SCI Engineered Materials (SCIA) 10-Q 4 Nov 19 2019 Q3 Quarterly report Financial data

Document And Entity Information

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Nov. 01, 2019
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Entity Registrant Name	SCI ENGINEERED MATERIALS, INC.
Entity Central Index Key	0000830616
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Trading Symbol	SCIA
Entity Common Stock, Shares Outstanding		4,342,744
Entity Shell Company	false
Entity Emerging Growth Company	false
Entity Small Business	true

BALANCE SHEETS

BALANCE SHEETS - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Current Assets
Cash	$ 1,694,890	$ 1,802,839
Accounts receivable, less allowance for doubtful accounts of $15,000	298,308	477,932
Note receivable	7,477	0
Inventories	3,094,944	2,752,845
Prepaid expenses	92,156	613,425
Total current assets	5,187,775	5,647,041
Property and Equipment, at cost
Machinery and equipment	8,155,324	8,017,850
Furniture and fixtures	129,683	127,610
Leasehold improvements	360,225	360,225
Construction in progress	330,651	138,067
Property, Plant and Equipment, Gross	8,975,883	8,643,752
Less accumulated depreciation	(6,948,062)	(6,720,847)
Property, Plant and Equipment, Net	2,027,821	1,922,905
Right of use asset, net	452,841	0
Other assets	85,767	75,613
Total other assets	538,608	75,613
TOTAL ASSETS	7,754,204	7,645,559
Current Liabilities
Finance lease obligations, current portion	97,322	114,853
Operating lease obligations, current portion	78,666	0
Accounts payable	243,838	321,348
Customer deposits	2,617,016	3,202,447
Accrued compensation	73,638	211,227
Accrued expenses and other	86,228	125,130
Total current liabilities	3,196,708	3,975,005
Finance lease obligations, net of current portion	148,864	147,878
Operating lease obligations, net of current portion	412,763	0
Total liabilities	3,758,335	4,122,883
Shareholders' Equity
Convertible preferred stock, Series B, 10% cumulative, nonvoting, no par value, $10 stated value, optional redemption at 103%; optional shareholder conversion 2 shares for 1; 24,152 shares issued and outstanding	508,400	514,438
Common stock, no par value, authorized 15,000,000 shares; 4,342,744 and 4,277,731 shares issued and outstanding, respectively	10,380,680	10,275,733
Additional paid-in capital	2,270,252	2,280,060
Accumulated deficit	(9,163,463)	(9,547,555)
Total shareholders' equity	3,995,869	3,522,676
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 7,754,204	$ 7,645,559

BALANCE SHEETS (Parenthetical)

BALANCE SHEETS (Parenthetical) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Allowance for doubtful accounts (in dollars)	$ 15,000	$ 15,000
Common stock, shares authorized	15,000,000	15,000,000
Common stock, shares issued	4,342,744	4,277,731
Common stock, shares outstanding	4,342,744	4,277,731
Convertible Preferred Stock Series B [Member]
Common stock, par value (in dollars per share)	$ 0	$ 0
Convertible preferred stock, series B, cumulative percentage of interest	10.00%	10.00%
Convertible preferred stock, par value (in dollars per share)	$ 0	$ 0
Convertible preferred stock, stated value (in dollars per share)	$ 10	$ 10
Convertible preferred stock, optional redemption	103.00%	103.00%
Convertible preferred stock, optional shareholder conversion	2:1	2:1
Convertible preferred stock, shares issued	24,152	24,152
Convertible preferred stock, shares outstanding	24,152	24,152

STATEMENTS OF OPERATIONS

STATEMENTS OF OPERATIONS - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Statement [Abstract]
Revenue	$ 3,255,201	$ 2,652,635	$ 10,012,187	$ 7,043,244
Cost of revenue	2,796,681	1,986,751	8,162,696	5,125,819
Gross profit	458,520	665,884	1,849,491	1,917,425
General and administrative expense	247,984	310,464	957,420	840,171
Research and development expense	80,203	98,514	283,672	252,049
Marketing and sales expense	63,462	110,209	201,427	260,805
Income from operations	66,871	146,697	406,972	564,400
Interest expense (income)	4,539	(2,015)	18,020	10,949
Income before provision for income taxes	62,332	148,712	388,952	553,451
Income tax expense	0	4,586	4,860	11,078
Net income	62,332	144,126	384,092	542,373
Dividends on preferred stock	6,038	6,038	18,114	18,114
INCOME APPLICABLE TO COMMON SHARES	$ 56,294	$ 138,088	$ 365,978	$ 524,259
Income per common share
Basic	$ 0.01	$ 0.03	$ 0.08	$ 0.12
Diluted	$ 0.01	$ 0.03	$ 0.08	$ 0.12
Weighted average shares outstanding
Basic	4,335,839	4,232,214	4,317,716	4,214,573
Diluted	4,356,947	4,294,214	4,357,273	4,228,943

STATEMENTS OF SHAREHOLDERS' EQU

STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($)	Convertible Preferred Stock Series B [Member]	Common Stock [Member]	Additional Paid-In Capital [Member]	Accumulated Deficit [Member]	Total
Balance at Dec. 31, 2017	$ 514,438	$ 10,131,307	$ 2,289,474	$ (10,455,424)	$ 2,479,795
Accretion of cumulative dividends	18,114	0	(18,114)	0	0
Proceeds from exercise of stock options (Note 4)	0	(840)	0	0	(840)
Payment of cumulative dividends (Note 5)	(24,152)	0	0	0	(24,152)
Stock based compensation expense (Note 4)	0	0	10,581	0	10,581
Common stock issued (Note 4)	0	73,379	0	0	73,379
Net income	0	0	0	542,373	542,373
Balance at Sep. 30, 2018	508,400	10,205,526	2,281,941	(9,913,051)	3,082,816
Balance at Jun. 30, 2018	502,362	10,167,903	2,283,821	(10,057,177)	2,896,909
Accretion of cumulative dividends	6,038	0	(6,038)	0	0
Proceeds from exercise of stock options (Note 4)	0	840	0	0	840
Stock based compensation expense (Note 4)	0	0	4,158	0	4,158
Common stock issued (Note 4)	0	36,783	0	0	36,783
Net income	0	0	0	144,126	144,126
Balance at Sep. 30, 2018	508,400	10,205,526	2,281,941	(9,913,051)	3,082,816
Balance at Dec. 31, 2018	514,438	10,275,733	2,280,060	(9,547,555)	3,522,676
Accretion of cumulative dividends	18,114	0	(18,114)	0	0
Proceeds from exercise of stock options (Note 4)	0	14,952	0	0	14,952
Payment of cumulative dividends (Note 5)	(24,152)	0	0	0	(24,152)
Stock based compensation expense (Note 4)	0	0	8,306	0	8,306
Common stock issued (Note 4)	0	89,995	0	0	89,995
Net income	0	0	0	384,092	384,092
Balance at Sep. 30, 2019	508,400	10,380,680	2,270,252	(9,163,463)	3,995,869
Balance at Jun. 30, 2019	502,362	10,350,684	2,273,521	(9,225,795)	3,900,772
Accretion of cumulative dividends	6,038	0	(6,038)	0	0
Stock based compensation expense (Note 4)	0	0	2,769	0	2,769
Common stock issued (Note 4)	0	29,996	0	0	29,996
Net income	0	0	0	62,332	62,332
Balance at Sep. 30, 2019	$ 508,400	$ 10,380,680	$ 2,270,252	$ (9,163,463)	$ 3,995,869

STATEMENTS OF CASH FLOWS

STATEMENTS OF CASH FLOWS - USD ($)	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 384,092	$ 542,373
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and accretion	315,161	344,163
Amortization	54,945	2,142
Stock based compensation	98,301	83,960
Loss on disposal of equipment	4,226	275
Inventory reserve	900	(27,759)
Changes in operating assets and liabilities:
Accounts receivable	179,624	(20,423)
Note receivable	(7,477)	0
Inventories	(342,999)	(1,600,487)
Prepaid expenses	521,269	(392,619)
Right of use asset	(505,701)	0
Other assets	(12,239)	(11,480)
Accounts payable	(77,510)	121,793
Operating lease obligations	491,429	0
Accrued expenses and customer deposits	(763,827)	2,923,898
Net cash provided by operating activities	340,194	1,965,836
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	(343,448)	(345,140)
Net cash used in investing activities	(343,448)	(345,140)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of common stock options	14,952	840
Payment of cumulative dividends on preferred stock	(24,152)	(24,152)
Principal payments on finance lease obligations and notes payable	(95,495)	(255,444)
Net cash used in financing activities	(104,695)	(278,756)
NET (DECREASE) INCREASE IN CASH	(107,949)	1,341,940
CASH - Beginning of period	1,802,839	920,802
CASH - End of period	1,694,890	2,262,742
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest	8,318	18,774
Income taxes	4,860	11,078
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES
Property and equipment purchased by finance lease	78,950	105,325
Increase in asset retirement obligation	$ 1,906	$ 1,796

Business Organization and Purpo

Business Organization and Purpose	9 Months Ended
	Sep. 30, 2019
Business Organization and Purpose
Business Organization and Purpose	Note 1. Business Organization and Purpose SCI Engineered Materials, Inc. (“SCI”, or the “Company”), an Ohio corporation, was incorporated in 1987. The Company operates in one segment as a global supplier and manufacturer of advanced materials for Physical Vapor Deposition (“PVD”) Thin Film Applications. The Company is focused on specific markets within the PVD industry (Photonics, Thin Film Solar, Glass and Transparent Electronics). Substantially all of the Company’s revenues are generated from customers with multi-national operations. The Company develops innovative customized solutions enabling commercial success through collaboration with end users and Original Equipment Manufacturers.

Summary of Significant Accounti

Summary of Significant Accounting Policies	9 Months Ended
	Sep. 30, 2019
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies	Note 2. Summary of Significant Accounting Policies Basis of Presentation - The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with instructions to Form 10‑Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for fair presentation of the results of operations for the periods presented have been included. The financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2018. Interim results are not necessarily indicative of results for the full year. Use of Estimates - The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of 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 estimates.

Recent Accounting Pronouncement

Recent Accounting Pronouncements	9 Months Ended
	Sep. 30, 2019
Recent Accounting Pronouncements
Recent Accounting Pronouncements	Note 3. Recent Accounting Pronouncements Leases - In February 2016, the FASB issued ASU No. 2016‑02, Leases (Topic 842). The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. In July 2018, the FASB issued ASU No. 2018‑10, Codification Improvements to Topic 842, Leases. The amendments in ASU 2018‑10 clarify, correct or remove inconsistencies in the guidance provided under ASU 2016‑02 related to sixteen specific issues identified. Also in July 2018, the FASB issued ASU No. 2018‑11, Targeted Improvements to Topic 842. This amendment provides the Company with an additional and optional transition method to adopt the new lease standard. Under this new transition method, the Company can apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption and present the accounting on a prospective or go-forward basis instead of applying to the earliest comparative period presented in the financial statements. The new lease standard became effective for the Company January 1, 2019. The Company elected to apply the new transition method upon adoption of the new standard. The Company also elected the available practical expedients on adoption. The new standard did not have a material impact on the Company’s income statements. The most significant impact of the new standard was the recognition of a ROU asset and lease liability of over $500,000 as of January 1, 2019. Revenue Recognition - The core principle of ASC 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company’s analysis of sales contracts under ASC 606 supports the recognition of revenue at a point in time, typically when title passes to the customer upon shipment, which is consistent with the previous revenue recognition model. The core principle of ASC 606 is supported by five steps which are listed below: 1. Identify the contract with the customer. 2. Identify the performance obligation in the contract. 3. Determine the transaction price. 4. Allocate the transaction price to performance obligations in the contract. 5. Recognize revenue when or as the Company satisfies a performance obligation. The Company adopted this guidance as of January 1, 2018 utilizing the modified retrospective approach method as applied to customer contracts that were not completed as of January 1, 2018. As a result, financial information for reporting periods beginning on or after January 1, 2018 are presented in accordance with ASC 606, while comparative financial information has not been adjusted and continues to be reported in accordance with the Company’s revenue recognition policies prior to the adoption of ASC 606. Implementation of the standard did not have a material impact on the Company’s financial statements as the Company’s method for recognizing revenue subsequent to the implementation of ASC 606 does not vary significantly from its revenue recognition practices under the prior revenue standard. Accordingly, there was no required cumulative adjustment to retained earnings as of January 1, 2018. The Company enters into contracts with its customers that generally represent purchase orders specifying general terms and conditions, order quantities and per unit product prices. The Company has determined that each unit of product purchased represents a separate performance obligation. The Company satisfies its performance obligations and recognizes revenue at a point in time when control of a unit of product is transferred to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products. For the majority of product sales, transfer of control occurs when the products are shipped from the Company’s manufacturing facility to the customer. The cost of delivering products to the Company’s customers is recorded as a component of cost of products sold. Those costs may include the amounts paid to a third party to deliver the products. Any freight costs billed to and paid by a customer are included in revenue. The Company considers collectability of amounts due under a contract to be probable upon inception of a sale based on an evaluation of the credit worthiness of each customer. The Company sells its products typically under agreements with payment terms less than 45 days. The Company does not typically include extended payment terms or significant financing components in contracts with customers. The majority of the Company’s contracts have an obligation to transfer products within one year. Sales commissions are expensed when incurred and recorded within marketing and sales expenses. The Company treats shipping and handling activities that occur after control of the product transfers as fulfillment activities, and therefore, does not account for shipping and handling costs as a separate performance obligation. Customer deposits are funds received in advance from customers and are recognized as revenue when the Company has transferred control of product to the customer. During the three months ended September 30, 2019 and 2018, revenue from the photonics market was approximately 100% and 71% of total revenue, respectively. During the nine months ended September 30, 2019 and 2018, revenue from the photonics market was approximately 97% and 80% of total revenue, respectively. The balance of the revenue in these periods was almost entirely from the thin film solar market. The top two customers represented approximately 79% and 63% of total revenue for the nine months ended September 30, 2019 and 2018, respectively. International shipments resulted in 10% and 20% of total revenue for the first nine months of 2019 and 2018, respectively.

Common Stock and Stock Options

Common Stock and Stock Options	9 Months Ended
	Sep. 30, 2019
Common Stock and Stock Options
Common Stock and Stock Options	Note 4. Common Stock and Stock Options Stock Based Compensation cost for all stock awards is based on the grant date fair value and recognized over the required service (vesting) period. Non cash stock based compensation expense was $32,765 and $40,941 for the three months ended September 30, 2019 and 2018, respectively. Non cash stock based compensation expense was $98,301 and $83,960 for the nine months ended September 30, 2019 and 2018, respectively. Unrecognized compensation expense was $17,473 as of September 30, 2019 and will be recognized through 2023. There was no tax benefit recorded for this compensation cost as the expense relates to incentive stock options that do not qualify for a tax deduction until, and only if, a qualifying disposition occurs. The non-employee Board members received compensation of 35,725 and 52,487 aggregate shares of common stock of the Company during the nine months ended September 30, 2019 and 2018, respectively. The stock had an aggregate value of $89,995 and $73,379 for the nine months ended September 30, 2019 and 2018, respectively, and was recorded as non-cash stock compensation expense in the financial statements. The cumulative status of options granted and outstanding at September 30, 2019, and December 31, 2018, as well as options which became exercisable in connection with the Company’s stock option plans is summarized as follows: Employee Stock Options Weighted Average Stock Options Exercise Price Outstanding at January 1, 2018 381,447 $ 4.54 Granted 41,719 1.25 Exercised (21,225) 0.84 Expired (5,000) 3.10 Outstanding at December 31, 2018 396,941 $ 4.41 Exercised (31,788) 0.84 Expired (271,500) 6.00 Forfeited (17,616) 1.00 Outstanding at September 30, 2019 76,037 $ 1.03 Options exercisable at December 31, 2018 329,988 $ 5.09 Options exercisable at September 30, 2019 33,643 $ 0.92 During the nine months ended September 30, 2019, a total of 31,788 stock options were exercised. The Company’s new President, Mr. Jeremy Young, received a loan from the Company in the amount of $14,952 in February 2019 to enable him to exercise 17,800 stock options. Per a Promissory Note signed by Mr. Young this loan is to be repaid in two installments with the final installment due January 1, 2020. The first installment of $7,475 was repaid in February 2019 and the balance is recorded on the balance sheet as a Note Receivable as of September 30, 2019. Exercise prices for options ranged from $0.84 to $1.25 at September 30, 2019. The weighted average option price for all options outstanding at September 30, 2019, was $1.03 with a weighted average remaining contractual life of 6.7 years. There were no non-employee director stock options outstanding during 2019 and 2018.

Preferred Stock

Preferred Stock	9 Months Ended
	Sep. 30, 2019
Preferred Stock
Preferred Stock	Note 5. Preferred Stock Dividends on the Series B preferred stock accrue at 10% annually on the outstanding shares. Dividends on the Series B preferred stock were $6,038 for the three months ended September 30, 2019 and 2018, and $18,114 for the nine months ended September 30, 2019 and 2018. The Company had accrued dividends on Series B preferred stock of $259,634 at September 30, 2019, and $265,672 at December 31, 2018. These amounts are included in Convertible preferred stock, Series B, on the balance sheet at September 30, 2019, and December 31, 2018. During the first nine months of 2019 and 2018, a dividend payment of $24,152 was made to preferred shareholders of record.

Inventories

Inventories	9 Months Ended
	Sep. 30, 2019
Inventories
Inventories	Note 6. Inventories Inventories consisted of the following: September 30, December 31, 2019 2018 (unaudited) Raw materials $ 1,523,573 $ 1,568,487 Work-in-process 1,444,909 1,144,080 Finished goods 157,103 70,019 Inventory reserve (30,641) (29,741) $ 3,094,944 $ 2,752,845

Earnings Per Share

Earnings Per Share	9 Months Ended
	Sep. 30, 2019
Earnings Per Share
Earnings Per Share	Note 7. Earnings Per Share Basic income per share is calculated as income applicable to common shareholders divided by the weighted average of common shares outstanding. Diluted earnings per share is calculated as diluted income applicable to common shareholders divided by the diluted weighted average number of common shares. Diluted weighted average number of common shares gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. Diluted earnings per share exclude all diluted potential shares if their effect is anti-dilutive. All convertible preferred stock and common stock options listed in Note 4 that were out-of-the-money or anti-dilutive were excluded from diluted earnings per share. The following is provided to reconcile the earnings per share calculations: Three months ended September 30, Nine months ended September 30, 2019 2018 2019 2018 Income applicable to common shares $ 56,294 $ 138,088 $ 365,978 $ 524,259 Weighted average common shares outstanding - basic 4,335,839 4,232,214 4,317,716 4,214,573 Effect of dilution 21,108 62,000 39,557 14,370 Weighted average shares outstanding - diluted 4,356,947 4,294,214 4,357,273 4,228,943

Note Payable

Note Payable	9 Months Ended
	Sep. 30, 2019
Note Payable
Note Payable	Note 8. Note Payable During October of 2019, the Company renewed its line of credit with Huntington Bank for $1 million. The line of credit bears interest at 0.5 percentage points over the Prime Commercial Rate with an expiration date of October 5, 2020. At September 30, 2019, no amounts were drawn on the line of credit.

Income Taxes

Income Taxes	9 Months Ended
	Sep. 30, 2019
Income Taxes
Income Taxes	Note 9. Income Taxes Following is the income tax expense for the three and nine months ended September 30: Three months ended September 30, Nine months ended September 30, 2019 2018 2019 2018 Federal - deferred $ — $ — $ — $ — State and local — 4,586 4,860 11,078 $ — $ 4,586 $ 4,860 $ 11,078 Deferred tax assets and liabilities result from temporary differences in the recognition of income and expense for tax and financial reporting purposes. A full valuation allowance has been recorded against the realization of the net deferred tax assets at September 30, 2019 and December 31, 2018. The Company has net operating loss carryforwards available for federal and state tax purposes of approximately $3,800,000 which expire in varying amounts through 2038.

Operating Lease

Operating Lease	9 Months Ended
	Sep. 30, 2019
Operating Lease
Operating Lease	Note 10. Operating Lease The Company entered into an operating lease with a third party on March 18, 2014 for its headquarters in Columbus, Ohio. The terms of the lease include monthly payments ranging from $8,700 to $9.700 with a maturity date of November 30, 2024. The Company has the option to extend the lease period for an additional five years beyond the original expiration date. There are no restrictions or covenants associated with the lease. The lease costs were approximately $78,400 during the nine months ended September 30, 2019. The following is a maturity analysis, by year, of the annual undiscounted cash outflows of the operating lease liabilities as of September 30, 2019: 2019 $ 26,715 2020 108,117 2021 110,364 2022 112,611 2023 114,857 2024 102,550 Total minimum lease payments $ 575,214 Operating cash outflows from operating leases 53,890 Weighted average remaining lease term – operating leases 5.1 years Weighted average discount rate – operating leases 5.5 %

Finance Leases

Finance Leases	9 Months Ended
	Sep. 30, 2019
Finance Leases
Finance Leases	Note 11. Finance Leases The Company leases certain equipment under finance leases. Future minimum lease payments, by year, with the present value of such payments, as of September 30, 2019, are shown in the following table. 2019 $ 26,952 2020 107,808 2021 91,398 2022 21,756 2023 16,315 Total minimum lease payments 264,229 Less amount representing interest 18,043 Present value of minimum lease payments 246,186 Less current portion 97,322 Finance lease obligations, net of current portion $ 148,864 The equipment under finance lease at September 30, 2019, and December 31, 2018, is included in the accompanying balance sheets as follows: September 30, 2019 December 31, 2018 Machinery and equipment $ 438,316 $ 725,036 Less accumulated depreciation and amortization 85,374 222,973 Net book value $ 352,942 $ 502,063 These assets are amortized over a period of ten years using the straight-line method and amortization is included in depreciation expense. The finance leases are structured such that ownership of the leased asset reverts to the Company at the end of the lease term. Accordingly, leased assets are depreciated using the Company’s normal depreciation methods and lives. Ownership of certain assets were transferred to the Company in accordance with the terms of the leases and these assets have been excluded from the leased asset disclosure above. The Company entered into a finance lease obligation during September 2019 for the purchase of new production and testing equipment in the amount of $78,950.

Summary of Significant Accoun_2

Summary of Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 2019
Summary of Significant Accounting Policies
Basis of Presentation	Basis of Presentation - The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with instructions to Form 10‑Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for fair presentation of the results of operations for the periods presented have been included. The financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2018. Interim results are not necessarily indicative of results for the full year.
Use of Estimates	Use of Estimates - The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of 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 estimates.

Common Stock and Stock Options

Common Stock and Stock Options (Tables)	9 Months Ended
	Sep. 30, 2019
Common Stock and Stock Options
Schedule of employee stock option	The cumulative status of options granted and outstanding at September 30, 2019, and December 31, 2018, as well as options which became exercisable in connection with the Company’s stock option plans is summarized as follows: Employee Stock Options Weighted Average Stock Options Exercise Price Outstanding at January 1, 2018 381,447 $ 4.54 Granted 41,719 1.25 Exercised (21,225) 0.84 Expired (5,000) 3.10 Outstanding at December 31, 2018 396,941 $ 4.41 Exercised (31,788) 0.84 Expired (271,500) 6.00 Forfeited (17,616) 1.00 Outstanding at September 30, 2019 76,037 $ 1.03 Options exercisable at December 31, 2018 329,988 $ 5.09 Options exercisable at September 30, 2019 33,643 $ 0.92

Inventories (Tables)

Inventories (Tables)	9 Months Ended
	Sep. 30, 2019
Inventories
Schedule of Inventories	Inventories consisted of the following: September 30, December 31, 2019 2018 (unaudited) Raw materials $ 1,523,573 $ 1,568,487 Work-in-process 1,444,909 1,144,080 Finished goods 157,103 70,019 Inventory reserve (30,641) (29,741) $ 3,094,944 $ 2,752,845

Earnings Per Share (Tables)

Earnings Per Share (Tables)	9 Months Ended
	Sep. 30, 2019
Earnings Per Share
Schedule of Earnings per share, Basic and Diluted	The following is provided to reconcile the earnings per share calculations: Three months ended September 30, Nine months ended September 30, 2019 2018 2019 2018 Income applicable to common shares $ 56,294 $ 138,088 $ 365,978 $ 524,259 Weighted average common shares outstanding - basic 4,335,839 4,232,214 4,317,716 4,214,573 Effect of dilution 21,108 62,000 39,557 14,370 Weighted average shares outstanding - diluted 4,356,947 4,294,214 4,357,273 4,228,943

Income Taxes (Tables)

Income Taxes (Tables)	9 Months Ended
	Sep. 30, 2019
Income Taxes
Schedule of income tax expense	Following is the income tax expense for the three and nine months ended September 30: Three months ended September 30, Nine months ended September 30, 2019 2018 2019 2018 Federal - deferred $ — $ — $ — $ — State and local — 4,586 4,860 11,078 $ — $ 4,586 $ 4,860 $ 11,078

Operating Lease (Tables)

Operating Lease (Tables)	9 Months Ended
	Sep. 30, 2019
Operating Lease
Schedule of annual undiscounted cash flows of the operating lease liabilities	The following is a maturity analysis, by year, of the annual undiscounted cash outflows of the operating lease liabilities as of September 30, 2019: 2019 $ 26,715 2020 108,117 2021 110,364 2022 112,611 2023 114,857 2024 102,550 Total minimum lease payments $ 575,214
Schedule of operating lease other information	Operating cash outflows from operating leases 53,890 Weighted average remaining lease term – operating leases 5.1 years Weighted average discount rate – operating leases 5.5 %

Finance Leases (Tables)

Finance Leases (Tables)	9 Months Ended
	Sep. 30, 2019
Finance Leases
Schedule of future minimum lease payments	The Company leases certain equipment under finance leases. Future minimum lease payments, by year, with the present value of such payments, as of September 30, 2019, are shown in the following table. 2019 $ 26,952 2020 107,808 2021 91,398 2022 21,756 2023 16,315 Total minimum lease payments 264,229 Less amount representing interest 18,043 Present value of minimum lease payments 246,186 Less current portion 97,322 Finance lease obligations, net of current portion $ 148,864
Schedule of equipment under finance leases	The equipment under finance lease at September 30, 2019, and December 31, 2018, is included in the accompanying balance sheets as follows: September 30, 2019 December 31, 2018 Machinery and equipment $ 438,316 $ 725,036 Less accumulated depreciation and amortization 85,374 222,973 Net book value $ 352,942 $ 502,063

Business Organization and Pur_2

Business Organization and Purpose (Details)	9 Months Ended
	Sep. 30, 2019segment
Business Organization and Purpose
Number of operating segments	1

Recent Accounting Pronounceme_2

Recent Accounting Pronouncements (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Jan. 01, 2019	Dec. 31, 2018
Operating Lease, Right-of-Use Asset	$ 452,841		$ 452,841			$ 0
Photonics market [Member]
Concentration Risk, Percentage	100.00%	71.00%	97.00%	80.00%
Top two customers [Member]
Concentration Risk, Percentage			79.00%	63.00%
International Shipments [Member]
Concentration Risk, Percentage			10.00%	20.00%
Accounting Standards Update 2016-02 [Member]
Operating Lease, Right-of-Use Asset					$ 500,000
Operating Lease, Liability					$ 500,000

Common Stock and Stock Option_2

Common Stock and Stock Options (Details) - Employee Stock Option [Member] - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Common Stock and Stock Options
Stock Options, Outstanding, Beginning Balance	396,941	381,447
Stock Options, Granted		41,719
Stock Options, Exercised	(31,788)	(21,225)
Stock Options, Expired	(271,500)	(5,000)
Stock Options, Forfeited	(17,616)
Stock Options, Outstanding, Ending Balance	76,037	396,941
Stock Options, Options exercisable	33,643	329,988
Weighted Average Exercise Price, Outstanding, Beginning Balance	$ 4.41	$ 4.54
Weighted Average Exercise Price, Granted		1.25
Weighted Average Exercise Price, Exercised	0.84	0.84
Weighted Average Exercise Price, Expired	6	3.10
Weighted Average Exercise Price, Forfeited	1
Weighted Average Exercise Price, Outstanding, Ending Balance	1.03	4.41
Weighted Average Exercise Price, Options exercisable	$ 0.92	$ 5.09

Common Stock and Stock Option_3

Common Stock and Stock Options - Additional Information (Details) - USD ($)	1 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended
	Feb. 28, 2019	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018	Dec. 31, 2017
Common Stock and Stock Options
Share-based Compensation		$ 32,765	$ 40,941	$ 98,301	$ 83,960
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized		17,473		17,473
Stock Issued During Period, Value, New Issues		$ 29,996	36,783	$ 89,995	$ 73,379
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Lower Range Limit				$ 0.84
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Upper Range Limit				1.25
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Outstanding Options, Weighted Average Exercise Price		$ 1.03		$ 1.03
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term				6 years 8 months 12 days
Employee Stock Option [Member]
Common Stock and Stock Options
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number		33,643		33,643		329,988
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period				31,788		21,225
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number		76,037		76,037		396,941	381,447
President [Member]
Common Stock and Stock Options
Notes Receivable, Related Parties	$ 14,952
Proceeds from Collection of Notes Receivable	$ 7,475
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number	17,800
Common Stock [Member]
Common Stock and Stock Options
Stock Issued During Period, Shares, New Issues				35,725	52,487
Stock Issued During Period, Value, New Issues		$ 29,996	$ 36,783	$ 89,995	$ 73,379
Common Stock [Member] | Employee Stock Option [Member]
Common Stock and Stock Options
Stock Issued During Period, Value, New Issues				$ 89,995	$ 73,379

Preferred Stock (Details)

Preferred Stock (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Preferred Stock Dividends, Income Statement Impact	$ 6,038	$ 6,038	$ 18,114	$ 18,114
Dividend Payment, Preferred Stock			$ 24,152	24,152
Series B Preferred Stock [Member]
Preferred Stock, Dividend Rate, Percentage			10.00%
Dividends			$ 259,634		$ 265,672
Dividend Payment, Preferred Stock			$ 24,152	$ 24,152

Inventories (Details)

Inventories (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Inventories
Raw materials	$ 1,523,573	$ 1,568,487
Work-in-process	1,444,909	1,144,080
Finished goods	157,103	70,019
Reserve for obsolete inventory	(30,641)	(29,741)
Inventory, Net	$ 3,094,944	$ 2,752,845

Earnings Per Share (Details)

Earnings Per Share (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Earnings Per Share
Income applicable to common shares	$ 56,294	$ 138,088	$ 365,978	$ 524,259
Weighted average common shares outstanding - basic	4,335,839	4,232,214	4,317,716	4,214,573
Effect of dilution	21,108	62,000	39,557	14,370
Weighted average shares outstanding - diluted	4,356,947	4,294,214	4,357,273	4,228,943

Notes Payable (Details)

Notes Payable (Details) - Hunting Ton Bank [Member] - USD ($)	1 Months Ended
	Oct. 31, 2019	Sep. 30, 2019
Debt Conversion [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 1,000,000
Debt Instrument, Basis Spread on Variable Rate	0.50%
Borrowings on line of credit		$ 0

Income Taxes - Income tax expen

Income Taxes - Income tax expense (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Taxes
Federal - deferred	$ 0	$ 0	$ 0	$ 0
State and local	0	4,586	4,860	11,078
Income Tax Expense (Benefit)	$ 0	$ 4,586	$ 4,860	$ 11,078

Income Taxes - Additional infor

Income Taxes - Additional information (Details)	Sep. 30, 2019USD ($)
Income Taxes
Deferred Tax Assets, Operating Loss Carryforwards, State and Local	$ 3,800,000

Operating Lease - Future minimu

Operating Lease - Future minimum lease payments (Details)	Sep. 30, 2019USD ($)
Operating Lease
2019	$ 26,715
2020	108,117
2021	110,364
2022	112,611
2023	114,857
2024	102,550
Total minimum lease payments	$ 575,214

Operating Lease - Additional in

Operating Lease - Additional information (Details)	9 Months Ended
	Sep. 30, 2019USD ($)
Operating cash outflows from operating leases	$ 53,890
Weighted average remaining lease term - operating leases	5 years 1 month 6 days
Weighted average discount rate - operating leases	5.50%
Operating lease, renewal term	5 years
Operating Lease, Cost	$ 78,400
Maximum [Member]
Operating Lease Monthly Rent Payable	9.700
Minimum [Member]
Operating Lease Monthly Rent Payable	$ 8,700

Finance Leases - Future minimum

Finance Leases - Future minimum lease payments (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Finance Leases
2019	$ 26,952
2020	107,808
2021	91,398
2022	21,756
2023	16,315
Total minimum lease payments	264,229
Less amount representing interest	18,043
Present value of minimum lease payments	246,186
Less current portion	97,322	$ 114,853
Finance lease obligations, net of current portion	$ 148,864	$ 147,878

Finance Leases - Equipment unde

Finance Leases - Equipment under finance lease and additional information (Details) - USD ($)	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Finance Leases
Machinery and equipment	$ 438,316		$ 725,036
Less accumulated depreciation and amortization	85,374		222,973
Net book value	$ 352,942		$ 502,063
Amortization period, Finance lease (in years)	10 years
Property and equipment purchased by finance lease	$ 78,950	$ 105,325