SCI Engineered Materials (SCIA) 10-Q 4 May 20 2020 Q1 Quarterly report Financial data

Document And Entity Information

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2020	May 01, 2020
Document And Entity Information
Document Type	10-Q
Document Period End Date	Mar. 31, 2020
Entity Registrant Name	SCI ENGINEERED MATERIALS, INC.
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		4,396,604
Entity Central Index Key	0000830616
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1
Amendment Flag	false
Trading Symbol	SCIA

BALANCE SHEETS

BALANCE SHEETS - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Current Assets
Cash	$ 1,818,620	$ 1,828,397
Accounts receivable Trade, less allowance for doubtful accounts of $15,000	310,158	346,381
Other	7,359	2,143
Inventories	1,842,884	2,749,038
Prepaid expenses	78,799	105,464
Total current assets	4,057,820	5,031,423
Property and Equipment, at cost
Machinery and equipment	8,219,020	8,258,578
Furniture and fixtures	137,680	137,680
Leasehold improvements	592,899	592,899
Construction in progress	157,237	0
Property, Plant and Equipment, Gross	9,106,836	8,989,157
Less accumulated depreciation	(7,109,474)	(7,036,955)
Property, Plant and Equipment, Net	1,997,362	1,952,202
Right of use asset, net	415,774	434,492
Intangibles	88,030	86,958
Total other assets	503,804	521,450
TOTAL ASSETS	6,558,986	7,505,075
Current Liabilities
Finance lease obligations, current portion	99,817	98,524
Operating lease obligations, current portion	82,720	80,669
Accounts payable	129,157	254,004
Customer deposits	1,568,862	2,408,837
Accrued compensation	55,354	116,686
Accrued expenses and other	91,438	80,375
Total current liabilities	2,027,348	3,039,095
Finance lease obligations, net of current portion	99,866	125,311
Operating lease obligations, net of current portion	370,240	391,833
Total liabilities	2,497,454	3,556,239
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	520,476	514,438
Common stock, no par value, authorized 15,000,000 shares; 4,396,604 and 4,370,519 shares issued and outstanding, respectively	10,440,675	10,410,677
Additional paid-in capital	2,261,069	2,265,925
Accumulated deficit	(9,160,688)	(9,242,204)
Total shareholders' equity	4,061,532	3,948,836
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 6,558,986	$ 7,505,075

BALANCE SHEETS (Parenthetical)

BALANCE SHEETS (Parenthetical) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Allowance for doubtful accounts (in dollars)	$ 15,000	$ 15,000
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized	15,000,000	15,000,000
Common stock, shares issued	4,396,604	4,370,519
Common stock, shares outstanding	4,396,604	4,370,519
Convertible Preferred Stock Series B [Member]
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
	Mar. 31, 2020	Mar. 31, 2019
Income Statement [Abstract]
Revenue	$ 3,438,795	$ 4,015,038
Cost of revenue	2,929,457	3,318,736
Gross profit	509,338	696,302
General and administrative expense	283,165	359,800
Research and development expense	86,904	108,869
Marketing and sales expense	51,784	68,619
Income from operations	87,485	159,014
Interest expense (income)	4,069	(1,188)
Income before provision for income taxes	83,416	160,202
Income taxes	1,900	4,860
Net income	81,516	155,342
Dividends on preferred stock	6,038	6,038
INCOME APPLICABLE TO COMMON STOCK	$ 75,478	$ 149,304
Income per common share
Basic	$ 0.02	$ 0.03
Diluted	$ 0.02	$ 0.03
Weighted average shares outstanding
Basic	4,385,998	4,295,417
Diluted	4,394,574	4,350,377

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, 2018	$ 514,438	$ 10,275,733	$ 2,280,060	$ (9,547,555)	$ 3,522,676
Accretion of cumulative dividends	6,038	0	(6,038)	0	0
Stock based compensation expense (Note 4)	0	0	4,158	0	4,158
Proceeds from exercise of stock options (Note 4)	0	14,952	0	0	14,952
Common stock issued (Note 4)	0	30,002	0	0	30,002
Net income	0	0	0	155,342	155,342
Balance at Mar. 31, 2019	520,476	10,320,687	2,278,180	(9,392,213)	3,727,130
Balance at Dec. 31, 2019	514,438	10,410,677	2,265,925	(9,242,204)	3,948,836
Accretion of cumulative dividends	6,038	0	(6,038)	0	0
Stock based compensation expense (Note 4)	0	0	1,182	0	1,182
Common stock issued (Note 4)	0	29,998	0	0	29,998
Net income	0	0	0	81,516	81,516
Balance at Mar. 31, 2020	$ 520,476	$ 10,440,675	$ 2,261,069	$ (9,160,688)	$ 4,061,532

STATEMENTS OF CASH FLOWS

STATEMENTS OF CASH FLOWS - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 81,516	$ 155,342
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and accretion	112,977	109,138
Amortization	713	17,941
Stock based compensation	31,180	34,160
Gain on sale of equipment	(1,000)	0
Inventory reserve	300	300
Changes in operating assets and liabilities:
Accounts receivable	31,007	(208,925)
Note receivable		(7,477)
Inventories	905,854	(456,714)
Prepaid expenses	26,665	524,435
Right of use asset	18,718	(505,700)
Other assets	(1,785)	(1,900)
Accounts payable	(124,847)	97,863
Operating lease obligations	(19,543)	527,719
Accrued expenses and customer deposits	(891,143)	(357,961)
Net cash provided by (used in) operating activities	170,612	(71,779)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on sale of equipment	1,000	0
Purchases of property and equipment	(157,237)	(207,451)
Net cash used in investing activities	(156,237)	(207,451)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options		14,952
Principal payments on finance lease obligations and notes payable	(24,152)	(38,901)
Net cash used in financing activities	(24,152)	(23,949)
NET DECREASE IN CASH	(9,777)	(303,179)
CASH - Beginning of period	1,828,397	1,802,839
CASH - End of period	1,818,620	1,499,660
Cash paid during the periods for:
Interest	2,800	3,234
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES
Increase in asset retirement obligation	$ 900	$ 635

Business Organization and Purpo

Business Organization and Purpose	3 Months Ended
	Mar. 31, 2020
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	3 Months Ended
	Mar. 31, 2020
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, 2019. 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. Right of Use Assets and Lease Liabilities - 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 adopted the new standard on January 1, 2019. The Company also elected the package of practical expedients to not reassess existing classifications 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 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. Thus, the Company elects to use the practical expedient where incremental cost of obtaining a contract, such as commissions, is expensed when incurred because the amortization period for those costs is one year or less. 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. Product revenues are recognized upon shipment of goods as the customer has assumed the significant risks and rewards of ownership and the Company is entitled to payment at this point. Service revenues are recognized upon completion as the customer cannot realize the benefit of the service until fully completed. During the three months ended March 31, 2020 and 2019, revenue from the photonics market was 100% and approximately 97% of total revenue, respectively. The balance of the revenue in 2019 was almost entirely from the thin film solar market. The top two customers represented approximately 91% and 75% of total revenue for the three months ended March 31, 2020 and 2019, respectively. International shipments resulted in 1% and 16% of total revenue for the first three months of 2020 and 2019, respectively.

Recent Accounting Pronouncement

Recent Accounting Pronouncements	3 Months Ended
	Mar. 31, 2020
Recent Accounting Pronouncements
Recent Accounting Pronouncements	Note 3. Recent Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13 “Credit Losses - Measurement of Credit Losses on Financial Instruments.” ASU No. 2016-13 significantly changes how entities will measure credit losses for most financial assets, including accounts and notes receivables, by replacing today’s “incurred loss” approach with an “expected loss” model under which allowances will be recognized based on expected rather than incurred losses. ASU No. 2016-13 will become effective for us in the first quarter of 2021. We are evaluating the impact that the adoption of this update will have on our financial statements.

Common Stock and Stock Options

Common Stock and Stock Options	3 Months Ended
	Mar. 31, 2020
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 $31,180 and $34,160 for the three months ended March 31, 2020 and 2019, respectively. Unrecognized compensation expense was $14,580 as of March 31, 2020 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 26,085 and 8,850 aggregate shares of common stock of the Company during the three months ended March 31, 2020 and 2019, respectively. The stock had an aggregate value of $29,998 and $30,002 for the three months ended March 31, 2020 and 2019, respectively, and was recorded as non-cash stock compensation expense in the financial statements. The cumulative status of options granted and outstanding at March 31, 2020, and December 31, 2019, 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, 2019 396,941 $ 4.41 Exercised (31,788) 0.84 Expired (271,500) 6.00 Forfeited (17,616) 1.00 Outstanding at December 31, 2019 76,037 $ 1.03 Outstanding at March 31, 2020 76,037 $ 1.03 Options exercisable at December 31, 2019 48,265 $ 0.90 Options exercisable at March 31, 2020 48,265 $ 0.90 Exercise prices for options ranged from $0.84 to $1.25 at March 31, 2020. The weighted average option price for all options outstanding at March 31, 2020, was $1.03 with a weighted average remaining contractual life of 6.2 years. There were no non-employee director stock options outstanding during 2020 and 2019.

Preferred Stock

Preferred Stock	3 Months Ended
	Mar. 31, 2020
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 March 31, 2020 and 2019. The Company had accrued dividends on Series B preferred stock of $271,710 at March 31, 2020, and $265,672 at December 31, 2019. These amounts are included in Convertible preferred stock, Series B, on the balance sheet at March 31, 2020, and December 31, 2019. A dividend payment of $24,152 was made during 2019 to preferred shareholders of record. The Board of Directors approved a dividend payment of $24,152, to be paid in June 2020, to preferred shareholders of record.

Inventories

Inventories	3 Months Ended
	Mar. 31, 2020
Inventories
Inventories	Note 6. Inventories Inventories consisted of the following: March 31, December 31, 2020 2019 (unaudited) Raw materials $ 829,254 $ 883,767 Work-in-process 953,091 1,802,092 Finished goods 82,836 85,176 Inventory reserve (22,297) (21,997) $ 1,842,884 $ 2,749,038

Earnings Per Share

Earnings Per Share	3 Months Ended
	Mar. 31, 2020
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 March 31, 2020 2019 Income applicable to common shares $ 75,478 $ 149,304 Weighted average common shares outstanding - basic 4,385,998 4,295,417 Effect of dilution 8,576 54,960 Weighted average shares outstanding - diluted 4,394,574 4,350,377

Note Payable

Note Payable	3 Months Ended
	Mar. 31, 2020
Note Payable
Note Payable	Note 8. Note Payable The Company renewed its line of credit with Huntington Bank for $1 million during 2019. 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 March 31, 2020, no amounts were drawn on the line of credit.

Income Taxes

Income Taxes	3 Months Ended
	Mar. 31, 2020
Income Taxes
Income Taxes	Note 9. Income Taxes Following is the income tax expense for the three months ended March 31: 2020 2019 Federal – deferred $ — $ — State and local 1,900 4,860 $ 1,900 $ 4,860 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 March 31, 2020 and December 31, 2019. The Company has net operating loss carryforwards available for federal and state tax purposes of approximately $3,900,000 which expire in varying amounts through 2039.

Operating Lease

Operating Lease	3 Months Ended
	Mar. 31, 2020
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 $9,000 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 $27,000 and $26,100 during the three months ended March 31, 2020 and 2019, respectively. The following is a maturity analysis, by year, of the annual undiscounted cash outflows of the operating lease liabilities as of March 31, 2020: 2020 $ 81,157 2021 110,364 2022 112,611 2023 114,857 2024 102,550 Total minimum lease payments $ 521,539 Operating cash outflows from operating leases $ 92,359 Weighted average remaining lease term – operating leases 4.7 years Weighted average discount rate – operating leases 5.5 %

Finance Leases

Finance Leases	3 Months Ended
	Mar. 31, 2020
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 March 31, 2020, are shown in the following table. 2020 $ 80,855 2021 91,398 2022 21,609 2023 18,129 Total minimum lease payments 211,991 Less amount representing interest 12,308 Present value of minimum lease payments 199,683 Less current portion 99,817 Finance lease obligations, net of current portion $ 99,866 The equipment under finance lease at March 31, 2020, and December 31, 2019, is included in the accompanying balance sheets as follows: March 31, 2020 December 31, 2019 Machinery and equipment $ 438,316 $ 438,316 Less accumulated depreciation and amortization 109,264 98,305 Net book value $ 329,052 $ 340,011 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.

Subsequent Event

Subsequent Event	3 Months Ended
	Mar. 31, 2020
Subsequent Event
Subsequent Event	Note 12. Subsequent Event On April 17, 2020 we entered into an unsecured promissory note under the Paycheck Protection Program (the “PPP”), with a principal amount of $325,300. The PPP was established under the recently congressional approved Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration (the “SBA”). The term of the PPP loan is two years. The interest rate on this loan is 1.0% per annum, which shall be deferred for the first six months of the term of the loan. After the initial six-month deferral period, the loan requires monthly payments of principal and interest until maturity with respect to any portion of the PPP loan which is not forgiven as described below. The Company is permitted to prepay or partially prepay the PPP loan at any time with no prepayment penalties. Under the terms of the CARES Act, PPP loan recipients can apply for, and be granted, forgiveness for all or a portion of loans granted under the PPP. Such forgiveness will be determined, subject to limitations and ongoing rulemaking by the SBA, based on the use of loan proceeds for payroll costs and mortgage interest, rent or utility costs and the maintenance of employee and compensation levels. While there is no assurance the Company will obtain forgiveness of the PPP loan in whole or in part, it expects most of this loan to be forgiven by the SBA as the Company anticipates all loan covenants to be met.

Summary of Significant Accoun_2

Summary of Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2020
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, 2019. 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.
Right of Use Assets and Lease Liabilities	Right of Use Assets and Lease Liabilities - 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 adopted the new standard on January 1, 2019. The Company also elected the package of practical expedients to not reassess existing classifications 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	Revenue Recognition - 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. Thus, the Company elects to use the practical expedient where incremental cost of obtaining a contract, such as commissions, is expensed when incurred because the amortization period for those costs is one year or less. 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. Product revenues are recognized upon shipment of goods as the customer has assumed the significant risks and rewards of ownership and the Company is entitled to payment at this point. Service revenues are recognized upon completion as the customer cannot realize the benefit of the service until fully completed. During the three months ended March 31, 2020 and 2019, revenue from the photonics market was 100% and approximately 97% of total revenue, respectively. The balance of the revenue in 2019 was almost entirely from the thin film solar market. The top two customers represented approximately 91% and 75% of total revenue for the three months ended March 31, 2020 and 2019, respectively. International shipments resulted in 1% and 16% of total revenue for the first three months of 2020 and 2019, respectively.

Common Stock and Stock Options

Common Stock and Stock Options (Tables)	3 Months Ended
	Mar. 31, 2020
Common Stock and Stock Options
Schedule of share-based compensation, employee stock options, activity	The cumulative status of options granted and outstanding at March 31, 2020, and December 31, 2019, 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, 2019 396,941 $ 4.41 Exercised (31,788) 0.84 Expired (271,500) 6.00 Forfeited (17,616) 1.00 Outstanding at December 31, 2019 76,037 $ 1.03 Outstanding at March 31, 2020 76,037 $ 1.03 Options exercisable at December 31, 2019 48,265 $ 0.90 Options exercisable at March 31, 2020 48,265 $ 0.90

Inventories (Tables)

Inventories (Tables)	3 Months Ended
	Mar. 31, 2020
Inventories
Schedule of Inventories	Inventories consisted of the following: March 31, December 31, 2020 2019 (unaudited) Raw materials $ 829,254 $ 883,767 Work-in-process 953,091 1,802,092 Finished goods 82,836 85,176 Inventory reserve (22,297) (21,997) $ 1,842,884 $ 2,749,038

Earnings Per Share (Tables)

Earnings Per Share (Tables)	3 Months Ended
	Mar. 31, 2020
Earnings Per Share
Summary of reconciliation of earnings per share calculations	The following is provided to reconcile the earnings per share calculations: Three months ended March 31, 2020 2019 Income applicable to common shares $ 75,478 $ 149,304 Weighted average common shares outstanding - basic 4,385,998 4,295,417 Effect of dilution 8,576 54,960 Weighted average shares outstanding - diluted 4,394,574 4,350,377

Income Taxes (Tables)

Income Taxes (Tables)	3 Months Ended
	Mar. 31, 2020
Income Taxes
Schedule of Components of the income tax provision	Following is the income tax expense for the three months ended March 31: 2020 2019 Federal – deferred $ — $ — State and local 1,900 4,860 $ 1,900 $ 4,860

Operating Lease (Tables)

Operating Lease (Tables)	3 Months Ended
	Mar. 31, 2020
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 March 31, 2020: 2020 $ 81,157 2021 110,364 2022 112,611 2023 114,857 2024 102,550 Total minimum lease payments $ 521,539
Schedule of operating lease other information	Operating cash outflows from operating leases $ 92,359 Weighted average remaining lease term – operating leases 4.7 years Weighted average discount rate – operating leases 5.5 %

Finance Leases (Tables)

Finance Leases (Tables)	3 Months Ended
	Mar. 31, 2020
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 March 31, 2020, are shown in the following table. 2020 $ 80,855 2021 91,398 2022 21,609 2023 18,129 Total minimum lease payments 211,991 Less amount representing interest 12,308 Present value of minimum lease payments 199,683 Less current portion 99,817 Finance lease obligations, net of current portion $ 99,866
Schedule of equipment under finance leases	The equipment under finance lease at March 31, 2020, and December 31, 2019, is included in the accompanying balance sheets as follows: March 31, 2020 December 31, 2019 Machinery and equipment $ 438,316 $ 438,316 Less accumulated depreciation and amortization 109,264 98,305 Net book value $ 329,052 $ 340,011

Business Organization and Pur_2

Business Organization and Purpose (Details)	3 Months Ended
	Mar. 31, 2020segment
Business Organization and Purpose
Number of operating segments	1

Summary of Significant Accoun_3

Summary of Significant Accounting Policies (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019	Jan. 01, 2019
Accounting Policies [Line Items]
ROU asset	$ 415,774		$ 434,492
Geographic Concentration Risk [Member] | Sales Revenue, Net [Member] | International
Accounting Policies [Line Items]
Concentration Risk, Percentage	1.00%	16.00%
Product Concentration Risk [Member] | Sales Revenue, Net [Member] | Photonics market [Member]
Accounting Policies [Line Items]
Concentration Risk, Percentage	100.00%	97.00%
Accounting Standards Update 2016-02 [Member] | Restatement Adjustment
Accounting Policies [Line Items]
ROU asset				$ 500,000
Lease liability				$ 500,000
Two Customers [Member] | Sales Revenue, Net [Member]
Accounting Policies [Line Items]
Concentration Risk, Percentage	91.00%	75.00%

Common Stock and Stock Option_2

Common Stock and Stock Options (Details) - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Common Stock and Stock Options
Weighted Average Contractual Term, Outstanding	6 years 2 months 12 days
Employee Stock Option [Member]
Common Stock and Stock Options
Stock Options, Outstanding, Beginning Balance	76,037	396,941
Stock Options, Exercised		(31,788)
Stock Options, Expired		(271,500)
Forfeited, Stock Options		(17,616)
Stock Options, Outstanding, Ending Balance	76,037	76,037
Stock Options, Options exercisable	48,265	48,265
Weighted Average Exercise Price, Outstanding, Beginning Balance	$ 1.03	$ 4.41
Weighted Average Exercise Price, Exercised		0.84
Weighted Average Exercise Price, Expired		6
Weighted Average Exercise Price, Forfeited		1
Weighted Average Exercise Price, Outstanding, Ending Balance	1.03	1.03
Weighted Average Exercise Price, Options exercisable	$ 0.90	$ 0.90

Common Stock and Stock Option_3

Common Stock and Stock Options - Additional Information (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019	Dec. 31, 2018
Common Stock and Stock Options
Stock based compensation	$ 31,180	$ 34,160
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Total	14,580
Stock Issued During Period, Value, New Issues	$ 29,998	30,002
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, Ending Balance	$ 1.03
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term	6 years 2 months 12 days
Common Stock [Member]
Common Stock and Stock Options
Stock Issued During Period, Value, New Issues	$ 29,998	$ 30,002
Employee Stock Option [Member]
Common Stock and Stock Options
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	76,037		76,037	396,941
Employee Stock Option [Member] | Common Stock [Member]
Common Stock and Stock Options
Stock Issued During Period, Shares, New Issues	26,085	8,850
Stock Issued During Period, Value, New Issues	$ 29,998	$ 30,002
Non-employee director
Common Stock and Stock Options
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	0	0

Preferred Stock (Details)

Preferred Stock (Details) - USD ($)	3 Months Ended		9 Months Ended	12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Sep. 30, 2019	Dec. 31, 2019
Preferred Stock Dividends, Income Statement Impact	$ 6,038	$ 6,038
Dividend Payment, Preferred Stock	24,152			$ 24,152
Series B Preferred Stock [Member]
Preferred Stock, Dividend Rate, Percentage			10.00%
Preferred Stock Dividends, Income Statement Impact	6,038	$ 6,038
Dividends	$ 271,710			$ 265,672

Inventories (Details)

Inventories (Details) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Inventories
Raw materials	$ 829,254	$ 883,767
Work-in-process	953,091	1,802,092
Finished goods	82,836	85,176
Inventory reserve	(22,297)	(21,997)
Inventory, Net	$ 1,842,884	$ 2,749,038

Earnings Per Share - Reconcilia

Earnings Per Share - Reconciliation of Earnings Per Share Calculations (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Earnings Per Share
Income applicable to common shares	$ 75,478	$ 149,304
Weighted average common shares outstanding - basic	4,385,998	4,295,417
Effect of dilution	8,576	54,960
Weighted average shares outstanding - diluted	4,394,574	4,350,377

Note Payable (Details)

Note Payable (Details) - Huntington Bank [Member] - USD ($)	12 Months Ended
	Dec. 31, 2019	Mar. 31, 2020
Debt Conversion [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 1,000,000
Borrowings on line of credit		$ 0
Prime Commercial Rate
Debt Conversion [Line Items]
Debt Instrument, Basis Spread on Variable Rate	0.50%

Income Taxes - Income tax expen

Income Taxes - Income tax expense (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income Taxes
Federal - deferred	$ 0	$ 0
State and local	1,900	4,860
Total	$ 1,900	$ 4,860

Income Taxes - Additional infor

Income Taxes - Additional information (Details)	3 Months Ended
	Mar. 31, 2020USD ($)
Income Taxes
Deferred Tax Assets, Operating Loss Carryforwards, State and Local	$ 3,900,000
Operating Loss Carry forward Expiration Year	2039

Operating Lease - Future Minimu

Operating Lease - Future Minimum Lease Payments (Details)	Mar. 31, 2020USD ($)
Operating Lease
2020	$ 81,157
2021	110,364
2022	112,611
2023	114,857
2024	102,550
Total minimum lease payments	$ 521,539

Operating Lease - Additional In

Operating Lease - Additional Information (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Operating cash outflows from operating leases	$ 92,359
Weighted average remaining lease term - operating leases	4 years 8 months 12 days
Weighted average discount rate - operating leases	5.50%
Operating lease, renewal term	5 years
Operating Lease, Cost	$ 27,000	$ 26,100
Minimum [Member]
Operating Lease Monthly Rent Payable	9,000
Maximum [Member]
Operating Lease Monthly Rent Payable	$ 9,700

Finance Leases - Future minimum

Finance Leases - Future minimum lease payments (Details) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Finance Leases
2020	$ 80,855
2021	91,398
2022	21,609
2023	18,129
Total minimum lease payments	211,991
Less amount representing interest	12,308
Present value of minimum lease payments	199,683
Less current portion	99,817	$ 98,524
Finance lease obligations, net of current portion	$ 99,866	$ 125,311

Finance Lease - Equipment under

Finance Lease - Equipment under finance lease and additional information (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Finance Leases
Machinery and equipment	$ 438,316	$ 438,316
Less accumulated depreciation and amortization	109,264	98,305
Net book value	$ 329,052	$ 340,011
Amortization period, Finance lease (in years)	10 years

Subsequent Event (Details)

Subsequent Event (Details) - Notes Payable to Banks [Member] - Subsequent Event [Member]	Apr. 17, 2020USD ($)
Subsequent Event [Line Items]
Principal amount	$ 325,300
Debt term	2 years
Debt interest rate (percentage)	1.00%
Interest payment deferred period	6 months
Prepayment penalties	$ 0