Quarterly report pursuant to Section 13 or 15(d)

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2021
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

NOTE 1 - Summary of Significant Accounting Policies


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


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


Reclassification - Certain amounts in prior-period financial statements have been reclassified for comparative purposes to conform to presentation in the current-period financial statements. 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.


Pursuant to ASC 815-40-25-10, because the Company did not have sufficient authorized and unissued shares of common stock available to settle the warrants at the issue date, such warrants were accounted for as a derivative liability. On May 24, 2021, upon receiving shareholder approval to increase its authorized common shares, the Company reclassified the warrant liability to equity pursuant to ASC 815.40.35.8.


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


    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):


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 outstanding warrants, options and preferred shares were excluded due to the anti-dilutive effect they would have on the computation. At September 30, 2021 and 2020, the Company had the following common shares underlying these instruments:


    September 30,  
    2021     2020  
Warrants     3,987,931       1,845,722  
Preferred Stock Warrants     -       260,089  
Stock Options     1,400,407       610,229  
Preferred Stock     124,483       227,695  
Total Underlying Common Shares     5,512,821       2,943,735  



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 and 2020:


    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 )
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.


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