Note 2 - Summary of Significant Accounting Policies	12 Months Ended
Dec. 31, 2020
Notes to Financial Statements
Significant Accounting Policies [Text Block]	Note 2 - Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of CVD Equipment Corporation and its wholly owned subsidiaries. The Company has five wholly owned subsidiaries: CVD Materials Corporation, which provides material coatings, process development support and process startup assistance through Tantaline ApS and CVD MesoScribe Technologies Corporation, FAE Holdings 411519R, LLC, a real estate holding company whose sole asset is its interest in the real estate and building housing our corporate headquarters and 555 N Research Corporation whose sole asset is its interest in the real estate and building located at 555 North Research Place, Central Islip, NY. All significant intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company's significant estimates are the accounting for certain items such as revenues on long-term contracts recognized on the input method, depreciation and amortization, valuation of inventories at the lower of cost or net realizable value; allowance for doubtful accounts receivable; valuation allowances for deferred tax assets, impairment considerations of long-lived assets and valuation of stock-based compensation. Reclassification Certain reclassifications have been made to prior year amounts to conform with the current year presentation. Revenue Recognition The Company designs, manufactures and sells custom chemical vapor deposition equipment through contractual agreements. These system sales require the Company to deliver functioning equipment that is generally completed within three to eighteen months from commencement of order acceptance. The Company recognizes revenue over time by using an input method based on costs incurred as it depicts the Company's progress toward satisfaction of the performance obligation. Under this method, revenue arising from fixed price contracts is recognized as work is performed based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations, typically within three months to eighteen months. Incurred costs include all direct material and labor costs and those indirect costs related to contract performance, such as supplies, tools, repairs and depreciation costs. Contract material costs are included in incurred costs when the project materials have been purchased or moved to work in process, and installed, as required by the project's engineering design. Cost based input methods of revenue recognition require the Company to make estimates of costs to complete the projects. In making such estimates, significant judgment is required to evaluate assumptions related to the costs to complete the projects, including materials, labor and other system costs. If the estimated total costs on any contract are greater than the net contract revenues, the Company recognizes the entire estimated loss in the period the loss becomes known and can be reasonably estimated. “Contract assets,” include unbilled amounts typically resulting from system sales under contracts and revenue recognition exceeds the amount billed to the customer. The amount may not exceed their estimated net realizable value. Contract assets are classified as current based on our contract operating cycle. “Contract liabilities,” include advance payments and billings in excess of revenue recognized. The Company typically receives down payments upon receipt of order and progress payments during the manufacturing cycle. Contract liabilities are classified as current based on our contract operating cycle and reported on a contract-by-contract basis, net of revenue recognized, at the end of each reporting period For outright sales of products, revenue is recognized when control of the promised products or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services (the transaction price). A performance obligation is a promise in a contract to transfer a distinct product or service to a customer and is the unit of account under ASC 606 (“Revenue from Contracts with Customers”). Inventories Inventories are valued at the lower of cost (determined on the first -in, first -out method) or net realizable value. Income Taxes Deferred tax assets and liabilities are determined based on the estimated future tax effects of temporary differences between the financial statements and tax bases of assets and liabilities, as measured by using the future enacted tax rates. Deferred tax expense (benefit) is the result of changes in the deferred tax assets and liabilities. The Company records a valuation allowance against deferred tax assets when it is more likely than not that future tax benefits will not be utilized based on a lack of sufficient positive evidence. Investment tax credits are accounted for by the flow-through method, reducing income taxes currently payable and the provision for income taxes in the period the assets giving rise to such credits are placed in service. To the extent such credits are not currently utilized on the Company's tax return, deferred tax assets, subject to considerations about the need for a valuation allowance, are recognized for the carryforward amount. The Company recognizes the tax benefit from an uncertain tax position only if it is more-likely-than- not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The accounting guidance on accounting for uncertainty in income taxes also addresses derecognition, classification, interest and penalties on income taxes, and accounting in interim periods. The Company does not believe it has any uncertain tax positions through the year ending December 31, 2020 which would have a material impact on the Company's consolidated financial statements. The Company and its subsidiaries file combined income tax returns in the U.S. Federal and New York State jurisdiction. In addition, the parent company files standalone tax returns in California, Delaware, Florida, Michigan, Minnesota, New Hampshire and Wisconsin. The Company is no longer subject to U.S. federal and state income tax examinations for tax periods before 2016. Impairment of Long Lived Assets and Intangibles Long-lived assets consist primarily of property, plant, and equipment. Intangibles consist of patents, copyrights and intellectual property, licensing agreements and certifications. Long-lived assets are reviewed for impairment whenever events or circumstances indicate their carrying value may not be recoverable. When such events or circumstances arise, an estimate of the future undiscounted cash flows produced by the asset, or the appropriate grouping of assets, is compared to the asset's carrying value to determine if impairment exists pursuant to the requirements of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360 - 10 - 35, “Impairment or Disposal of Long-Lived Assets.” If the asset is determined to be impaired, the impairment loss is measured on the excess of its carrying value over its fair value. Assets to be disposed of are reported at the lower of their carrying value or net realizable value. Based upon continued operating losses and negative cash flows from the Tantaline product line and the Company's updated forecasting, the expected future cash flows of the Tantaline product line is negative and thus management has recorded an impairment charge of $3.6 million in the fourth quarter and year ended December 31, 2020. The Company had no recorded impairment charges in the consolidated statement of operations during the year ended December 31, 2019. Property, Plant and Equipment Property, plant and equipment are recorded at cost. Depreciation is determined on a straight-line basis for buildings and building improvements over 5 to 39 years and for machinery and equipment over 5 to 8 years. Depreciation and amortization of assets used in manufacturing are recorded in Cost of revenue. Depreciation and amortization of all other assets are recorded in Operating Expenses-General and Administrative. Intangible Assets The cost of intangible assets is being amortized on a straight-line basis over their estimated initial useful lives which ranged from 5 to 20 years. Amortization expense recorded by the Company in 2020 and 2019 totaled $124,550 and $120,488, respectively. Research & Development Research and development costs are expensed as incurred. Our laboratory staff conducts research and development independent of customer orders. For the year ended December 31 2020 and 2019, we incurred approximately $373,000 and $598,000, respectively, of research and development expenses. Product Warranty The Company records warranty costs as incurred and does not provide for possible future costs. Management estimates such costs are immaterial, based on historical experience. Earnings Per Share Basic earnings per common share is computed by dividing the net income by the weighted average number of shares of common stock outstanding during each period. When applicable, diluted earnings per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be adjusted upon exercise of common stock options and warrants. Potential common shares issued are calculated using the treasury stock method, which recognizes the use of proceeds that could be obtained upon the exercise of options and warrants in computing diluted earnings per share. It assumes that any proceeds would be used to purchase common stock at the average market price of the common stock during the period. Cash and Cash Equivalents The Company had cash and cash equivalents of $7.7 million and $8.7 million at December 31, 2020 and 2019, respectively. The Company invests excess cash in treasury bills, certificates of deposit or money market accounts, all with maturities of less than three months. Cash equivalents were $1.0 million and $2.1 million for the years ended December 31, 2020 and December 31, 2019, respectively. The Company places most of its temporary cash investments with financial institutions, which from time to time may exceed the Federal Deposit Insurance Corporation limit. The amount at risk at December 31, 2020 and at December 31, 2019 was $5,822,000 and $5,198,000 respectively. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, and accounts receivable. The Company places its cash equivalents with financial institutions and invests its excess cash primarily in treasury bills, certificates of deposit or money market instruments. The Company has established guidelines relative to credit ratings and maturities that seek to maintain stability and liquidity. The Company sells products and services to various companies across several industries in the ordinary course of business. The Company routinely assesses the financial strength of its customers and maintains allowances for anticipated losses based upon historical experience. Accounts Receivable The Company sells products and services to various companies across several industries in the ordinary course of business. The Company performs ongoing credit evaluations to assess the probability of accounts receivable collection based on a number of factors, including past transaction experience, evaluation of their credit history and review of the invoicing terms of the contract to determine the financial strength of its customers. The Company has accounts receivables from certain customers that exceed 10%. As of December 31, 2020, and 2019, the accounts receivable balance includes amounts from two customers, which totals 35% and three customers which total 61%, respectively. Accounts receivable is presented net of an allowance for doubtful accounts of $164,000 and $24,000 as of December 31, 2020 and 2019, respectively. The allowance is based on historical experience and management's evaluation of the collectability of accounts receivable. Management believes the allowance is adequate. However, future estimates may fluctuate based on changes in economic and customer conditions. The Company doesn't require collateral from its customers. Sales Concentrations Revenue to a single customer in any one year can exceed 10.0% of our total sales. Two customers represented 30.5% and two customers represented 39.3%, respectively, of our annual revenues in fiscal years 2020 and 2019. We believe that our relationships with these customers are positive and may provide us with ongoing continuous sustainability for years to come, however the loss of a large customer would have to be replaced by others, and our inability to do so may have a material adverse effect on our business and financial condition. Export sales to customers represented approximately 16.8% and 21.3% of sales for the years ended December 31, 2020 and 2019, respectively. Export sales in both 2020 and 2019 were primarily to customers in Europe and Asia. Primarily all contracts except those entered into by CVD Tantaline ApS are denominated in U.S. dollars. The Company has not entered into any foreign exchange contracts. Fair Value of Financial Instruments The carrying amounts of financial instruments including cash and cash equivalents, accounts receivable, net, accounts payable, contract liabilities and customer deposits approximate fair value due to the relatively short-term maturity of these instruments. The carrying value of long-term debt approximates fair value based on prevailing borrowing rates currently available for loans with similar terms and maturities. Stock-Based Compensation The Company records stock-based compensation in accordance with the provisions set forth in ASC 718, “Stock Compensation”. ASC 718 requires companies to recognize the cost of employee services received in exchange for awards of equity instruments based upon the grant date fair value of those awards over the vesting period. Shipping and Handling It is the Company's policy to include freight charges billed to customers in total revenue. The amount included in revenue was $6,000 and $39,000 for the years ended December 31, 2020 and 2019, respectively. Liquidity and Management's Plan The Company has incurred recurring losses since 2018, which have resulted in an accumulated deficit of $2.9 million as of December 31, 2020. For the year ended December 31, 2020, the Company incurred a net loss of $6.1 million, which includes a $3.6 million impairment charge related to its Tantaline product line. At December 31, 2020, the Company's cash and cash equivalents were $7.7 million, and our working capital was $8.1 million. The Company's current capital resources include cash and cash equivalents ( $7.7 million), accounts receivable ( $1.0 million), contract assets ( $.5 million), inventories ( $1.1 million) and a tax receivable ( $.7 million). In addition, the Company receives advance deposits on new system orders. In February 2021, the Company initiated a plan approved by the Board of directors to sell its building located at 555 North Research Place, Central Islip, NY, and to consolidate that facility into its building located at 355 South Technology Drive, Central Islip, NY, which houses manufacturing and executive offices. This significant action will monetize a substantial portion of the Company's long-term assets, generating additional cash proceeds. In addition, the consolidation of the facilities will help lower operating costs (See Note 14 ). Based upon all the above factors, including the Board approved management plan, utilizing our current operating assets and reducing other operating expenses, the Company estimates that it will have sufficient cash and cash equivalents to fund our operations for the next twelve months from the date of the filing of this annual report. Recently Issued Accounting Standards In June 2016, the FASB issued Accounting Standard Update (“ASU”) 2016 - 13, Financial Instruments – Credit Losses (Topic 326 ) , which require that financial assets measured at amortized cost be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected. The income statement reflects the measurement of credit losses for newly recognized financial assets, as well as the increase or decreases of expected credit losses that have taken place during the period. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. On November 15, 2019, the FASB delayed the effective date for smaller reporting companies. The amendments in this update are now effective for fiscal years beginning after December 15, 2022 and interim periods within those annual periods. Early adoption for fiscal years beginning after December 15, 2018 is permitted. We are currently evaluating the effect of this update on our consolidated financial statements. In December 2019, the FASB issued ASU 2019 - 12, "Income Taxes (Topic 740 ): Simplifying the Accounting for Income Taxes," which is intended to enhance and simplify various aspects of the accounting for income taxes. The amendments in this update remove certain exceptions to the general principles in Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019 - 12 also clarifies and amends existing guidance to improve consistent application of the accounting for franchise taxes, enacted changes in tax laws or rates and transactions that result in a step-up in the tax basis of goodwill. ASU 2019 - 12 is effective for annual and interim periods beginning after December 15, 2020, with early adoption permitted in any interim period. We believe our adoption of ASU 2019 - 12 in our first quarter of 2021 will not have a material effect on our consolidated financial statements. We believe there is no additional new accounting guidance adopted, but not yet effective that is relevant to the readers of our financial statements. However, there are numerous new proposals under development which, if and when enacted, may have a significant impact on our financial reporting.

Note

- Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of CVD Equipment Corporation and its wholly owned subsidiaries. The Company has

five

wholly owned subsidiaries: CVD Materials Corporation, which provides material coatings, process development support and process startup assistance through Tantaline ApS and CVD MesoScribe Technologies Corporation, FAE Holdings

411519R,

LLC, a real estate holding company whose sole asset is its interest in the real estate and building housing our corporate headquarters and

555

N Research Corporation whose sole asset is its interest in the real estate and building located at

555

North Research Place, Central Islip, NY. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Company's significant estimates are the accounting for certain items such as revenues on long-term contracts recognized on the input method, depreciation and amortization, valuation of inventories at the lower of cost or net realizable value; allowance for doubtful accounts receivable; valuation allowances for deferred tax assets, impairment considerations of long-lived assets and valuation of stock-based compensation.

Reclassification

Certain reclassifications have been made to prior year amounts to conform with the current year presentation.

Revenue Recognition

The Company designs, manufactures and sells custom chemical vapor deposition equipment through contractual agreements. These system sales require the Company to deliver functioning equipment that is generally completed within

three

eighteen

months from commencement of order acceptance. The Company recognizes revenue over time by using an input method based on costs incurred as it depicts the Company's progress toward satisfaction of the performance obligation. Under this method, revenue arising from fixed price contracts is recognized as work is performed based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations, typically within

three

months to

eighteen

months.

Incurred costs include all direct material and labor costs and those indirect costs related to contract performance, such as supplies, tools, repairs and depreciation costs. Contract material costs are included in incurred costs when the project materials have been purchased or moved to work in process, and installed, as required by the project's engineering design. Cost based input methods of revenue recognition require the Company to make estimates of costs to complete the projects. In making such estimates, significant judgment is required to evaluate assumptions related to the costs to complete the projects, including materials, labor and other system costs. If the estimated total costs on any contract are greater than the net contract revenues, the Company recognizes the entire estimated loss in the period the loss becomes known and can be reasonably estimated.

“Contract assets,” include unbilled amounts typically resulting from system sales under contracts and revenue recognition exceeds the amount billed to the customer. The amount

may

not

exceed their estimated net realizable value. Contract assets are classified as current based on our contract operating cycle.

“Contract liabilities,” include advance payments and billings in excess of revenue recognized. The Company typically receives down payments upon receipt of order and progress payments during the manufacturing cycle. Contract liabilities are classified as current based on our contract operating cycle and reported on a contract-by-contract basis, net of revenue recognized, at the end of each reporting period

For outright sales of products, revenue is recognized when control of the promised products or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services (the transaction price). A performance obligation is a promise in a contract to transfer a distinct product or service to a customer and is the unit of account under ASC

606

(“Revenue from Contracts with Customers”).

Inventories

Inventories are valued at the lower of cost (determined on the

first

-in,

first

-out method) or net realizable value.

Income Taxes

Deferred tax assets and liabilities are determined based on the estimated future tax effects of temporary differences between the financial statements and tax bases of assets and liabilities, as measured by using the future enacted tax rates. Deferred tax expense (benefit) is the result of changes in the deferred tax assets and liabilities. The Company records a valuation allowance against deferred tax assets when it is more likely than

not

that future tax benefits will

not

be utilized based on a lack of sufficient positive evidence.

Investment tax credits are accounted for by the flow-through method, reducing income taxes currently payable and the provision for income taxes in the period the assets giving rise to such credits are placed in service. To the extent such credits are

not

currently utilized on the Company's

tax return, deferred tax assets, subject to considerations about the need for a valuation allowance, are recognized for the carryforward amount.

The Company recognizes the tax benefit from an uncertain tax position only if it is more-likely-than-

not

that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such

positions are measured based on the largest benefit that has a greater than

50%

likelihood of being realized upon ultimate settlement.

The accounting guidance on accounting for uncertainty in income taxes also addresses derecognition, classification, interest and penalties on income taxes, and accounting in interim periods. The Company does

not

believe it has any uncertain tax positions through the year ending

December 31, 2020

which would have a material impact on the Company's consolidated financial statements.

The Company and its subsidiaries file combined income tax returns in the U.S. Federal and New York State jurisdiction. In addition, the parent company files standalone tax returns in California, Delaware, Florida, Michigan, Minnesota, New Hampshire and Wisconsin. The Company is

longer subject to U.S. federal and state income tax examinations for tax periods before

2016.

Impairment of Long Lived Assets and Intangibles

Long-lived assets consist primarily of property, plant, and equipment. Intangibles consist of patents, copyrights and intellectual property, licensing agreements and certifications. Long-lived assets are reviewed for impairment whenever events or circumstances indicate their carrying value

may

not

be recoverable. When such events or circumstances arise, an estimate of the future undiscounted cash flows produced by the asset, or the appropriate grouping of assets, is compared to the asset's carrying value to determine if impairment exists pursuant to the requirements of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)

360

35,

“Impairment or Disposal of Long-Lived Assets.” If the asset is determined to be impaired, the impairment loss is measured on the excess of its carrying value over its fair value. Assets to be disposed of are reported at the lower of their carrying value or net realizable value. Based upon continued operating losses and negative cash flows from the Tantaline product line and the Company's updated forecasting, the expected future cash flows of the Tantaline product line is negative and thus management has recorded an impairment charge of

$3.6

million in the

fourth

quarter and year ended

December 31, 2020.

The Company had

recorded impairment charges in the consolidated statement of operations during the year ended

December 31, 2019.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Depreciation is determined on a straight-line basis for buildings and building improvements over

years and for machinery and equipment over

years. Depreciation and amortization of assets used in manufacturing are recorded in Cost of revenue. Depreciation and amortization of all other assets are recorded in Operating Expenses-General and Administrative.

Intangible Assets

The cost of intangible assets is being amortized on a straight-line basis over their estimated initial useful lives which ranged from

years. Amortization expense recorded by the Company in

2020

and

2019

totaled

$124,550

and

$120,488,

respectively.

Research & Development

Research and development costs are expensed as incurred. Our laboratory staff conducts research and development independent of customer orders. For the year ended

December 31 2020

and

2019,

we incurred approximately

$373,000

and

$598,000,

respectively, of research and development expenses.

Product Warranty

The Company records warranty costs as incurred and does

not

provide for possible future costs. Management estimates such costs are immaterial, based on historical experience.

Earnings Per Share

Basic earnings per common share is computed by dividing the net income by the weighted average number of shares of common stock outstanding during each period. When applicable, diluted earnings per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be adjusted upon exercise of common stock options and warrants.

Potential common shares issued are calculated using the treasury stock method, which recognizes the use of proceeds that could be obtained upon the exercise of options and warrants in computing diluted earnings per share. It assumes that any proceeds would be used to purchase common stock at the average market price of the common stock during the period.

Cash and Cash Equivalents

The Company had cash and cash equivalents of

$7.7

million and

$8.7

million at

December 31, 2020

and

2019,

respectively. The Company invests excess cash in treasury bills, certificates of deposit or money market accounts, all with maturities of less than

three

months. Cash equivalents were

$1.0

million and

$2.1

million for the years ended

December 31, 2020

and

December 31, 2019,

respectively.

The Company places most of its temporary cash investments with financial institutions, which from time to time

may

exceed the Federal Deposit Insurance Corporation limit. The amount at risk at

December 31, 2020

and at

December 31, 2019

was

$5,822,000

and

$5,198,000

respectively.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, and accounts receivable. The Company places its cash equivalents with financial institutions and invests its excess cash primarily in treasury bills, certificates of deposit or money market instruments. The Company has established guidelines relative to credit ratings and maturities that seek to maintain stability and liquidity.

The Company sells products and services to various companies across several industries in the ordinary course of business. The Company routinely assesses the financial strength of its customers and maintains allowances for anticipated losses based upon historical experience.

Accounts Receivable

The Company sells products and services to various companies across several industries in the ordinary course of business. The Company performs ongoing credit evaluations to assess the probability of accounts receivable collection based on a number of factors, including past

transaction experience, evaluation of their credit history and review of the invoicing terms of the contract to determine the financial strength of its customers. The Company has accounts receivables from certain customers that exceed

10%.

As of

December 31, 2020,

and

2019,

the accounts receivable balance includes amounts from

two

customers, which totals

35%

and

three

customers which total

61%,

respectively.

Accounts receivable is presented net of an allowance for doubtful accounts of

$164,000

and

$24,000

as of

December 31, 2020

and

2019,

respectively. The allowance is based on historical experience and management's evaluation of the collectability of accounts receivable. Management believes the allowance is adequate. However, future estimates

may

fluctuate based on changes in economic and customer conditions. The Company doesn't require collateral from its customers.

Sales Concentrations

Revenue to a single customer in any

one

year can exceed

10.0%

of our total sales. Two customers represented

30.5%

and

two

customers represented

39.3%,

respectively, of our annual revenues in fiscal years

2020

and

2019.

We believe that our relationships with these customers are positive and

may

provide us with ongoing continuous sustainability for years to come, however the loss of a large customer would have to be replaced by others, and our inability to do so

may

have a material adverse effect on our business and financial condition.

Export sales to customers represented approximately

16.8%

and

21.3%

of sales for the years ended

December 31, 2020

and

2019,

respectively. Export sales in both

2020

and

2019

were primarily to customers in Europe and Asia. Primarily all contracts except those entered into by CVD Tantaline ApS are denominated in U.S. dollars. The Company has

not

entered into any foreign exchange contracts.

Fair Value of Financial Instruments

The carrying amounts of financial instruments including cash and cash equivalents, accounts receivable, net, accounts payable, contract liabilities and customer deposits approximate fair value due to the relatively short-term maturity of these instruments. The carrying value of long-term debt approximates fair value based on prevailing borrowing rates currently available for loans with similar terms and maturities.

Stock-Based Compensation

The Company records stock-based compensation in accordance with the provisions set forth in ASC

718,

“Stock Compensation”. ASC

718

requires companies to recognize the cost of employee services received in exchange for awards of equity instruments based upon the grant date fair value of those awards over the vesting period.

Shipping and Handling

It is the Company's policy to include freight charges billed to customers in total revenue. The amount included in revenue was

$6,000

and

$39,000

for the years ended

December 31, 2020

and

2019,

respectively.

Liquidity and Management's Plan

The Company has incurred recurring losses since

2018,

which have resulted in an accumulated deficit of

$2.9

million as of

December 31, 2020.

For the year ended

December 31, 2020,

the Company incurred a net loss of

$6.1

million, which includes a

$3.6

million impairment charge related to its Tantaline product line. At

December 31, 2020,

the Company's cash and cash equivalents were

$7.7

million, and our working capital was

$8.1

million.

The Company's current capital resources include cash and cash equivalents (

$7.7

million), accounts receivable (

$1.0

million), contract assets (

$.5

million), inventories (

$1.1

million) and a tax receivable (

$.7

million). In addition, the Company receives advance deposits on new system orders.

February 2021,

the Company initiated a plan approved by the Board of directors to sell its building located at

555

North Research Place, Central Islip, NY, and to consolidate that facility into its building located at

355

South Technology Drive, Central Islip, NY, which houses manufacturing and executive offices. This significant action will monetize a substantial portion of the Company's long-term assets, generating additional cash proceeds. In addition, the consolidation of the facilities will help lower operating costs (See Note

Based upon all the above factors, including the Board approved management plan, utilizing our current operating assets and reducing other operating expenses, the Company estimates that it will have sufficient cash and cash equivalents to fund our operations for the next

twelve

months from the date of the filing of this annual report.

Recently Issued Accounting Standards

June 2016,

the FASB issued Accounting Standard Update (“ASU”)

2016

13,

Financial Instruments

–

Credit Losses (Topic

326

)

, which require that financial assets measured at amortized cost be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected. The income statement reflects the measurement of credit losses for newly recognized financial assets, as well as the increase or decreases of expected credit losses that have taken place during the period. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. On

November 15, 2019,

the FASB delayed the effective date for smaller reporting companies. The amendments in this update are now effective for fiscal years beginning after

December 15, 2022

and interim periods within those annual periods. Early adoption for fiscal years beginning after

December 15, 2018

is permitted. We are currently evaluating the effect of this update on our consolidated financial statements.

December 2019,

the FASB issued ASU

2019

12,

"Income Taxes (Topic

740

): Simplifying the Accounting for Income Taxes," which is intended to enhance and simplify various aspects of the accounting for income taxes. The amendments in this update remove certain exceptions to the general principles in Topic

740

related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU

2019

also clarifies and amends existing guidance to improve consistent application of the accounting for franchise taxes, enacted changes in tax laws or rates and transactions that result in a step-up in the tax basis of goodwill. ASU

2019

is effective for annual and interim periods beginning after

December 15, 2020,

with early adoption permitted in any interim period. We believe our adoption of ASU

2019

in our

first

quarter of

2021

will

not

have a material effect on our consolidated financial statements.

We believe there is

additional new accounting guidance adopted, but

not

yet effective that is relevant to the readers of our financial statements. However, there are numerous new proposals under development which, if and when enacted,

may

have a significant impact on our financial reporting.