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Stockholders' Equity | 12 Months Ended
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Dec. 31, 2020
Equity [Abstract] |
Stockholders' Equity | NOTE 8 – Stockholders’ Equity Common Stock Effective February 27, 2020, our Articles of Incorporation were amended to provide for a reverse stock split of the outstanding shares of our common stock on a 1-for-10 basis (the “Reverse Stock Split”), and a corresponding decrease in the number of shares of our common stock that we are authorized to issue (the “Share Decrease”). The effects of the stock split have been retroactively reflected to all periods presented. On March 27, 2020, at a special shareholders’ meeting, our authorized shares of common stock were increased from 2,250,000 to 8,000,000. At our annual shareholders’ meeting held on June 15, 2020, our authorized shares of common stock were increased from 8,000,000 to 12,000,000. On April 6, 2020, the Company closed a public offering of equity securities in which it issued 493,027 shares of common stock and pre-funded warrants to purchase up to 22,438 shares of the Company’s common stock. The Company also issued Series A Warrants to purchase an aggregate of 515,465 shares of the Company’s common stock pursuant to a private placement. In connection with this offering, the Company issued Dawson James Securities, Inc., its Placement Agent, a warrant to purchase an aggregate of 41,237 shares of the Company’s Common Stock (which amount is based on the number of Common Shares and shares underlying the Pre-Funded Warrants) at an exercise price of $3.64 per share. Net proceeds to the Company after deducting offering expenses were approximately $1,230,000. On December 4, 2020, the Company issued 22,438 shares of common stock for the exercise of the pre-funded warrants. In the twelve months ended December 31, 2020, the Company issued 3,272,048 shares of common stock in exchange for the conversion of 7,404 shares of Series D Convertible Preferred stock, and 774,940 shares of common stock as in-kind payment of preferred stock dividends. In the twelve months ended December 31, 2020, the Company issued 25,851 shares of common stock for services. In January 2019, the Company issued 20,000 shares of common stock to directors valued at $15.00 per share, or $300,000, with such shares vesting ratably over four quarterly installments. Also in January 2019, the Company issued 8,843 shares of common stock upon the cashless exercise of Unit Purchase Options issued in our June 2018 public offering. In January and February 2019, the Company issued a total of 7,023 shares of common stock upon the exercise of 7,023 warrants having an exercise price of $10.80 resulting in gross cash proceeds of $75,848. In March 2019, the Company issued 150 shares of common stock valued at $20.00 per share to the Company’s Vice President of Business Development in connection with his achievement of performance milestones, with such shares vesting immediately. Also in March 2019, the Company closed a public offering of equity securities in which it issued 140,080 shares of common stock and warrants to purchase a total of 42,024 shares of common stock resulting in net proceeds of approximately $1,679,230, after deducting placement agent commissions and other offering expenses payable by the Company. In May 2019, the Company closed a private placement of equity securities in which it issued 40,000 shares of common stock and warrants to purchase a total of 22,000 shares of common stock resulting in net proceeds of approximately $515,000, after deducting placement agent commissions and other offering expenses payable by the Company. On August 2, 2019, the Company closed a public offering of equity securities in which it issued 287,500 shares of common stock resulting in net proceeds of approximately $1,971,000, after deducting commissions and other offering expenses payable by the Company. On August 15, 2019, the Company issued 2,500 shares of common stock valued at $6.84 per share to MHZCI, LLC, an investor relations firm engaged by the Company, as partial compensation for services to be rendered. On September 13, 2019, Aegis Capital Corp. partially exercised its over-allotment option granted by the Company in the foregoing August 2019 public offering by purchasing an additional 20,000 shares of common stock, resulting in net proceeds of $148,800 after deducting commissions. Deferred Compensation In 2020 and 2019, the Company issued to various employees, directors, and contractors shares of the Company’s common stock, subject to restrictions, pursuant to the 2013 Equity Incentive Plan (the “2013 Plan”). Such shares were valued at the fair value at the date of issue. The fair value was expensed as compensation over the vesting period and recorded as a reduction of stockholders’ equity. During 2020 and 2019, $77,187 and $303,000, respectively, of the unvested compensation cost related to these issues was recognized. Preferred Stock The Company is authorized to issue 10,000,000 shares of preferred stock, $0.001 par value. 715 and 0 shares of preferred stock were issued and outstanding at December 31, 2020 and 2019, 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 an initial stated value of $1,000 per share (the “Stated Value”). Dividends accrue at a dividend rate of 9% per annum (subject to increase upon the occurrence (and during the continuance) of certain triggering events described therein) and, on a monthly basis, shall be payable in kind by the increase of the Stated Value of the Series D Preferred Shares by said amount. The holders of the Series D Preferred Shares will have the right at any time to convert all or a portion of the Series D Preferred Shares (including, without limitation, accrued and unpaid dividends and make-whole dividends through the third anniversary of the closing date) into shares of the Company’s Common Stock at the conversion price then in effect, which is $2.50 (subject to adjustment for stock splits, dividends, recapitalizations and similar events and full ratchet price protection). In addition, a holder may at any time, alternatively, convert all, or any part, of its Series D Preferred Shares at an alternative conversion price, which equals the lower of the applicable conversion price then in effect, and the greater of (x) $1.80 and (y) 85% of the average volume weighted average price (“VWAP”) of the Common Stock for a five (5) trading day period prior to such conversion. Upon the occurrence of certain triggering events, described in the Certificate of Designations, including, but not limited to payment defaults, breaches of transaction documents, failure to maintain listing on the Nasdaq Capital Market, and other defaults set forth therein, the Series D Preferred Shares would become subject to redemption, at the option of a holder, at a 125% premium to the underlying value of the Series D Preferred Shares being redeemed. At December 31, 2020 there were 382 shares of Series D Convertible Preferred stock outstanding, which if converted as of December 31, 2020, including the make-whole dividends, would have resulted in the issuance of 181,374 shares of common stock. Concurrent with the Institutional Private Placement, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain of its directors and the Company’s largest shareholder (the “Other Private Placement”). Pursuant to the SPA, the Company issued and sold 333 shares of the Company’s newly created Series E Convertible Preferred Stock (the “Series E Preferred Stock”). Dividends accrue at a dividend rate of 9% per annum and, on a monthly basis, shall be payable in kind by the increase of the Stated Value of the Series E Preferred Shares by said amount. The Series E Preferred Stock is initially convertible into 48,544 shares of Common Stock. At December 31, 2020, all of the issued Series E Convertible Preferred Stock were outstanding, which if converted as of December 31, 2020, including the make-whole dividends, would have resulted in the issuance of 61,651 shares of common stock. Stock Options On June 15, 2020, at the Annual Meeting of Stockholders of the Company, the Company’s stockholders approved an amendment to the 2013 Plan to increase the number of shares of the Company’s common stock reserved for issuance under the 2013 Plan by 650,000 shares of our common stock to a total of 890,000 shares. As of December 31, 2020, there were 152,753 shares available for issuance under the 2013 Plan. During 2020, the Company granted a total of 579,998 options to 19 employees, 4 directors, and 5 consultants with vesting periods ranging from immediately upon issue to three years beginning May 1, 2020. In 2020, 294,373 options vested and $854,217 of compensation cost was recognized during the year. As of December 31, 2020, there were options to purchase 663,010 shares issued and outstanding under the 2013 Plan. Of this amount, there are vested options exercisable for 349,642 shares of common stock. No options were exercised during the year ended December 31, 2020. During 2019, the Company granted a total of 100,326 options to 22 employees and 2 consultants with vesting periods ranging from immediately upon issue to 4 years beginning January 1, 2019. In 2019, 38,143 options vested and $494,240 of compensation cost was recognized during the year. As of December 31, 2019, there were options to purchase 180,903 shares issued and outstanding under the 2013 Plan. Of this amount, there are vested options exercisable for 88,163 shares of common stock. No options were exercised during the year ended December 31, 2019. The Company generally grants stock options to employees and directors at exercise prices equal to the fair market value of the Company’s stock on the dates of grant. Stock options are typically granted throughout the year and generally vest over four years of service and expire ten years from the date of the award, unless otherwise specified. The Company recognizes compensation expense for the fair value of the stock options over the requisite service period for each stock option award. Total share-based compensation expense included in the statements of operations for the years ended December 31, 2020 and 2019 is $596,842, of which $573,232 is related to stock options, and $497,240, of which $ 494,740 is related to stock options, respectively. There was no capitalized share-based compensation cost as of December 31, 2020 and 2019, and there were no recognized tax benefits during the years ended December 31, 2020 and 2019. To estimate the value of an award, the Company uses the Black-Scholes option-pricing model. This model requires inputs such as expected life, expected volatility and risk-free interest rate. The forfeiture rate also impacts the amount of aggregate compensation. These inputs are subjective and generally require significant analysis and judgment to develop. While estimates of expected life, volatility and forfeiture rate are derived primarily from the Company’s historical data, the risk-free rate is based on the yield available on U.S. Treasury constant maturity rates with similar terms to the expected term of the stock option awards. The fair value of share-based awards was estimated using the Black-Scholes model with the following weighted-average assumptions for the years ended December 31, 2020 and 2019: Assumptions:
|  | 2020 |  |  | 2019 |
Dividend yield |  |  | 0.00 | % |  |  | 0.00 | %
Risk-free interest rate |  |  | 0.19-0.50 | % |  |  | 1.42-2.53 | %
Expected volatility |  |  | 116.0 – 117.0 | % |  |  | 105.2-112.1 | %
Expected life (in years) |  |  | 5 |  |  |  | 5-10 |
Option activity for the year ended December 31, 2020 and 2019 was as follows:
|  |  |  |  | Weighted Average |  |  | Weighted Average |  |  |  |
|  |  |  |  | Exercise |  |  | Remaining |  |  | Aggregate |
|  |  |  |  | Price |  |  | Contractual |  |  | Intrinsic |
|  | Options |  |  | ($) |  |  | Life (Yrs.) |  |  | Value ($) |
Options outstanding at December 31, 2018 |  |  | 82,629 |  |  |  | 2.49 |  |  |  | 6.47 |  |  |  | 60,090 |
Granted |  |  | 100,333 |  |  |  | 1.25 |  |  |  | 4.79 |  |  |  | - |
Exercised |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Forfeited or cancelled |  |  | (2,050 | ) |  |  | 1.68 |  |  |  | - |  |  |  | - |
Options outstanding at December 31, 2019 |  |  | 180,912 |  |  |  | 1.81 |  |  |  | 5.09 |  |  |  | 25,988 |
Granted |  |  | 579,998 |  |  |  | 2.55 |  |  |  | 4.57 |  |  |  | 477,802 |
Exercised |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Forfeited or cancelled |  |  | (47,900) |  |  |  | 22.62 |  |  |  | - |  |  |  | - |
Options outstanding at December 31, 2020 |  |  | 713,010 |  |  |  | 5.15 |  |  |  | 4.40 |  |  |  | 477,802 |
Options expected to vest in the future as of December 31, 2020 |  |  | 363,368 |  |  |  | 3.92 |  |  |  | 4.53 |  |  |  | - |
Options exercisable at December 31, 2020 |  |  | 349,642 |  |  |  | 6.43 |  |  |  | 4.27 |  |  |  | - |
Options vested, exercisable, and options expected to vest at December 31, 2020 |  |  | 713,010 |  |  |  | 5.15 |  |  |  | 4.40 |  |  |  | 477,802 |
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 $3.38 closing price of our Common Stock on December 31, 2020. All of the 2020 option grants have an exercise price currently below $3.38. At December 31, 2020, there was $1,029,056 of unrecognized share-based compensation expense related to unvested share options with a weighted average remaining recognition period of 2.90 years. Stock Appreciation Rights On June 23, 2020, the board of directors (the “Board”) of the Company adopted the Sigma Labs, Inc. 2020 Stock Appreciation Rights Plan (the “Plan”). The purposes of the Plan are to: (i) enable the Company to attract and retain the types of employees, consultants, and directors (collectively, “Service Providers”) who will contribute to the Company’s long-range success; (ii) provide incentives that align the interests of Service Providers with those of the shareholders of the Company; and (iii) promote the success of the Company’s business. The Plan provides for incentive awards that are only made in the form of stock appreciation rights payable in cash (“SARs”). No shares of common stock were reserved in connection with the adoption of the Plan since no shares will be issued pursuant to the Plan. SARs may be granted to any Service Provider. A SAR is the right to receive an amount equal to the Spread with respect to a share of the Company’s common stock (“Share”) upon the exercise of the SAR. The “Spread” is the difference between the exercise price per share specified in a SAR agreement on the date of grant and the fair market value per share on the date of exercise of the SAR. The exercise price per share will not be less than 100% of the fair market value of a Share on the date of grant of the SAR. The administrator of the Plan will have the authority to, among other things, prescribe the terms and conditions of each SAR, including, without limitation, the exercise price and medium of payment and vesting provisions, and to specify the provisions of the SAR Agreement relating to such grant. On June 23, 2020, the Company granted, pursuant to the Plan, (i) 60,094 SARs to its President and Chief Executive Officer, (ii) 12,019 SARs to its Vice President of Business Development, (iii) 24,038 SARs to its Chief Technology Officer, and (iv) 18,028 SARs to its Chief Financial Officer. The exercise price of each such SAR is $2.63, which was the closing price of the Company’s common stock on the date of grant. Such SARs expire on the fifth anniversary of the grant date and may be settled only in cash. Additionally, each such SAR will vest and become exercisable in three equal (as closely as possible) installments on each of the first, second and third anniversaries of the grant date, subject, in each case, to the applicable SAR holder being in the continuous employ of the Company on the applicable vesting date, and, in the event of a Change in Control (as defined in the Plan), will become immediately vested and exercisable as long as the applicable holder is in the Company’s employ immediately prior to the Change in Control, and will otherwise be on such other terms set forth in the form of Stock Appreciation Rights Agreement. On November 19, 2020, we granted 13,500 SARs to a consultant as partial compensation for services pursuant to the consulting agreement. The Company recognizes compensation expense and a corresponding liability for the fair value of the SARs over the requisite service period for each SAR award. The SAR’s are revalued at each reporting date in accordance with ASC 718 “Compensation-Stock Compensation”, and any changes in fair value are reflected in income as of the applicable reporting date. The fair value of SAR awards was estimated using the Black-Scholes model with the following weighted-average assumptions for the twelve months ended December 31, 2020: Assumptions:
|  | 2020 |
Dividend yield |  |  | 0.00 | %
Risk-free interest rate |  |  | 0.22 | %
Expected volatility |  |  | 116.8 | %
Expected life (in years) |  |  | 5 |
SARs activity for the twelve months ended December 31, 2020 was as follows:
|  |  |  |  | Weighted Average |  |  | Weighted Average |  |  |  |
|  |  |  |  | Exercise |  |  | Remaining |  |  | Aggregate |
|  |  |  |  | Price |  |  | Contractual |  |  | Intrinsic |
|  | SARs |  |  | ($) |  |  | Life (Yrs.) |  |  | Value ($) |
SARs outstanding at December 31, 2019 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Granted |  |  | 127,679 |  |  |  | 2.61 |  |  |  | 4.52 |  |  |  | 97,919 |
Exercised |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Forfeited or cancelled |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
SARs outstanding December 31, 2020 |  |  | 127,679 |  |  |  | 2.61 |  |  |  | 4.52 |  |  |  | 97,919 |
SARs expected to vest in the future as of December 31, 2020 |  |  | 125,429 |  |  |  | 2.62 |  |  |  | 4.51 |  |  |  | 95,872 |
SARs exercisable at December 31, 2020 |  |  | 2,250 |  |  |  | 2.47 |  |  |  | 4.89 |  |  |  | 2,047 |
SARs vested, exercisable, and options expected to vest at December 31, 2020 |  |  | 127,679 |  |  |  | 2.61 |  |  |  | 4.52 |  |  |  | 97,919 |
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 $3.38 closing price of our common stock on December 31, 2020. All of the 2020 SARs grants have an exercise price currently below $3.38. At December 31, 2020, there was $216,149 of unrecognized share-based compensation expense related to unvested SARs with a weighted average remaining recognition period of 2.48 years. Warrants At December 31, 2020, the Company had outstanding warrants to purchase a total of 1,881,429 shares of common stock. The warrants have exercise prices that range from $0.10 to $40.00, which if not exercised, will expire between February 21, 2022 and December 9, 2025. Warrant activity for the year ended December 31, 2020 and 2019 was as follows:
|  |  |  |  | Weighted Average |  |  | Weighted Average |
|  |  |  |  | Exercise |  |  | Remaining |
|  |  |  |  | Price |  |  | Contractual |
|  | Warrants |  |  | ($) |  |  | Life (Yrs.) |
Warrants outstanding at December 31, 2018 |  |  | 305,060 |  |  |  | 27.50 |  |  |  | 3.86 |
Granted |  |  | 65,690 |  |  |  | 15.60 |  |  |  | 4.39 |
Exercised |  |  | (7,023 | ) |  |  | 10.80 |  |  |  | - |
Forfeited or cancelled |  |  | - |  |  |  | - |  |  |  | - |
Warrants outstanding at December 31, 2019 |  |  | 363,728 |  |  |  | 25.60 |  |  |  | 3.12 |
Granted |  |  | 1,540,139 |  |  |  | 3.19 |  |  |  | 4.64 |
Exercised |  |  | (22,438 | ) |  |  | - |  |  |  | - |
Forfeited or cancelled |  |  | - |  |  |  | - |  |  |  | - |
Warrants outstanding at December 31, 2020 |  |  | 1,881,429 |  |  |  | 7.57 |  |  |  | 4.16 |
In connection with its January 2020 private placement, the Company issued 6,156 warrants to purchase its Series D Preferred Stock (the Preferred Warrants”). As of December 31, 2020, there were 10 Preferred Warrants outstanding, which if exercised would result in the issuance of 10 shares of Series D Convertible Preferred Stock. The Series D Convertible Preferred stock, including make-whole dividends, was convertible into 4,748 shares of common stock on December 31, 2020.

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- Definition The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(e)(1)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.3-04) -URI http://asc.fasb.org/extlink&oid=120397183&loc=d3e187085-122770 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI http://asc.fasb.org/topic&trid=2208762 + Details
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