10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                       to                       

Commission file number: 0-31641

SCI ENGINEERED MATERIALS, INC.

(Exact name of registrant as specified in its charter)

Ohio	31-1210318
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

2839 Charter Street, Columbus, Ohio 43228

(Address of principal executive offices) (Zip Code)

(614) 486-0261

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, without par value	SCIA	OTCQB

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

4,498,908 shares of Common Stock, without par value, were outstanding at July 28, 2021.

FORM 10-Q

SCI ENGINEERED MATERIALS, INC.

Table of Contents

		Page No.
PART I.          FINANCIAL INFORMATION
Item 1.	Financial Statements
	Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020	3
	Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020 (unaudited)	5
	Statements of Shareholders’ Equity for the Three and Six Months Ended June 30, 2021 and 2020 (unaudited)	6
	Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020 (unaudited)	7
	Notes to Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	N/A
Item 4.	Controls and Procedures	19
PART II.        OTHER INFORMATION
Item 1.	Legal Proceedings	N/A
Item 1A.	Risk Factors	N/A
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	N/A
Item 3.	Defaults Upon Senior Securities	N/A
Item 4.	Mine Safety Disclosures	N/A
Item 5.	Other Information	N/A
Item 6.	Exhibits	21
Signatures		22

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SCI ENGINEERED MATERIALS, INC.

BALANCE SHEETS

ASSETS

	June 30,		December 31,
	2021		2020
	(UNAUDITED)
Current Assets
Cash	$	3,497,202	$	2,917,551
Accounts receivable
Trade, less allowance for doubtful accounts of $15,000		427,774		459,471
Tax - Employee Retention Credit		176,252		—
Inventories		4,245,768		1,180,359
Prepaid expenses		282,609		131,333
Total current assets		8,629,605		4,688,714
Property and Equipment, at cost
Machinery and equipment		7,863,346		8,280,611
Furniture and fixtures		132,365		132,365
Leasehold improvements		596,867		592,899
Construction in progress		338,030		3,904
		8,930,608		9,009,779
Less accumulated depreciation		(6,714,701)		(7,121,647)
		2,215,907		1,888,132
Right of use asset, Net		316,604		357,396
Deferred tax asset		888,315		1,019,317
Other assets		91,760		96,623
Total other assets		1,296,679		1,473,336
TOTAL ASSETS	$	12,142,191	$	8,050,182

The accompanying notes are an integral part of these financial statements.

3

SCI ENGINEERED MATERIALS, INC.

BALANCE SHEETS

LIABILITIES AND SHAREHOLDERS’ EQUITY

	June 30,		December 31,
	2021		2020
	(UNAUDITED)
Current Liabilities
Finance lease obligations, current portion	$	120,820	$	160,416
Notes payable, current portion		—		252,577
Operating lease obligations, current portion		93,090		86,844
Accounts payable		434,150		147,284
Customer deposits		4,428,665		1,010,236
Accrued compensation		180,657		115,143
Accrued expenses and other		102,527		105,585
Total current liabilities		5,359,909		1,878,085
Finance lease obligations, net of current portion		195,392		243,218
Notes payable, net of current portion		—		72,723
Operating lease obligations, net of current portion		255,179		304,989
Total liabilities		5,810,480		2,499,015
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; 4,498,908 and 4,466,969 shares issued and outstanding, respectively		10,558,867		10,530,669
Additional paid-in capital		2,236,790		2,246,501
Accumulated deficit		(6,966,308)		(7,740,441)
		6,331,711		5,551,167
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	12,142,191	$	8,050,182

The accompanying notes are an integral part of these financial statements.

4

SCI ENGINEERED MATERIALS, INC.

STATEMENTS OF OPERATIONS

THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

	THREE MONTHS ENDED JUNE 30,				SIX MONTHS ENDED JUNE 30,
	2021		2020		2021		2020
Revenue	$	1,972,049	$	2,606,587	$	4,994,359	$	6,045,382
Cost of revenue		1,409,495		2,168,803		3,628,769		5,098,260
Gross profit		562,554		437,784		1,365,590		947,122
General and administrative expense		283,708		272,216		571,589		555,381
Research and development expense		54,377		90,421		92,596		177,325
Marketing and sales expense		46,434		47,387		97,827		99,171
Income from operations		178,035		27,760		603,578		115,245
Gain on extinguishment of debt		—		—		(325,300)		—
Interest expense		9,014		7,300		16,652		11,369
Income before provision for income taxes		169,021		20,460		912,226		103,876
Provision for income taxes		47,473		—		138,093		1,900
Net income		121,548		20,460		774,133		101,976
Dividends on preferred stock		6,038		6,038		12,076		12,076
INCOME APPLICABLE TO COMMON STOCK	$	115,510	$	14,422	$	762,057	$	89,900
Earnings per share - basic and diluted (Note 7)
Income per common share
Basic	$	0.03	$	0.00	$	0.17	$	0.02
Diluted	$	0.03	$	0.00	$	0.17	$	0.02
Weighted average shares outstanding
Basic		4,497,903		4,411,714		4,488,913		4,398,856
Diluted		4,526,062		4,418,325		4,516,478		4,406,478

The accompanying notes are an integral part of these financial statements.

5

SCI ENGINEERED MATERIALS, INC.

STATEMENTS OF SHAREHOLDERS’ EQUITY

THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

	Convertible				Additional
	Preferred Stock,		Common		Paid-In		Accumulated
	Series B		Stock		Capital		Deficit		Total
Balance 12/31/2020	$	514,438	$	10,530,669	$	2,246,501	$	(7,740,441)	$	5,551,167
Accretion of cumulative dividends		6,038		—		(6,038)		—		—
Stock based compensation expense (Note 4)		—		—		1,183		—		1,183
Common stock issued (Note 4)		—		20,705		—		—		20,705
Net income		—		—		—		652,585		652,585
Balance 3/31/2021	$	520,476	$	10,551,374	$	2,241,646	$	(7,087,856)	$	6,225,640
Accretion of cumulative dividends		6,038		—		(6,038)		—		—
Payment of cumulative dividends (Note 5)		(24,152)		—		—		—		(24,152)
Stock based compensation expense (Note 4)		—		—		1,182		—		1,182
Common stock issued (Note 4)		—		7,493		—		—		7,493
Net income		—		—		—		121,548		121,548
Balance 6/30/2021	$	502,362	$	10,558,867	$	2,236,790	$	(6,966,308)	$	6,331,711
Balance 12/31/2019	$	514,438	$	10,410,677	$	2,265,925	$	(9,242,204)	$	3,948,836
Accretion of cumulative dividends		6,038		—		(6,038)		—		—
Stock based compensation expense (Note 4)		—		—		1,182		—		1,182
Common stock issued (Note 4)		—		29,998		—		—		29,998
Net income		—		—		—		81,516		81,516
Balance 3/31/2020	$	520,476	$	10,440,675	$	2,261,069	$	(9,160,688)	$	4,061,532
Accretion of cumulative dividends		6,038		—		(6,038)		—		—
Payment of cumulative dividends (Note 5)		(24,152)		—		—		—		(24,152)
Stock based compensation expense (Note 4)		—		—		1,182		—		1,182
Common stock issued (Note 4)		—		30,000		—		—		30,000
Net income		—		—		—		20,460		20,460
Balance 6/30/2020	$	502,362	$	10,470,675	$	2,256,213	$	(9,140,228)	$	4,089,022

The accompanying notes are an integral part of these financial statements.

6

SCI ENGINEERED MATERIALS, INC.

STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	774,133	$	101,976
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and accretion		230,689		226,956
Amortization of right of use asset		40,792		37,806
Amortization of patents		2,207		1,724
Stock based compensation		30,563		62,362
Loss (gain) on disposal of equipment		3,224		(3,063)
Deferred tax asset		131,002		—
Gain on extinguishment of debt		(325,300)		—
Inventory reserve		600		33,629
Changes in operating assets and liabilities:
Accounts receivable		(144,555)		(39,814)
Inventories		(3,066,009)		1,844,385
Prepaid expenses		(151,276)		(50,569)
Other assets		2,656		(6,488)
Accounts payable		286,866		(74,390)
Operating lease obligations		(43,565)		(39,456)
Accrued expenses and customer deposits		3,477,435		(2,086,240)
Net cash provided by operating activities		1,249,462		8,818
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on sale of equipment		591		3,063
Purchases of property and equipment		(558,828)		(167,999)
Net cash used in investing activities		(558,237)		(164,936)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of cumulative dividends on preferred stock		(24,152)		(24,152)
Proceeds from SBA Paycheck Protection Program		—		325,300
Principal payments on finance lease obligations and notes payable		(87,422)		(48,620)
Net cash (used in) provided by financing activities		(111,574)		252,528
NET INCREASE IN CASH		579,651		96,410
CASH - Beginning of period		2,917,551		1,828,397
CASH - End of period	$	3,497,202	$	1,924,807
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest	$	5,895	$	5,826
Income taxes		138,093		1,900
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES
Increase in asset retirement obligation		3,450		1,800

The accompanying notes are an integral part of these financial statements.

7

SCI ENGINEERED MATERIALS, INC.

NOTES TO FINANCIAL STATEMENTS

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 markets within the PVD industry including Photonics, Solar, Glass and Transparent Electronics. Substantially all 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.

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 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, 2020. 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.

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 most 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.

8

SCI ENGINEERED MATERIALS, INC.

NOTES TO FINANCIAL STATEMENTS

Note 2.  Summary of Significant Accounting Policies (continued)

During the three months ended June 30, 2021, and 2020, revenue from the photonics market was approximately 99% and 96% of total revenue, respectively. During the six months ended June 30, 2021, and 2020, revenue from the photonics market was approximately 100% and 98% of total revenue, respectively. The balance of the revenue in these periods was from the thin film solar and thin film battery markets. The top two customers represented approximately 79% and 87% of total revenue for the six months ended June 30, 2021, and 2020, respectively. International shipments resulted in 3% and 4% of total revenue for the first six months of 2021 and 2020, respectively.

Employee Retention Credit - The Company qualified for federal government assistance through Employee Retention Credit provisions of the Consolidated Appropriations Act of 2021 during the current fiscal year in the amount of $255,507 during the first quarter of 2021 and $151,701 during the second quarter of 2021. The purpose of the Employee Retention Credit is to encourage employers to keep employees on the payroll, even if they are not working during the covered period because of the coronavirus outbreak. This credit is recorded in the Statement of Operations as an offset to payroll costs in their respective expense lines. A balance of $176,252 appears as a tax receivable on the balance sheets at June 30, 2021.

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 2023. We are evaluating the impact that the adoption of this update will have on our financial statements.

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. Noncash stock-based compensation expense was $8,675 and $31,182 for the three months ended June 30, 2021, and 2020, respectively.

Noncash stock-based compensation expense was $30,563 and $62,362 for the six months ended June 30, 2021, and 2020, respectively.

Unrecognized stock-based compensation expense was $8,669 as of June 30, 2021, 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 5,265 and 51,085 aggregate shares of common stock of the Company during the six months ended June 30, 2021, and 2020, respectively. The stock had an aggregate value of $14,987 and $59,998 for the six months ended June 30, 2021, and 2020, respectively, and was recorded as noncash stock-based compensation expense in the financial statements.

Employees received compensation of 4,804 aggregate shares of common stock of the Company during the six months ended June 30, 2021, which had an aggregate value of $13,211, and was recorded as noncash stock-based compensation expense in the financial statements. In addition, during the six months ended June 30, 2021, a total of 30,181 stock options were exercised by management.

The cumulative status of options granted and outstanding at June 30, 2021, and December 31, 2020, as well as options which became exercisable in connection with the Company’s stock option plans is summarized as follows:

9

SCI ENGINEERED MATERIALS, INC.

NOTES TO FINANCIAL STATEMENTS

Note 4.  Common Stock and Stock Options (continued)

Employee Stock Options

		Weighted
		Average
	Stock Options	Exercise Price
Outstanding at January 1, 2020	76,037	$	1.03
Outstanding at December 31, 2020	76,037	$	1.03
Exercised	(30,181)		0.96
Outstanding at June 30, 2021	45,856	$	1.07
Options exercisable at December 31, 2020	55,208	$	0.94
Options exercisable at June 30, 2021	31,970	$	0.99

Exercise prices for options ranged from $0.84 to $1.25 at June 30, 2021. The weighted average option price for all options outstanding at June 30, 2021, was $1.07 with a weighted average remaining contractual life of 5.3 years. There were no non-employee director stock options outstanding during 2021 and 2020.

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, 2021, and 2020, and $12,076 for the six months ended June 30, 2021, and 2020. The Company had accrued dividends on Series B preferred stock of $253,596 at June 30, 2021, and $265,672 at December 31, 2020. These amounts are included in Convertible preferred stock, Series B, on the balance sheet at June 30, 2021, and December 31, 2020. During June 2021 and June 2020, a dividend payment of $24,152 was made to preferred shareholders.

Note 6.  Inventories

Inventories consisted of the following:

	June 30,		December 31,
	2021		2020
	(unaudited)
Raw materials	$	2,717,901	$	206,668
Work-in-process		1,393,580		877,812
Finished goods		159,105		120,097
Inventory reserve		(24,818)		(24,218)
	$	4,245,768	$	1,180,359

10

SCI ENGINEERED MATERIALS, INC.

NOTES TO FINANCIAL STATEMENTS

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,
	2021		2020		2021		2020
Income applicable to common shares	$	115,510	$	14,422	$	762,057	$	89,900
Weighted average common shares outstanding - basic		4,497,903		4,411,714		4,488,913		4,398,856
Effect of dilution		28,159		6,611		27,565		7,622
Weighted average shares outstanding - diluted		4,526,062		4,418,325		4,516,478		4,406,478

Note 8.   Notes Payable

On April 17, 2020, the Company 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 Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and administered by the U.S. Small Business Administration (the “SBA”). The term of the PPP loan was two years. The interest rate on this loan was 1.0% per annum, which was deferred for the first six months of the term of the loan. After the initial six-month deferral period or until forgiveness of the loan was approved, the loan required monthly payments of principal and interest until maturity with respect to any portion of the PPP loan which was not forgiven. Under the terms of the CARES Act, PPP loan recipients are eligible to apply for, and be granted, forgiveness for all or a portion of loans granted under the PPP. Such forgiveness was 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. The Company applied for forgiveness of the entire amount of the loan during the fourth quarter of 2020, and the SBA approved the Forgiveness Application in full during the first quarter of 2021. This amount is included in the Statement of Operations as gain on extinguishment of debt in the first quarter of 2021.

The Company has a line of credit with Huntington National 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, 2021. At June 30, 2021, no amounts were drawn on the line of credit.

Note 9.  Income Taxes

The provision for income taxes for the three months and six months ended June 30, 2021, is based on our projected annual effective tax rate for fiscal year 2021, adjusted for permanent differences and specific items that are required to be recognized in the period in which they are incurred. The provision for income taxes was $47,473 and $0 for the three months ended June 30, 2021, and 2020 respectively, and $138,093 and $1,900 for the six months ended June 30, 2021, and 2020 respectively.

When compared to the statutory rate of 21%, the effective tax rate of 14.4% for the six months ended June 30, 2021, was due primarily to a tax benefit of $325,300 from the PPP loan forgiveness.

11

SCI ENGINEERED MATERIALS, INC.

NOTES TO FINANCIAL STATEMENTS

Note 9.  Income Taxes (continued)

Following is the income tax expense for the three and six months ended June 30:

	Three months ended				Six months ended
	June 30,				June 30,
	2021		2020		2021		2020
Federal - deferred	$	43,160	$	—	$	131,002	$	—
State and local		4,313		—		7,091		1,900
	$	47,473	$	—	$	138,093	$	1,900

Deferred tax assets and liabilities result from temporary differences in the recognition of income and expense for tax and financial reporting purposes. A valuation allowance of $0 has been recorded against the realizability of the net deferred tax asset at June 30, 2021, and December 31, 2020. The Company had net operating loss carryforwards available for federal and state tax purposes of approximately $3,700,000 at December 31, 2020, which expire in varying amounts through 2035.

As of December 31, 2020, management determined that there was sufficient positive evidence to conclude that it is more likely than not that deferred taxes of $1,019,317 are realizable in part because the Company achieved four consecutive years of pretax income, expect profits to continue for the foreseeable future and implemented new efficiencies in the Company’s manufacturing process. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. Accordingly, management determined that no valuation allowance was necessary, and the deferred tax asset was $888,315 at June 30, 2021.

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 $9,200 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 $55,000 and $53,900 during the six months ended June 30, 2021, and 2020, respectively.

The following is a maturity analysis, by year, of the annual undiscounted cash outflows of the operating lease liabilities as of June 30, 2021:

2021	$	55,319
2022		112,611
2023		114,857
2024		102,550
Total minimum lease payments		385,337
Less debt discount		37,068
Total operating lease obligations	$	348,269

Operating cash outflows from operating leases	$	197,050
Weighted average remaining lease term		3.4	years
Weighted average discount rate		5.5	%

12

SCI ENGINEERED MATERIALS, INC.

NOTES TO FINANCIAL STATEMENTS

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, 2021, are shown in the following table.

2021	$	79,279
2022		105,154
2023		101,675
2024		49,859
Total minimum lease payments		335,967
Less amount representing interest		19,755
Present value of minimum lease payments		316,212
Less current portion		120,820
Finance lease obligations, net of current portion	$	195,392

The equipment under finance lease at June 30, 2021, and December 31, 2020, is included in the accompanying balance sheets as follows:

	June 30, 2021		Dec. 31, 2020
Machinery and equipment	$	745,289	$	745,289
Less accumulated depreciation and amortization		194,750		157,486
Net book value	$	550,539	$	587,803

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.

During the first six months of 2021 the Company was approved by Fifth Third Equipment Finance Company for an equipment line of credit not to exceed $800,000 with an implicit rate of 2.71% at time of approval. Delivery and acceptance of new production equipment must be no later than December 31, 2021. Deposits of $319,109 were made during the first half of 2021 towards purchase orders totaling $718,900 for new equipment. The lease schedules are to commence upon acceptance of delivered equipment. The final lease rate factor or loan interest rate shall be fixed at funding using the Bloomberg SWAP Rate report for the most recent previous day close and shall remain constant throughout the term. At June 30, 2021, no amounts were drawn on the line of credit.

13

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Financial Statements and Notes contained herein and with those in our Form 10-K for the year ended December 31, 2020.

Except for the historical information contained herein, the matters discussed in this Quarterly Report on Form 10-Q include certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Those statements include, but may not be limited to, all statements regarding our intent, belief, and expectations, such as statements concerning our future profitability and operating and growth strategy. Words such as “believe,” “anticipate,” “expect,” “will,” “may,” “should,” “intend,” “plan,” “estimate,” “predict,” “potential,” “continue,” “likely” and similar expressions are intended to identify forward-looking statements. Investors are cautioned that all forward-looking statements contained in this Quarterly Report on Form 10-Q and in other statements we make involve risks and uncertainties including, without limitation, the factors set forth under the caption “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2020, and other factors detailed from time to time in our other filings with the Securities and Exchange Commission. One or more of these factors have affected, and in the future could affect our business and financial condition and could cause actual results to differ materially from plans and projections. Although we believe the assumptions underlying the forward-looking statements contained herein are reasonable, there can be no assurance that any of the forward-looking statements included in this Quarterly Report on Form 10-Q will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved.

Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statements are made or reflect the occurrence of unanticipated events, unless necessary to prevent such statements from becoming misleading. New factors emerge from time to time, and it is not possible for us to predict all factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Executive Summary

In March 2020, the World Health Organization declared the coronavirus disease (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. Since then, most federal, state, and local executive orders have been lifted and we continue to follow practical safety procedures. These procedures include, but are not limited to: wearing masks, social distancing, staggering start times, and teleconferencing versus in person meetings. Almost all of our employees have been fully vaccinated. We recently resumed in person meetings with some customers and continue to maintain regular contact, via phone and other electronic means, with other customers and suppliers.

Based on recent conversations with customers, we do not expect to experience any material impairments or changes in accounting judgements related to COVID-19. We are not experiencing any material adverse impact in our supply chain and remain in frequent contact with our suppliers. Although we continue to face a period of uncertainty regarding the ongoing impact of the COVID-19 pandemic and emergence of new variants on projected customer demand, market conditions continue to gradually improve. In the midst of this challenging environment, we remain focused on taking the necessary steps to respond quickly to changes in our business through specific contingency plans including (but not limited to): reviewing and monitoring planned capital expenditures, reviewing all operating expenses for opportunities to reduce and/or defer spending, and aligning inventory to planned shipments and estimated revenue.

We continue to monitor the evolving situation related to COVID-19 including guidance from federal, state, and local public health authorities and may take additional actions based on these recommendations. In these circumstances, there may be developments outside our control requiring us to adjust our operating plan. As such, given the dynamic nature of this situation, we cannot reasonably estimate the impacts of COVID-19 or the emergence of new variants on our results of operations, cash flows and liquidity in the future.

14

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

There have been public reports and announcements of a global semiconductor chip shortage that is anticipated to continue into at least early 2022. It is affecting companies across a wide range of industries, including some of our customers, which could temporarily impact the Company’s revenue, volume, and profitability. We continue to actively monitor these developments, including ongoing contact with our suppliers and customers, and adapting to their specific circumstances and forecasts.

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 Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and administered by the U.S. Small Business Administration (the “SBA”). The SBA approved our Forgiveness Application in full on January 6, 2021.

The Employee Retention Credit (ERC), as originally enacted on March 27, 2020, by the CARES Act, is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021. The Taxpayer Certainty and Disaster Tax Relief Act (the “Relief Act”), enacted on December 27, 2020, amended, and extended the ERC. On March 1, 2021, the IRS released Notice 2021-20 to provide guidance on the original ERC, as modified by the Relief Act. During 2021 we filed Form 941-X to claim a credit of $105,000 on qualified wages paid in 2020. This receivable appears on the balance sheet as of June 30, 2021, as Tax Receivable, and as a credit to wages in the Statement of Operations during the six months ended June 30, 2021.

The Relief Act extended and enhanced the Employee Retention Credit for qualified wages paid after December 31, 2020, through June 30, 2021. Under the Relief Act, eligible employers may claim a refundable tax credit against certain employment taxes equal to 70% of the qualified wages an eligible employer pays to employees after December 31, 2020, through June 30, 2021. As of the March 11, 2021, passage of the American Rescue Plan Act, the ERC is available for all four quarters of 2021.

During the first quarter of 2021, we experienced a decline in gross receipts of 25% compared to the first quarter of 2019. This decline, along with continued underutilization of certain manufacturing equipment, reduction in employee’s workloads, travel restrictions and supply chain issues, qualified us to receive this credit. We filed Form 941 for the first quarter of 2021 and claimed a credit of $150,507 on qualified wages paid in the first quarter of 2021. These funds were received during the second quarter of 2021 and appear as a credit to wages in the Statement of Operations during the six months ended June 30, 2021. An employer that has a decline continues to be eligible until the end of the calendar quarter in which gross receipts are greater than 80% of its 2019 calendar quarter receipts. Thus, we were eligible for this credit for the second quarter of 2021 in the amount of $151,701, which appears as a credit to wages in the Statement of Operations for the three and six months ended June 30, 2021.  $80,448 was applied as a credit to payroll taxes throughout the second quarter and the remainder appears on the balance sheet as Tax Receivable as of June 30, 2021.

During the second quarter of 2021, we experienced a decline in gross receipts of 30% compared to the second quarter of 2019. This decline, along with continued underutilization of certain manufacturing equipment, reduction in employee’s workloads, travel restrictions and supply chain issues, qualified us to receive this credit for the third quarter of 2021. As previously mentioned, an employer that has a decline in gross receipts continues to be eligible until the end of the calendar quarter in which gross receipts are greater than 80% of its 2019 calendar quarter receipts. Thus, we expect to be eligible for this credit for a similar amount during the third quarter of 2021.

For the three months ended June 30, 2021, we had total revenue of $1,972,049. This was a decrease of $634,538 or 24.3%, compared to the three months ended June 30, 2020. For the six months ended June 30, 2021, we had total revenue of $4,994,359. This was a decrease of $1,051,023, or 17.4%, compared to the six months ended June 30, 2020. The decrease was principally due to lower pricing in the three and six months ended June 30, 2021, which was partially offset by higher volume and product mix.

Gross profit was $562,554 for the three months ended June 30, 2021, compared to $437,784 for the same three months in 2020 and $1,365,590 and $947,122 for the six months ended June 30, 2021, and 2020, respectively. This increase was due to volume, product mix, and improved manufacturing efficiency. In addition, $87,287 and $238,275 was related to the Employee Retention Credit for the three and six months ended June 30, 2021, respectively.

15

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Operating expenses were $384,519, and $410,024 for the three months ended June 30, 2021, and 2020, respectively and $762,012 and $831,877 for the six months ended June 30, 2021, and 2020, respectively.

Income from operations was $178,035 and $27,760 for the three months ended June 30, 2021, and 2020, respectively, which included $151,701 related to the Employee Retention Credit during the second quarter of 2021. Income from operations was $603,578 and $115,245 for the six months ended June 30, 2021, and 2020, respectively, which included $407,207 related to the Employee Retention Credit.

Consistent with our growth strategy, we have identified niche markets that can benefit from our expertise in custom powder solutions, such as near infrared doped phosphors and short-wave infrared applications. These applications enable extended life of phosphors for specific nighttime identification needs of defense personnel and first responders.

New initiatives are also being pursued that utilize our vacuum hot press, cold isostatic press, and kilns for development projects, including diffusion bonding. We recently manufactured and sold conductive metal oxides for direct current sputtering of Tungsten Oxide and Molybdenum Oxide materials. We continue to invest in developing new products for all our markets including transparent conductive oxide systems for the solar and display markets as well as with our transparent electronic products. Those products involve research and development expense to accelerate time to market.

RESULTS OF OPERATIONS

Three and six months ended June 30, 2021 (unaudited) compared to three and six months ended June 30, 2020 (unaudited):

Revenue

For the three months ended June 30, 2021, we had total revenue of $1,972,049. This was a decrease of $634,538, or 24.3%, compared to the three months ended June 30, 2020. For the six months ended June 30, 2021, we had total revenue of $4,994,359. This was a decrease of $1,051,023, or 17.4%, compared to the six months ended June 30, 2020. These increases were principally due to lower pricing in 2021, which was partially offset by higher volume and product mix. We anticipate revenue to increase significantly during the third quarter of 2021 based on orders received during the first half of 2021.

Gross profit

Gross profit was $562,554 for the three months ended June 30, 2021, compared to $437,784 for the same three months in 2020. This was an increase of $124,770, or 28.5%. Gross profit as a percentage of revenue (gross margin) was 28.5% for the second quarter of 2021 compared to 16.8% for the same period in 2020. Gross profit was $1,365,590 for the six months ended June 30, 2021, compared to $947,122 for the first six months of 2020. This was an increase of $418,468 or 44.2%.  Gross margin was 27.3% for the first six months of 2021 compared to 15.7% for the same period in 2020. These increases were due to volume, product mix, and improved manufacturing efficiency. In addition, $87,287 and $238,275 was related to the Employee Retention Credit for the three and six months ended June 30, 2021, respectively. While we expect revenue and gross profit to increase during the third quarter of 2021, it is anticipated that gross margin will decrease due to higher raw material cost.

General and administrative expense

General and administrative expense for the three months ended June 30, 2021, and 2020, was $283,708 and $272,216, respectively, an increase of 4.2%. General and administrative expense for the six months ended June 30, 2021, and 2020, was $571,589 and $555,381, respectively, an increase of 2.9%. Increase in compensation was offset by the Employee Retention Credit of $21,000 during the second quarter of 2021 and $57,000 for the six months ended June 30, 2021.

Included in general and administrative expense was $53,561 and $56,555 for professional fees for the three months ended June 30, 2021, and 2020, respectively and $124,759 and $120,137 for the six months ended June 30, 2021, and 2020, respectively. These continued expenses were primarily related to SEC compliance costs for legal, accounting and stockholder relations fees.

16

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Research and development expense

Research and development expense for the three months ended June 30, 2021, was $54,377 compared to $90,421 for the same period in 2020, a decrease of 39.9%. Research and development expense for the six months ended June 30, 2021, was $92,596 compared to $177,325 for the same period in 2020, a decrease of 47.8%. This decrease is primarily related to the Employee Retention Credit of $22,750 during the second quarter of 2021 and $61,750 during the first six months of 2021. Specialty materials are being researched for use in niche markets which include custom applications and additive manufacturing. Our development efforts utilize a disciplined innovation approach focused on accelerating time to market for these applications and involve ongoing research and development expense.

Marketing and sales expense

Marketing and sales expense was $46,434 and $47,387 for the three months ended June 30, 2021, and 2020, respectively. This was a decrease of 2.0%. Compensation expense related to an increase in staff in 2021 was offset by the Employee Retention Credit of approximately $20,663.

Marketing and sales expense was $97,827 and $99,171 for the six months ended June 30, 2021, and 2020, respectively. This was a decrease of 1.4%. Higher outside consulting expense and compensation expense related to an increase in staff in 2021 were offset by the Employee Retention Credit of $50,183, as well as lower travel expense.

Stock compensation expense

Included in total expenses were noncash stock-based compensation costs of $8,675 and $31,182 for the three months ended June 30, 2021, and 2020, respectively, and $30,563 and $62,362 for the six months ended June 30, 2021, and 2020, respectively. Compensation expense for all stock-based awards is based on the grant date fair value and recognized over the required service (vesting) period. Unrecognized non-cash stock-based compensation expense was $8,669 as of June 30, 2021, and will be recognized through 2023.

Interest

Interest expense was $9,014 for the three months ended June 30, 2021, and $7,300 for the three months ended June 30, 2020. Interest expense was $16,652 for the six months ended June 30, 2021, and $11,369 for the six months ended June 30, 2020. Lower interest income during the first half of 2021 resulted in an increase to overall interest expense.

Income taxes

Income tax expense was $47,473 and $0 for the three months ended June 30, 2021, and 2020, respectively, and $138,093 and $1,900 for the six months ended June 30, 2021, and 2020, respectively. In December 2020, we reversed in full our valuation allowance that had been recorded against the unrealizability of the deferred tax asset, which resulted in the recording of the asset of $1,019,317 at December 31, 2020. Management considered new evidence, both positive and negative, during the first half of 2021 that could affect its view of the future realization of deferred tax assets and determined that no valuation allowance was necessary at June 30, 2021, and the deferred tax asset was $888,315 at June 30, 2021.

Income applicable to common stock

Income applicable to common stock for the three months ended June 30, 2021, and 2020, was $115,510 and $14,422, respectively. Income applicable to common stock for the six months ended June 30, 2021, and 2020 was $762,057 and $89,900, respectively. The increase was primarily the result of higher gross profit and the Employee Retention Credit for the three and six months ended June 30, 2021, as well as forgiveness of the PPP Loan in the first quarter of this year.

17

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Liquidity and Capital Resources

Cash

As of June 30, 2021, cash on hand was $3,497,202 compared to $2,917,551 at December 31, 2020, an increase of 19.9%.

Working capital

At June 30, 2021, working capital was $3,269,696 compared to $2,810,629 at December 31, 2020, an increase of $459,067, or 16.3%, primarily due to the increase in cash of $579,651.

Cash from operations

Net cash provided by operating activities during the six months ended June 30, 2021, was $1,249,462 and $8,818 for the six months ended June 30, 2020. This included depreciation and amortization of $273,688 and $266,486, and noncash stock-based compensation costs of $30,563 and $62,362 for the six months ended June 30, 2021, and 2020, respectively. Due to orders received during the first half of 2021, inventories increased $3,065,409, accrued expenses and customer deposits increased $3,477,435 and accounts payable increased $286,866.

Cash from investing activities

Cash of $558,828 and $167,999 was used in investing activities during the six months ended June 30, 2021, and June 30, 2020, respectively, for the acquisition of production equipment.

Cash from financing activities

Cash of $87,422 and $48,620 was used in financing activities for principal payments to third parties for finance lease obligations during the six months ended June 30, 2021, and 2020, respectively. The increase is due to the commencement of a finance lease during the third quarter of 2020 for the rebuild of production equipment. Also, a dividend payment of $24,152 was made to owners of our Series B preferred stock during the second quarter of 2021 and 2020.

Debt outstanding

Total debt outstanding decreased to $316,212 at June 30, 2021, from $728,934 at December 31, 2020, a decrease of 56.6%. As previously mentioned, cash of $87,422 was used for principal payments for finance lease obligations and our PPP loan of $325,300 was forgiven in full by the SBA.

Off Balance Sheet Arrangements

We have no off-balance sheet arrangements including special purpose entities.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make judgments, assumptions and estimates that affect the amounts reported in the Financial Statements and accompanying notes. Note 2 to the Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2020, describes the significant accounting policies and methods used in the preparation of the Financial Statements. Estimates are used for, but not limited to, accounting for the allowance for doubtful accounts, inventory allowances, property and equipment depreciable lives, patents and licenses useful lives, revenue recognition, tax valuation allowance, stock-based compensation and assessing changes in which impairment of certain long-lived assets may occur. Actual results could differ from these estimates. The following critical accounting policies are impacted significantly by judgments, assumptions and estimates used in the preparation of the Financial Statements. The allowance for doubtful accounts is based on our assessment of the collectability of specific customer accounts and the aging of the accounts receivable. If there

18

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

is a deterioration of a major customer’s credit worthiness or actual defaults are higher than our historical experience, our estimates of the recoverability of amounts due us could be adversely affected. Inventory purchases and commitments are based upon future demand forecasts. If there is a sudden and significant decrease in demand for our products or there is a higher risk of inventory obsolescence because of rapidly changing technology and customer requirements, we may be required to increase our inventory allowances and our gross margin could be adversely affected. Depreciable and useful lives estimated for property and equipment, licenses and patents are based on initial expectations of the period of time these assets and intangibles will benefit us. Changes in circumstances related to a change in our business, change in technology or other factors could result in these assets becoming impaired, which could adversely affect the value of these assets.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and implemented, can only provide reasonable assurance of achieving the desired control objectives. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, to allow timely discussions regarding required disclosure.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective. Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) of the Exchange Act as controls and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with the SEC under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.

Inherent Limitations over Internal Controls

Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could have a material effect on the financial statements.

Management is responsible for the consistency, integrity, and presentation of information. To fulfill our responsibility, we maintain systems of internal control designed to provide reasonable assurance that assets are safeguarded, and transactions are executed in accordance with established procedures. The concept of reasonable assurance is based upon recognition that the cost of the controls should not exceed the benefit derived. We believe our systems of internal control provide this reasonable assurance.

The Board of Directors exercises its oversight role with respect to our systems of internal control primarily through its Audit Committee, which is comprised of independent directors. The Committee oversees our financial reporting, quarterly reviews, and audits to assess whether their quality, integrity, and objectivity are sufficient to protect shareholders’ investments.

19

Item 4. Controls and Procedures (continued)

Changes in Internal Controls over Financial Reporting

Other than the remediation described above, there were no changes in our internal controls over financial reporting for the three months ended June 30, 2021, that materially affected or were reasonably likely to materially affect our disclosure controls and procedures. Additionally, there were no changes in our internal controls that could materially affect our disclosure controls and procedures subsequent to the date of their evaluation.

20

Item 6. Exhibits

3(a)		Certificate of Second Amended and Restated Articles of Incorporation of Superconductive Components, Inc. (Incorporated by reference to Exhibit 3(a) to the Company’s initial Form 10-SB, filed on September 28, 2000)
3(b)		Restated Code of Regulations of Superconductive Components, Inc. (Incorporated by reference to Exhibit 3(b) to the Company’s initial Form 10-SB, filed on September 28, 2000)
3(c)		Amendment to Articles of Incorporation recording the change of the corporate name to SCI Engineered Materials, Inc.  (Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-QSB filed November 7, 2007).
4(a)		SCI Engineered Materials, Inc. 2011 Stock Incentive Plan (Incorporated      by reference to the Company’s Definitive Proxy Statement for the 2011  Annual Meeting of Shareholders held on June 10, 2011, filed April 28,  2011).
4(b)		Superconductive Components, Inc. 2006 Stock Incentive Plan (Incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement for the 2006 Annual Meeting of Shareholders held on June 9, 2006, filed May 1, 2006).
10(c)		Description of Unsecured Promissory Note administered by the U.S. Small Business Administration for funds received April 24, 2020 (Incorporated by reference to the Company’s Current Report on Form 8-K, dated April 29, 2020).
14(a)		SCI Engineered Materials Code of Ethics for the Chief Executive Officer and Chief Financial Officer (Incorporated by reference to the Company’s Current Report via the Company’s website at www.sciengineeredmaterials.com)
31.1	*	Rule 13a-14(a) Certification of Principal Executive Officer.
31.2	*	Rule 13a-14(a) Certification of Principal Financial Officer.
32.1	*	Section 1350 Certification of Principal Executive Officer.
32.2	*	Section 1350 Certification of Principal Financial Officer.
99.1		Press Release dated July 29, 2021, entitled “SCI Engineered Materials, Inc., Reports 2021 Second Quarter and Year-to-Date Results.”
101		The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at June 30, 2021 and December 31, 2020 (ii) Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020, (iii) Consolidated Statement of Changes in Equity for the three and six months ended June 30, 2021 and 2020, (iv) Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020, and (v) Notes to Financial Statements.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith

21

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SCI ENGINEERED MATERIALS, INC.
Date: July 29, 2021	/s/ Jeremiah R. Young
	Jeremiah R. Young, President and Chief Executive Officer
	(Principal Executive Officer)
	/s/ Gerald S. Blaskie
	Gerald S. Blaskie, Vice President and Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)

22

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jeremiah R. Young, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of SCI Engineered Materials, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 29, 2021	/s/ Jeremiah R. Young
	Jeremiah R. Young
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Gerald S. Blaskie, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of SCI Engineered Materials, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 29, 2021	/s/ Gerald S. Blaskie
	Gerald S. Blaskie
	Vice President and Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SCI Engineered Materials, Inc.  (the “Company”) on Form 10-Q for the period ending June 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeremiah R. Young,  President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Jeremiah R. Young

Jeremiah R. Young

President and Chief Executive Officer of

SCI Engineered Materials, Inc.

(Principal Executive Officer)

July 29, 2021

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SCI Engineered Materials, Inc.  (the “Company”) on Form 10-Q for the period ending June 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gerald S. Blaskie, Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Gerald S. Blaskie

Gerald S. Blaskie

Vice President and Chief Financial Officer of

SCI Engineered Materials, Inc. (Principal Financial
Officer and Principal Accounting Officer)

July 29, 2021

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2021	Jul. 28, 2021
Document And Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Jun. 30, 2021
Entity File Number	0-31641
Entity Registrant Name	SCI ENGINEERED MATERIALS, INC.
Entity Incorporation, State or Country Code	OH
Entity Tax Identification Number	31-1210318
Entity Address, Address Line One	2839 Charter Street
Entity Address, City or Town	Columbus
Entity Address, State or Province	OH
Entity Address, Postal Zip Code	43228
City Area Code	614
Local Phone Number	486-0261
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		4,498,908
Entity Central Index Key	0000830616
Title of 12(b) Security	Common stock, without par value
Security Exchange Name	NONE
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q2
Amendment Flag	false
Trading Symbol	SCIA

XML

BALANCE SHEETS - USD ($)	Jun. 30, 2021	Dec. 31, 2020
Current Assets
Cash	$ 3,497,202	$ 2,917,551
Accounts receivable Trade, less allowance for doubtful accounts of $15,000	427,774	459,471
Tax - Employee Retention Credit	176,252	0
Inventories	4,245,768	1,180,359
Prepaid expenses	282,609	131,333
Total current assets	8,629,605	4,688,714
Property and Equipment, at cost
Machinery and equipment	7,863,346	8,280,611
Furniture and fixtures	132,365	132,365
Leasehold improvements	596,867	592,899
Construction in progress	338,030	3,904
Property, Plant and Equipment, Gross	8,930,608	9,009,779
Less accumulated depreciation	(6,714,701)	(7,121,647)
Property, Plant and Equipment, Net	2,215,907	1,888,132
Right of use asset, Net	316,604	357,396
Deferred tax asset	888,315	1,019,317
Other assets	91,760	96,623
Total other assets	1,296,679	1,473,336
TOTAL ASSETS	12,142,191	8,050,182
Current Liabilities
Finance lease obligations, current portion	120,820	160,416
Notes payable, current portion		252,577
Operating lease obligations, current portion	93,090	86,844
Accounts payable	434,150	147,284
Customer deposits	4,428,665	1,010,236
Accrued compensation	180,657	115,143
Accrued expenses and other	102,527	105,585
Total current liabilities	5,359,909	1,878,085
Finance lease obligations, net of current portion	195,392	243,218
Notes payable, net of current portion		72,723
Operating lease obligations, net of current portion	255,179	304,989
Total liabilities	5,810,480	2,499,015
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; 4,498,908 and 4,466,969 shares issued and outstanding, respectively	10,558,867	10,530,669
Additional paid-in capital	2,236,790	2,246,501
Accumulated deficit	(6,966,308)	(7,740,441)
Total shareholders' equity	6,331,711	5,551,167
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 12,142,191	$ 8,050,182

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BALANCE SHEETS (Parenthetical) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2021	Dec. 31, 2020
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	4,498,908	4,466,969
Common stock, shares outstanding	4,498,908	4,466,969
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

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STATEMENTS OF OPERATIONS - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
STATEMENTS OF OPERATIONS
Revenue	$ 1,972,049	$ 2,606,587	$ 4,994,359	$ 6,045,382
Cost of revenue	1,409,495	2,168,803	3,628,769	5,098,260
Gross profit	562,554	437,784	1,365,590	947,122
General and administrative expense	283,708	272,216	571,589	555,381
Research and development expense	54,377	90,421	92,596	177,325
Marketing and sales expense	46,434	47,387	97,827	99,171
Income from operations	178,035	27,760	603,578	115,245
Gain on extinguishment of debt	0	0	(325,300)	0
Interest expense	9,014	7,300	16,652	11,369
Income before provision for income taxes	169,021	20,460	912,226	103,876
Provision for income taxes	47,473	0	138,093	1,900
Net income	121,548	20,460	774,133	101,976
Dividends on preferred stock	6,038	6,038	12,076	12,076
INCOME APPLICABLE TO COMMON STOCK	$ 115,510	$ 14,422	$ 762,057	$ 89,900
Income per common share
Basic (In dollars per share)	$ 0.03	$ 0.00	$ 0.17	$ 0.02
Diluted (In dollars per share)	$ 0.03	$ 0.00	$ 0.17	$ 0.02
Weighted average shares outstanding
Basic (In shares)	4,497,903	4,411,714	4,488,913	4,398,856
Diluted (In shares)	4,526,062	4,418,325	4,516,478	4,406,478

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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, 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
Balance at Dec. 31, 2019	514,438	10,410,677	2,265,925	(9,242,204)	3,948,836
Net income					101,976
Balance at Jun. 30, 2020	502,362	10,470,675	2,256,213	(9,140,228)	4,089,022
Balance at Mar. 31, 2020	520,476	10,440,675	2,261,069	(9,160,688)	4,061,532
Accretion of cumulative dividends	6,038	0	(6,038)	0	0
Stock based compensation expense (Note 4)	0	0	1,182	0	1,182
Payment of cumulative dividends (Note 5)	(24,152)	0	0	0	(24,152)
Common stock issued (Note 4)	0	30,000	0	0	30,000
Net income	0	0	0	20,460	20,460
Balance at Jun. 30, 2020	502,362	10,470,675	2,256,213	(9,140,228)	4,089,022
Balance at Dec. 31, 2020	514,438	10,530,669	2,246,501	(7,740,441)	5,551,167
Accretion of cumulative dividends	6,038	0	(6,038)	0	0
Stock based compensation expense (Note 4)	0	0	1,183	0	1,183
Common stock issued (Note 4)	0	20,705	0	0	20,705
Net income	0	0	0	652,585	652,585
Balance at Mar. 31, 2021	520,476	10,551,374	2,241,646	(7,087,856)	6,225,640
Balance at Dec. 31, 2020	514,438	10,530,669	2,246,501	(7,740,441)	5,551,167
Net income					774,133
Balance at Jun. 30, 2021	502,362	10,558,867	2,236,790	(6,966,308)	6,331,711
Balance at Mar. 31, 2021	520,476	10,551,374	2,241,646	(7,087,856)	6,225,640
Accretion of cumulative dividends	6,038	0	(6,038)	0	0
Stock based compensation expense (Note 4)	0	0	1,182	0	1,182
Payment of cumulative dividends (Note 5)	(24,152)	0	0	0	(24,152)
Common stock issued (Note 4)	0	7,493	0	0	7,493
Net income	0	0	0	121,548	121,548
Balance at Jun. 30, 2021	$ 502,362	$ 10,558,867	$ 2,236,790	$ (6,966,308)	$ 6,331,711

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STATEMENTS OF CASH FLOWS - USD ($)	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 774,133	$ 101,976
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and accretion	230,689	226,956
Amortization of right of use asset	40,792	37,806
Amortization of patents	2,207	1,724
Stock based compensation	30,563	62,362
Loss (gain) on disposal of equipment	3,224	(3,063)
Deferred tax asset	131,002	0
Gain on extinguishment of debt	(325,300)	0
Inventory reserve	600	33,629
Changes in operating assets and liabilities:
Accounts receivable	(144,555)	(39,814)
Inventories	(3,066,009)	1,844,385
Prepaid expenses	(151,276)	(50,569)
Other assets	2,656	(6,488)
Accounts payable	286,866	(74,390)
Operating lease obligations	(43,565)	(39,456)
Accrued expenses and customer deposits	3,477,435	(2,086,240)
Net cash provided by operating activities	1,249,462	8,818
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on sale of equipment	591	3,063
Purchases of property and equipment	(558,828)	(167,999)
Net cash used in investing activities	(558,237)	(164,936)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of cumulative dividends on preferred stock	(24,152)	(24,152)
Proceeds from SBA Paycheck Protection Program	0	325,300
Principal payments on finance lease obligations and notes payable	(87,422)	(48,620)
Net cash (used in) provided by financing activities	(111,574)	252,528
NET INCREASE IN CASH	579,651	96,410
CASH - Beginning of period	2,917,551	1,828,397
CASH - End of period	3,497,202	1,924,807
Cash paid during the periods for:
Interest	5,895	5,826
Income taxes	138,093	1,900
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES
Increase in asset retirement obligation	$ 3,450	$ 1,800

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Business Organization and Purpose

6 Months Ended

Jun. 30, 2021

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 markets within the PVD industry including Photonics, Solar, Glass and Transparent Electronics. Substantially all 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.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2021

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 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, 2020. 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.

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 most 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.

Note 2.  Summary of Significant Accounting Policies (continued)

During the three months ended June 30, 2021, and 2020, revenue from the photonics market was approximately 99% and 96% of total revenue, respectively. During the six months ended June 30, 2021, and 2020, revenue from the photonics market was approximately 100% and 98% of total revenue, respectively. The balance of the revenue in these periods was from the thin film solar and thin film battery markets. The top two customers represented approximately 79% and 87% of total revenue for the six months ended June 30, 2021, and 2020, respectively. International shipments resulted in 3% and 4% of total revenue for the first six months of 2021 and 2020, respectively.

Employee Retention Credit - The Company qualified for federal government assistance through Employee Retention Credit provisions of the Consolidated Appropriations Act of 2021 during the current fiscal year in the amount of $255,507 during the first quarter of 2021 and $151,701 during the second quarter of 2021. The purpose of the Employee Retention Credit is to encourage employers to keep employees on the payroll, even if they are not working during the covered period because of the coronavirus outbreak. This credit is recorded in the Statement of Operations as an offset to payroll costs in their respective expense lines. A balance of $176,252 appears as a tax receivable on the balance sheets at June 30, 2021.

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2021

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 2023. We are evaluating the impact that the adoption of this update will have on our financial statements.

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Common Stock and Stock Options

6 Months Ended

Jun. 30, 2021

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. Noncash stock-based compensation expense was $8,675 and $31,182 for the three months ended June 30, 2021, and 2020, respectively.

Noncash stock-based compensation expense was $30,563 and $62,362 for the six months ended June 30, 2021, and 2020, respectively.

Unrecognized stock-based compensation expense was $8,669 as of June 30, 2021, 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 5,265 and 51,085 aggregate shares of common stock of the Company during the six months ended June 30, 2021, and 2020, respectively. The stock had an aggregate value of $14,987 and $59,998 for the six months ended June 30, 2021, and 2020, respectively, and was recorded as noncash stock-based compensation expense in the financial statements.

Employees received compensation of 4,804 aggregate shares of common stock of the Company during the six months ended June 30, 2021, which had an aggregate value of $13,211, and was recorded as noncash stock-based compensation expense in the financial statements. In addition, during the six months ended June 30, 2021, a total of 30,181 stock options were exercised by management.

The cumulative status of options granted and outstanding at June 30, 2021, and December 31, 2020, as well as options which became exercisable in connection with the Company’s stock option plans is summarized as follows:

Note 4.  Common Stock and Stock Options (continued)

Employee Stock Options

		Weighted
		Average
	Stock Options	Exercise Price
Outstanding at January 1, 2020	76,037	$	1.03
Outstanding at December 31, 2020	76,037	$	1.03
Exercised	(30,181)		0.96
Outstanding at June 30, 2021	45,856	$	1.07
Options exercisable at December 31, 2020	55,208	$	0.94
Options exercisable at June 30, 2021	31,970	$	0.99

Exercise prices for options ranged from $0.84 to $1.25 at June 30, 2021. The weighted average option price for all options outstanding at June 30, 2021, was $1.07 with a weighted average remaining contractual life of 5.3 years. There were no non-employee director stock options outstanding during 2021 and 2020.

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Preferred Stock

6 Months Ended

Jun. 30, 2021

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, 2021, and 2020, and $12,076 for the six months ended June 30, 2021, and 2020. The Company had accrued dividends on Series B preferred stock of $253,596 at June 30, 2021, and $265,672 at December 31, 2020. These amounts are included in Convertible preferred stock, Series B, on the balance sheet at June 30, 2021, and December 31, 2020. During June 2021 and June 2020, a dividend payment of $24,152 was made to preferred shareholders.

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Inventories

6 Months Ended

Jun. 30, 2021

Inventories

Inventories

Note 6.  Inventories

Inventories consisted of the following:

	June 30,		December 31,
	2021		2020
	(unaudited)
Raw materials	$	2,717,901	$	206,668
Work-in-process		1,393,580		877,812
Finished goods		159,105		120,097
Inventory reserve		(24,818)		(24,218)
	$	4,245,768	$	1,180,359

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Earnings Per Share

6 Months Ended

Jun. 30, 2021

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,
	2021		2020		2021		2020
Income applicable to common shares	$	115,510	$	14,422	$	762,057	$	89,900
Weighted average common shares outstanding - basic		4,497,903		4,411,714		4,488,913		4,398,856
Effect of dilution		28,159		6,611		27,565		7,622
Weighted average shares outstanding - diluted		4,526,062		4,418,325		4,516,478		4,406,478

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Notes Payable

6 Months Ended

Jun. 30, 2021

Notes Payable

Notes Payable

Note 8.   Notes Payable

On April 17, 2020, the Company 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 Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and administered by the U.S. Small Business Administration (the “SBA”). The term of the PPP loan was two years. The interest rate on this loan was 1.0% per annum, which was deferred for the first six months of the term of the loan. After the initial six-month deferral period or until forgiveness of the loan was approved, the loan required monthly payments of principal and interest until maturity with respect to any portion of the PPP loan which was not forgiven. Under the terms of the CARES Act, PPP loan recipients are eligible to apply for, and be granted, forgiveness for all or a portion of loans granted under the PPP. Such forgiveness was 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. The Company applied for forgiveness of the entire amount of the loan during the fourth quarter of 2020, and the SBA approved the Forgiveness Application in full during the first quarter of 2021. This amount is included in the Statement of Operations as gain on extinguishment of debt in the first quarter of 2021.

The Company has a line of credit with Huntington National 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, 2021. At June 30, 2021, no amounts were drawn on the line of credit.

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Income Taxes

6 Months Ended

Jun. 30, 2021

Income Taxes

Income Taxes

Note 9.  Income Taxes

The provision for income taxes for the three months and six months ended June 30, 2021, is based on our projected annual effective tax rate for fiscal year 2021, adjusted for permanent differences and specific items that are required to be recognized in the period in which they are incurred. The provision for income taxes was $47,473 and $0 for the three months ended June 30, 2021, and 2020 respectively, and $138,093 and $1,900 for the six months ended June 30, 2021, and 2020 respectively.

When compared to the statutory rate of 21%, the effective tax rate of 14.4% for the six months ended June 30, 2021, was due primarily to a tax benefit of $325,300 from the PPP loan forgiveness.

Note 9.  Income Taxes (continued)

Following is the income tax expense for the three and six months ended June 30:

	Three months ended				Six months ended
	June 30,				June 30,
	2021		2020		2021		2020
Federal - deferred	$	43,160	$	—	$	131,002	$	—
State and local		4,313		—		7,091		1,900
	$	47,473	$	—	$	138,093	$	1,900

Deferred tax assets and liabilities result from temporary differences in the recognition of income and expense for tax and financial reporting purposes. A valuation allowance of $0 has been recorded against the realizability of the net deferred tax asset at June 30, 2021, and December 31, 2020. The Company had net operating loss carryforwards available for federal and state tax purposes of approximately $3,700,000 at December 31, 2020, which expire in varying amounts through 2035.

As of December 31, 2020, management determined that there was sufficient positive evidence to conclude that it is more likely than not that deferred taxes of $1,019,317 are realizable in part because the Company achieved four consecutive years of pretax income, expect profits to continue for the foreseeable future and implemented new efficiencies in the Company’s manufacturing process. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. Accordingly, management determined that no valuation allowance was necessary, and the deferred tax asset was $888,315 at June 30, 2021.

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Operating Lease

6 Months Ended

Jun. 30, 2021

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 $9,200 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 $55,000 and $53,900 during the six months ended June 30, 2021, and 2020, respectively.

The following is a maturity analysis, by year, of the annual undiscounted cash outflows of the operating lease liabilities as of June 30, 2021:

2021	$	55,319
2022		112,611
2023		114,857
2024		102,550
Total minimum lease payments		385,337
Less debt discount		37,068
Total operating lease obligations	$	348,269

Operating cash outflows from operating leases	$	197,050
Weighted average remaining lease term		3.4	years
Weighted average discount rate		5.5	%

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Finance Leases

6 Months Ended

Jun. 30, 2021

Finance Leases

Finance Leases

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, 2021, are shown in the following table.

2021	$	79,279
2022		105,154
2023		101,675
2024		49,859
Total minimum lease payments		335,967
Less amount representing interest		19,755
Present value of minimum lease payments		316,212
Less current portion		120,820
Finance lease obligations, net of current portion	$	195,392

The equipment under finance lease at June 30, 2021, and December 31, 2020, is included in the accompanying balance sheets as follows:

	June 30, 2021		Dec. 31, 2020
Machinery and equipment	$	745,289	$	745,289
Less accumulated depreciation and amortization		194,750		157,486
Net book value	$	550,539	$	587,803

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.

During the first six months of 2021 the Company was approved by Fifth Third Equipment Finance Company for an equipment line of credit not to exceed $800,000 with an implicit rate of 2.71% at time of approval. Delivery and acceptance of new production equipment must be no later than December 31, 2021. Deposits of $319,109 were made during the first half of 2021 towards purchase orders totaling $718,900 for new equipment. The lease schedules are to commence upon acceptance of delivered equipment. The final lease rate factor or loan interest rate shall be fixed at funding using the Bloomberg SWAP Rate report for the most recent previous day close and shall remain constant throughout the term. At June 30, 2021, no amounts were drawn on the line of credit.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2021

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 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, 2020. 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.

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 most 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.

Note 2.  Summary of Significant Accounting Policies (continued)

During the three months ended June 30, 2021, and 2020, revenue from the photonics market was approximately 99% and 96% of total revenue, respectively. During the six months ended June 30, 2021, and 2020, revenue from the photonics market was approximately 100% and 98% of total revenue, respectively. The balance of the revenue in these periods was from the thin film solar and thin film battery markets. The top two customers represented approximately 79% and 87% of total revenue for the six months ended June 30, 2021, and 2020, respectively. International shipments resulted in 3% and 4% of total revenue for the first six months of 2021 and 2020, respectively.

Employee Retention Credit

Employee Retention Credit - The Company qualified for federal government assistance through Employee Retention Credit provisions of the Consolidated Appropriations Act of 2021 during the current fiscal year in the amount of $255,507 during the first quarter of 2021 and $151,701 during the second quarter of 2021. The purpose of the Employee Retention Credit is to encourage employers to keep employees on the payroll, even if they are not working during the covered period because of the coronavirus outbreak. This credit is recorded in the Statement of Operations as an offset to payroll costs in their respective expense lines. A balance of $176,252 appears as a tax receivable on the balance sheets at June 30, 2021.

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Common Stock and Stock Options (Tables)

6 Months Ended

Jun. 30, 2021

Common Stock and Stock Options

Schedule of share-based compensation, employee stock options, activity

The cumulative status of options granted and outstanding at June 30, 2021, and December 31, 2020, as well as options which became exercisable in connection with the Company’s stock option plans is summarized as follows:

Note 4.  Common Stock and Stock Options (continued)

Employee Stock Options

		Weighted
		Average
	Stock Options	Exercise Price
Outstanding at January 1, 2020	76,037	$	1.03
Outstanding at December 31, 2020	76,037	$	1.03
Exercised	(30,181)		0.96
Outstanding at June 30, 2021	45,856	$	1.07
Options exercisable at December 31, 2020	55,208	$	0.94
Options exercisable at June 30, 2021	31,970	$	0.99

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Inventories (Tables)

6 Months Ended

Jun. 30, 2021

Inventories

Schedule of Inventories

	June 30,		December 31,
	2021		2020
	(unaudited)
Raw materials	$	2,717,901	$	206,668
Work-in-process		1,393,580		877,812
Finished goods		159,105		120,097
Inventory reserve		(24,818)		(24,218)
	$	4,245,768	$	1,180,359

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2021

Earnings Per Share

Summary of reconciliation of earnings per share calculations

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Income applicable to common shares	$	115,510	$	14,422	$	762,057	$	89,900
Weighted average common shares outstanding - basic		4,497,903		4,411,714		4,488,913		4,398,856
Effect of dilution		28,159		6,611		27,565		7,622
Weighted average shares outstanding - diluted		4,526,062		4,418,325		4,516,478		4,406,478

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Income Taxes (Tables)

6 Months Ended

Jun. 30, 2021

Income Taxes

Schedule of components of the income tax expense

Following is the income tax expense for the three and six months ended June 30:

	Three months ended				Six months ended
	June 30,				June 30,
	2021		2020		2021		2020
Federal - deferred	$	43,160	$	—	$	131,002	$	—
State and local		4,313		—		7,091		1,900
	$	47,473	$	—	$	138,093	$	1,900

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Operating Lease (Tables)

6 Months Ended

Jun. 30, 2021

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 June 30, 2021:

2021	$	55,319
2022		112,611
2023		114,857
2024		102,550
Total minimum lease payments		385,337
Less debt discount		37,068
Total operating lease obligations	$	348,269

Schedule of operating lease other information

Operating cash outflows from operating leases	$	197,050
Weighted average remaining lease term		3.4	years
Weighted average discount rate		5.5	%

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Finance Leases (Tables)

6 Months Ended

Jun. 30, 2021

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 June 30, 2021, are shown in the following table.

2021	$	79,279
2022		105,154
2023		101,675
2024		49,859
Total minimum lease payments		335,967
Less amount representing interest		19,755
Present value of minimum lease payments		316,212
Less current portion		120,820
Finance lease obligations, net of current portion	$	195,392

Schedule of equipment under finance leases

The equipment under finance lease at June 30, 2021, and December 31, 2020, is included in the accompanying balance sheets as follows:

	June 30, 2021		Dec. 31, 2020
Machinery and equipment	$	745,289	$	745,289
Less accumulated depreciation and amortization		194,750		157,486
Net book value	$	550,539	$	587,803

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Business Organization and Purpose (Details)	6 Months Ended
	Jun. 30, 2021 segment
Business Organization and Purpose
Number of operating segments	1

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Summary of Significant Accounting Policies (Details) - USD ($)	3 Months Ended			6 Months Ended
	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Accounting Policies [Line Items]
Employee retention credit provisions	$ 151,701	$ 255,507
Tax - Employee Retention Credit	$ 176,252			$ 176,252		$ 0
Sales Revenue, Net [Member] | Photonics market [Member]
Accounting Policies [Line Items]
Concentration Risk Percentage	99.00%		96.00%	100.00%	98.00%
Geographic Concentration Risk [Member] | Sales Revenue, Net [Member] | International
Accounting Policies [Line Items]
Concentration Risk, Percentage				3.00%	4.00%
Two Customers [Member] | Sales Revenue, Net [Member]
Accounting Policies [Line Items]
Concentration Risk Percentage				79.00%	87.00%

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Common Stock and Stock Options (Details) - $ / shares	6 Months Ended
	Jun. 30, 2021	Dec. 31, 2020
Common Stock and Stock Options
Weighted Average Contractual Term, Outstanding	5 years 3 months 18 days
Employee Stock Option [Member]
Common Stock and Stock Options
Stock Options, Outstanding, Beginning Balance	76,037
Stock Options, Exercised	(30,181)
Stock Options, Outstanding, Ending Balance	45,856
Stock Options, Options exercisable	31,970	55,208
Weighted Average Exercise Price, Outstanding, Beginning Balance	$ 1.03
Weighted Average Exercise Price, Exercised	0.96
Weighted Average Exercise Price, Outstanding, Ending Balance	1.07
Weighted Average Exercise Price, Options exercisable	$ 0.99	$ 0.94

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Common Stock and Stock Options - Additional Information (Details) - USD ($)	3 Months Ended				6 Months Ended
	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Common Stock and Stock Options
Stock based compensation	$ 8,675		$ 31,182		$ 30,563	$ 62,362
Unrecognized compensation expense	8,669				$ 8,669
Stock Issued During Period, Value, New Issues	$ 7,493	$ 20,705	30,000	$ 29,998
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	$ 1.07				$ 1.07
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term					5 years 3 months 18 days
Common Stock [Member]
Common Stock and Stock Options
Stock Issued During Period, Value, New Issues	$ 7,493	$ 20,705	$ 30,000	$ 29,998
Employee Stock Option [Member]
Common Stock and Stock Options
Stock options exercised					30,181
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	45,856				45,856		76,037
Employee Stock Option [Member] | Common Stock [Member]
Common Stock and Stock Options
Stock Issued During Period, Shares, New Issues					4,804
Stock Issued During Period, Value, New Issues					$ 13,211
Non-employee director
Common Stock and Stock Options
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	0				0		0
Non-employee director | Common Stock [Member]
Common Stock and Stock Options
Stock Issued During Period, Shares, New Issues					5,265	51,085
Stock Issued During Period, Value, New Issues					$ 14,987	$ 59,998

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Preferred Stock (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Preferred Stock Dividends, Income Statement Impact	$ 6,038	$ 6,038	$ 12,076	$ 12,076
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	$ 12,076	$ 12,076
Accrued Dividend	$ 253,596		$ 253,596		$ 265,672

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Inventories (Details) - USD ($)	Jun. 30, 2021	Dec. 31, 2020
Inventories
Raw materials	$ 2,717,901	$ 206,668
Work-in-process	1,393,580	877,812
Finished goods	159,105	120,097
Inventory reserve	(24,818)	(24,218)
Inventory, Net	$ 4,245,768	$ 1,180,359

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Earnings Per Share - Reconciliation of Earnings Per Share Calculations (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Earnings Per Share
Income applicable to common stock	$ 115,510	$ 14,422	$ 762,057	$ 89,900
Weighted average common shares outstanding - basic	4,497,903	4,411,714	4,488,913	4,398,856
Effect of dilution	28,159	6,611	27,565	7,622
Weighted average shares outstanding - diluted	4,526,062	4,418,325	4,516,478	4,406,478

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Notes Payable - (Details) - USD ($)		6 Months Ended
	Apr. 17, 2020	Jun. 30, 2021
SBA PPP Loan
Debt Instrument [Line Items]
Unsecured promissory note	$ 325,300
Term of loan	2 years
Interest rate (in percentage)	1.00%
Deferral period for monthly payments	6 months
Huntington Bank [Member]
Debt Instrument [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity		$ 1,000,000
Borrowings on line of credit		$ 0
Huntington Bank [Member] | Prime Commercial Rate
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate		0.50%

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Income Taxes - Income tax expense (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Income Taxes
Federal - deferred	$ 43,160	$ 0	$ 131,002	$ 0
State and local	4,313	0	7,091	1,900
Total	$ 47,473	$ 0	$ 138,093	$ 1,900

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Income Taxes - Additional information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Income Taxes
Recorded Valuation Allowance	$ 0		$ 0		$ 0
Deferred Tax Assets, Operating Loss Carryforwards, State and Local					3,700,000
Operating Loss Carry forward Expiration Year			2035
Net deferred tax asset	888,315		$ 888,315		$ 1,019,317
Deferred Tax Assets, Valuation Allowance	0		0
Provision for income taxes	$ 47,473	$ 0	$ 138,093	$ 1,900
Statutory rate			21.00%
Effective rate			14.40%
Tax benefit from debt forgiveness			$ 325,300

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Operating Lease - Future Minimum Lease Payments (Details)	Jun. 30, 2021 USD ($)
Operating Lease
2021	$ 55,319
2022	112,611
2023	114,857
2024	102,550
Total minimum lease payments	385,337
Less debt discount	37,068
Total operating lease obligations	$ 348,269

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Operating Leases - Additional Information (Details) - USD ($)	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Operating cash outflows from operating leases	$ 197,050
Weighted average remaining lease term	3 years 4 months 24 days
Weighted average discount rate	5.50%
Operating lease, renewal term	5 years
Operating Lease, Cost	$ 55,000	$ 53,900
Minimum [Member]
Operating Lease Monthly Rent Payable	9,200
Maximum [Member]
Operating Lease Monthly Rent Payable	$ 9,700

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Finance Leases - Future minimum lease payments (Details) - USD ($)	Jun. 30, 2021	Dec. 31, 2020
Finance Leases
2021	$ 79,279
2022	105,154
2023	101,675
2024	49,859
Total minimum lease payments	335,967
Less amount representing interest	19,755
Present value of minimum lease payments	316,212
Less current portion	120,820	$ 160,416
Finance lease obligations, net of current portion	$ 195,392	$ 243,218

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Finance Leases - Equipment under finance lease and additional information (Details) - USD ($)	6 Months Ended
	Jun. 30, 2021	Dec. 31, 2020
Line of Credit Facility [Line Items]
Machinery and equipment	$ 745,289	$ 745,289
Less accumulated depreciation and amortization	194,750	157,486
Net book value	$ 550,539	$ 587,803
Amortization period, Finance lease (in years)	10 years
Fifth Third Equipment Finance Company
Line of Credit Facility [Line Items]
Equipment line of credit	$ 800,000
Implicit rate	2.71%
Deposits towards purchase orders for new equipment	$ 319,109
Amount of purchase orders for new equipment	718,900
Borrowings on line of credit	$ 0