UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30,~~March 31, ~~2021~~2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-38015

~~Sigma Labs, Inc.~~SIGMA LABS, INC.

(Exact name of registrant as specified in its charter)

nevada

27-1865814

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

3900 Paseo del Sol

Santa Fe, NM 87507

(Address of principal executive offices)

(505) 438-2576

(Registrant’s telephone ~~number)~~number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol

Name of each exchange on which registered

Common Stock, par value $0.001 per share

SGLB

~~The~~ ~~NASDAQ~~ ~~Stock Market LLC~~

~~Warrants to Purchase Common Stock,~~

~~par value $0.001 per share~~

~~SGLBW~~

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated Filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ~~Yes☐~~Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of ~~October 20, 2021,~~April 25, 2022, the issuer had 10,498,802shares of common stock outstanding.

SIGMA LABS, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Sigma Labs, Inc.

Condensed Balance Sheets

~~(Unaudited)~~

	September 30, 2021			December 31, 2020			March 31, 2022 (Unaudited)			December 31, 2021

ASSETS
Current Assets:
Cash	$	13,064,394		$	3,700,814		$	9,277,929		$	11,447,047
Accounts Receivable, net		666,740			331,562			261,022			412,192
Inventory		856,547			659,651			782,099			710,080
Prepaid Assets		130,675			90,735			165,274			114,278
Total Current Assets		14,718,356			4,782,762			10,486,324			12,683,597

Other Assets:
Property and Equipment, net		201,752			138,626			288,924			232,282
Intangible Assets, net		868,265			753,122			978,984			925,111
Long-Term Prepaid Asset		-			26,000
Total Other Assets		1,070,017			917,748			1,267,908			1,157,393

TOTAL ASSETS	$	15,788,373		$	5,700,510		$	11,754,232		$	13,840,990

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:
Accounts Payable	$	223,157		$	128,937		$	320,547		$	206,442
Deferred Revenue		85,480			77,957			160,276			148,855
Accrued Expenses		432,615			243,815			416,643			625,942
Total Current Liabilities		741,252			450,709			897,466			981,239

Long-Term Liabilities:
Stock Appreciation Rights		93,525			48,341
CARES Act Deferred Payroll Tax Liability		37,728			37,728
Total Long-Term Liabilities		131,253			86,069

TOTAL LIABILITIES		872,505			536,778			897,466			981,239

Stockholders’ Equity
Preferred Stock, $0.001 par; 10,000,000 shares authorized; 465 and 715 issued and outstanding, respectively		1			1
Common Stock, $0.001 par; 24,000,000 shares authorized; 10,498,802 and 5,995,320 issued and outstanding, respectively		10,499			5,995
Preferred Stock, $0.001 par; 10,000,000 shares authorized; 465 shares issued and outstanding, respectively								1			1
Common Stock, $0.001 par; 24,000,000 shares authorized; 10,498,802 shares issued and outstanding , respectively								10,499			10,499
Additional Paid-In Capital		53,086,908			38,262,744			53,661,061			53,442,431
Accumulated Deficit		(38,181,540	)		(33,105,008	)		(42,814,795	)		(40,593,180	)
Total Stockholders’ Equity		14,915,868			5,163,732			10,856,766			12,859,751

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	15,788,373		$	5,700,510		$	11,754,232		$	13,840,990

See accompanying notes to condensed financial statements.

Sigma Labs, Inc.

Condensed Statements of Operations

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended
	2021			2020			2021			2020			March 31, 2022			March 31, 2021

REVENUES	$	700,237		$	248,526		$	1,302,525		$	637,944		$	51,844		$	458,140

COST OF REVENUE		164,766			97,785			409,493			400,172			40,091			128,331

GROSS PROFIT		535,471			150,741			893,032			237,772			11,753			329,809

OPERATING EXPENSES:
Salaries & Benefits		1,222,760			657,889			3,055,279			1,915,381			1,292,010			847,171
Stock-Based Compensation		659,512			58,219			893,431			483,208			170,976			117,477
Operating R&D Costs		131,772			79,673			608,812			245,008
Investor, Public Relations & Marketing		119,622			66,794			342,725			353,802
Operations and R&D Costs														143,418			196,340
Investor & Public Relations														94,326			108,341
Organization Costs		342,112			173,041			578,256			328,716			58,749			77,616
Legal & Professional Service Fees		261,075			133,273			681,941			530,660			211,416			176,847
Office Expenses		172,238			84,357			472,335			310,947			205,432			148,225
Depreciation & Amortization		27,689			50,167			76,502			86,150			31,584			23,031
Other Operating Expenses		90,108			59,100			267,663			194,836			87,787			86,356
Total Operating Expenses		3,026,888			1,362,513			6,976,944			4,448,708			2,295,698			1,781,404

LOSS FROM OPERATIONS		(2,491,417	)		(1,211,772	)		(6,083,912	)		(4,210,936	)		(2,283,945	)		(1,451,595	)

OTHER INCOME (EXPENSE)
Interest Income		2,981			77			10,053			959			1,571			55
Gain on Derivative Liability														-			802,285
State Incentives		-			-			-			151,657			76,628			-
Exchange Rate Gain (Loss)		(490	)		(252	)		(333	)		(1,674	)
Exchange Rate Loss														(330	)		(51	)
Interest Expense		(2,052	)		(6,066	)		(5,434	)		(12,741	)		(1,319	)		(1,353	)
Loss on Dissolution of Joint Venture		-			-			-			(201	)
Other Income		-			-			1,092,441			361,700
Total Other Income (Expense)		439			(6,241	)		1,096,727			499,700			76,550			800,936

LOSS BEFORE PROVISION FOR INCOME TAXES		(2,490,978	)		(1,218,013	)		(4,987,185	)		(3,711,236	)		(2,207,395	)		(650,659	)

Provision for income Taxes		-			-			-			-
Provision for Income Taxes														-			-

Net Loss	$	(2,490,978	)	$	(1,218,013	)	$	(4,987,185	)	$	(3,711,236	)	$	(2,207,395	)	$	(650,659	)

Preferred Dividends		(14,220	)		(737,344	)		(89,347	)		(1,744,471	)		(14,220	)		(60,908	)

Net Loss Applicable to Common Stockholders	$	(2,505,198	)	$	(1,955,357	)	$	(5,076,532	)	$	(5,455,707	)	$	(2,221,615	)	$	(711,567	)

Net Loss per Common Share – Basic and Diluted	$	(0.24	)	$	(0.42	)	$	(0.53	)	$	(1.74	)
Net Loss per Common Share - Basic and Diluted													$	(0.21	)	$	(0.09	)

Weighted Average Number of Shares Outstanding – Basic and Diluted		10,494,560			4,675,749			9,602,666			3,137,459
Weighted Average Number of Shares Outstanding - Basic and Diluted														10,498,802			7,790,121

See accompanying notes to condensed financial statements.

Sigma Labs, Inc.

Statement of Stockholders’ Equity

For ~~the Three~~The Quarters Ended March 31, 2022 and ~~Nine Months Ended September 30,~~March 31, 2021 ~~and 2020~~

(Unaudited)

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

Preferred Stock Common Stock Additional
Shares Outstanding Preferred Stock Shares Outstanding Common Stock
Paid-in
Capital
Accumulated Deficit Total
Balances, June 30, 2021 465 $ 1 10,493,598 $ 10,494 $ 52,058,003 $ (35,676,342 ) $ 16,392,156

Preferred Stock Dividends - - - - 14,220 (14,220 ) -
Preferred Stock Dividends, shares
Shares Securities Issued to Directors for Services - - - - 282,306 - 282,306
Securities Issued to Directors for Services, Shares
Securities Issued for Third Party Services - - - - 72,872 - 72,872
Securities Issued for Third Party Services, shares
Securities Awarded to Employees - - 5,204 5 659,507 - 659,512
Preferred Shares issued for Exercise of Preferred Warrants
Preferred Shares issued for Exercise of Preferred Warrants, shares
Common Shares issued for Conversion of Preferred Shares
Common Shares issued for Conversion of Preferred Shares, shares
Common Shares Sold in Public Offering
Common Shares Sold in Public Offering, shares
Preferred Shares Sold in Private Offering
Preferred Shares Sold in Private Offering, shares
Extinguishment of Derivative Liability
Common Shares issued for Exercise of Common Warrants
Common Shares issued for Exercise of Common Warrants, shares
Offering Costs
Issuance of Fractional Shares from Reverse Split
Issuance of Fractional Shares from Reverse Split, shares
Stock Options Awarded to Directors
Securities Issued to Directors for Services
Net Loss - - - - - (2,490,978 ) (2,490,978 )

Balances, September 30, 2021 465 $ 1 10,498,802 $ 10,499 $ 53,086,908 $ (38,181,540 ) $ 14,915,868


	Preferred Stock				Common Stock				Additional
	Shares Outstanding		Preferred Stock		Shares Outstanding		Common Stock		Paid-in Capital		Accumulated Deficit			Total
Balances, December 31, 2021		465	$	1		10,498,802	$	10,499	$	53,442,431	$	(40,593,180	)	$	12,859,751
Net Loss		-		-		-		-		-		(2,207,395	)		(2,207,395	)
Preferred Stock Dividends		-		-		-		-		14,220		(14,220	)		-
Preferred Stock Dividends, shares
Common Shares Issued for Third Party Services		-		-		-		-		11,713		-			11,713
Stock Options Awarded to Directors for Services		-		-		-		-		21,721		-			21,721
Stock Options Awarded to Employees		-		-		-		-		170,976		-			170,976

Balances, March 31, 2022		465		1		10,498,802		10,499		53,661,061		(42,814,795	)		10,856,766

Preferred Stock Common Stock Additional
Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in Capital Accumulated Deficit Total
Balances, June 30, 2020 333 $ 1 3,926,362 $ 3,926 $ 33,151,829 $ (29,595,944 ) $ 3,559,812

Preferred Stock Dividends - - 339,499 339 737,005 (737,344 ) -
Common Shares issued for Conversion of Preferred Shares (3,318 ) (3 ) 1,555,550 1,556 (1,553 ) - -
Preferred Shares issued for Exercise of Preferred Warrants 3,568 3 - - 3,478,796 - 3,478,799
Securities Issued to Directors for Services - - 8,334 8 131,142 - 131,150
Securities Issued for Third Party Services - - 3,500 4 58,918 - 58,922
Securities Awarded to Employees - - - - 58,220 - 58,220
Net Loss - - - - - (1,218,013 ) (1,218,013 )

Balances, September 30, 2020 583 $ 1 5,833,245 $ 5,833 $ 37,614,357 $ (31,551,301 ) $ 6,068,890

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

Preferred Stock Common Stock Additional
Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in Capital Accumulated Deficit Total
Balances, December 31, 2020 715 $ 1 5,995,320 $ 5,995 $ 38,262,744 $ (33,105,008 ) $ 5,163,732
Beginning balance 715 $ 1 5,995,320 $ 5,995 $ 38,262,744 $ (33,105,008 ) $ 5,163,732

Common Shares Sold in Public Offering - - 3,901,783 3,902 14,865,997 - 14,869,899
Extinguishment of Derivative Liability - - - - (1,092,441 ) - (1,092,441 )
Preferred Stock Dividends - - 19,000 19 89,328 (89,347 ) -
Common Shares issued for Conversion of Preferred Shares (250 ) - 100,000 100 (100 ) - -
Common Shares issued for Exercise of Common Warrants - - 475,995 476 1,135,534 - 1,136,010
Stock Options Awarded to Directors - - - - 404,580 - 404,580
Securities Issued for Third Party Services - - 1,500 2 128,807 - 128,809
Securities Awarded to Employees - - 5,204 5 893,426 - 893,431
Offering Costs - - - - (1,600,967 ) - (1,600,967 )
Net Loss - - - - - (4,987,185 ) (4,987,185 )

Balances, September 30, 2021 465 $ 1 10,498,802 $ 10,499 $ 53,086,908 $ (38,181,540 ) $ 14,915,868
Ending balance 465 $ 1 10,498,802 $ 10,499 $ 53,086,908 $ (38,181,540 ) $ 14,915,868

	Preferred Stock					Common Stock				Additional
	Shares Outstanding			Preferred Stock		Shares Outstanding		Common Stock		Paid-in Capital			Accumulated Deficit			Total
Balances, December 31, 2020		715		$	1		5,995,320	$	5,995	$	38,262,744		$	(33,105,008	)	$	5,163,732
Net Loss		-			-		-		-		-			(650,659	)		(650,659	)
Common Shares Sold in Public Offerings		-			-		3,901,783		3,902		14,865,997			-			14,869,899
Derivative Liability Value on Issuance Date		-			-		-		-		(5,708,212	)		-			(5,708,212	)
Common Shares issued for Exercise of Warrants		-			-		475,995		476		1,135,534			-			1,136,010
Preferred Stock Dividends		-			-		19,000		19		60,889			(60,908	)		-
Common Shares Issued for Conversion of Preferred Shares		(250	)		-		100,000		100		(100	)		-			-
Common Shares Issued for Third Party Services		-			-		1,500		2		30,979			-			30,981
Stock Options Awarded to Directors for Services		-			-		-		-		61,471			-			61,471
Stock Options Awarded to Employees		-			-		-		-		117,477			-			117,477
Offering Costs		-			-		-		-		(1,600,967	)		-			(1,600,967	)

Balances, March 31, 2021		465		$	1		10,493,598	$	10,494	$	47,225,812		$	(33,816,575	)	$	13,419,732

Preferred Stock Common Stock Additional
Shares Outstanding Preferred Stock Shares Outstanding Common Stock Paid-in Capital Accumulated Deficit Total
Balances, December 31, 2019 - $ - 1,403,759 $ 1,404 $ 26,746,439 $ (26,095,594 ) $ 652,249

Common Shares Sold in Public Offering - - 493,027 493 1,499,507 - 1,500,000
Preferred Shares Sold in Private Offering 1,973 3 - - 2,099,997 - 2,100,000
Preferred Stock Dividends - - 749,924 750 1,743,721 (1,744,471 ) -
Common Shares issued for Conversion of Preferred Shares (7,154 ) (7 ) 3,157,427 3,157 (3,150 ) - -
Preferred Shares issued for Exercise of Preferred Warrants 5,764 5 - - 5,619,895 - 5,619,900
Securities Issued to Directors for Services - - 8,334 8 131,142 - 131,150
Securities Issued for Third Party Services - - 6,000 6 113,837 - 113,843
Securities Awarded to Employees - - 11,517 12 483,196 - 483,208

Offering Costs - - - (820,224 ) - (820,224 )
Issuance of Fractional Shares from Reverse Split - - 3,257 3 (3 ) - -
Net Loss - - - - - (3,711,236 ) (3,711,236 )

Balances, September 30, 2020 583 $ 1 5,833,245 $ 5,833 $ 37,614,357 $ (31,551,301 ) $ 6,068,890

See accompanying notes to condensed financial statements.

Sigma Labs, Inc.

Condensed Statements of Cash Flows

(Unaudited)


	Nine Months Ended						Three Months Ended
	September 30, 2021			September 30, 2020			March 31, 2022			March 31, 2021
OPERATING ACTIVITIES
Net Loss	$	(4,987,185	)	$	(3,711,236	)	$	(2,207,395	)	$	(650,659	)
Adjustments to reconcile Net Loss to Net Cash used in operating activities:
Noncash Expenses:
Depreciation and Amortization		76,502			86,150			31,584			23,031
Gain on Derivative Liability		(1,092,441	)		-			-			(802,285	)
Stock Based Compensation - Employees		893,431			483,208
Stock Based Compensation Employees								170,976			117,477
Stock Based Compensation – Third Party Services		128,809			113,843			11,713			30,981
Stock Based Compensation - Directors		404,580			131,150			21,721			61,471
Change in assets and liabilities:
Accounts Receivable		(335,178	)		(429,527	)		151,170			(56,488	)
Inventory		(196,896	)		24,178			(72,019	)		(88,129	)
Prepaid Assets		(13,940	)		55,669			(50,996	)		(44,718	)
Accounts Payable		94,220			(544,991	)		114,105			151,500
Deferred Revenue		7,523			(46,606	)		11,421			(1,540	)
Accrued Expenses		233,985			108,022			(209,299	)		18,773
Deferral of Payroll Taxes under the CARES Act		-			53,545
NET CASH USED IN OPERATING ACTIVITIES		(4,786,590	)		(3,676,595	)		(2,027,019	)		(1,240,586	)

INVESTING ACTIVITIES
Purchase of Property and Equipment		(116,631	)		(88,074	)		(83,248	)		(5,350	)
Purchase of Intangible Assets		(138,141	)		(161,878	)		(58,851	)		(16,619	)
Dissolution of Joint Venture		-			500
NET CASH USED IN INVESTING ACTIVITIES		(254,772	)		(249,452	)		(142,099	)		(21,969	)

FINANCING ACTIVITIES
Gross Proceeds from Public and Private Issuances of Securities		14,869,899			3,600,000			-			14,869,899
Less Offering Costs		(1,600,967	)		(820,224	)		-			(1,600,967	)
Payment of Note Payable		-			(50,000	)
Proceeds from Exercise of Warrants		1,136,010			5,619,900			-			1,136,010
NET CASH PROVIDED BY FINANCING ACTIVITIES		14,404,942			8,349,676			-			14,404,942

NET CHANGE IN CASH FOR PERIOD		9,363,580			4,423,629			(2,169,118	)		13,142,387

CASH AT BEGINNING OF PERIOD		3,700,814			86,919			11,447,047			3,700,814

CASH AT END OF PERIOD	$	13,064,394		$	4,510,548		$	9,277,929		$	16,843,201

Supplemental Disclosures:
Noncash investing and financing activities disclosure:
Issuance of Common Shares for Preferred Dividends	$	89,347		$	1,744,471			14,220			60,908
Other noncash operating activities disclosure:
Issuance of Securities for Services	$	533,387		$	244,993			33,434			92,452
Disclosure of cash paid for:
Interest	$	5,434		$	12,741		$	1,319		$	1,353
Income Taxes	$	-		$	-		$	-		$	-

See accompanying notes to condensed financial statements.

SIGMA LABS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

~~September 30, 2021~~MARCH 31, 2022

(Unaudited)

NOTE 1 - Summary of Significant Accounting Policies

Nature of Business ~~- Sigma~~-Sigma Labs, ~~Inc., formerly named Framewaves,~~ Inc., a Nevada corporation, was founded by a group of scientists, engineers and businessmen to develop and commercialize novel and unique manufacturing and materials technologies. Sigma believes that some of these technologies will fundamentally redefine conventional quality assurance and process control practices by embedding them into the manufacturing processes in real time, enabling process intervention and ultimately leading to closed loop process control. The Company anticipates that its core technologies will allow its clientele to combine advanced manufacturing quality assurance and process control protocols with novel materials to achieve breakthrough product potential in many industries including aerospace, defense, oil and gas, bio-medical, and power generation. The terms the “Company,” “Sigma,” “we,” “us” and “our” refer to Sigma Labs, Inc.

Basis of Presentation - The accompanying financial statements have been prepared by the Company in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States of America. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ and for the periods then ended have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with ~~U.S. generally accepted accounting principles~~GAAP have been condensed or omitted. The Company suggests these condensed financial statements be read in conjunction with the December 31, ~~2020~~2021 audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K. The results of operations for the periods ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ are not necessarily indicative of the operating results for the full year.

Reclassification - Certain amounts in prior-period financial statements have been reclassified for comparative purposes to conform to presentation in the current-period financial statements. ~~These reclassifications have no impact on the previously reported results.~~

Fair Value of Financial Instruments - ~~The Company applies ASC 820, “Fair Value Measurements~~.” This guidance defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:

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

	●	Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

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

The carrying amounts reported in the balance sheets for the cash and cash equivalents, receivables, accounts payable, and accrued liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.

The Company does not use derivative instruments for hedging of market risk or for trading or speculative purposes. On March 26, 2021, the Company closed an offering in which it issued warrants to purchase an aggregate of 2,190,000 shares of common stock in a private placement concurrently with a registered direct offering ~~(“Registered Offering”)~~ of our common stock The warrants became exercisable on May 24, 2021, the date the Company obtained stockholder approval to increase its authorized common shares from 12,000,000 to 24,000,000 ~~(“the Initial Exercise Date”)~~ and will expire two years after the ~~Initial Exercise Date.~~initial exercise date.

Pursuant to ASC 815-40-25-10, because the Company did not have sufficient authorized and unissued shares of common stock available to settle the warrants at the issue date, such warrants were accounted for as a derivative liability. For the three months ended March 31, 2021, the Company recorded a gain of $802,285 due to the change in the fair value of the derivative liability as measured on a recurring basis. On May 24, 2021, upon receiving shareholder approval to increase its authorized common shares, the Company reclassified the warrant liability to equity pursuant to ASC 815.40.35.8.

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

~~Schedule of Warrant Liability Measured on Recurring Basis~~

September 30, 2021 Date of Issuance March 26, 2021
Fair Value Input Level Fair Value Input Level

Derivative Liability - Warrants $ - - $ 5,708,212 Level 3

~~The following table presents a reconciliation of the derivative liability measured at fair value on a recurring basis using significant unobservable input (Level 3):~~

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

Warrants
Fair Value on Issuance Date $ 5,708,212
Change in Fair Value (1,092,441 )
Fair Value on May 24, 2021 4,615,771
Extinguishment of Derivative Liability (4,615,771 )
Fair Value on September 30, 2021 $ -

Loss Per Share - – The computation of loss per share is based on the weighted average number of shares outstanding during the period in accordance with ASC Topic No. 260, “Earnings Per Share.” Shares underlying the ~~Companies~~Company’s outstanding warrants, options and preferred shares were excluded due to the anti-dilutive effect they would have on the computation. At ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the Company had the following common shares underlying these instruments:

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

	September 30,				Three Months Ended March 31,
	2021		2020		2022		2021
Warrants		3,987,931		1,845,722		3,825,781		1,797,931
Preferred Stock Warrants		-		260,089
Stock Options		1,400,407		610,229		1,547,797		856,082
Preferred Stock		124,483		227,695		148,918		124,483

Total Underlying Common Shares		5,512,821		2,943,735		5,522,496		2,778,496

The following data shows the amounts used in computing loss per share and the effect on income and the weighted average number of shares of dilutive potential common stock for the periods ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:

Schedule of ~~Earnings~~Computing Loss Per Share ~~Basic and Diluted~~

2021 2020 2021 2020
Three Months Ended
September 30 Nine Months Ended
September 30
2021 2020 2021 2020

Net Loss per Common Share - Basic and Diluted $ (0.24 ) $ (0.42 ) $ (0.53 ) $ (1.74 )
Loss from continuing
Operations available to Common stockholders (numerator) $ (2,505,198 ) $ (1,955,357 ) $ (5,076,532 ) $ (5,455,707 )
Loss from continuing Operations available to Common stockholders (numerator) $ (2,505,198 ) $ (1,955,357 ) $ (5,076,532 ) $ (5,455,707 )

Weighted average number of common shares Outstanding used in loss per share during the Period (denominator) 10,494,560 4,675,749 9,602,666 3,137,459

~~Recently Enacted Accounting Standards~~ - The FASB established the ASC as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with GAAP. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) issued under authority of federal securities laws are also sources of GAAP for SEC registrants.


	Three Months Ended March 31
	2022			2021

Net Loss per Common Share - Basic and Diluted	$	(0.21	)	$	(0.09	)
Loss from continuing operations available to common stockholders (numerator)	$	(2,221,615	)	$	(711,567	)

Weighted average number of common shares outstanding used in loss per share during the period (denominator)		10,498,802			7,790,121

Accounting Estimates - The preparation of financial statements in conformity with ~~generally accepted accounting principles in the United States~~GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimated by management. Significant accounting estimates that may materially change in the near future are impairment of long-lived assets, values of stock compensation awards and stock equivalents granted as offering costs, and allowance for bad debts and inventory obsolescence.

NOTE 2 – Inventory

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Company’s inventory was comprised of:

Schedule of Inventory

	September 30, 2021		December 31, 2020		March 31, 2022		December 31, 2021
Raw Materials	$	312,181	$	309,305	$	204,303	$	202,015
Work in Process		260,380		175,884		251,580		224,079
Finished Goods		283,986		174,462		326,216		283,986
Total Inventory	$	856,547	$	659,651	$	782,099	$	710,080

NOTE 3 –~~CARES Act Deferred Payroll~~ Deferral of Social Security Tax ~~Liability~~Payments

Pursuant to sections 2302(a)(1) and (a)(2) of the CARES Act, the Company has elected to defer payments of its share of Social Security tax due during the “payroll tax deferral ~~period”.~~period.” The payroll tax deferral period began on March 27, 2020 and ended on December 31, 2020. At ~~September 30, 2021~~March 31, 2022, the total remaining amount of ~~such~~the deferral was $~~75,455~~37,728. Per the terms of the deferral program, 50~~% of the deferred~~such amount is due ~~on December 31, 2021, and the remaining~~by 50~~% is due on~~ December 31, 2022, at 0%0% interest.

~~NOTE 4 -~~ ~~Derivative Liability~~

~~On March 26, 2021 (the “Issuance Date”), the Company issued warrants to purchase an aggregate of~~ ~~2,190,000~~ ~~shares of common stock to holders in a private placement concurrently with a registered direct offering of~~ ~~2,190,000~~ ~~shares of its common stock. The warrants entitle the holders to purchase one share of our common stock at an exercise price equal to $4.32~~ ~~per share commencing on~~ ~~May 24, 2021~~ ~~and will expire~~ ~~two years~~ from such date. The Company has determined that these warrants are free standing financial instruments that are legally detachable and separately exercisable from the common stock included in the registered direct offering. Management also determined that on the Issuance Date, the Company did not have sufficient authorized and unissued shares to settle the warrants, and as such required classification as a liability pursuant to ASC 815 ~~“Derivative Instruments and Hedging”~~. In accordance with the accounting guidance, the outstanding warrants were recognized as a warrant liability on the balance sheet and were measured at their inception date fair value and subsequently re-measured at each reporting period with changes being recorded as a component of other income in the statement of operations.

~~At a Special Stockholders Meeting held on May 24, 2021, the Company received approval to increase its authorized common shares from~~ ~~12,000,000~~ to ~~24,000,000. Pursuant to ASC 815-40-35-8, the Company reclassified the warrant liability to equity as of such date.~~

The fair value of the derivative liability presented below was measured using the Black Scholes valuation model. Significant inputs into the model for the nine months ended September 30, 2021 are as follows:

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

	~~September 30, 2021~~
~~Dividend yield~~		~~0.00~~	%
~~Risk-free interest rate~~		~~0.6% -~~ ~~0.7~~	%
~~Expected volatility~~		~~121.2~~ ~~% -~~ ~~124.0~~	%
~~Expected life (in years)~~		2

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

~~Schedule of Fair Value of Warrant Liability~~

Warrant Liability Warrants Outstanding Fair Value Per Share Fair Value
Fair Value at initial measurement date of March 26, 2021 2,190,000 $ 2.61 $ 5,708,212
(Gain) on change in Fair Value of Warrant Liability - $ - (1,092,441 )
Fair Value as of May 24, 2021 2,190,000 $ 2.11 4,615,771
Extinguishment of Derivative Liability (2,190,000 ) $ 2.11 (4,615,771 )
Fair Value as of September 30, 2021 - $ - -

The Company has presented the fair value measurement as a Level 3 measurement, relying on unobservable inputs reflecting management’s assumptions. Level 3 measurements, which are not based on quoted prices in active markets, introduce a higher degree of subjectivity and may be more sensitive to fluctuations in stock prices, volatility rates and U.S. Treasury Bond rates and could have a material impact on future fair value measurements.

The Company uses the Black Scholes model, based on the adjusted historical volatility rates for fair value measurements through the date of stockholder approval (i.e., May 24, 2021). Management has determined the Black Scholes model to be the most reliable and least volatile determinate of the current fair value of the warrants. It is the Company’s expectation to maximize on all observable market inputs for the warrants and calibrate the model to incorporate relevant observable market data into the fair value measurement at each future measurement date, if applicable.

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

119

NOTE 54 - Stockholders’ Equity

Common Stock

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

In January 2021, the Company closed a public offering of its securities in which it issued 1,711,783 shares of common stock at a price of $3.00 per share, resulting in net proceeds of approximately $4,532,445 after deducting underwriting commissions and other offering expenses payable by the Company. Pursuant to the Underwriting Agreement, the Company also issued to the Underwriter or its designee warrants to purchase 136,943 shares of common stock. Such warrants have a term of five years and an exercise price of $3.75 per share.

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

In March 2021, the Company issued 119,000 shares of common stock in exchange for the conversion of 250 shares of Series D Convertible Preferred Stock, including 19,000 shares of common stock as in-kind payment of preferred stock dividends. Also in March 2021, the ~~Company~~company issued 191,204 shares of common stock pursuant to the exercise of warrants issued in our April 2020 offering, and 21,591 shares of common stock issued pursuant to the cashless exercise of placement agent warrants.

In March 2021, the Company closed a public offering of its securities in which it issued 2,190,000shares of common stock at $4.445per share, resulting in net proceeds to the Company of approximately $8,736,487after deducting placement agent commissions and other offering costs payable by the Company. Pursuant to the Purchase Agreement, the purchasers severally agreed to vote the shares of common stock purchased under the Purchase Agreement in favor of any resolution presented to the stockholders of the Company for the purpose of obtaining approval of an increase in the authorized shares of the Company’s Common Stock from 12,000,000 to 24,000,000 shares (“Stockholder Approval”). In a concurrent private placement under the Purchase Agreement, the Company issued to the purchasers warrants (“Warrants”) to purchase an aggregate of 2,190,000shares of Common Stock at an exercise price of $4.32per share. Each Warrant became exercisable oncommencing May 24, 2021, the date the Company obtained ~~stockholder approval of an increase in the authorized shares of the Company’s Common Stock~~Stockholder Approval and will expire two years ~~from such~~ after the initial exercise date. The Company also issued to designees of the Placement Agent warrants to purchase up to 175,200 shares of Common Stock (the “Placement Agent Warrants”) constituting 8% of the aggregate number of shares of Common Stock sold in the ~~Registered Offering.~~public offering, The Placement Agent Warrants have substantially the same terms as the Warrants, except that the Placement Agent Warrants have an exercise price equal to 125% of the offering price per share (or $5.55625 per share). Upon any exercise of the Warrants for cash, we have also agreed to pay the Placement Agent warrants to purchase 8.0% of the number of shares of our Common Stock issued upon ~~the cash exercise of the Warrants.~~such exercise.

In March 2021, Company issued 1,500 shares of common stock valued at $4.99 per share to ~~CorProminence,~~ an investor relations firm previously engaged by the Company as partial compensation for services ~~previously~~ rendered.

~~In September 2021, the Company granted~~ ~~5,204~~ ~~shares of common stock to non-executive employees pursuant to the 2013 Equity Incentive Plan.~~

~~On April 6, 2020, the Company closed a public offering of equity securities in which it issued~~ ~~493,027~~ ~~shares of common stock and pre-funded warrants to purchase up to~~ ~~22,438~~ ~~shares of the Company’s common stock. The Company also issued Series A Warrants to purchase an aggregate of~~ ~~515,465~~ shares of the Company’s common stock pursuant to a private placement. In connection with this offering, the Company issued Dawson James Securities, Inc., its Placement Agent, a warrant to purchase an aggregate of ~~41,237~~ ~~shares of the Company’s Common Stock (which amount is based on the number of Common Shares and shares underlying the Pre-Funded Warrants) at an exercise price of $3.64~~ ~~per share. Net proceeds to the Company after deducting offering expenses were approximately $1,230,000~~.

~~In the nine months ended September 30, 2020, the Company issued~~ ~~3,157,427~~ ~~shares of common stock in exchange for the conversion of~~ ~~6,109~~ ~~shares of Series D Convertible Preferred stock, and~~ ~~749,924~~ ~~shares of common stock as in-kind payment of preferred stock dividends.~~

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

1210

Preferred Stock

The Company is authorized to issue 10,000,000shares of preferred stock, $0.001par value. 465 ~~and~~ ~~583~~ shares of preferred stock were issued and outstanding at ~~September 30, 2021~~March 31, 2022 and ~~2020,~~December 31,2021, respectively.

In January 2020, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain institutional investors (the “Institutional Private Placement”). Pursuant to the SPA, the Company issued and sold 1,640 shares of the Company’s newly created Series D Convertible Preferred Stock (the “Series D Preferred Stock”)~~. Under the Certificate of Designations for the Series D Preferred Stock, the Series D Preferred Stock has~~ at an initial stated value of $1,000 per share (the “Stated Value”). Dividends accrue at a ~~dividend~~ rate of 9% per annum (subject to increase upon the occurrence (and during the continuance) of certain triggering events described therein) and, on a monthly basis, shall be payable in kind by the increase of the Stated Value of the Series D Preferred Shares by said amount. The holders of the Series D Preferred Shares ~~will~~ have the right at any time to convert all or a portion of the Series D Preferred Shares (including, without limitation, accrued and unpaid dividends and make-whole dividends through the third anniversary of the closing date) into shares of the Company’s Common Stock at the conversion price then in effect, which is $2.50 (subject to adjustment for stock splits, dividends, recapitalizations and similar events and full ratchet price protection). ~~In addition,~~Alternatively, a holder may at any time ~~alternatively,~~ convert all, or any part, of its Series D Preferred Shares at an alternative conversion price ~~which equals~~equal to the lower of the applicable conversion price then in effect, and the greater of (x) $1.80 and (y) 85% of the average volume weighted average price (“VWAP”) of the Common Stock for a five (5) trading day period prior to such conversion. Upon the occurrence of certain triggering events, described in the Certificate of Designations, including, but not limited to payment defaults, breaches of transaction documents, failure to maintain listing on the Nasdaq Capital Market, and other defaults set forth therein, the Series D Preferred Shares would become subject to redemption, at the option of a holder, at a 125% premium to the underlying value of the Series D Preferred ~~Shares~~Stock being redeemed.

At ~~September 30, 2021~~March 31, 2022, there were 132 shares of Series D ~~Convertible~~ Preferred ~~stock~~Stock outstanding, which if converted ~~at the Conversion Price of $2.50~~as of ~~September 30, 2021,~~March 31, 2022, including the make-whole dividends, would ~~have resulted~~result in the issuance of ~~62,832~~87,267 shares of common stock.

Concurrent with the Institutional Private Placement, the Company entered into a Securities Purchase Agreement ~~(the “SPA”) with~~pursuant to which the Company issued and sold to certain of its directors and the Company’s previously largest shareholder ~~(the “Other Private Placement”). Pursuant to the SPA, the Company issued and sold~~ 333shares of the Company’s newly created Series E Convertible Preferred Stock (the “Series E Preferred Stock”). at an initial stated value of $1,000 per share. 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~~stated value of the Series E Preferred ~~Shares~~Stock by said amount. The Series E Preferred Stock is initially convertible into 48,544shares of ~~Common Stock.~~common stock (subject to adjustment for stock splits, dividends, recapitalizations and similar events).

At ~~September 30, 2021,~~March 31, 2022, all of the issued Series E ~~Convertible~~ Preferred Stock ~~were~~was outstanding, which if converted as of ~~September 30, 2021,~~March 31, 2022, including the make-whole dividends, would ~~have resulted~~result in the issuance of 61,651 shares of common stock.

~~Deferred Compensation~~

In previous years and in the nine months ended September 30, 2021, the Company issued to various employees, directors, and contractors shares of the Company’s common stock, subject to restrictions, pursuant to the 2013 Equity Incentive Plan (the “2013 Plan”). Such shares are valued at the fair value at the date of issue. The fair value is expensed as compensation over the vesting period and recorded as an increase to stockholders’ equity. During the nine months ended September 30, 2021 and September 30, 2020, $0 ~~and $15,740, respectively, of the unvested compensation cost related to these issues was recognized.~~

~~At September 30, 2021, there was~~ 0 ~~unrecognized deferred compensation expense to be recognized over the remainder of the year.~~

1311

Stock Options

On July 15, 2021, at the Annual Meeting of Stockholders of the Company, the Company’s stockholders approved an amendment to the 2013 Equity Incentive Plan to increase the number of shares of the Company’s common stock reserved for issuance under the 2013 Plan by ~~875,000~~ ~~shares of our common stock to a total of~~ ~~1,765,000~~ ~~shares.~~

As of ~~September 30, 2021,~~March 31, 2022, an aggregate of ~~335,152~~187,762 shares of common stock ~~remained available~~were reserved for future issuance under the 2013 Plan.

~~During the nine months ended September 30, 2021,~~ In March 2022, the Company granted options to its non-employee directors to purchase ~~a total~~up to an aggregate of ~~697,831~~56,000 shares of common stock ~~to 34 employees, 4 directors~~at a strike price of $2.50. As of March 31, 2022, 25% of such grants were fully vested and ~~4 consultants with vesting periods ranging from immediately upon issuance to~~exercisable, and the remaining 75% will vest in equal installments at the end of each of the next three ~~years beginning January 4, 2021.~~quarters.

During the ~~nine~~three months ended ~~September 30, 2020,~~ March 31, 2022, the Company granted four employees options to purchase ~~a total~~up to an aggregate of ~~472,183~~22,000 shares of common stock in connection with their employment. The options have a strike price of $2.50 and will vest in equal annual installments on the first through third anniversaries of the grant dates, provided that the employees remain employed by the Company on such dates. In addition, in February 2022, the Company granted its President and CEO an option to ~~20 employees, 5 directors~~purchase up to 70,000 shares of common stock in connection with his employment. The option has a strike price of $2.50 and 5will vest in equal monthly installments over 36 months beginning March 2022, provided that the President and CEO remains employed by the Company on such dates.

Also in March 2022, the Company granted two consultants ~~with vesting periods ranging from immediately upon issuance~~options to ~~3 years beginning July 31, 2020.~~purchase up to an aggregate of 14,000 shares of common stock for services to be rendered. The options have a strike price of $2.50, and are fully vested and exercisable as to 50% of such grants. The remaining 50% will vest on June 30, 2022, provided that the consultants remain as service providers to the Company as of such date.

The Company generally grants stock options to employees and directors at exercise prices equal to the fair market value of the Company’s stock on the dates of grant. Stock options are typically granted throughout the year and generally vest over ~~four~~a period from one to three years of service and expire five years from the grant date, ~~of the award,~~ unless otherwise specified. The Company recognizes compensation expense for the fair value of the stock options over the requisite service period for each stock option award.

Total ~~share-based~~stock-based compensation expense included in the statements of operations for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020 is~~was $~~893,431~~170,976 and $~~483,208~~117,477, respectively, all of which $~~874,176~~ ~~and $467,468~~ is related to stock ~~options, respectively.~~options.

The fair value of share-based awards was estimated using the Black-Scholes model with the following weighted-average assumptions for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~the year ended December 31, 2021:

Schedule of Share Based Payments Award Stock Options Valuation Assumptions

Assumptions:

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

2021 2020
Dividend yield 0.00 % 0.00 %
Risk-free interest rate 0.19 – 0.70 % 0.22-1.52 %
Expected volatility 116.8- 123.8 % 114.0-117.0 %
Expected life (in years) 5 5

	2022			2021
Dividend yield		0.00	%		0.00	%
Risk-free interest rate		0.95-1.65	%		0.19-0.67	%
Expected volatility		106.4-110.0	%		117.0–124.0	%
Expected life (in years)		5			5

1412

Option activity for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and the year ended December 31, ~~2020~~2021 was as follows:

Schedule of Stock Option Activity

				Weighted Average		Weighted Average				Options			Weighted Average Exercise Price ($)		Weighted Average Remaining Contractual Life (Yrs.)		Aggregate Intrinsic Value ($)
				Exercise		Remaining		Aggregate
				Price		Contractual		Intrinsic
	Options			($)		Life (Yrs.)		Value ($)
Options outstanding at December 31, 2019		180,912			18.11		5.09		25,988
Granted		579,998			2.55		4.57		-
Exercised		-			-		-		-
Forfeited or cancelled		(47,900	)		22.62		-		-
Options outstanding at December 31, 2020		713,010			5.15		4.40		477,802		713,010			5.15		4.40		477,802
Granted		697,831			3.29		4.64		46,800		698,831			3.29		4.39		46,800
Exercised		(5,204	)		2.50		-		-		(5,204	)		2.50		-		-
Forfeited or cancelled		(5,230	)		4.41		-		-		(10,755	)		3.49		-		-
Options outstanding September 30, 2021		1,400,407			4.24		4.14		267,577
Options expected to vest in the future as of September 30, 2021		574,146			3.59		4.29		110,275
Options exercisable at September 30, 2021		826,261			4.68		4.04		157,302
Options vested, exercisable, and options expected to vest at September 30, 2021		1,400,407			4.24		4.14		267,577
Options outstanding at December 31, 2021											1,395,882			4.24		3.89		-
Granted											162,000			2.50		4.94		-
Exercised											-			-		-		-
Forfeited or cancelled											(10,085	)		3.60		-		-
Options outstanding March 31, 2022											1,547,797			4.06		3.78		-
Options expected to vest in the future as of March 31, 2022											526,617			3.29		4.12		-
Options exercisable at March 31, 2022											1,021,180			4.46		3.60		-
Options vested, exercisable, and options expected to vest at March 31, 2022											1,547,797			4.06		3.78		-

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the ~~quoted~~market price of our common stock for those awards that have an exercise price ~~currently~~ below the $~~3.02~~2.04 closing price of our ~~common stock~~Common Stock on ~~September 30, 2021. None of the 2021~~March 31, 2022. At March 31, 2022, no option grants ~~have~~had an exercise price ~~currently~~ below $~~3.02~~2.04.

At ~~September 30, 2021,~~March 31, 2022, there was $~~1,544,383~~1,222,243 of unrecognized share-based compensation expense related to unvested ~~share~~stock options with a weighted average remaining recognition period of ~~3.0~~1.94 years.

Stock Appreciation Rights

On June 23, 2020, the board of directors (the “Board”) of the Company adopted the Sigma Labs, Inc. 2020 Stock Appreciation Rights Plan (the “Plan”). The purposes of the Plan are to: (i) enable the Company to attract and retain the types of employees, consultants, and directors (collectively, “Service Providers”) who will contribute to the Company’s ~~long range~~long-range success; (ii) provide incentives that align the interests of Service Providers with those of the shareholders of the Company; and (iii) promote the success of the Company’s business. The Plan provides for incentive awards ~~that are~~ only ~~made~~ in the form of stock appreciation rights payable in cash (“SARs”)~~. No~~ and no shares of common stock ~~were~~are reserved in connection with the adoption of the Plan since no shares will be issued pursuant to the Plan.

SARs may be granted to any Service Provider. A SAR is the right to receive an amount equal to the Spread with respect to a share of the Company’s common stock (“Share”) upon the exercise of the SAR. The “Spread” is the difference between the exercise price per share specified in a SAR agreement on the date of grant and the fair market value per share on the date of exercise of the SAR. The exercise price per share will not be less than 100% of the fair market value of a Share on the date of grant of the SAR. The administrator of the Plan will have the authority to, among other things, prescribe the terms and conditions of each SAR, including, without limitation, the exercise price and ~~medium of payment and~~ vesting provisions, and to specify the provisions of the SAR Agreement relating to such grant.

On ~~August 11, 2021,~~January 3, 2022, the Company granted ~~pursuant to the Plan, (i)~~a total of ~~77,748~~12,033 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~~eleven employees at an exercise price of ~~each such SAR is~~ $~~3.42~~1.87, ~~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 were fully vested and exercisable on the date of the grant.

On ~~June 23, 2020,~~February 16, 2022, the Company granted ~~pursuant to the Plan, (i)~~ ~~60,094~~30,000 SARs to its President and ~~Chief Executive Officer, (ii)~~ ~~12,019~~ ~~SARs to its Vice President of Business Development, (iii)~~ ~~24,038~~ ~~SARs to its Chief Technology Officer, and (iv)~~ ~~18,028~~ ~~SARs to its Chief Financial Officer. The~~CEO at an exercise price of ~~each such SAR is~~ $~~2.63~~2.50, ~~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. Additionally, each such SAR~~ will vest ~~and become exercisable in three equal (as closely as possible) installments on each of~~equally over 36 months beginning March 2022, provided that the ~~first, second and third anniversaries of the grant date, subject, in each case, to the applicable SAR holder being in the continuous employ~~CEO remains an employee of the Company on such dates.

On March 31, 2022, the ~~applicable vesting date, and, in~~Company granted 3,000 SARs to a consultant as partial compensation for services pursuant to a consulting agreement.at an exercise price of $2.50, The SARs expire on the ~~event~~fifth anniversary of ~~a Change in Control (as defined in~~ the ~~Plan), will become immediately~~grant date. As of March 31, 2022, 50% of such grant was fully vested and exercisable, ~~as long as~~and the ~~applicable holder is in~~remaining 50% will vest on June 30, 2022, provided that the ~~Company’s employ immediately prior~~consultant remains a service provider to the ~~Change in Control, and will otherwise be~~Company on ~~such other terms set forth in the form of Stock Appreciation Rights Agreement.~~that date.

The Company recognizes compensation expense and a corresponding liability for the fair value of the SARs over the requisite service period for each SAR award. The ~~SAR’s~~SARs are revalued at each reporting date in accordance with ASC 718 “Compensation-Stock Compensation”, and any changes in fair value are reflected in ~~income~~the Statement of Operations as of the applicable reporting date.

The fair value of SAR awards was estimated using the Black-Scholes model with the following weighted-average assumptions for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~the year ended December 31, 2021:

Schedule of ~~Share-based Payment~~Share Based Payments Award Stock Options Valuation Assumptions

Assumptions:

2021 2020
Dividend yield 0.00 % 0.00 %
Risk-free interest rate 0.4 % 0.22 %
Expected volatility 122.8 % 116.8 %
Expected life (in years) 5 5

	2022			2021
Dividend yield		0.00	%		0.00	%
Risk-free interest rate		0.82-1.65	%		0.39-0.40	%
Expected volatility		108.4%-119.0	%		123.0	%
Expected life (in years)		5			5

SARs activity for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and the year ended December 31, 2021 was as follows:

Schedule of Stock Option Activity

			Weighted Average		Weighted Average
			Exercise		Remaining		Aggregate
			Price		Contractual		Intrinsic
	SARs		($)		Life (Yrs.)		Value ($)		Options		Weighted Average Exercise Price ($)		Weighted Average Remaining Contractual Life (Yrs.)		Aggregate Intrinsic Value ($)
													-
SARs outstanding at December 31, 2020		127,679		2.61		4.52		97,919		127,679		2.61		4.52		97,919
Granted		242,945		3.43		4.86		-		242,945		3.43		4.61		-
Exercised		-		-		-		-		-		-		-		-
Forfeited or cancelled		-		-		-		-		-		-		-		-
SARs outstanding September 30, 2021		370,624		3.15		4.49		51,955
SARs expected to vest in the future as of September 30, 2021		250,975		3.19		4.52		29,687
SARs exercisable at September 30, 2021		119,649		3.08		4.42		22,268
SARs vested, exercisable, and options expected to vest at September 30, 2021		370,624		3.15		4.49		51,955
SARs outstanding at December 31, 2021										370,624		3.15		4.24		-
Granted										45,033		2.33		4.86		-
Exercised										-		-		-		-
Forfeited or cancelled										-		-		-		-
SARs outstanding March 31, 2022										415,657		3.06		4.08		2,046
SARs expected to vest in the future as of March 31, 2022										339,732		3.16		4.16		-
SARs exercisable at March 31, 2022										75,925		2.63		3.74		2,046
SARs vested, exercisable, and SARs expected to vest at March 31, 2022										415,657		3.06		1.08		2,046

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of our common stock for those awards that have an exercise price currently below the $~~3.02~~2.04 closing price of our common stock on ~~September 30, 2021. None~~March 31, 2022. 12,033 of the ~~2021~~ SARs grants have an exercise price ~~currently~~ below $~~3.02~~2.04.

At ~~September 30, 2021,~~March 31, 2022, there was $~~614,947~~660,001 of unrecognized share-based compensation expense related to unvested SARs with a weighted average remaining recognition period of ~~2.87~~2.21 years.

Warrants

Warrant activity for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 the year ended December 31, 2021 ~~and 2020~~ was as follows:

~~Summary~~Schedule of ~~Warrant~~Warranty Activity

Weighted Average Weighted Average
Exercise Remaining
Price Contractual
Warrants ($) Life (Yrs.)
Warrants outstanding at December 31, 2019 363,727 25.60 3.12
Granted 1,481,995 3.22 4.89
Exercised - - -
Forfeited or cancelled - - -
Warrants outstanding at September 30, 2020 1,845,722 7.64 4.39

Warrants outstanding at December 31, 2020 1,881,429 7.57 4.16
Granted 2,602,143 4.36 1.89
Exercised (495,641 ) 2.59 -
Forfeited or cancelled - - -
Warrants outstanding at September 30, 2021 3,987,931 6.10 2.36

~~In connection with its March 2021 private placement, the Company issued warrants to purchase~~ ~~2,190,000~~ ~~shares of its common stock at an exercise price of $4.32~~ ~~per share. Each Warrant became exercisable on~~ ~~May 24, 2021, the date the Company obtained stockholder approval of an increase in the authorized shares of the Company’s Common Stock and will expire~~ ~~two years~~ ~~from such date. The Company also issued to designees of the Placement Agent warrants to purchase up to~~ ~~175,200~~ ~~shares of Common Stock (the “Placement Agent Warrants”) constituting~~ 8% of the aggregate number of shares of Common Stock sold in the Registered Offering. The Placement Agent Warrants have substantially the same terms as the Warrants, except that the Placement Agent Warrants have an exercise price equal to ~~125% of the offering price per share (or $5.55625~~ ~~per share). Upon any exercise of the Warrants for cash, we have also agreed to pay the Placement Agent warrants to purchase~~ ~~8.0% of the number of shares of our Common Stock issued upon the cash exercise of the Warrants.~~

~~In connection with its January 2021 public offering, the Company issued to the Underwriter or its designee warrants to purchase~~ ~~136,943~~ ~~of shares of common stock. Such warrants have a term of~~ ~~five years~~ ~~from the commencement of sales in the Offering and an exercise price of $3.75~~ ~~per share.~~

On January 8, 2021, the Company obtained a waiver (“Waiver”) from certain investors (“Investors”) with respect to certain anti-dilution adjustment provisions of a January 2020 warrant and an April 2020 warrant issued to the Investors. ~~As consideration for the Waiver, the Company issued an additional warrant (“Warrant”) to the Investors to purchase an aggregate of~~ ~~100,000~~ ~~shares of common stock, each exercisable after six months for a five-year period with an exercise price equal to 115% of the closing price of the Company’s stock on the date of the waiver.~~

	Warrants			Weighted Average Exercise Price ($)		Weighted Average Remaining Contractual Life (Yrs.)
Warrants outstanding at December 31, 2020		1,881,429			7.57		4.16
Granted		2,602,143			4.36		1.63
Exercised		(495,641	)		-		-
Forfeited or cancelled		-			-		-
Warrants outstanding at December 31, 2021		3,987,931			6.10		2.10
Granted		-			-		-
Exercised		-			-		-
Forfeited or cancelled		(162,150	)		40.00		-
Warrants outstanding at March 31, 2022		3,825,781			4.66		1.94

NOTE 65 - Subsequent Events

The Company performed an evaluation of subsequent events through the date of filing of these condensed financial statements with the SEC. There were no material subsequent events which affected, or could affect, the amounts or disclosures in the condensed financial statements.

1714

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward-looking statements

This Quarterly ~~Report, including any documents which may be incorporated by reference into this~~ Report contains “Forward-Looking Statements.” All statements other than statements of historical fact are “Forward-Looking Statements” for purposes of these provisions, including but not limited to, statements regarding our expectations about development and commercialization of our technology, any projections of revenues or statements regarding our anticipated revenues or other financial items, any statements of the plans and objectives of management for future operations, any statements concerning proposed new products or services, ~~or the impact of COVID-19 on our business,~~ any statements regarding future economic conditions or performance, and any statements of assumptions underlying any of the foregoing. All Forward-Looking Statements included in this document are made as of the date hereof and are based on information available to us as of such date. We assume no obligation to update any Forward-Looking Statement. In some cases, Forward-Looking Statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “potential,” or “continue,” or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the Forward-Looking Statements contained herein are reasonable, there can be no assurance that such expectations or any of the Forward-Looking Statements will prove to be correct, and actual results could differ materially from those projected or assumed in the Forward-Looking Statements. Future financial condition and results of operations, as well as any Forward-Looking Statements are subject to inherent risks and uncertainties, including any other factors referred to in our press releases and reports filed with the Securities and Exchange Commission (“SEC”). All subsequent Forward-Looking Statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Additional factors that may have a direct bearing on our operating results are described under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 and elsewhere in this ~~report.~~Quarterly Report.

Corporation Information

We were incorporated as Messidor Limited in Nevada on December 23, 1985 and changed our name to Framewaves Inc. in 2001. On September 27, 2010, we changed our name ~~from Framewaves Inc.~~ to Sigma Labs, Inc. We commenced our current business operations in 2010.

Our principal executive offices are located at 3900 Paseo del Sol, Santa Fe, New Mexico 87507, and our telephone number is (505) 438-2576. Our website address is www.sigmalabsinc.com. The Company’s annual reports, quarterly reports, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”), and other information related to the Company, are available, free of charge, on that website as soon as we electronically file those documents with, or otherwise furnish them to, the SEC. The Company’s website and the information contained therein, or connected thereto, are not and are not intended to be incorporated into this Quarterly ~~Report on Form 10-Q.~~Report.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported ~~amounts~~assets, liabilities, sales and expenses in the accompanying ~~consolidated financial statements and related notes. These estimates and assumptions have a significant impact on our consolidated~~ financial statements. ~~Actual results could differ materially from those estimates.~~ Critical accounting policies are those that require the most subjective and complex judgments, often employing the use of estimates about the effect of matters that are inherently uncertain. ~~Our significant~~By their nature, changes in these assumptions and estimates could significantly affect our financial position or results of operations. Significant accounting estimates that may materially change in the near future are revenue recognition, impairment of long-lived assets, values of stock compensation awards and stock equivalents granted as offering costs, and allowance for bad debts and inventory obsolescence. Such critical accounting policies, including the assumptions and judgments underlying them, are disclosed in Note 1 of the Notes to ~~the~~ Financial Statements included in this Quarterly ~~Report on Form 10-Q.~~Report. However, we do not believe that there are any alternative methods of accounting for our operations that would have a material effect on our financial statements.

The critical accounting policies and estimates addressed below reflect our most significant judgements and estimates used in the preparation of our financial statements

Revenue Recognition - The Company’s revenue is derived primarily from sales of our software and related hardware suite and from providing engineering services under contracts. Generally, revenue is recognized 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. Significant estimates and judgements for determining revenue recognition include: (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 the contract; and (5) recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.

Accounts Receivable and Allowance for Doubtful Accounts - Trade accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts. We determine the allowance for doubtful accounts by identifying potential troubled accounts and by using historical experience and future expectations applied to an aging of accounts. Trade accounts receivable are written off when deemed uncollectible. Recoveries of trade accounts receivable previously written off are recorded as income when received.

Inventory Valuation - Inventories consist of raw materials used in the production of customized parts, work-in-process and finished goods components which will be sold to customers. Inventories are valued at the lower of cost or net realizable value, using the first-in, first-out (FIFO) method. Charges for obsolete inventory are based on specific identification of inventory items resulting from regular, on ongoing reviews of our build of materials.

Long-Lived and Intangible Assets – Long-lived assets and certain identifiable definite life intangibles to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company continuously evaluates the recoverability of its long-lived assets based on estimated future cash flows and the estimated liquidation value of such long-lived assets and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the long-lived assets. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value. Utility patents are amortized over a 17-year period. Patents which are pending are not amortized.

Stock Based Compensation – We measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share based compensation arrangements may include stock options, grants of shares of common stock with and without restrictions, performance-based awards, stock appreciation rights and employee stock purchase plans. Compensation cost is measured on the date of grant at its fair value.

Equity instruments issued to non-employees are recorded on the basis of the grant date fair value of the instruments. 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 are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant.

The grant date fair value of stock based and other equity instruments is calculated using the Black Scholes valuation model, and requires estimates of several inputs to the model, including risk-free interest rates, dividends, and expected volatility of our stock price.

Results of Operations

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

We generate revenues through ~~licensing our PrintRite3D®~~ hardware and software ~~edge computing platform~~licensing of our PrintRite3D® technology to customers that seek to improve their manufacturing production processes, and through ongoing annual software upgrades and maintenance fees. Additionally, we generate revenues from our contract manufacturing activities in metal additive manufacturing, or AM. Our ability to generate revenues in the future will depend on our ability to further commercialize and increase market presence of our PrintRite3D® technologies, and it will depend on whether key prospective customers continue to move from AM metal prototyping to production.

In January 2022, we announced the foundational elements of a three-year plan that we believe will increase the Company’s ability to achieve its mission of setting the quality standard for additive manufacturing. The combined strategies are geared at making our technology more consumable in terms of ease of use and cost by end users, both for initial purchases and expansion opportunities, making it easier for original equipment manufacturers (“OEMs”) to embed our technology and generate attractive revenue streams for the OEM, and finally increasing the Company’s gross margins by moving towards a software-only solution.

To lower the barrier for initial users and for expansion opportunities within end users with a large number of printers, we began offering our current PrintRite3D integrated hardware and software solution on a subscription basis. The impact of the change will currently reduce the initial upfront cost to a new user from over $100,000 to approximately $3,000-$4,000 per month. In addition, we believe the subscription model will smooth out the Company’s revenue and cash receipts while making them more predictable.

In order to expand the number of OEMs distributing our technology, we launched a three-tiered OEM program directed to: (1) new OEMs without their own quality assurance or monitoring solution; (2) established OEMs with a quality monitoring offering, but who have customers with multiple printers from multiple OEMs and want a single 3rd party quality and analytics solution with consistent quality metrics across printers, processes and materials; and (3) OEMs building open APIs to integrate components of Sigma’s proprietary technology with their current offerings. We are now working with OEMs on their next generation printers to offer a software-only solution that will utilize the printer’s computing infrastructure and dramatically reduce the overall cost of its technology, enabling the opportunity to move towards a software only embedded solution on every printer sold by partner OEMs.

The combination of subscription pricing and the software-only embedded OEM offerings are intended to make our technology more affordable to acquire and easier for OEM’s to bundle, distribute and support in an effort to become the industry standard.

The shift in our business model has had an impact on our near-term revenue growth as we increase our focus on building strategic partnerships, expanding our partner ecosystem, and ensuring the success of our existing customers as they move into production. However, we believe these changes will contribute to faster adoption of our product by end users and will result in more predictable and profitable revenues over the longer term.

During the three months ended ~~September 30, 2021,~~March 31, 2022, we recognized revenue of ~~$700,237,~~$51,844, as compared to ~~$248,526~~$458,140 in revenue recognized during the same period in ~~2020, an increase~~2021, a decrease of ~~$451,711.~~$406,296, or 89%. The ~~increase~~decrease is primarily due to ~~increased~~decreased PrintRite3D® unit sales ~~including~~of $416,500 in the ~~Company’s~~ first ~~multi-unit sale, which was to a U.S. Department~~quarter of ~~Energy contractor, as well as a single unit sale to a U.S. National Laboratory. Third quarter 2021 revenues were~~2022, partially offset by ~~a return~~an increase in revenues of $13,425 from ~~a first quarter sale of $72,000.~~our subscription based pricing program.

Our cost of revenue for the three months ended ~~September 30, 2021 and 2020~~March 31, 2022 was $164,766 and $97,785, respectively, an increase of $66,981. The increase is primarily attributable to additional PrintRite3D unit sales, partially offset by a decrease in certain material costs, and lower costs associated with the Company’s Rapid Test and Evaluation (“RTE”) program.

~~Our gross profit for the three months ended September 30, 2021 was $535,471, or 76.5% of revenues,~~$40,091, as compared to ~~$150,741, or 60.7% of revenues~~$128,331 for the same period in ~~2020.~~2021, a decrease of $88,240, or 69%. The decrease was primarily attributable to fewer unit sales in 2022.

Sigma’s total operating expenses for the three months ended ~~September 30, 2021~~March 31, 2022 were ~~$3,026,888~~$2,295,698, as compared to ~~$1,362,513~~$1,781,404 for the same period in ~~2020,~~2021, an increase of ~~$1,664,375.~~$514,294, or 29%. The increase was primarily attributable to an increase in salary and benefit costs, as described below, related to the hiring of additional employees in an effort to expand the commercialization of our products.

Salary and benefits costs were ~~$1,222,760~~$1,292,010 for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to ~~$657,889~~$847,171 for the same period in ~~2020,~~2021, an increase of ~~$564,871~~$444,839, or ~~86%~~53%. ~~Employee~~The increase was comprised of: (a) $266,711 related to the hire of additional employees; (b) $84,677 related to salary increases ~~together with 13 additional employees contributed $289,356, while associated~~for existing employees; (c) increased stock appreciation rights of $37,498; and (d) increased taxes and benefits ~~contributed $75,511, and increased expense associated with the stock appreciation rights granted~~of $98,607. Partially offsetting these increases was a decrease in commissions of $42,654 due to ~~executive management in August 2021 contributed $200,004 to the increase.~~fewer unit sales.

Stock-based compensation was ~~$659,512~~$170,976 for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to ~~$58,219~~$117,477 for the same period in ~~2020, a $601,293, increase.~~2021, an increase of $53,499, or 46%. . This increase is ~~partially due to~~primarily a ~~timing difference as stock options were awarded to employees in the second quarter~~result of ~~2020 versus the third quarter of 2021, as well as an overall increase in~~ stock options granted to ~~employees, including our thirteen~~ new employees of $3,267 and increased stock option grants to existing employees and executive management of $12,748 and $37,484, respectively, in ~~August 2021, and fully vested stock options granted to~~ the ~~Company’s newly hired Senior Vice President.~~three months ended March 31, 2022.

~~Research~~Operations and research & development ~~expenditures~~expenses of ~~$131,772~~$143,418 were incurred during the three months ended ~~September 30, 2021~~March 31, 2022, as compared to ~~$79,673~~$196,340 in the same period of ~~2020,~~2021, a ~~$52,099~~decrease of $52,922, or ~~65% increase.~~30%. The decrease was primarily due to a decrease in operations costs of $59,192 as we incurred charges in the first quarter of 2021 of $52,987 for inventory obsolescence, including $14,471 for metal powder write-offs, field service expenses of $5,220, as well as equipment upgrades in both our manufacturing facility and our 3D metal printers totaling $12,277. Partially offsetting these decreases was an increase ~~is primarily attributable to $27,500~~ in ~~CT scans related to new development work, $5,019 related to optics redesign, and $19,580 in purchase~~purchases of lab supplies of $11,565, and ~~part and materials.~~increased research & development costs of $6,268 due to an increase in consulting costs of $21,043 in connection with ongoing PrintRite3D software development, partially offset by a decrease in expenses associated with a first quarter 2021 simulation project of $14,775.

Investor, public relations, and marketing expenses of ~~$119,622~~$94,326 were incurred during the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to ~~$66,794 incurred~~$108,341 during the same period in ~~2020.~~2021. The ~~increase~~decrease of ~~$52,828~~$14,015, or ~~79% is~~13%, was primarily due to a decrease in investor relations consulting costs of $23,473 due to issuance of fewer stock appreciation rights and options issued in 2022 and lower advertising expenses of $3,984, partially offset by an increase in tradeshow expenses of ~~$38,699, and the reclassification~~$13,442 as a result of ~~proxy management expenses from Investor Relations~~increased attendance due to ~~Organization Costs of $26,135~~reduced COVID travel restrictions in ~~2020, partially offset by decreased advertising costs of $8,252 in 2021.~~2022.

Organization costs ~~of $342,112 were~~ incurred ~~during~~in the three months ended ~~September 30, 2021,~~March 31, 2022 were $58,749, as compared to ~~$173,041 in~~$77,616 during the same period in ~~2020.~~2021. The ~~increase~~decrease of ~~$169,071~~$18,867, or ~~98% is~~24% was primarily due to ~~additional $6,465~~a decrease in ~~Shareholder Services, $11,450~~non-employee director stock-based compensation of $39,750, partially offset by an increase in ~~Organization Costs, and $151,156 in Stock Options expense from grants made to non-employee directors in August 2021.~~such directors’ cash compensation of $20,695.

Legal & professional fees incurred in the three months ended ~~September 30, 2021~~March 31, 2022 were ~~$261,075~~$211,416, as compared to ~~$133,273~~$176,847 incurred during the same period in ~~2020. The~~2021, an increase of ~~$127,802 is~~$34,569, or 20%. This increase was primarily ~~attributed~~a result of an increase in consulting expenses of $82,175 due to ~~increased legal~~the engagement of technical consulting support of $28,590 in connection with our new subscription-based pricing model, $3,500 in external human resources consulting, $17,800 for manufacturing support, and $32,285 related to consulting services for corporate matters, and an increase in audit fees of ~~$20,415, increased accounting fees~~$9,936. These increases were partially offset by a decrease in legal expenses of ~~$7,244 related to certain regulatory filings, increased~~$28,590 and a decrease in recruiting ~~fees~~expenses of ~~$56,805~~$26,667 related to new hires ~~increased consulting fees of $51,966, and increased information technology expense of $1,517, partially offset by a $10,145 reclassification of other professional services to research and development.~~in 2021.

Office expenses ~~incurred during~~for the three months ended ~~September 30, 2021~~March 31, 2022 were ~~$172,238~~$205,432, as compared to ~~$84,357 incurred~~$148,225 for the same period in 2021, an increase of $57,207, or 39%. The increases resulted primarily from: (a) travel and entertainment of $53,542 as compared to virtually no travel during the same period in ~~2020, an increase of $87,881, or 104%. The increase is primarily due to increased travel costs of $54,864~~2021 as a result of ~~easing of~~ COVID ~~related~~19 travel ~~restrictions,~~restrictions; (b) an increase in payroll service fees of ~~$12,659 in dues and subscriptions, primarily~~$2,247 related to new ~~software applications including~~hires; and (c) dues & subscriptions of $12,910 for new customer relationship management, product lifecycle management, and ~~compliance, an increase of $9,312~~project management software. Partially offsetting these increases was a decrease in postage and shipping ~~increased training~~of $6,388, and ~~education~~a decrease in office supply expense of ~~$6,082 and an increase in supplies and miscellaneous expenses of $4,964.~~$7,377.

Depreciation and amortization expense for the three months ended ~~September 30, 2021 was $27,689,~~March 31, 2022 totaled 31,584 as compared to ~~$50,167~~$23,031 for the same period in ~~2020, a decrease~~2021, an increase of ~~$22,478,~~$8,553, or ~~45%~~37%. The ~~primary reason for~~increase is primarily the ~~decrease is an adjustment in 2020 for the reclassification~~result of ~~a protype~~two PrintRite3D ~~system from finished goods to fixed assets.~~units on out new leasing program.

Other operating expenses were ~~$90,108~~$87,787 for the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to ~~$59,100 incurred during~~$86,356 for the same period in ~~2020.~~2021. The increase iswas primarily due to ~~higher insurance premiums in 2021, and~~ an increase in our insurance policy premiums for 2022 of $1,701, partially offset by lower bank service fees ~~from a credit card transaction.~~during the period.

In the three months ended ~~September 30, 2021, our~~March 31, 2022, we realized net other income ~~& expense was net income~~ of ~~$439~~$76,550, as compared to net ~~expense~~other income of ~~$6,241~~$800,936 in ~~2020.~~2021. The ~~increase is~~decrease of $724,386, or 90% was primarily due to an unrealized gain of $802,285 from the ~~result~~March 31, 2021 revaluation of the ~~interest paid~~derivative liability resulting from our private placement of warrants to ~~employees on salary reductions~~purchase 2,190,000 shares of common stock in ~~2020.~~the first quarter of 2021, partially offset by $76,628 received in New Mexico state incentives in the first quarter of 2022.

Sigma’s net loss applicable to common stockholders for the three months ended ~~September 30, 2021 totaled $2,505,198~~March 31, 2022 was $2,221,615, as compared to ~~$1,955,357~~$711,567 for the same period of ~~2020,~~2021, a ~~$549,841 decrease.~~$1,510,048 increase. The ~~third quarter net operating loss contributed $1,279,646~~increase was primarily due to the increased loss ~~increase, partially offsetting these losses was an increase~~from operations of $832,350 and the decrease in other income of ~~$6,680, and preferred dividends of $723,124.~~

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

~~During the nine months ended September 30, 2021, we recognized revenue of $1,302,525 compared to $637,944 during the same period of 2020. The primary contributors to the $664,581 increase~~$724,386. These increases were ~~an increase in PrintRite3D® unit sales contributing $799,221,~~ partially offset by a decrease in ~~revenue from our Rapid Test and Evaluation Program (RTE)~~preferred dividends of $82,064 and a first quarter sale return for $72,000. Third quarter 2021 revenues included the Company’s first multi-unit sale, which was to a U.S. Department of Energy contractor, and a single unit sale to a U.S. National Laboratory.

Our cost of revenue for the nine months ended September 30, 2021 was $409,493 compared to $400,172 during the same period in 2020. The increase of $9,321 is primarily due to the cost associated with our increase in PrintRite3D® unit sales, partially offset by a decrease in certain material parts, as well as a decrease in the ongoing support of legacy RTE programs, including equipment upgrades and additional labor costs.

~~Our gross profit for the nine months ended September 30, 2021 was $893,032, or 68.6% of revenues, as compared to $237,772, or 37.3% of revenues for the same period in 2020.~~

~~Sigma’s total operating expenses for the nine months ended September 30, 2021 were $6,976,944 compared to $4,448,708 for the same period in 2020, a $2,528,236, or 56.8% increase.~~

Payroll costs for the nine months ended September 30, 2021 were $3,055,279 compared to $1,915,381 for the same period in 2020, an increase of $1,139,898. The increase is primarily due to increased salaries of $741,303 reflecting raises granted in January and 13 additional employees in 2021 as compared to 2020, an associated increase in taxes and benefits of $137,976, and $260,619 of increased expense related to stock appreciation rights granted to executive management in August, 2021.

Stock-based compensation for the nine months ended September 30, 2021 was $893,431 compared to $483,208 for the same period in 2020, a $410,223 increase, primarily due annual option grants made to employees in August of 2021, including 13 additional employees as compared to 2020, and options granted to the Company’s newly hired Senior Vice President.

During the nine months ended September 30, 2021, Sigma incurred research and development expenditures of $608,812 compared to $245,008 in the same period of 2020. The $363,804 increase is a result of development costs incurred in connection with PrintRite3D version 7.0 of $89,800, increased purchase of lab supplies of $115,453, CT scans conducted for new development work and a simulation project totaling $101,138, increased write-offs of obsolete inventory and metal powder of $53,082, and $26,351 related to an optics redesign. Partially offsetting these increases was a decrease in consulting costs of $22,020 due to the full time hire of a consultant in 2021.

Investor, public relations and marketing expenses incurred in the nine months ended September 30, 2021 were $342,725 compared to $353,802 during the same period in 2020. The $11,077 decrease in the nine-month comparative expenditures results primarily from decrease in marketing and advertising expenses of $72,490 as a result of discontinuing Network Newswire services and the use of a public relations firm. Partially offsetting these decreases were an increase in Tradeshow expense of $38,698, and the reclassification of proxy management expenses of $26,135 to organization costs in 2020.

Organization costs for the nine months ended for September 30, 2021 were $578,256 compared to $328,716 during the same period in 2020, an increase of $249,540. The increase is primarily due to an increase of $273,429 related to stock option grants to non-employee directors in January and July of 2021 verses none in the first half of 2020. Non-employee directors received their option grants at the end of July, 2020. Partially offsetting this increase was a decrease in non-employee director cash compensation of $20,931, and lower transfer agent expenses of $2,958 resulting from fewer share transactions in the first nine months of 2021.

Legal and professional fees incurred in the nine months ended September 30, 2021 were $681,941, compared to $530,660 incurred during the same period in 2020, an increase of $151,281, or 29%. Legal fees decreased by $81,822 due to expenses incurred during the first quarter of 2020 in connection with our January 2020 private offering, Nasdaq related matters, and our February 27, 2020 reverse stock split. Also contributing to the decrease were lower accounting related expenses of $9,426. Partially offsetting these decreases was an increase in recruiting fees of $147,473 related to 13 new hires in 2021, increased consulting fees of $87,301 related to an external marketing consultant and corporate consulting services, and increased IT services of $7,755.

During the nine months ended September 30, 2021, Sigma’s office expenses were $472,335 compared to $310,947 in the same period of 2020. The $161,388 increase in these expenditures primarily resulted from $30,693 in postage and shipping, $27,500 in new computer hardware and software related to new hires, payroll servicing fees of $10,685 due to new hires and a first-year fee discount that ended in 2020, increased dues and subscriptions of $35,786 to new software applications, including customer relationship management, product lifecycle management, and compliance, increased travel expenses of $46,438 and increased training and education expense of $12,146, partially offset by a decrease in rent and utilities expense of $1,861.

Depreciation and Amortization expense for the nine months ended September 30, 2021 was $76,502, compared to $86,150 for the same period in 2020. The primary reason for the decrease is due to a nine month catch up adjustment in 2020 from the reclassification of a prototype PrintRite3D system from finished goods inventory to fixed assets.

Other operating expenses for the nine months ended September 30, 2021 were $267,663, as compared to $194,836 during the same period in 2020. The increase of $72,827 is primarily due to increased insurance premiums.

In the nine months ended September 30, 2021, our net other income & expense was net income of $1,096,727, as compared to net income of $499,700 during the same period in 2020. The increase is primarily a result of a gain of $1,092,441 on the revaluation of the derivative liability incurred in connection with the issuance of warrants to purchase common stock in our March 2021 offering, and $9,095 from a new interest-bearing sweep bank account, as compared to 2020 New Mexico state job incentive credits of $151,657 and $361,700 from the forgiveness of our PPP loan.

Sigma’s net loss applicable to common shareholders for the nine months ended September 30, 2021 totaled $5,076,532 as compared to $5,455,707 for the same period in 2020, a $379,175 decrease. While the net operating loss increased by $1,872,976, the increase of $597,027 in other income together with a decrease in preferred dividend expense of $1,655,124 accounted for the overall decrease.

We financed our operations during the three and nine months ended September 30, 2021 and 2020 primarily from revenue generated from PrintRite3D® system sales and engineering consulting services we provided to third parties during these periods and through sales of our common and preferred stock. We expect that our revenue will increase in future periods as we seek to further commercialize and expand our market presence for our PrintRite3D®-related technologies.$46,688.

Liquidity and Capital Resources

As of ~~September 30, 2021,~~March 31, 2022, we had ~~$13,064,394~~$9,277,929 in cash and working capital of ~~$13,977,104,~~$9,588,858, as compared with ~~$3,700,814~~$11,447,047 in cash and working capital of ~~$4,332,053~~$11,702,358 as of December 31, ~~2020.~~2021.

Our major sources of funding have been proceeds from public and private offerings of our equity securities (both common stock and preferred stock), and from warrant exercises.

In January 2021, the Company closed a public offering of its securities in which it issued 1,711,783 shares of common stock at $3.00 per share, resulting in net proceeds of approximately $4,532,445 after deducting underwriting commissions and other offering expenses payable by the Company.

InOn March 26, 2021, the Company closed a public offering of its securities in which it issued 2,190,000 shares of common stock at a price of $4.445 per share, resulting in net proceeds to the Company of approximately $8,736,487 after deducting placement agent commissions and other offering costs payable by the Company. ~~Concurrent with~~Pursuant to the ~~public offering,~~Purchase Agreement, the purchasers severally agreed to vote the shares of common stock purchased under the Purchase Agreement in favor of any resolution presented to the stockholders of the Company for the purpose of obtaining approval of an increase in the authorized shares of the Company’s Common Stock from 12,000,000 to 24,000,000 shares (“Stockholder Approval”). In a concurrent private placement under the Purchase Agreement, the Company issued ~~warrants~~ to ~~investors~~the purchasers warrants to purchase an aggregate of 2,190,000 shares of common stock ~~to holders in a private placement. The warrants entitle the holders to purchase one share of our common stock~~ at an exercise price ~~equal to~~of $4.32 per ~~share commencing~~share. Each warrant became exercisable on May 24, 2021, which was the date the Company obtained Stockholder Approval, and will expire two years ~~from such~~after the initial exercise date. ~~If all~~

On January 12, 2021, the Company closed a public offering of ~~the warrants are exercised~~common stock in which it issued 1,711,783 shares of common stock at a price of $3.00 per share, resulting in net proceeds of approximately $4,532,445 after deducting commissions and other offering expenses payable by the ~~holders thereof, the potential gross proceeds to the Company will be $9,460,800.~~Company.

During the first quarter of 2021, the Company ~~issued 454,404 shares~~received net cash proceeds of ~~common stock pursuant to~~$1,136,010 from the exercise of ~~warrants, resulting in net proceeds to the Company of $1,136,010.~~outstanding warrants.

We believe that our existing cash on hand will be sufficient to fund our anticipated operating costs and capital expenditure requirements through ~~2022.~~at least the first quarter of 2023. We have based this estimate on assumptions that may prove to be wrong, ~~such as our current expectations of revenue generation and burn rate,~~ and we could exhaust our capital resources sooner than we expect.

Because of the numerous risks and uncertainties associated with the research, development, and commercialization of our products, we are unable to estimate the exact amount of our working capital requirements. Our future capital requirements will depend on many factors, including:

	●	Revenue from the sales of our existing and future products;
	●	Costs associated with the expansion of our business and operations;
	●	The cost of expending, maintaining, and enforcing our intellectual property portfolio, including filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights; and
	●	The effect of competing technological and market ~~developments;~~developments.
	●	~~The revenue from the sales of our existing and future products;~~
	●	~~The cost of operating as a public company; and~~
	●	~~The increasing cost of engineering talent.~~

During ~~the remainder of 2021 and throughout~~ 2022, we expect to sustain our operations and our commercialization and marketing efforts with our cash reserves and revenues generated from sales of our PrintRite3D® technology. We expect that continued enhancements of our IPQA®-enabled PrintRite3D® technology ~~including the May 2021 release of version 7.0,~~ will enable us to further commercialize this technology into the AM metal market in ~~2021.~~2022. To support the commercialization of our PrintRite3D® technology, we plan to continue funding our development activities and operating expenses by licensing our PrintRite3D® systems and supporting field services, as applicable, and providing PrintRite3D®-enabled engineering consulting services concerning our areas of expertise (materials and manufacturing quality assurance and process control technologies).

AsThe worldwide COVID-19 pandemic caused a reduction, and in some cases a freeze, in capital spending within the ~~third quarter~~Company’s targeted industries. The future impact of ~~2021 progressed,~~ the ~~effect~~ongoing epidemic, including the emergence of ~~COVID-19 on~~variations of the virus, is highly uncertain so that no assurance can be given that our business and results of operations will not be materially and adversely affected. It is also uncertain as to any further disruption of the financial markets, which may reduce our ability to generate revenue, seemed to lessen; however, the Company continued to be adversely affected by the COVID-19 global economic slowdown, which has resulted in lower revenue than anticipated. Two key industries with which we do business, aerospace and oil and gas, have experienced a reduction in the global demand for their products due to the pandemic. As a result of the decrease in the demand for our products from customers and potential customers in these and other industries, the Company expects that revenue from these sectors will remain under pressure. It is impossible to knowaccess capital on favorable terms or at this time how long companies will limit capital expenditures and if the industries that have been most negatively affected will resume normal purchasing. Additionally, access to customer and prospect installations due to country specific regulations regarding COVID-19 quarantining has consumed resources for longer periods of time than expected, resulting in overall lower productivity and increased expenses. all.

However, due to the need to have more flexibility in supply chains with the ability to respond quickly to shortages in parts or products, we believe that the crisis will eventually accelerate the adoption of 3D printing, which ~~would be a positive trend for~~may benefit the Company.

Net Cash Used in Operating Activities

Net cash used in operating activities during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 increased to ~~$4,786,590~~$2,027,019 from ~~$3,676,595~~$1,240,586 during the same period in ~~2020,~~2021, a ~~$1,109,995~~$786,433, or 63% increase. ~~Primary drivers of the~~Contributing to this increase ~~were increased~~was an increase in net loss of ~~$1,275,948, the gain on the derivative liability of $1,092,441,~~$1,566,736 and increased inventory of $231,148. Partially offsetting these increases were an increase in non-cash securities-based compensation of $698,618, a decrease in accounts receivable of $94,349, and a decreasedecreases in accounts payable and accrued expenses of ~~$721,705.~~$265,467, prepaid assets of $6,278, and total stock-based compensation of $5,519. Partially offsetting these increases in cash usage were a decrease in the gain on derivative liability of $802,285, a decrease in accounts receivable of $207,658, a decrease in inventory purchases of $16,110, and increases in deferred revenue and depreciation and amortization expense of $12,961 and $8,553, respectively.

Net Cash ~~Used/Provided by~~Used in Investing Activities

Net cash used by investing activities during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was ~~$254,772,~~$142,099, which compares to ~~$249,452~~$21,969 of cash used by investing activities during the same period of ~~2020,~~2021, an increase of ~~$5,320. This is primarily attributable to~~$120,130. The increase resulted from leased PrintRite3D units reclassified as property, plant and equipment, and increased ~~equipment purchases of $28,557, partially offset by lower~~ patent costs ~~of $23,737~~ during the ~~period.~~first quarter of 2022.

Net Cash Provided by Financing Activities

The Company did not raise any capital nor were there any warrant exercises during the three months ended March 31, 2022. Cash provided by financing activities during the ~~nine~~three months ended ~~September 30,~~March 31, 2021 ~~increased to~~totaled $14,404,942 ~~from $8,349,676 during the same period in 2020~~ due to the receipt of $14,869,899 of proceeds less $1,600,967 of offering costs in connection with our January ~~2021~~ and March 2021 public and private ~~and public offerings and~~offerings. The exercise of ~~Preferred Warrants. Cash provided by financing activities~~outstanding warrants during the ~~same period~~three months ended March 31, 2021 provided an additional $1,136,010 in 2020 resulted from the receipt of $3,600,000 in proceeds less $820,224 of offering costs in connection with our January 2020 and April 2020 offerings, and $5,619,900 in proceeds from the exercise of warrants, partially offset by the payment of the remaining outstanding principal balance on a convertible note payable in the amount of $50,000.cash proceeds.

Our ability to continue to fund our liquidity and working capital needs will be dependent upon the success of our efforts to generate revenues from existing and future ~~PrintRite3D®-proof-of-concept~~PrintRite3D contracts, follow-on contracts resulting from successful ~~proof-of-concept~~ engagements, possible strategic partnerships, and by obtaining additional capital from the ~~issuance~~sale of securities or by borrowing funds from lenders to fulfill our business plans. ~~Such financing, if in~~If we issue additional equity or debt securities, stockholders may experience additional dilution or the ~~form~~new equity securities may have rights, preferences or privileges senior to those of ~~equity, may be highly dilutive to~~existing holders of our existing stockholders and may otherwise include onerous terms. If in the form of debt, such financing may include covenants and repayment obligations which may be difficult to meet and that could adversely affect our business operations.common stock. There is no assurance ~~as to the amount and availability of any required future financing or the terms thereof.~~that we will be successful in obtaining additional funding. The Company is unable to predict the effect that the ~~ongoing~~ COVID-19 ~~pandemic~~outbreak or geopolitical events, including the conflict in Ukraine, may have on its access to the financing markets. If we fail to obtain sufficient funding when needed, we may be forced to delay, or scale back or eliminate all or a portion of our commercialization efforts and operations.

We have no lines of credit ~~lines as of October 21, 2021, nor have we ever had a credit line since our inception.~~or other financing arrangements.

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

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of disclosure controls and procedures and changes in internal controls over financial reporting.

Rule 13a-15(e) under the Exchange Act of 1934, as amended (the “Exchange Act”) defines the term “disclosure controls and procedures” as those controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Based upon an evaluation of the effectiveness of our disclosure controls and procedures performed by our management, with the participation of our President and Chief Executive Officer, and our Principal Financial and Accounting Officer, as of the end of the period covered by this quarterly 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. In addition, no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the three months ended ~~September 30, 2021~~March 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

2320

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Not applicable.

ITEM 1A. RISK FACTORS.

You should consider the “Risk Factors” included under Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 filed with the SEC on March 24, ~~2021.~~2022.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

~~None.~~None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

~~None.~~None

ITEM 6. EXHIBITS.

10.1	~~Sigma Labs, Inc. 2013 Equity Incentive Plan, as Amended (filed as Exhibit 10.1~~Amendment, dated February 16, 2022, to the Company’s Current Report on Form 8-K filed July 16, 2021 and incorporated herein by reference).*

~~10.2~~	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).*

~~10.3~~	Employment letter agreement, effective as of September 20, 2021, between Sigma Labs, Inc. and Jacob ~~Brunsberg.~~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).* **

10.2	Amendment, dated February 16, 2022, to Amended and Restated Employment Agreement, dated June 10, 2021, between Sigma Labs, Inc. and Mark K. 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).*

31.1	Rule 13a-14(a) Certification of Principal Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**

31.2	Rule 13a-14(a) Certification of Principal Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**

32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.***

101.INS	Inline XBRL Instance ~~Document – the instance document does not appear in the Interactive Data File because its XBRL tags are imbedded within the Inline XBRL document.~~Document.
101.SCH	Inline XBRL Schema Document.
101.CAL	Inline XBRL Calculation Linkbase Document.
101.DEF	Inline XBRL Definition Linkbase Document.
101.LAB	Inline XBRL Labels Linkbase Document.
101.PRE	Inline XBRL Presentation Linkbase Document.

104	Cover Page Interactive Data File ~~(formatted as~~(embedded within the Inline XBRL ~~and contained in Exhibit 101)~~document)

* Indicates a management contract or compensatory plan or arrangement.

** Filed herewith.

*** Furnished herewith and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

2422

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SIGMA LABS, INC.

~~October 21, 2021~~April 26, 2022	By:	/s/ ~~Mark K Ruport~~Jacob Brunsberg
		~~Mark K. Ruport~~Jacob Brunsberg
		President and Chief Executive Officer (Principal Executive Officer)

~~October 21, 2021~~April 26, 2022	By:	/s/ Frank Orzechowski
		Frank Orzechowski
		Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

2523

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS	3

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	1815

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	2320

ITEM 4. CONTROLS AND PROCEDURES	2320

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS	2241

ITEM 1A. RISK FACTORS	2421

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.	2421

ITEM 3. DEFAULTS UPON SENIOR SECURITIES	2421

ITEM 4. MINE SAFETY DISCLOSURES	2421

ITEM 5. OTHER INFORMATION	2421

ITEM 6. EXHIBITS	2422

SIGNATURES	2523

	Warrants
Fair Value on Issuance Date	$	5,708,212
Change in Fair Value		(1,092,441	)
Fair Value on May 24, 2021		4,615,771
Extinguishment of Derivative Liability		(4,615,771	)
Fair Value on September 30, 2021	$	-

Warrant Liability	Warrants Outstanding			Fair Value Per Share		Fair Value
Fair Value at initial measurement date of March 26, 2021		2,190,000		$	2.61	$	5,708,212
(Gain) on change in Fair Value of Warrant Liability		-		$	-		(1,092,441	)
Fair Value as of May 24, 2021		2,190,000		$	2.11		4,615,771
Extinguishment of Derivative Liability		(2,190,000	)	$	2.11		(4,615,771	)
Fair Value as of September 30, 2021		-		$	-		-