Quarterly report pursuant to Section 13 or 15(d)

Summary of Significant Accounting Policies (Policies)

Summary of Significant Accounting Policies (Policies)
9 Months Ended
Sep. 30, 2022
Accounting Policies [Abstract]  
Nature of Business

Nature of Business -Sigma Additive Solutions, Inc. (formerly Sigma Labs, Inc.), a Nevada corporation (“Company,” “Sigma,” “we,” “us” and “our”), was founded by a group of scientists, engineers and businessmen to develop and commercialize novel and unique manufacturing and materials technologies. Sigma believes that some of these technologies will fundamentally redefine conventional quality assurance and process control practices by embedding them into the manufacturing processes in real time, enabling process intervention and ultimately leading to closed loop process control. The Company anticipates that its core technologies will allow its customers 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.


Basis of Presentation

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, 2022 and 2021 and for the periods then ended have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The Company suggests these condensed financial statements be read in conjunction with the December 31, 2021 audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K. The results of operations for the period ended September 30, 2022 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.


Fair Value of Financial Instruments

Fair Value of Financial Instruments - The carrying amounts reported in the balance sheets for the cash and cash equivalents, receivables, accounts payable, and accrued liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of 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 issued warrants to purchase an aggregate of 2,190,000 shares of common stock in a private placement concurrently with a registered direct offering of our common stock The warrants became exercisable on May 24, 2021, the date the Company obtained stockholder approval to increase its authorized common shares from 12,000,000 to 24,000,000, and will expire on May 24, 2023.


Pursuant to ASC 815.40.25.10, such warrants were accounted for as a derivative liability because the Company did not have sufficient authorized and unissued shares of common stock available to settle the warrants at the issue date. On May 24, 2021, upon receiving stockholder approval to increase its authorized common shares, the Company reclassified the warrant liability to equity pursuant to ASC 815.40.35.8.


For the nine months ended September 30, 2021, the Company recorded a gain of $1,092,441 due to the change in the fair value of the derivative liability as measured on a recurring basis.


Loss Per Share

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 Company’s outstanding warrants, options and preferred stock were excluded due to the anti-dilutive effect they would have on the computation. At September 30, 2022 and 2021, the Company had the following common shares underlying these instruments:


    September 30,  
    2022     2021  
Warrants     3,825,781       3,987,931  
Stock Options     1,784,942       1,400,407  
Preferred Stock     148,918       124,483  
Total Underlying Common Shares     5,759,641       5,512,821  



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


    2022     2021     2022     2021  
    Three Months Ended September 30     Nine Months Ended September 30  
    2022     2021     2022     2021  
Net Loss per Common Share - Basic and Diluted   $ (0.22 )   $ (0.24 )   $ (0.65 )   $ (0.53 )
Loss Applicable to Common Stockholders (numerator)   $ (2,306,528 )   $  (2,505,198 )   $ (6,789,533 )   $ (5,076,532 )
Weighted Average Number of Common Shares Outstanding Used in Loss Per Share During the Period (denominator)     10,498,802       10,494,560       10,498,802       9,602,666  


Accounting Estimates

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


Revenue Recognition

Revenue Recognition The Company’s revenue is derived primarily from sales of our software and related hardware suite under perpetual licenses and from providing engineering services under contracts. The Company recognizes revenue in accordance with ASC Topic No. 606. In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that superseded nearly all existing revenue recognition guidance under prior U.S. GAAP and replaced it with a principles-based approach for determining revenue recognition. The core principle of the standard is the recognition of revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In general, we determine revenue recognition by: (1) identifying the contract, or contracts, with our customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to performance obligations in the contract; and (5) recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.


In January 2022, the Company began offering a subscription option to its customers, pursuant to which it leases its PrintRite3D platform for terms between 12 and 36 months and provide technical support and maintenance for the term of the arrangement, as well as installation and training. The Company has determined these are leases because they relate to discrete pieces of equipment to which customers have the right to substantially all the economic benefit from and exclusive right to use during the term of the arrangement. These leases are classified as operating leases and the Company retains title to the underlying equipment.


The leases may be renewed for successive one-year terms unless notice is given by either party of its intent not to renew at least 30 days before the end of the lease term. For leases with 36-month terms, the lessee may terminate the agreement after the first 18 months with 30-days written notice. Some, but not all, of the leases permit lessees to purchase the equipment at any time at an amount that approximates fair value and are not reasonably certain to be exercised at the inception of the lease. There are no anticipated variable lease payments at the inception of the lease.


There are two non-lease components in the arrangement that consist of technical support and maintenance, and installation and training. The Company has elected the single component practical expedient to combine the technical support and maintenance with the lease as they have the same pattern of transfer. The installation and training component does not have the same pattern of transfer; therefore, this component is not eligible for the single component practical expedient. The consideration has been allocated on a relative fair value basis of the underlying lease and non-lease components. The Company has estimated the residual value of the leased equipment based on its useful life, and the ability to refurbish and sell the equipment, as well as the Company’s ability to componentize the hardware and utilize subassemblies in other products.


Revenue from these operating leases for the three and nine months ended September 30, 2022 was $2,834 and $17,006, respectively.



Minimum Lease Payments Receivable


Minimum lease payments receivable for each of the succeeding years ending December 31 are as follows:


Year ending December 31,   Amount  
2022 (remaining)   $ 8,503  
2023   $ 8,503  
2024     -  
2025 and thereafter     -  
Total   $ 17,006  


Equipment Underlying Operating Leases:


Equipment under operating leases as of September 30, 2022 were comprised of the following:


    September 30,
PrintRite 3D Hardware   $ 38,949  
Accumulated Depreciation     4,173  
Net Book Value   $ 34,776  


The Company is depreciating the underlying equipment over its useful life of 7 years, but certain subassemblies and components may have a longer economic life.