651 shares of common stock including the “make-whole dividend), and the Class A Warrants have an initial exercise

price of $11.30 per share.

have entered into an “at-will” employment agreement, effective as of September 15, 2022, with Stephan Kuehr under which

he serves as General Manager of European Operations.

Kuehr is entitled to an annual base salary of €200,000, and an annual

incentive bonus of up to €75,000 depending on individual and Company performance against certain specified goals.

the employment agreement, Mr.

Kuehr was granted an option to purchase up to 50,000 shares of common stock of the Company, with an

exercise price of $2.50, and vested as to 25,000 shares on January 1, 2023, and will vest as to 25,000 shares on January 1, 2024,

provided that Mr.

Kuehr remains an employee of the Company through such vesting date.

In addition, in connection with his

employment, on January 26, 2023 Mr.

Kuehr was granted an option to purchase up to 74.206 shares of common stock of the Company, with

an exercise price of $0.58 which vested as to 37,103 shares on January 26, 2023, and will vest as to the remaining 37,103 shares in

equal monthly installments beginning February 28, 2023 through December 31, 2024, provided, in each case, that Mr.

Kuehr remains an

employee of the Company through such vesting dates.

Indemnification

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years ended December 31, 2022 and 2021:

the above table, in accordance with the SEC’s definitions and rules, “audit fees” are fees that we paid for

professional services for the audit of our financial statements included in our Form 10-K and review of the interim financial statements

included in quarterly reports, and for services that are normally provided by the registered public accounting firm in connection with

statutory and regulatory filings or engagements;

“audit-related fees” are fees for assurance and related services that are

reasonably related to the performance of the audit or review of our financial statements;

and “tax fees” are fees for tax

compliance, tax advice and tax planning.

The Audit Committee’s pre-approval

policies and procedures and other protocols are discussed in its written charter which can be found at www.sigmalabsinc.com under

the tab “Investors.” Before our independent registered public accounting firm is engaged by the Company to render

audit or non-audit services, the Audit Committee must pre-approve the engagement.

Audit Committee pre-approval of audit and

non-audit services are not required if the engagement for the services is entered into pursuant to pre-approval policies and

procedures established by the Audit Committee regarding the Company’s engagement of the independent registered public

accounting firm, provided the policies and procedures are detailed as to the particular service, the Audit Committee is informed of

each service provided and such policies and procedures do not include delegation of the Audit Committee’s responsibilities

under the Exchange Act to the Company’s management.

The Audit Committee may delegate to one or more designated members of the

Audit Committee the authority to grant pre-approvals.

If the Audit Committee elects to establish pre-approval policies and

procedures regarding non-audit services, the Audit Committee must be informed of each non-audit service provided by the independent

registered public accounting firm.

Audit Committee pre-approval of non-audit services (other than review and attestation services)

also will not be required if such services fall within available exceptions established by the SEC.

The Audit Committee may not

engage the independent registered public accounting firm to perform non-audit services prohibited by law or regulation.

basis, our management reports to the Audit Committee all audit services performed during the previous 12 months and all fees billed

by our independent registered public accounting firm for such services.

In our fiscal year ended December

31, 2021, Haynie & Company provided no professional services other than those described above, that would require our

Audit Committee to consider their compatibility with maintaining the independence of Haynie & Company.

Audit Related Fees

the above table, in accordance with the SEC’s definitions and rules, “audit fees” are fees that we paid for professional

services for the audit of our financial statements included in our Form 10-K and review of the interim financial statements included

in quarterly reports, and for services that are normally provided by the registered public accounting firm in connection with statutory

and regulatory filings or engagements;

“audit-related fees” are fees for assurance and related services that are reasonably

related to the performance of the audit or review of our financial statements;

and “tax fees” are fees for tax compliance,

tax advice and tax planning.

Audit Committee’s pre-approval policies and procedures and other protocols are discussed in its written charter which can be found

at www.sigmaadditive.com under the tab “Investors.” Before our independent registered public accounting firm is engaged by

the Company to render audit or non-audit services, the Audit Committee must pre-approve the engagement.

Audit Committee pre-approval

of audit and non-audit services are not required if the engagement for the services is entered into pursuant to pre-approval policies

and procedures established by the Audit Committee regarding the Company’s engagement of the independent registered public accounting

firm, provided the policies and procedures are detailed as to the particular service, the Audit Committee is informed of each service

provided and such policies and procedures do not include delegation of the Audit Committee’s responsibilities under the Exchange

Act to the Company’s management.

The Audit Committee may delegate to one or more designated members of the Audit Committee the

authority to grant pre-approvals.

If the Audit Committee elects to establish pre-approval policies and procedures regarding non-audit

services, the Audit Committee must be informed of each non-audit service provided by the independent registered public accounting firm.

Audit Committee pre-approval of non-audit services (other than review and attestation services) also will not be required if such services

fall within available exceptions established by the SEC.

The Audit Committee may not engage the independent registered public accounting

firm to perform non-audit services prohibited by law or regulation.

On an annual basis, our management reports to the Audit Committee

all audit services performed during the previous 12 months and all fees billed by our independent registered public accounting firm for

such services.

our fiscal year ended December 31, 2022, Haynie & Company provided no professional services other than those described above that

would require our Audit Committee to consider their compatibility with maintaining the independence of Haynie & Company.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

2 unchanged sentences

are furnished as exhibits to this Form 10-K.

Underwriting Agreement, dated January 8, 2021, by and among Sigma Labs, Inc.

Wainwright & Co., LLC, as the representative for the underwriters named therein (filed as Exhibit 1.1 to the Company’s Current Report on Form 8-K filed January 12, 2021, and incorporated herein by reference).

Amended and Restated Articles of Incorporation of the Company, as amended.**

and Restated Articles of Incorporation of the Company, as amended (previously filed by the Company as Exhibit 3.1 to the

Company’s Form 10-K filed on March 24, 2022 and incorporated herein by reference).

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

and Restated Bylaws of the Company, as amended.

(previously filed by the Company as Exhibit 3.12 to the Company’s Form

(filed by the Company as Exhibit 3.12 to the Company’s Form

10-K, filed on March 24, 2021, and incorporated herein by reference).

Amendment No.

3 to Amended and Restated By-Laws of Sigma Additive Solutions, Inc.

(filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed December 16, 2022, and incorporated herein by reference).

Form of Common Stock Purchase Warrant (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed April 6, 2018, and incorporated herein by reference).

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Form of Placement Agent Warrant (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K filed March 30, 2021, and incorporated herein by reference).

Description of Securities.

Asset Purchase Agreement dated April 17, 2010 between B6 Sigma, Inc.

and Technology Management Company, Inc.

(filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K/A filed November 12, 2010, and incorporated herein by reference).

Form of Nonqualified Stock Option Agreement for the Plan (previously filed by the Company as Exhibit 10.4 to the Company’s Form 10-K, filed on April 1, 2019, and incorporated herein by reference)*

Form of Incentive Stock Option Agreement for the 2013 Equity Incentive Plan (filed as Exhibit 4.3 to the Company’s Form S-8 Registration Statement, filed on July 24, 2014, and incorporated herein by reference).*

Form of Restricted Stock Agreement for the Plan (previously filed by the Company as Exhibit 10.6 to the Company’s Form 10-K, filed on April 1, 2019, and incorporated herein by reference).

Warrant to Purchase Common Stock issued January 26, 2023.**

Description of Common Stock (set forth under the heading “Description of Our Securities” in the prospectus contained in the Company’s Registration Statement on Form S-1 (Registration No.

333-212735) filed on July 28, 2016, as amended, and incorporated by reference).

Form of Nonqualified Stock Option Agreement (previously filed by the Company as Exhibit 10.4 to the Company’s Form 10-K, filed on April 1, 2019, and incorporated herein by reference)*

Form of Incentive Stock Option Agreement (filed as Exhibit 4.3 to the Company’s Form S-8 Registration Statement, filed on July 24, 2014, and incorporated herein by reference).*

Form of Restricted Stock Agreement (previously filed by the Company as Exhibit 10.6 to the Company’s Form 10-K, filed on April 1, 2019, and incorporated herein by reference).

Employment Offer Letter Agreement, effective August 10, 2015, between Sigma Labs, Inc.

23 unchanged sentences

2020 Stock Appreciation Rights Plan) (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed June 29, 2020 and incorporated herein by reference).*

Form of Stock Appreciation Rights Agreement (Non-employee Directors;

2020 Stock Appreciation Rights Plan) (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed June 29, 2020 and incorporated herein by reference).

Form of Waiver (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 12, 2021, and incorporated herein by reference).

Form of Securities Purchase Agreement (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 30, 2021, and incorporated herein by reference).

Amended and Restated Employment Agreement, dated June 10, 2021, between Sigma Labs, Inc.

Ruport (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 15, 2021 and incorporated herein by reference).*

2021 and 2022 Corporate Goals – Cash and Equity Incentive Plan, dated June 10, 2021 (filed as an exhibit to the Company’s Current Report on Form 8-K filed June 15, 2021, and incorporated herein by reference).*

Sigma Labs, Inc.

2013 Equity Incentive Plan, as Amended (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 16, 2021 and incorporated herein by reference).*

Sigma Labs, Inc.

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

Employment letter agreement, effective as of September 20, 2021, between Sigma Labs, Inc.

and Jacob Brunsberg (filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed October 21, 2021, and incorporated herein by reference).*

Amendment, dated February 16, 2022, to Employment letter agreement, effective as of September 20, 2021, between Sigma Labs, Inc.

and Jacob Brunsberg.* **

Amendment, dated February 16, 2022, to Amended and Restated Employment Agreement, dated June 10, 2021, between Sigma Labs, Inc.

of Stock Appreciation Rights Agreement (Non-employee Directors;

2020 Stock Appreciation Rights Plan) (filed as Exhibit 10.3 to the

Company’s Current Report on Form 8-K filed June 29, 2020 and incorporated herein by reference).

of Waiver (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 12, 2021, and incorporated herein

by reference).

of Securities Purchase Agreement (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 30, 2021, and

incorporated herein by reference).

and 2022 Corporate Goals – Cash and Equity Incentive Plan, dated June 10, 2021

(filed as an exhibit to the Company’s Current Report on Form 8-K filed June 15, 2021,

and incorporated herein by reference).*

Corporate Goals – Cash and Equity Incentive Plan, dated July 1, 2023 (filed as an exhibit to the Company’s Current Report

on Form 8-K filed July 8, 2022, and incorporated herein by reference).*

Additive Solutions, Inc.

2013 Equity Incentive Plan, as Amended (filed as Exhibit 99.1 to

the Company’s Form S-8 Registration Statement, filed on October 19, 2022 and incorporated

herein by reference).*

2021 Employee Stock Purchase Plan (filed as Exhibit 10.2 to the Company’s

Current Report on Form 8-K filed July 16, 2021 and incorporated herein by reference).*

letter agreement, effective as of September 20, 2021, between Sigma Labs, Inc.

Brunsberg (filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed

October 21, 2021, and incorporated herein by reference).*

dated February 16, 2022, to employment letter agreement, effective as of September 20, 2021,

between Sigma Labs, Inc.

and Jacob Brunsberg (filed by the Company as Exhibit 10.28 to the

Company’s Form 10-K, filed on March 24, 2022 and incorporated herein by reference).*

dated February 16, 2022, to Amended and Restated Employment Agreement, dated June 10, 2021, between Sigma Labs, Inc.

Ruport (filed by the Company as Exhibit 10.29 to the Company’s Form 10-K, filed on March 24, 2022, and incorporated herein

by reference).*

effective as of April 1, 2022, to employment letter agreement, effective as of September 20, 2021, between Sigma Labs, Inc.

Brunsberg (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed August 5, 2022, and incorporated herein

by reference).*

Bonus and Change in Control Agreement, dated as of January 26, 2023, entered into by Sigma Additive Solutions, Inc.

Brunsberg.* **

Bonus and Change in Control Agreement, dated as of January 26, 2023, entered into by Sigma Additive Solutions, Inc.

Orzechowski.* **

Consent of Haynie & Company.**

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.***

Instance Document.

Taxonomy Extension Schema Document.

Taxonomy Extension Calculation Linkbase Document.

Taxonomy Extension Definition Linkbase Document.

Taxonomy Extension Label Linkbase Document.

Taxonomy Extension Presentation Linkbase Document.

Cover Page Interactive Data File (formatted as Inline

XBRL and contained in Exhibit 101).

XBRL Instance Document.

XBRL Taxonomy Extension Schema Document.

XBRL Taxonomy Extension Calculation Linkbase Document.

XBRL Taxonomy Extension Definition Linkbase Document.

XBRL Taxonomy Extension Label Linkbase Document.

XBRL Taxonomy Extension Presentation Linkbase Document.

Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

Indicates a management contract or compensatory plan or arrangement.

6 unchanged sentences

on its behalf by the undersigned, thereunto duly authorized.

Executive Officer

ADDITIVE SOLUTIONS, INC.

Jacob Brunsberg

and Chief Executive Officer

Executive Officer)

4 unchanged sentences

registrant in the capacities and on the dates indicated.

Executive Officer (Principal Executive Officer and Director)

Jacob Brunsberg

and Chief Executive Officer (Principal Executive Officer and Director)

Frank Orzechowski

4 unchanged sentences

to Financial Statements

of Independent Registered Public Accounting Firm PCAOB ID No.

Report of Independent Registered Public Accounting Firm PCAOB ID No.

Balance Sheets

5 unchanged sentences

the Board of Directors and

Stockholders of Sigma Labs, Inc.

Stockholders of Sigma Additive Solutions, Inc.

(formerly Sigma Labs, Inc.)

on the Financial Statements

have audited the accompanying balance sheets of Sigma Labs, Inc.

(the Company) as of December 31, 2021 and 2020, and the related

statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31,

have audited the accompanying balance sheets of Sigma Additive Solutions, Inc.

(the Company) as of December 31, 2022 and 2021, and the

related statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December

31, 2022, and the related notes (collectively referred to as the financial statements).

In our opinion, the financial statements present

fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its

operations and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with accounting

principles generally accepted in the United States of America.

fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations

and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with accounting principles generally

accepted in the United States of America.

Consideration

of the Company’s Ability to Continue as a Going Concern

accompanying financial statements have been prepared assuming the Company will continue as a going concern.

As discussed in Note 1 to

the financial statements, the company has sustained recurring losses and negative cash flows from operations since inception.

will require additional funding in the public or private markets to continue operations for the next year.

These factors raise substantial

doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

financial statements are the responsibility of the Company’s management.

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of the Matter :

discussed in Note 1 to the financial statements, Sigma Labs, Inc.’s revenue is derived primarily from the sale of software, the

related hardware suite, and engineering services.

The Company’s contracts with customers typically include the promise to transfer

multiple goods and/or services to the customer.

Management must assess whether each promised good or service is distinct for the purpose

of identifying the performance obligations within the contract and must then determine and allocate the transaction price to the performance

This assessment can be subjective and requires management to make judgments about the individual promised goods or services

and whether such goods or services are separable and distinct from the other aspects of the contractual relationship.

discussed in Note 1 to the financial statements, Sigma Additive Solutions, Inc.’s revenue is derived primarily from the sale of

software, the related hardware suite, and engineering services.

The Company’s contracts with customers typically include the promise

to transfer multiple goods and/or services to the customer.

Management must assess whether each promised good or service is distinct

for the purpose of identifying the performance obligations within the contract and must then determine and allocate the transaction price

to the performance obligations.

This assessment can be subjective and requires management to make judgments about the individual promised

goods or services and whether such goods or services are separable and distinct from the other aspects of the contractual relationship.

management’s assessment and recognition of revenue can be complex, involves judgment, and is based on a thorough understanding

3 unchanged sentences

key controls and analysis of the design and operating effectiveness of these controls.

To evaluate Sigma Labs Inc.’s assessment

of performance obligations and allocation of price, our audit procedures included, among others, reading and evaluating management’s

To evaluate Sigma Additive Solutions, Inc.’s

assessment of performance obligations and allocation of price, our audit procedures included, among others, reading and evaluating management’s

assumptions used to determine the distinct performance obligations and price allocations.

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have served as the Company’s auditor since 2018.

Receivable, net

Additive Solutions, Inc.

(formerly Sigma Labs, Inc.)

December 31, 2022

December 31, 2021

Current Assets:

and Equipment, net

Prepaid Asset

AND STOCKHOLDERS’ EQUITY

Accounts Receivable, net

Prepaid Assets

Total Current Assets

Other Assets:

Property and Equipment, net

Intangible Assets, net

Total Other Assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

Appreciation Rights

Act Deferred Payroll Taxes

Long-Term Liabilities

Stockholders’

Stock, $ 0.001 par;

10,000,000 shares

715 shares issued

and outstanding, respectively

Stock, $ 0.001 par;

24,000,000 authorized;

10,498,802 and

5,995,320 shares

issued and outstanding, respectively 10,499

Paid-In Capital

Accounts Payable

Deferred Revenue

Accrued Expenses

Total Current Liabilities

TOTAL LIABILITIES

Commitments & Contingencies

Stockholders’ Equity

Preferred Stock, $ 0.001

shares authorized;

shares issued and outstanding

Common Stock, $ 0.001

shares authorized;

shares issued and outstanding

Additional Paid-In Capital

Accumulated Deficit

( 49,342,484 )

( 40,593,180 )

Stockholders’ Equity

LIABILITIES AND STOCKHOLDERS’ EQUITY

Total Stockholders’ Equity

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

accompanying notes to financial statements

Additive Solutions, Inc.

(formerly Sigma Labs, Inc.)

of Operations

PROFIT (LOSS)

and R&D Costs

Public Relations and Marketing

Organizational

& Professional Service Fees

& Amortization

Operating Expenses

FROM OPERATIONS

December 31, 2022

December 31, 2021

COST OF REVENUE

Salaries & Benefits

Stock-Based Compensation

Operations and R&D Costs

Investor, Public Relations and Marketing

Organizational Costs

Legal & Professional Service Fees

Office Expenses

Depreciation & Amortization

Other Operating Expenses

Total Operating Expenses

LOSS FROM OPERATIONS

( 8,749,004 )

( 8,479,385 )

INCOME (EXPENSE)

Rate Gain (Loss)

on Dissolution of Joint Venture

OTHER INCOME (EXPENSE)

BEFORE PROVISION FOR INCOME TAXES

Interest Income

State Incentives

Exchange Rate Loss

Interest Expense

Total Other Income (Expense)

LOSS BEFORE PROVISION FOR INCOME TAXES

( 8,692,424 )

( 7,384,605 )

for Income Taxes

Provision for Income Taxes

$ ( 8,692,424 )

$ ( 7,384,605 )

Loss applicable to Common Stockholders

Preferred Dividends

Net Loss applicable to Common Stockholders

$ ( 8,749,304 )

$ ( 7,488,172 )

Loss per Common Share - Basic and Diluted

Average Number of Shares Outstanding - Basic and Diluted

Net Loss per Common Share - Basic and Diluted

Weighted Average Number of Shares Outstanding - Basic and Diluted

accompanying notes to financial statements

Additive Solutions, Inc.

(formerly Sigma Labs, Inc.)

of Stockholders’ Equity

The Years Ended December 31, 2022 and 2021

Shares Outstanding

Paid-in Capital

December 31, 2019

$ ( 26,095,594 )

Shares Sold in Public Offering

on Derivative Liability

Shares Sold in Public Offering

Stock Dividends

Preferred Shares Outstanding

Preferred Stock

Common Shares Outstanding

Additional Paid-in Capital

Accumulated Deficit

Balances, December 31, 2020

$ ( 33,105,008 )

Shares Issued for Conversion of Preferred Shares

Shares Issued for Conversion of Series D Prefunded Warrants

Shares issued for Exercise of Preferred Warrants

Shares Issued for Exercise of Common Warrants

Shares Issued for Exercise of Common Warrants , shares

Issued to Directors for Services

Issued for Third Party Services

Awarded to Employees

of Fractional Shares from Reverse Split

Common Shares Sold in Public Offerings

Gain on Derivative Liability

( 1,092,441 )

December 31, 2020

Preferred Stock Dividends

Common Shares Issued for Conversion of Preferred Shares

Common Shares Issued for Exercise of Common Warrants

Securities Issued to Directors for Services

Securities Issued for Third Party Services

Securities Awarded to Employees

Offering Costs

( 1,600,967 )

Shares Sold in Public Offerings

on Derivative Liability

( 1,600,967 )

( 7,384,605 )

Stock Dividends

Shares Issued for Conversion of Preferred Shares

Shares Issued for Exercise of Common Warrants

Issued to Directors for Services

Issued for Third Party Services

Awarded to Employees

( 7,384,605 )

Balances, December 31, 2021

$ ( 40,593,180 )

Preferred Stock Dividends

Securities Issued to Directors for Services

Securities Issued for Third Party Services

Securities Awarded to Employees

( 8,692,424 )

December 31, 2021

Balances, December 31, 2022

$ ( 49,342,484 )

accompanying notes to financial statements

and Subsidiaries

Additive Solutions, Inc.

(formerly Sigma Labs, Inc.)

of Cash Flows

December 31, 2022

December 31, 2021

OPERATING ACTIVITIES

$ ( 8,692,424 )

$ ( 7,384,605 )

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

and Amortization

on Derivative Liability

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

Noncash Expenses:

Depreciation and Amortization

Gain on Derivative Liability

( 1,092,441 )

Based Compensation - Employees

Based Compensation - Third Party Services

Based Compensation - Directors

in assets and liabilities:

portion of Stock Appreciation Rights

Term portion of Deferred Payroll Taxes under the CARES Act

CASH USED IN OPERATING ACTIVITIES

Stock Based Compensation - Employees

Stock Based Compensation - Third Party Services

Stock Based Compensation - Directors

Change in assets and liabilities:

Accounts Receivable

Prepaid Assets

Accounts Payable

Deferred Revenue

Accrued Expenses

Long-Term portion of Stock Appreciation Rights

Long-Term portion of Deferred Payroll Taxes under the CARES Act

NET CASH USED IN OPERATING ACTIVITIES

( 8,212,154 )

( 6,298,959 )

of Property and Equipment

of Intangible Assets

of Joint Venture

CASH USED IN INVESTING ACTIVITIES

Proceeds from Public and Private Issuances of Securities

Offering Costs

INVESTING ACTIVITIES

Purchase of Property and Equipment

Purchase of Intangible Assets

NET CASH USED IN INVESTING ACTIVITIES

FINANCING ACTIVITIES

Gross Proceeds from Public and Private Issuances of Securities

Less Offering Costs

( 1,600,967 )

of Note Payable

from Exercise of Warrants

CASH PROVIDED BY FINANCING ACTIVITIES

CHANGE IN CASH FOR PERIOD

AT BEGINNING OF PERIOD

AT END OF PERIOD

investing and financing activities disclosure:

of Common Shares for Preferred Dividends

of Cash Received for:

of Preferred Stock for Exercise of Preferred Warrants

noncash operating activities disclosure:

of Securities for services

of cash paid for:

Proceeds from Exercise of Warrants

NET CASH PROVIDED BY FINANCING ACTIVITIES

NET CHANGE IN CASH FOR PERIOD

( 8,601,116 )

CASH AT BEGINNING OF PERIOD

CASH AT END OF PERIOD

Supplemental Disclosures:

Noncash investing and financing activities disclosure:

Issuance of Common Shares for Preferred Dividends

Other noncash operating activities disclosure:

Issuance of Securities for Services

Disclosure of cash paid for:

accompanying notes to financial statements

ADDITIVE SOLUTIONS, INC.

(FORMERLY SIGMA LABS, INC.)

TO FINANCIAL STATEMENTS

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.

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.

Stock Split - Effective February 27, 2020, our Articles of Incorporation were amended to provide for a reverse stock split of the

outstanding shares of our common stock on a 1-for-10 basis (the “Reverse Stock Split”), and a corresponding decrease in the

number of shares of our common stock that we are authorized to issue (the “Share Decrease”).

The effects of the stock split

have been retroactively reflected to all periods presented.

of Business – Sigma Additive Solutions, Inc.

(formerly Sigma Labs, Inc.), a Nevada corporation, (“Company,” “Sigma,”

“we,” “us” and “our”), was founded by a group of scientists, engineers and businessmen to develop

and commercialize novel and unique manufacturing and materials technologies.

Sigma believes that some of these technologies will fundamentally

redefine conventional quality assurance and process control practices by embedding them into the manufacturing processes in real time,

enabling process intervention and ultimately leading to closed loop process control.

The Company anticipates that its core technologies

will allow its clientele 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.

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

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31, 2022 and 2021 and for the periods then ended have been made.

Reclassification

- Certain amounts in prior-period financial statements have been reclassified for comparative purposes to conform to presentation

in the current-period financial statements.

These reclassifications have no impact on the previously reported results

Operations – The Company has sustained losses and had negative cash flows from operating activities since its inception.

in 2017, the company committed itself to a focused initiative to transition its product and its company culture from research and development

Going Concern – The Company has sustained losses and had negative cash flows from operating activities since its inception.

in 2017, the company committed itself to a focused initiative to transition its product and culture from research and development

into an enterprise with a commercial industrial product and a business-oriented operation culture.

2021 and 2020, the Company relied on both public and private offerings to finance its operations.

In January 2021, the Company closed

a public offering of our common stock in which it issued 1,711,783 shares of common stock at $ 3.00 per share, resulting in net proceeds

of approximately $ 4,532,444 after deducting underwriting discounts and commissions and other offering expenses payable by the Company.

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

share, resulting in net proceeds to the Company of approximately $ 8,736,488 after deducting placement agent commissions and other offering

costs payable by the Company.

During the first quarter of 2021, the Company issued 454,404 shares of common stock pursuant to the exercise

of warrants, resulting in net proceeds to the Company of $ 1,136,010 .

January 2020, we completed two private placements consisting of shares of our newly created Series D and Series E Preferred Stock, warrants

to purchase additional shares of Series D Preferred Stock and warrants to purchase shares of our Common Stock resulting in net cash proceeds

to us of approximately $ 1,711,124 .

On March 27, 2020, pursuant to the terms of the Agreement, we forced the exercise of a portion of the warrants to purchase our Series

D Preferred Stock which resulted in net cash proceeds to the Company of $ 460,000 .

On April 6, 2020, the Company closed an offering of equity securities in which the Company sold and issued to certain institutional investors

(a) 493,027 shares

of the Company’s common stock (the “Common Shares”) and pre-funded warrants (the “Pre-funded Warrants”)

to purchase up to 22,438

shares of the Company’s common stock, and (b) Series

A Warrants (the “Private Warrants”) to purchase an aggregate of 515,465

shares of the Company’s common stock pursuant

to a private placement resulting in net proceeds of approximately $ 1,230,000 .

On April 14, 2020 we were granted a loan from BOKF, NA dba Bank of Oklahoma in the aggregate amount of $ 361,700 , pursuant to the Paycheck

Protection Program (the “ PPP ” ) under Division A, Title I of the Coronavirus Aid, Relief and Economic Security

Act (the “ CARES Act ” ), which was enacted March 27, 2020.

The Company used the entire loan proceeds to fund

payroll expenses, and as such, the loan was forgiven in full on January 13, 2021.

Company did not raise any capital in 2022.

In 2021, the Company relied on both public and private offerings to finance its operations.

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

per share, resulting in net proceeds of approximately $ 4,532,444 after deducting underwriting discounts and commissions and other offering

expenses payable by the Company.

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

of common stock at $ 4.445 per share, resulting in net proceeds to the Company of approximately $ 8,736,488 after deducting placement agent

commissions and other offering costs payable by the Company.

During the first quarter of 2021, the Company issued 454,404 shares of common

stock pursuant to the exercise of warrants, resulting in net proceeds to the Company of $ 1,136,010 .

continuing operations of the Company are no longer solely dependent upon financing the cost of product development in the absence of

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of both customer licensing and purchases and creating a dynamic in which public and private offerings facilitate the growth of revenues.

a result, the Company currently has sufficient cash and working capital to fund operations through the end of 2022 and is anticipating

that contracts may be closed during fiscal 2022 generating additional cash flow in the near-term.

In addition, the Company has access

to public and private markets from which to derive additional financing to sustain operations beyond that term, if required;

the Company is unable to predict the extent to which the novel coronavirus or global economic and geopolitical developments may

affect the financial markets and the Company’s access to such markets.

There is no assurance that we will be successful in obtaining

additional funding.

If we fail to obtain sufficient funding when needed, we may be forced to delay, scale back or eliminate all or a

portion of our commercialization efforts and operations.

Company currently has sufficient cash and working capital to fund operations through May 2023 and will require additional funding in

the public or private markets in the near-term to be able to continue operations.

The Company currently has no understanding or

agreement to obtain such funding, and there is no assurance that we will be successful in obtaining additional funding.

to obtain sufficient funding when needed, we will be forced to delay, scale back or eliminate all or a portion of our

commercialization efforts and operations.

As a result, there is substantial doubt about our ability to continue as a going concern.

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

4 unchanged sentences

2021, the Company had the following common shares underlying these instruments:

of Antidilutive Securities Excluded from Computation of Earnings Per Share

Ended December 31,

Stock Warrants

Underlying Common Shares

Schedule of Anti-dilutive Securities Excluded

from Computation of Earnings Per Share

Year Ended December 31,

Stock Options

Preferred Stock

Total Underlying Common Shares

and Equipment – Property and equipment are stated at cost.

12 unchanged sentences

Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.

the years ended December 31, 2021 and 2020, the Company recognized no

interest and penalties.

All tax years starting

with 2018 are open for examination.

the years ended December 31, 2022 and 2021, the Company recognized no interest and penalties.

All tax years starting with 2018 are open

for examination.

Receivable and Allowance for Doubtful Accounts - Trade accounts receivable are carried at original invoice amount less an estimate

18 unchanged sentences

value or estimated net realizable value.

Three patents were written off totaling $ 10,510 in December of 2021, and no patents were written

No patents were written off in 2022, and three patents totaling $ 10,510 were written off in

Utility patents are amortized over a 17 -year period.

Patents which are pending are not amortized.

Equivalents - The Company considers all highly liquid investments with an original maturity of three months or less at date of purchase

to be cash equivalents.

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.

4 unchanged sentences

(“the Initial Exercise Date”) and will expire two years after the Initial Exercise Date.

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

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

On May 24, 2021, upon receiving shareholder approval

to ASC 815.40.25.10, such warrants were accounted for as a derivative liability because the Company did not have sufficient authorized

and unissued shares of common stock available to settle the warrants at the issue date.

On May 24, 2021, upon receiving stockholder 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:

of Warrant Liability Measured on Recurring Basis

of Issuance March 26, 2021

Liability - Warrants

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

input (Level 3):

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

Value on Issuance Date

in Fair Value

( 1,092,441 )

Fair Value on May

Extinguishment

of Derivative Liability

( 4,615,771 )

Value on December 31, 2021

the twelve months ended December 31, 2021, the Company recorded a gain of $ 1,092,441 due to the change in the fair value of the derivative

liability as measured on a recurring basis.

Concentration

14 unchanged sentences

instruments issued to non-employees are recorded on the basis of the fair value of the instruments, as required by ASC Topic No.

“Equity Based Payments to Non-Employees.” In general, the measurement date is either (a) when a performance commitment, as

In general, the measurement date is either (a) when a performance commitment, as

defined, is reached or (b) the earlier of the date that (i) the non-employee performance requirement is complete or (ii) the instruments

11 unchanged sentences

costs, and allowance for bad debts and inventory obsolescence.

Recognition – The Company’s revenue is derived primarily from sales of our software and related hardware suite and from

providing engineering services under contracts.

The Company recognizes revenue in accordance with ASC Topic No.

In May 2014, the

Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2014-09, Revenue from Contracts with Customers .

ASU 2014-09 is a comprehensive revenue recognition standard that superseded nearly all existing revenue recognition guidance under prior

GAAP and replace it with a principles-based approach for determining revenue recognition.

The core principle of the standard is

the recognition of revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration

to which the company expects to be entitled in exchange for those goods or services.

general, we determine revenue recognition by:

- The Company leases office space from third parties.

The Company determines if a contract is a lease at inception.

contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

The lease term begins on the commencement date, which is the date the Company takes possession of the asset and may include options to

extend or terminate the lease when it is reasonably certain that the option will be exercised.

Leases are classified as operating or

finance leases based on factors such as the lease term, lease payments, and the economic life, fair value and estimated residual value

of the asset.

Where leases include an option to purchase the leased asset at the end of the lease term, this is assessed as a part of

the Company’s lease classification determination.

The Company only has short-term leases, cancelable upon 45 days’ notice,

and with remaining lease terms of less than one year.

Therefore, the Company has elected the short-term lease recognition exemption for

all leases, whereby leases are not recorded on the Company’s balance sheet and lease payments are recognized as lease expense on

a straight-line basis over the lease term.

Recognition – The Company’s revenue is derived primarily from sales of our software and related hardware suite under

perpetual licenses and from providing engineering services under contracts.

The Company recognizes revenue in accordance with ASC Topic

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2014-09, Revenue

from Contracts with Customers .

ASU 2014-09 is a comprehensive revenue recognition standard that superseded nearly all existing revenue

recognition guidance under prior U.S.

GAAP and replaced it with a principles-based approach for determining revenue recognition.

core principle of the standard is the recognition of revenue upon the transfer of promised goods or services to customers in an amount

that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

In general, we determine

revenue recognition by:

(1) identifying the contract, or contracts, with our customer;

(2) identifying the performance

obligations in the contract;

(3) determining the transaction price;

(4) allocating the transaction price to performance obligations in

(2) identifying the performance obligations in

the contract;

(3) determining the transaction price;

(4) allocating the transaction price to performance obligations in the contract;

and (5) recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.

January 2022, the Company began offering a subscription option to its customers, pursuant to which it leases its PrintRite3D platform

for terms between 12 and 36 months and provide technical support and maintenance for the term of the arrangement, as well as installation

and training.

The Company has determined these are leases because they relate to discrete pieces of equipment to which customers have

the right to substantially all the economic benefit from and exclusive right to use during the term of the arrangement.

are classified as operating leases and the Company retains title to the underlying equipment.

leases may be renewed for successive one-year terms unless notice is given by either party of its intent not to renew at least 30 days

before the end of the lease term.

For leases with 36-month terms, the lessee may terminate the agreement after the first 18 months with

30-days written notice.

Some, but not all, of the leases permit lessees to purchase the equipment at any time at an amount that approximates

fair value and are not reasonably certain to be exercised at the inception of the lease.

There are no anticipated variable lease payments

at the inception of the lease.

are two non-lease components in the arrangement that consist of technical support and maintenance, and installation and training.

Company has elected the single component practical expedient to combine the technical support and maintenance with the lease as they

have the same pattern of transfer.

The installation and training component does not have the same pattern of transfer;

therefore, this

component is not eligible for the single component practical expedient.

The consideration has been allocated on a relative fair value

basis of the underlying lease and non-lease components.

The Company has estimated the residual value of the leased equipment based on

its useful life, and the ability to refurbish and sell the equipment, as well as the Company’s ability to componentize the hardware

and utilize subassemblies in other products.

from these operating leases for the twelve months ended December 31, 2022 was $ 31,177 .

Lease Payments Receivable

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

Schedule of Minimum

Lease Payments Receivable

Year ending December 31,

2026 and thereafter

Underlying Operating Leases:

under operating leases as of December 31, 2022 was comprised of the following:

Schedule of Assets underlying Operating Leases

PrintRite 3D Hardware

Accumulated Depreciation

Net Book Value

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

longer economic life.

Stock Offering Costs – Costs related to stock offerings (if any) are deferred and will be offset against the proceeds of the

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

Schedule of Inventory

December 31 2022

December 31, 2021

Raw Materials

Work in Process

Finished Goods

Total Inventory

3 – Property and Equipment

1 unchanged sentence

of Property and Equipment

Ended December 31,

and Equipment

Year Ended December 31,

Property and Equipment

Accumulated Depreciation

1 unchanged sentence

( 1,146,690 )

Property and Equipment

Net Property and Equipment

expense on property and equipment was $ 92,001 and $ 88,866 for the years ended December 31, 2022 and 2021, respectively.

1 unchanged sentence

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

The Company capitalizes costs incurred in connection

with acquiring its patents.

These costs include registration, documentation, and legal fees associated with the application.

Costs incurred

with patents that have been granted are expensed as incurred.

patent applications are not amortized until a patent has been granted.

2 unchanged sentences

If a patent application is denied, then the costs will be expensed at that time.

2021, $ 91,260 of costs related to patents issued to us during 2021 were reclassified from provisional patent application to patent status

2022, $ 206,110 of costs related to patents issued during 2022 were reclassified from provisional patent application to patent status

and began to be amortized as of the date of issue.

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

of Definite-life Intangible Assets and Accumulated Amortization

Ended December 31,

Patent Applications

Summary of Definite-life Intangible Assets and Accumulated Amortization

Year Ended December 31,

Provisional Patent Applications

Accumulated Amortization

Intangible Assets

Net Intangible Assets

expense on intangible assets was $ 24,166 and $ 5,239 for the years ended December 31, 2022 and 2021, respectively.

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

of Aggregate Amortization Expense

asset and amortization expense

5 – Paycheck Protection Plan Loan

April 14, 2020, the Company was granted a loan from BOKF, NA dba Bank of Oklahoma in the aggregate amount of $ 361,700 , pursuant to the

Paycheck Protection Program (the “ PPP ” ) under Division A, Title I of the Coronavirus Aid, Relief and Economic

Security Act (the “ CARES Act ” ), which was enacted March 27, 2020.

Under the terms of the PPP, PPP loans and

accrued interest are forgivable after twenty-four weeks as long as the borrower uses the loan proceeds for eligible purposes, including

payroll, benefits, rent and utilities, and maintains its payroll levels.

The amount of loan forgiveness will be reduced if the borrower

terminates employees or reduces salaries during the forgiveness period.

of December 31, 2020, the Company had used the entire loan proceeds to fund its payroll expenses.

As a result, the Company concluded

that it met the PPP eligibility criteria for forgiveness and recognized the entire loan amount as Other Income.

January 2021, the Company received notice from the lender that the entire amount of the loan had been forgiven.

Schedule of Aggregate Amortization Expense

Intangible asset and

amortization expense

5 – 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

to sections 2302(a)(1) and (a)(2) of the CARES Act, the Company 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

At December 31, 2021 the total remaining amount of the deferral was $ 37,728 .

Per the terms of the deferral program, such amount

is due on December 31, 2022 at 0 % interest.

7 - 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 year ended December 31, 2021 are as follows:

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:

of Fair Value of Warrant Liability

Value Per Share

Value at initial measurement date of March 26, 2021

on change in Fair Value of Warrant Liability

( 1,092,441 )

Fair Value as of

Extinguishment

of Derivative Liability

( 2,190,000 )

( 4,615,771 )

Value as of December 31, 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 twelve months ended December 31, 2021, the Company recognized a gain of $ 1,092,441 on the change in fair value of the warrants.

At December 31, 2022 the total remaining amount of the deferral of $ 37,728

6 – Stockholders’ Equity

February 27, 2020, our Articles of Incorporation were amended to provide for a reverse stock split of the outstanding shares of our common

stock on a 1-for-10 basis (the “Reverse Stock Split”), and a corresponding decrease in the number of shares of our common

stock that we are authorized to issue (the “Share Decrease”).

The effects of the stock split have been retroactively reflected

to all periods presented.

May 24, 2021, at a special shareholders’ meeting, our authorized shares of common stock were increased from 12,000,000 to 24,000,000 .

At our annual shareholders’ meeting held on June 15, 2020, our authorized shares of common stock were increased from 8,000,000

to 12,000,000 .

On March 27, 2020, at a special shareholders’ meeting, our authorized shares of common stock were increased from

2,250,000 to 8,000,000 .

During 2022, the Company did not issue any common

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

26 unchanged sentences

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 an investor relations firm as partial compensation for services previously rendered.

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

for services previously rendered.

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 .

On December 4, 2020,

the Company issued 22,438 shares of common stock for the exercise of the pre-funded warrants.

the twelve months ended December 31, 2020, the Company issued 3,272,048 shares of common stock in exchange for the conversion of 7,404

shares of Series D Convertible Preferred stock, and 774,940 shares of common stock as in-kind payment of preferred stock dividends.

the twelve months ended December 31, 2020, the Company issued 25,851 shares of common stock for services.

2021 and 2020, 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 were valued at the fair value

at the date of issue.

The fair value was expensed as compensation over the vesting period and recorded as a reduction of stockholders’

During 2021 and 2020, $ 19,255 and $ 77,187 , respectively, of the unvested compensation cost related to these issues was recognized.

During 2022, the Company did not issue any shares

of common stock to employees.

In 2021, the Company issued to

various employees shares of the Company’s common stock, subject to restrictions, pursuant to the 2013 Equity Incentive Plan (the

“2013 Plan”).

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

The fair value was expensed as compensation

over the vesting period and recorded as a reduction of stockholders’ equity.

The shares were fully vested as of December 31, 2021,

and $ 19,255 of compensation cost related to these issues was recognized.

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

465 and 715 shares of preferred stock were issued

465 shares of preferred stock were issued

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

23 unchanged sentences

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

Pursuant 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

Pursuant 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 amount.

The Series E Preferred Stock is initially convertible into

2 unchanged sentences

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

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

August 9, 2022, at the Annual Meeting of Stockholders of the Company, the Company’s stockholders approved an amendment to the 2013

Plan to increase the number of shares of the Company’s common stock reserved for issuance under the 2013 Plan by 500,000 shares

2 unchanged sentences

2022, the Company granted a total of 487,473 options to 14 employees, 5 directors, and 2 consultants with vesting periods ranging from

immediately upon issue to three years beginning March 16, 2022 .

In 2022, 406,879 options vested and $ 907,373 of compensation cost was

recognized during the year.

As of December 31, 2022, there were options to purchase 1,799,053 , shares issued and outstanding, 1,749,053

of which have been issued under the 2013 Plan.

At December 31, 2022, there are vested options exercisable for 1,294,021 shares of common

No options to purchase shares of common stock were exercised during the year ended December 31, 2022.

2021, the Company granted a total of 698,831 options to 35 employees, 4 directors, and 4 consultants with vesting periods ranging from

immediately upon issue to three years beginning January 4, 2021 .

5 unchanged sentences

Options to purchase 5,204 shares of common stock were exercised during the year ended December 31, 2021.

2020, the Company granted a total of 579,998 options to 19 employees, 4 directors, and 5 consultants with vesting periods ranging from

immediately upon issue to three years beginning May 1, 2020 .

In 2020, 294,373 options vested and $ 854,217 of compensation cost was recognized

during the year.

As of December 31, 2020, there were options to purchase 713,010 shares issued and outstanding, 663,010 of which have

been issued under the 2013 Plan.

At December 31, 2020, there were vested options exercisable for 349,642 shares of common stock.

were exercised during the year ended December 31, 2020.

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

4 unchanged sentences

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

employee share-based compensation expense included in the statements of operations for the year ended December 31, 2021 is $ 1,066,455

of which $ 1,047,200 is related to stock options.

Total employee share-based compensation for 2020 totaled $ 596,842 , of which $ 573,232

is related to stock options.

There was no capitalized share-based compensation cost as of December 31, 2021 and 2020, and there were

no recognized tax benefits during the years ended December 31, 2021 and 2020.

employee share-based compensation expense for the year ended December 31, 2022, was $ 793,251

all of which is related to stock options.

Total employee share-based compensation for 2021 totaled $ 1,066,455 , of which $ 1,047,200 is

related to stock options.

There was no capitalized share-based compensation cost as of December 31, 2022 or 2021, and there were no

recognized tax benefits during the years ended December 31, 2022 and 2021.

estimate the value of an award, the Company uses the Black-Scholes option-pricing model.

9 unchanged sentences

of Share Based Payment Award Stock Option Valuations Assumptions

interest rate

Dividend yield

Risk-free interest rate

0.95 - 3.88 %

0.19 - 0.67 %

life (in years)

Expected volatility

106.0 – 110.0 %

117.0 – 124.0 %

Expected life (in years)

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

of Share Based Compensation Stock Option Activity

outstanding at December 31, 2019

outstanding at December 31, 2020

expected to vest in the future as of December 31, 2020

exercisable at December 31, 2020

vested, exercisable, and options expected to vest at December 31, 2020

Options outstanding

at December 31, 2020

outstanding at December 31, 2021

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

exercisable at December 31, 2021

vested, exercisable, and options expected to vest at December 31, 2021

Weighted Average

Options outstanding at December 31, 2020

Forfeited or cancelled

Options outstanding at December 31, 2021

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

Options exercisable at December 31, 2021

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

Options outstanding at December 31, 2021

Forfeited or cancelled

Options outstanding at December 31, 2022

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

Options exercisable at December 31, 2022

Options vested, exercisable, and options expected to vest at December 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 $ 1.84 closing price of our Common Stock on December

All of the 2021 option grants have an exercise price currently above $ 1.84 .

December 31, 2021, there was $ 1,164,723 of unrecognized share-based compensation expense related to unvested share options with a weighted

our common stock for those awards that have an exercise price below the $ 0.40 closing price of our Common Stock on December

All of the 2022 option grants have an exercise price above $ 0.40 .

December 31, 2022, there was $ 741,728 of unrecognized share-based compensation expense related to unvested stock options with a weighted

average remaining recognition period of 1.81 years.

22 unchanged sentences

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 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 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.

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.

January 3, 2022, the Company granted, pursuant to the Plan, 12,033 SARs to 11 employees.

The exercise price of each SAR is $ 1.87 , which

was the closing price of the Company’s common stock on the date of grant.

Such SARs were fully vested and exercisable on the date

of the grant, expire on the fifth anniversary of the grant date and may be settled only in cash.

February 16, 2022, the company issued, pursuant to the Plan, 30,000 SARs to its Chief Executive Officer.

The exercise price of each SAR

is $ 2.50 , expire on the fifth anniversary of the grant date and may be settled only in cash.

The SARs will vest and become exercisable

in equal monthly installments over three years, subject to the Chief Executive Officer being in the continuous employ of the Company

on the applicable vesting date, and may be settled only in cash.

July 1, 2022, the Company granted, pursuant to the Plan, (i) 194,940 SARs to its Chief Executive Officer, (ii) 25,117 SARs to its former

Chief Executive Officer, (iii) 16,944 SARs to its Chief Technology Officer, and (iv) 69,470 SARs to its Chief Financial Officer.

exercise price of each such SAR is $ 2.50 , expire on the fifth anniversary of the grant date and may be settled only in cash.

will vest and become exercisable in equal monthly installments over three years, subject, in each case, to the applicable SAR holder

being in the continuous employ of the Company on the applicable vesting date, and may be only settled in cash.

on July 1, 2022, the Company granted, pursuant to the Plan, and employee retention agreements (i) 181,947

SARs to its President and Chief Executive Officer, (ii) 87,335

SARs to its Vice President of Business Development, (iii) 97,038

SARs to its Chief Technology Officer, and (iv) 97,038

SARs to its Chief Financial Officer.

The exercise price of each such SAR is $ 1.30 ,

which was the closing price of the Company’s common stock on the date of grant.

The SARs expire on the fifth anniversary of

the grant date and may be settled only in cash.

The SARs will vest and become exercisable on March 15, 2025, subject, in each case,

to the applicable SAR holder being in the continuous employ of the Company on the vesting date.

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

December 31, 2022, all such SARs had expired.

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.

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.

In the event of a Change in Control (as defined in the Plan), all SARs

will become immediately vested and exercisable as long as the holder is in the Company’s employ immediately prior to the Change

in Control, and will otherwise be on such terms set forth in our standard form Stock Appreciation Rights Agreement.

July 29, 2021, we granted 10,000 SARs to a consultant as partial compensation for services pursuant to his consulting agreement, and

on November 19, 2020, we granted 13,500 SARs to such consultant as partial compensation for services pursuant to his consulting agreement.

As of December 31, 2021, all such SARs were full vested and exercisable.

As of December 31, 2022, all such SARs had expired.

Company recognizes compensation expense and a corresponding liability for the fair value of the SARs over the requisite service period

5 unchanged sentences

of Share Based Payments Award Stock Options Valuation Assumptions

interest rate

Dividend yield

Risk-free interest rate

0.82 - 2.79 %

0.39 - 0.40 %

life (in years)

activity for the twelve months ended December 31, 2021 was as follows:

Expected volatility

108.0 - 119.0 %

Expected life (in years)

activity for the years ended December 31, 2022 and 2021 was as follows:

of Stock Option Activity

SARs outstanding

at December 31, 2019

outstanding at December 31, 2020

outstanding December 31, 2021

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

exercisable at December 31, 2021

vested, exercisable, and options expected to vest at December 31, 2021

Weighted Average

SARs outstanding at December 31, 2020

Forfeited or cancelled

SARs outstanding December 31, 2021

SARs expected to vest in the future as of December 31, 2021

SARs exercisable at December 31, 2021

SARs vested, exercisable, and options expected to vest at December 31, 2021

SARs outstanding at December 31, 2021

Forfeited or cancelled

SARs outstanding December 31, 2022

SARs expected to vest in the future as of December 31, 2022

SARs exercisable at December 31, 2022

SARs vested, exercisable, and options expected to vest at December 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 $ 1.84 closing price of our common stock on December

All of the SARs grants have an exercise price currently above $ 1.84 .

our common stock for those awards that have an exercise price below the $ 0.40 closing price of our common stock on December

All the SARs have an exercise price above $ 0.40 .

December 31, 2022, there was $ 982,519 of unrecognized share-based compensation expense related to unvested SARs with a weighted average

remaining recognition period of 2.14 years.

December 31, 2021, the Company had outstanding warrants to purchase a total of 3,987,931

shares of common stock.

December 31, 2022, the Company had outstanding warrants to purchase a total of 3,823,279 shares of common stock.

The warrants have exercise

prices that range from $ 0.10

which if not exercised, will expire

between February 22, 2022 and January 6, 2026 .

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

prices that range from $ 2.50 to $ 17.50 , which if not exercised, will expire between May 24, 2023 and January 8, 2026 .

activity for the years ended December 31, 2022 and 2021 was as follows:

of Warranty Activity

outstanding at December 31, 2019

outstanding at December 31, 2020

outstanding at December 31, 2021

Weighted Average

Warrants outstanding at December 31, 2020

Forfeited or cancelled

Warrants outstanding at December 31, 2021

Forfeited or cancelled

Warrants outstanding at December 31, 2022

7 – Income Taxes

5 unchanged sentences

Service consist of tax years ended December 31, 2019 through 2021.

Company has available at December 31, 2021, unused operating loss carryforwards of approximately $ 26,342,855

which may be applied against future taxable income

and which expire in various years through 2040 .

However, if certain substantial changes in the Company’s ownership should occur, there could be an annual limitation on the amount

of net operating loss carryforward which can be utilized.

Company had available at December 31, 2022 unused operating loss carryforwards of approximately $ 41,128,000 which

may be applied against future taxable income .

Losses incurred between 2010 and 2017, which total $ 9,820,000 expire in various

years through 2038, and the remainder of the losses, which total $ 31,308,000 can be carried forward indefinitely.

certain substantial changes in the Company’s ownership should occur, there could be an annual limitation on the amount of net

operating loss carryforward which can be utilized.

The amount of and ultimate realization of the benefits from the operating loss

carryforwards for income tax purposes is dependent, in part, upon the tax laws in effect, the future earnings of the Company and other

future events, the effects of which cannot be determined.

Because of the uncertainty surrounding the realization of the loss carryforwards,

the Company has established a valuation allowance equal to the tax effect of the loss carryforwards and other temporary differences of

approximately $ 6,771,000

and $ 4,170,100

at December 31, 2021 and 2020, respectively,

and, therefore, no deferred tax asset has been recognized for the loss carryforwards.

carryforwards for income tax purposes is dependent, in part, upon the tax laws in effect, the future earnings of the Company and

other future events, the effects of which cannot be determined.

Because of the uncertainty surrounding the realization of the loss

carryforwards, the Company has established a valuation allowance equal to the tax effect of the loss carryforwards and other

temporary differences of approximately $ 8,575,900

and $ 6,771,000 at December

31, 2022 and 2021, respectively, and, therefore, no deferred tax asset has been recognized for the loss carryforwards.

tax assets are comprised of the following:

Schedule of Deferred Tax Assets

Deferred tax assets:

NOL carryover

Valuation allowance

( 8,575,900 )

( 6,771,000 )

deferred tax asset

Net deferred tax asset

reconciliation of the provision for income taxes computed at the U.S.

4 unchanged sentences

$ ( 1,572,500 )

& Entertainment

in valuation allowance

for Income Taxes

Meals & Entertainment

Stock Compensation

Change in valuation allowance

Provision for Income Taxes

8 – Loss Per Share

2 unchanged sentences

Schedule of Earnings Per Share, Basic and Diluted

Ended December 31

from continuing Operations available to Common stockholders (numerator)

Year Ended December 31

Loss from continuing Operations available to common stockholders (numerator)

$ ( 8,749,304 )

$ ( 7,488,172 )

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

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

loss per share was not presented as the Company’s outstanding common and preferred warrants, stock options and preferred stock

common equivalent shares for the periods presented would have had an anti-dilutive effect.

At December 31, 2021, the Company had outstanding

3,987,931 common warrants which could be converted to 3,987,931 shares of common stock, and 1,395,882 stock options exercisable for 1,395,882

shares of common stock, 132 shares of Series D Preferred Stock, which is convertible into 87,267 shares of common stock, and 333 shares

of Series E Preferred Stock, which could be converted into 61,651 shares of common stock, resulting in a potential total additional 5,532,731

shares of common stock outstanding in the future.

At December 31, 2020, the Company had outstanding 1,881,429 common warrants which could

be converted to 1,881,429 shares of common stock, and 713,010 stock options exercisable for 713,010 shares of common stock, 10 Series

D Preferred Warrants exercisable for 10 shares of Series D Preferred Stock, which in turn, are convertible into 4,748 shares of common

stock, and 715 shares of preferred stock, which could be converted into 243,024 shares of common stock, resulting in a potential total

additional 2,842,211 common stock shares outstanding in the future.

At December 31, 2022, the Company had

outstanding warrants

to purchase 3,823,279 shares

of common stock, and stock

options exercisable for 1,799,053 shares

of common stock, 132 shares

of Series D Preferred Stock, convertible into 87,267 shares

of common stock, and 333 shares

of Series E Preferred Stock, which could be converted into 61,651 shares

of common stock, resulting in a potential total additional 5,771,250 shares

of common stock outstanding in the future.

At December 31, 2021, the Company had outstanding common

warrants which could be converted to 3,987,931 shares

of common stock, and stock

options exercisable for 1,395,882 shares

of common stock, 132 shares

of Series D Preferred Stock, convertible into 87,267 shares

of common stock, and 333 shares

of Series E Preferred Stock, convertible into 61,651 shares

of common stock, resulting in a potential total additional 5,532,731 shares

of common stock outstanding in the future.

9 – Commitments and Contingencies

Leases – The Company leases office and laboratory space under operating leases.

Expense relating to these operating leases

was $ 101,004 and $ 103,242 for the years ended December 31, 2021 and 2020, respectively.

The future minimum lease payments required under

non-cancellable operating leases at December 31, 2021 were $7,230.

The future minimum lease payments are due during the year 2022 , with

$ 1,115 due in January 2023.

Leases – The Company leases office and laboratory space under short term, cancelable operating leases.

Expense relating to

these operating leases was $ 108,099 and $ 101,004 for the years ended December 31, 2022 and 2021, respectively.

The future minimum lease

payments required under operating leases at December 31, 2022 were $ 7,233 .

10 – Concentrations

7 unchanged sentences

accounts receivable balance at December 31, 2022 and 2021, respectively.

13 - Joint Venture

July 2015, we entered into a joint venture agreement with Arete Innovative Solutions LLC (“Arete”).

The Joint Venture was

not consolidated, but rather was accounted for on the equity method of recording investments.

The Company and Arete terminated the Joint

Venture in 2020 and distributed the remaining cash to the former partners.

11 - Defined Contribution Plan

2014, the Company adopted a qualified 401(K) plan (“the Plan”), in which all employees over the age of 21 may participate.

The Company makes a Safe Harbor contribution match of 100% of each participant’s contribution up to 3% of salary, and 50% of the

The Company has adopted a qualified 401(K) plan (“the Plan”), in which all employees over the age of 21 may

Company makes a Safe Harbor contribution match of 100% of each participant’s contribution up to 3% of salary, and 50% of the

next 2% of salary contributed .

The costs of matching contributions were $ 86,554 in 2021 and $ 55,321 in 2020.

The matching contributions were $ 99,341

in 2022 and $ 86,554

12 – Related Party Transactions

1 unchanged sentence

13 – Subsequent Events

16, 2022, Jacob Brunsberg was appointed as President and Chief Operating Officer.

In connection with this appointment, Mr.

Brunsberg’s employment agreement was amended to increase his salary to $ 250,000

from $ 200,000

In addition, Mr.

Brunsberg was granted a stock option to purchase up to 70,000

shares of our common stock under our 2013 Equity Incentive Plan at an exercise price of $ 2.50 ,

stock appreciation rights (“SARs”) under our 2020 Stock Appreciation Rights Plan at an exercise price of $ 2.50

Both the option and the SARs have a five-year

term and are on such other terms and conditions as contained in the Company’s forms of standard agreement.

Concurrently, Mark

Ruport resigned as President but remains as Chief Executive Officer and continues to serve as a director on the Board of

Ruport’s employment agreement was amended to decrease his salary from $ 250,000

to $ 200,000 per

January 26, 2023, the Company agreed to issue to a holder of 132 shares

of the Company’s outstanding Series D Preferred Stock (the “Preferred Shares”) a five-year warrant to purchase up

to 225,000 shares

of common stock of the Company at an initial exercise price of $ 0.58 per

share, the closing price of the common stock as reported on the Nasdaq Capital Market on such date, which exercise price is subject

to adjustment in the event of a stock split, reverse stock split and similar events.

The warrant was issued in consideration of the

holder’s agreement to convert, in full, the Series D Shares in accordance with their terms into 270,828 shares

of common stock, which equates to a conversion price of $ 0.58 per

In addition, the Company’s outstanding January 2020 warrants to purchase up to 516,400 shares

of common stock and April 2020 warrants to purchase up to 383,306 shares

of common stock, respectively, at an exercise price of $ 2.50 per

share contain full-ratchet anti-dilution provisions that are triggered by the sale or issuance of common stock or common stock

derivatives at an effective price per share below the exercise price of the warrants.

As a result, the exercise price of each of the

warrants was reduced to $ 0.58 per

share and the number of shares purchasable upon exercise of the April 2020 warrants was increased to 1,648,302 .

January 18, 2023, pursuant to a conversion notice, we issued 3,083 shares of common stock to a holder of 16.67 shares of our Series E

Preferred Stock, which includes the make-whole dividend and equates to a conversion price of $ 10.30 per share.

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

What changed 10-K

Item 9A. Controls and Procedures