Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Aug. 02, 2019 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 | |
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 Filer Category | Non-accelerated Filer | |
Trading Symbol | SCIA | |
Entity Common Stock, Shares Outstanding | 4,325,099 | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false |
BALANCE SHEETS
BALANCE SHEETS - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Current Assets | ||
Cash | $ 1,798,333 | $ 1,802,839 |
Accounts receivable, less allowance for doubtful accounts of $15,000 | 351,247 | 477,932 |
Note receivable | 7,477 | 0 |
Inventories | 3,562,209 | 2,752,845 |
Prepaid expenses | 54,949 | 613,425 |
Total current assets | 5,774,215 | 5,647,041 |
Property and Equipment, at cost | ||
Machinery and equipment | 8,145,042 | 8,017,850 |
Furniture and fixtures | 129,683 | 127,610 |
Leasehold improvements | 360,225 | 360,225 |
Construction in progress | 131,973 | 138,067 |
Property, Plant and Equipment, Gross | 8,766,923 | 8,643,752 |
Less accumulated depreciation | (6,854,081) | (6,720,847) |
Property, Plant and Equipment, Net | 1,912,842 | 1,922,905 |
Right of use asset, net | 470,825 | 0 |
Other assets | 82,984 | 75,613 |
Total other assets | 553,809 | 75,613 |
TOTAL ASSETS | 8,240,866 | 7,645,559 |
Current Liabilities | ||
Finance lease obligations, current portion | 77,956 | 114,853 |
Operating lease obligations, current portion | 76,710 | 0 |
Accounts payable | 326,971 | 321,348 |
Customer deposits | 3,127,505 | 3,202,447 |
Accrued compensation | 97,279 | 211,227 |
Accrued expenses and other | 92,243 | 125,130 |
Total current liabilities | 3,798,664 | 3,975,005 |
Finance lease obligations, net of current portion | 108,384 | 147,878 |
Operating lease obligations, net of current portion | 433,046 | 0 |
Total liabilities | 4,340,094 | 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 | 502,362 | 514,438 |
Common stock, no par value, authorized 15,000,000 shares; 4,325,099 and 4,277,731 shares issued and outstanding, respectively | 10,350,684 | 10,275,733 |
Additional paid-in capital | 2,273,521 | 2,280,060 |
Accumulated deficit | (9,225,795) | (9,547,555) |
Total shareholders' equity | 3,900,772 | 3,522,676 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 8,240,866 | $ 7,645,559 |
BALANCE SHEETS (Parenthetical)
BALANCE SHEETS (Parenthetical) - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 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 | 4,325,099 | 4,277,731 |
Common stock, shares outstanding | 4,325,099 | 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 | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Statement [Abstract] | ||||
Revenue | $ 2,741,948 | $ 2,543,751 | $ 6,756,986 | $ 4,390,609 |
Cost of revenue | 2,047,279 | 1,754,222 | 5,366,015 | 3,139,068 |
Gross profit | 694,669 | 789,529 | 1,390,971 | 1,251,541 |
General and administrative expense | 349,636 | 282,539 | 709,436 | 529,707 |
Research and development expense | 94,600 | 87,696 | 203,469 | 153,535 |
Marketing and sales expense | 69,346 | 89,804 | 137,965 | 150,596 |
Income from operations | 181,087 | 329,490 | 340,101 | 417,703 |
Interest expense | 14,669 | 5,236 | 13,481 | 12,964 |
Income before provision for income taxes | 166,418 | 324,254 | 326,620 | 404,739 |
Income tax expense | 0 | 3,244 | 4,860 | 6,492 |
Net income | 166,418 | 321,010 | 321,760 | 398,247 |
Dividends on preferred stock | 6,038 | 6,038 | 12,076 | 12,076 |
INCOME APPLICABLE TO COMMON SHARES | $ 160,380 | $ 314,972 | $ 309,684 | $ 386,171 |
Income per common share | ||||
Basic | $ 0.04 | $ 0.07 | $ 0.07 | $ 0.09 |
Diluted | $ 0.04 | $ 0.07 | $ 0.07 | $ 0.09 |
Weighted average shares outstanding | ||||
Basic | 4,321,387 | 4,214,605 | 4,308,504 | 4,205,608 |
Diluted | 4,363,276 | 4,222,613 | 4,352,297 | 4,206,762 |
STATEMENTS OF SHAREHOLDERS' EQU
STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Convertible Preferred Stock Series B [Member] | Total |
Balance at Dec. 31, 2017 | $ 10,131,307 | $ 2,289,474 | $ (10,455,424) | $ 514,438 | $ 2,479,795 |
Accretion of cumulative dividends | 0 | (6,038) | 0 | 6,038 | |
Stock based compensation expense (Note 4) | 0 | 2,738 | 0 | 0 | 2,738 |
Common stock issued (Note 4) | 17,848 | 0 | 0 | 0 | 17,848 |
Net income | 0 | 0 | 77,237 | 0 | 77,237 |
Balance at Mar. 31, 2018 | 10,149,155 | 2,286,174 | (10,378,187) | 520,476 | 2,577,618 |
Balance at Dec. 31, 2017 | 10,131,307 | 2,289,474 | (10,455,424) | 514,438 | 2,479,795 |
Net income | 398,247 | ||||
Balance at Jun. 30, 2018 | 10,167,903 | 2,283,821 | (10,057,177) | 502,362 | 2,896,909 |
Balance at Mar. 31, 2018 | 10,149,155 | 2,286,174 | (10,378,187) | 520,476 | 2,577,618 |
Accretion of cumulative dividends | 0 | (6,038) | 0 | 6,038 | |
Accrual of cumulative dividends | 0 | 0 | 0 | (24,152) | (24,152) |
Stock based compensation expense (Note 4) | 0 | 3,685 | 0 | 0 | 3,685 |
Common stock issued (Note 4) | 18,748 | 0 | 0 | 0 | 18,748 |
Net income | 0 | 0 | 321,010 | 0 | 321,010 |
Balance at Jun. 30, 2018 | 10,167,903 | 2,283,821 | (10,057,177) | 502,362 | 2,896,909 |
Balance at Dec. 31, 2018 | 10,275,733 | 2,280,060 | (9,547,555) | 514,438 | 3,522,676 |
Accretion of cumulative dividends | 0 | (6,038) | 0 | 6,038 | |
Stock based compensation expense (Note 4) | 0 | 4,158 | 0 | 0 | 4,158 |
Proceeds from exercise of stock options (Note 4) | 14,952 | 0 | 0 | 0 | 14,952 |
Common stock issued (Note 4) | 30,002 | 0 | 0 | 0 | 30,002 |
Net income | 0 | 0 | 155,342 | 0 | 155,342 |
Balance at Mar. 31, 2019 | 10,320,687 | 2,278,180 | (9,392,213) | 520,476 | 3,727,130 |
Balance at Dec. 31, 2018 | 10,275,733 | 2,280,060 | (9,547,555) | 514,438 | 3,522,676 |
Net income | 321,760 | ||||
Balance at Jun. 30, 2019 | 10,350,684 | 2,273,521 | (9,225,795) | 502,362 | 3,900,772 |
Balance at Mar. 31, 2019 | 10,320,687 | 2,278,180 | (9,392,213) | 520,476 | 3,727,130 |
Accretion of cumulative dividends | 0 | (6,038) | 0 | 6,038 | |
Payment of cumulative dividends (Note 5) | 0 | 0 | 0 | (24,152) | (24,152) |
Stock based compensation expense (Note 4) | 0 | 1,379 | 0 | 0 | 1,379 |
Common stock issued (Note 4) | 29,997 | 0 | 0 | 0 | 29,997 |
Net income | 0 | 0 | 166,418 | 0 | 166,418 |
Balance at Jun. 30, 2019 | $ 10,350,684 | $ 2,273,521 | $ (9,225,795) | $ 502,362 | $ 3,900,772 |
STATEMENTS OF CASH FLOWS
STATEMENTS OF CASH FLOWS - USD ($) | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income | $ 321,760 | $ 398,247 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and accretion | 219,302 | 242,250 |
Amortization | 36,261 | 1,554 |
Stock based compensation | 65,536 | 43,019 |
Loss on disposal of equipment | 4,226 | 0 |
Inventory reserve | 600 | 3,000 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 126,685 | (419,363) |
Note receivable | (7,477) | 0 |
Inventories | (809,964) | (951,460) |
Prepaid expenses | 558,476 | (81,358) |
Right of use asset | (505,700) | 0 |
Other assets | (8,757) | (8,011) |
Accounts payable | 5,623 | 352,940 |
Operating lease obligations | 509,756 | 0 |
Accrued expenses and customer deposits | (223,047) | 2,395,906 |
Net cash provided by operating activities | 293,280 | 1,976,724 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchases of property and equipment | (212,195) | (127,972) |
Net cash used in investing activities | (212,195) | (127,972) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from exercise of common stock options | 14,952 | 0 |
Payment of cumulative dividends on preferred stock | (24,152) | 0 |
Principal payments on finance lease obligations and notes payable | (76,391) | (187,258) |
Net cash used in financing activities | (85,591) | (187,258) |
NET (DECREASE) INCREASE IN CASH | (4,506) | 1,661,494 |
CASH - Beginning of period | 1,802,839 | 920,802 |
CASH - End of period | 1,798,333 | 2,582,296 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||
Interest | 5,939 | 13,704 |
Income taxes | 4,860 | 6,492 |
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES | ||
Property and equipment purchased by finance lease | 105,325 | |
Increase in asset retirement obligation | $ 1,271 | $ 1,160 |
Business Organization and Purpo
Business Organization and Purpose | 6 Months Ended |
Jun. 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. Through collaboration with end users and Original Equipment Manufacturers the Company develops innovative customized solutions enabling commercial success. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 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 | 6 Months Ended |
Jun. 30, 2019 | |
Summary of Significant Accounting Policies | |
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 June 30, 2019 and 2018, revenue from the photonics market was approximately 92% and 84% of total revenue, respectively. During the six months ended June 30, 2019 and 2018, revenue from the photonics market was approximately 95% and 85% 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 76% and 68% of total revenue for the six months ended June 30, 2019 and 2018, respectively. International shipments resulted in 14% and 15% of total revenue for the first six months of 2019 and 2018, respectively. |
Common Stock and Stock Options
Common Stock and Stock Options | 6 Months Ended |
Jun. 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 $31,376 and $22,433 for the three months ended June 30, 2019 and 2018, respectively. Non cash stock based compensation expense was $65,536 and $43,019 for the six months ended June 30, 2019 and 2018, respectively. Unrecognized compensation expense was $20,241 as of June 30, 2019 and will be recognized through 2023. There was no tax benefit recorded for this compensation cost as the expense primarily 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 18,080 and 35,957 aggregate shares of common stock of the Company during the six months ended June 30, 2019 and 2018, respectively. The stock had an aggregate value of $59,999 and $36,597 for the six months ended June 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 June 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 June 30, 2019 76,037 $ 1.03 Options exercisable at December 31, 2018 329,988 $ 5.09 Options exercisable at June 30, 2019 33,643 $ 0.92 During the six months ended June 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 June 30, 2019. Exercise prices for options ranged from $0.84 to $1.25 at June 30, 2019. The weighted average option price for all options outstanding at June 30, 2019, was $1.03 with a weighted average remaining contractual life of 7.2 years. There were no non-employee director stock options outstanding during 2019 and 2018. |
Preferred Stock
Preferred Stock | 6 Months Ended |
Jun. 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 June 30, 2019 and 2018, and $12,076 for the six months ended June 30, 2019 and 2018. The Company had accrued dividends on Series B preferred stock of $253,596 at June 30, 2019, and $265,672 at December 31, 2018. These amounts are included in Convertible preferred stock, Series B, on the balance sheet at June 30, 2019, and December 31, 2018. During June 2019, a dividend payment of $24,152 was made to preferred shareholders of record as of December 31, 2018. |
Inventories
Inventories | 6 Months Ended |
Jun. 30, 2019 | |
Inventories | |
Inventories | Note 6. Inventories Inventories consisted of the following: June 30, December 31, 2019 2018 (unaudited) Raw materials $ 1,556,461 $ 1,568,487 Work-in-process 1,930,467 1,144,080 Finished goods 105,622 70,019 Inventory reserve (30,341) (29,741) $ 3,562,209 $ 2,752,845 |
Earnings Per Share
Earnings Per Share | 6 Months Ended |
Jun. 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 June 30, Six months ended June 30, 2019 2018 2019 2018 Income applicable to common shares $ 160,380 $ 314,972 $ 309,684 $ 386,171 Weighted average common shares outstanding - basic 4,321,387 4,214,605 4,308,504 4,205,608 Effect of dilution 41,889 8,008 43,793 1,154 Weighted average shares outstanding - diluted 4,363,276 4,222,613 4,352,297 4,206,762 |
Note Payable
Note Payable | 6 Months Ended |
Jun. 30, 2019 | |
Note Payable | |
Note Payable | Note 8. Note Payable During the fourth quarter of 2018, the Company entered into a 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, 2019. At June 30, 2019, no amounts were drawn on the line of credit. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2019 | |
Income Taxes | |
Income Taxes | Note 9. Income Taxes Following is the income tax expense for the three and six months ended June 30: Three months ended June 30, Six months ended June 30, 2019 2018 2019 2018 Federal - deferred $ — $ — $ — $ — State and local — 3,244 $ — $ 3,244 $ $ 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 June 30, 2019 and December 31, 2018. The Company has net operating loss carryforwards available for federal and state tax purposes of approximately $3,700,000 which expire in varying amounts through 2038. |
Operating Lease
Operating Lease | 6 Months Ended |
Jun. 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 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 $52,300 during the six months ended June 30, 2019. The following is a maturity analysis, by year, of the annual undiscounted cash flows of the operating lease liabilities as of June 30, 2019: 2019 $ 53,194 2020 108,117 2021 110,364 2022 112,611 2023 114,857 2024 102,550 Total minimum lease payments $ 601,693 Operating cash flows from operating leases 35,562 Weighted average remaining lease term – operating leases 5.4 years Weighted average discount rate – operating leases 5.5 % |
Finance Lease
Finance Lease | 6 Months Ended |
Jun. 30, 2019 | |
Finance Lease | |
Finance Lease | Note 11. Finance Lease The Company leases certain equipment under finance leases. Future minimum lease payments, by year, with the present value of such payments, as of June 30, 2019, are shown in the following table. 2019 $ 43,026 2020 86,052 2021 69,641 Total minimum lease payments 198,719 Less amount representing interest 12,379 Present value of minimum lease payments 186,340 Less current portion 77,956 Finance lease obligations, net of current portion $ 108,384 The equipment under finance lease at June 30, 2019, and December 31, 2018, is included in the accompanying balance sheets as follows: June 30, 2019 December 31, 2018 Machinery and equipment $ 359,366 $ 725,036 Less accumulated depreciation and amortization 76,390 222,973 Net book value $ 282,976 $ 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. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 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) | 6 Months Ended |
Jun. 30, 2019 | |
Common Stock and Stock Options | |
Schedule of employee stock option | The cumulative status of options granted and outstanding at June 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 June 30, 2019 76,037 $ 1.03 Options exercisable at December 31, 2018 329,988 $ 5.09 Options exercisable at June 30, 2019 33,643 $ 0.92 |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Inventories | |
Schedule of Inventories | Inventories consisted of the following: June 30, December 31, 2019 2018 (unaudited) Raw materials $ 1,556,461 $ 1,568,487 Work-in-process 1,930,467 1,144,080 Finished goods 105,622 70,019 Inventory reserve (30,341) (29,741) $ 3,562,209 $ 2,752,845 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 6 Months Ended |
Jun. 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 June 30, Six months ended June 30, 2019 2018 2019 2018 Income applicable to common shares $ 160,380 $ 314,972 $ 309,684 $ 386,171 Weighted average common shares outstanding - basic 4,321,387 4,214,605 4,308,504 4,205,608 Effect of dilution 41,889 8,008 43,793 1,154 Weighted average shares outstanding - diluted 4,363,276 4,222,613 4,352,297 4,206,762 |
Income Taxes (Tables)
Income Taxes (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Income Taxes | |
Schedule of income tax expense | Following is the income tax expense for the three and six months ended June 30: Three months ended June 30, Six months ended June 30, 2019 2018 2019 2018 Federal - deferred $ — $ — $ — $ — State and local — 3,244 $ — $ 3,244 $ $ |
Operating Lease (Tables)
Operating Lease (Tables) | 6 Months Ended |
Jun. 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 flows of the operating lease liabilities as of June 30, 2019: 2019 $ 53,194 2020 108,117 2021 110,364 2022 112,611 2023 114,857 2024 102,550 Total minimum lease payments $ 601,693 |
Schedule of operating lease other information | Operating cash flows from operating leases 35,562 Weighted average remaining lease term – operating leases 5.4 years Weighted average discount rate – operating leases 5.5 % |
Finance Lease (Tables)
Finance Lease (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Finance Lease | |
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 June 30, 2019, are shown in the following table. 2019 $ 43,026 2020 86,052 2021 69,641 Total minimum lease payments 198,719 Less amount representing interest 12,379 Present value of minimum lease payments 186,340 Less current portion 77,956 Finance lease obligations, net of current portion $ 108,384 |
Schedule of equipment under finance lease | The equipment under finance lease at June 30, 2019, and December 31, 2018, is included in the accompanying balance sheets as follows: June 30, 2019 December 31, 2018 Machinery and equipment $ 359,366 $ 725,036 Less accumulated depreciation and amortization 76,390 222,973 Net book value $ 282,976 $ 502,063 |
Business Organization and Pur_2
Business Organization and Purpose (Details) | 6 Months Ended |
Jun. 30, 2019segment | |
Business Organization and Purpose | |
Number of operating segments | 1 |
Recent Accounting Pronounceme_2
Recent Accounting Pronouncements (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Jan. 01, 2019 | Dec. 31, 2018 | |
Operating Lease, Right-of-Use Asset | $ 470,825 | $ 470,825 | $ 0 | |||
Photonics market [Member] | ||||||
Concentration Risk, Percentage | 92.00% | 84.00% | 95.00% | 85.00% | ||
Top two customers [Member] | ||||||
Concentration Risk, Percentage | 76.00% | 68.00% | ||||
International Shipments [Member] | ||||||
Concentration Risk, Percentage | 14.00% | 15.00% | ||||
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 | 6 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Dec. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
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 | 6 Months Ended | 12 Months Ended | |||||
Feb. 28, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2018 | Mar. 31, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Share-based Compensation | $ 31,376 | $ 22,433 | $ 65,536 | $ 43,019 | |||||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized | 20,241 | $ 20,241 | |||||||
Stock Issued During Period, Value, New Issues | $ 29,997 | $ 30,002 | 18,748 | $ 17,848 | |||||
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 | 7 years 2 months 12 days | ||||||||
Employee Stock Option [Member] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
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] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
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] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Stock Issued During Period, Shares, New Issues | 18,080 | 35,957 | |||||||
Stock Issued During Period, Value, New Issues | $ 29,997 | $ 30,002 | $ 18,748 | $ 17,848 | |||||
Common Stock [Member] | Employee Stock Option [Member] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Stock Issued During Period, Value, New Issues | $ 59,999 | $ 36,597 |
Preferred Stock (Details)
Preferred Stock (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Preferred Stock Dividends, Income Statement Impact | $ 6,038 | $ 6,038 | $ 12,076 | $ 12,076 | |
Dividend Payment, Preferred Stock | $ 24,152 | $ 0 | |||
Series B Preferred Stock [Member] | |||||
Preferred Stock, Dividend Rate, Percentage | 10.00% | ||||
Dividends | $ 253,596 | $ 265,672 | |||
Dividend Payment, Preferred Stock | $ 24,152 |
Inventories (Details)
Inventories (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Inventories | ||
Raw materials | $ 1,556,461 | $ 1,568,487 |
Work-in-process | 1,930,467 | 1,144,080 |
Finished goods | 105,622 | 70,019 |
Inventory reserve | (30,341) | (29,741) |
Inventory, Net | $ 3,562,209 | $ 2,752,845 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Earnings Per Share | ||||
Income applicable to common shares | $ 160,380 | $ 314,972 | $ 309,684 | $ 386,171 |
Weighted average common shares outstanding - basic | 4,321,387 | 4,214,605 | 4,308,504 | 4,205,608 |
Effect of dilution | 41,889 | 8,008 | 43,793 | 1,154 |
Weighted average shares outstanding - diluted | 4,363,276 | 4,222,613 | 4,352,297 | 4,206,762 |
Note Payable (Details)
Note Payable (Details) - HuntingTon Bank [Member] - USD ($) | 3 Months Ended | |
Dec. 31, 2018 | Jun. 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% | |
Short-term Line of Credit | $ 0 |
Income Taxes - Income tax expen
Income Taxes - Income tax expense (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Taxes | ||||
Federal - deferred | $ 0 | $ 0 | ||
State and local | 0 | 3,244 | $ 4,860 | $ 6,492 |
Income Tax Expense (Benefit) | $ 0 | $ 3,244 | $ 4,860 | $ 6,492 |
Income Taxes - Additional infor
Income Taxes - Additional information (Details) | Jun. 30, 2019USD ($) |
Income Taxes | |
Deferred Tax Assets, Operating Loss Carryforwards, State and Local | $ 3,700,000 |
Operating Lease - Future minimu
Operating Lease - Future minimum lease payments (Details) | Jun. 30, 2019USD ($) |
Operating Lease | |
2019 | $ 53,194 |
2020 | 108,117 |
2021 | 110,364 |
2022 | 112,611 |
2023 | 114,857 |
2024 | 102,550 |
Total minimum lease payments | $ 601,693 |
Operating Lease - Additional in
Operating Lease - Additional information (Details) | 6 Months Ended |
Jun. 30, 2019USD ($) | |
Operating cash flows from operating leases | $ 35,562 |
Weighted average remaining lease term - operating leases | 5 years 4 months 24 days |
Weighted average discount rate - operating leases | 5.50% |
Operating lease, renewal term | 5 years |
Operating Lease, Cost | $ 52,300 |
Maximum [Member] | |
Operating Lease Monthly Rent Payable | 9,700 |
Minimum [Member] | |
Operating Lease Monthly Rent Payable | $ 8,700 |
Finance Lease - Future minimum
Finance Lease - Future minimum lease payments (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Finance Lease | ||
2019 | $ 43,026 | |
2020 | 86,052 | |
2021 | 69,641 | |
Total minimum lease payments | 198,719 | |
Less amount representing interest | 12,379 | |
Present value of minimum lease payments | 186,340 | |
Less current portion | 77,956 | $ 114,853 |
Finance lease obligations, net of current portion | $ 108,384 | $ 147,878 |
Finance Lease - Equipment under
Finance Lease - Equipment under finance lease and additional information (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2019 | Dec. 31, 2018 | |
Finance Lease | ||
Machinery and equipment | $ 359,366 | $ 725,036 |
Less accumulated depreciation and amortization | 76,390 | 222,973 |
Net book value | $ 282,976 | $ 502,063 |
Amortization period, Finance lease (in years) | 10 years |