What changed in this filing

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Item 1. Financial Statements

2020-11-12 compared with 2020-08-14 · 59 added, 59 removed, 229 unchanged (34% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

June 30, 2020

September 30, 2020

December 31, 2019

23 unchanged sentences

Common stock - $0.01 par value – 20,000,000 shares authorized;

issued and outstanding 6,639,685 at June 30, 2020 and 6,623,793 at December 31, 2019

issued and outstanding 6,640,935 at September 30, 2020 and 6,623,793 at December 31, 2019

Additional paid-in capital

6 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Cost of revenue

10 unchanged sentences

Loss before income tax

Income tax expense (benefit)

Net (loss) income

Basic income (loss) per common share

Diluted income (loss) per common share

Weighted average common shares

Outstanding-basic

Weighted average common shares

Outstanding-diluted

Income tax benefit

Basic loss per common share

Diluted loss per common share

Weighted average common shares Outstanding-basic

Weighted average common shares Outstanding-diluted

The accompanying notes are an integral part of these condensed consolidated financial statements

1 unchanged sentence

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three months ended June 30, 2020 and 2019

Balance at April 1, 2020

Three months ended September 30, 2020 and 2019

Balance at July 1, 2020

Share-Based Compensation

Balance at June 30, 2020

Balance at April 1, 2019

Balance at September 30, 2020

Balance at July 1, 2019

Share-Based Compensation

Balance at June 30, 2019

Six months ended June 30, 2020 and 2019

Balance at September 30, 2019

Nine months ended September 30, 2020 and 2019

Balance at January 1, 2020

Share-Based Compensation

Balance at June 30, 2020

Balance at September 30, 2020

Balance at January 1, 2019

Share-Based Compensation

Balance at June 30, 2019

Balance at September 30, 2019

The accompanying notes are an integral part of these condensed consolidated financial statements

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash used in operating activities

Adjustments to reconcile net loss to net cash used in operating activities

Stock-based compensation

1 unchanged sentence

Deferred income tax benefit

Recovery on contingent earnout

Bad debt expense

18 unchanged sentences

Net cash provided by (used) in financing activities

Net increase (decrease) in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

12 unchanged sentences

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary in order to make the interim financials not misleading have been included and all such adjustments are of a normal recurring nature.

The operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that can be expected for the year ending December 31, 2020.

The operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that can be expected for the year ending December 31, 2020.

The condensed consolidated balance sheet as of December 31, 2019 has been derived from the audited consolidated financial statements at such date, but does not contain all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

43 unchanged sentences

Cash and cash equivalents

The Company had cash and cash equivalents of $9.4 million and $8.7 million at June 30, 2020 and December 31, 2019, respectively.

The Company had cash and cash equivalents of $8.2 million and $8.7 million at September 30, 2020 and December 31, 2019, respectively.

The Company invests excess cash in U.S.

treasury bills, certificates of deposit or money market accounts, all with original maturities of less than three months.

Cash equivalents were $2.1 million at June 30, 2020 and December 31, 2019, respectively.

Cash equivalents were $1.0 million and $2.1 million, at September 30, 2020 and December 31, 2019, respectively.

The Company places most of its temporary cash investments with financial institutions, which from time to time may exceed the Federal Deposit Insurance Corporation limit.

The amount at risk at June 30, 2020 and December 31, 2019 was $7,699,000 and $5,198,000, respectively.

The amount at risk at September 30, 2020 and December 31, 2019 was $6,570,000 and $5,198,000, respectively.

CONCENTRATION OF CREDIT RISK (continued)

1 unchanged sentence

Revenue from a single customer in any one period can exceed 10% of our total revenues.

During the three months ended June 30, 2020, two customers exceeded 10%, and represented 42.2% and 10.0% revenues, and during the six months ended June 30, 2020 one customer represented 37% of revenues.

During the three and six months ended June 30, 2019, one customer represented 13% and 10% of revenues, respectively.

During the three months ended September 30, 2020, two customers exceeded 10%, and represented 13.5% and 12.5% revenues, and during the nine months ended September 30, 2020 three customers represented 21.0%, 12.8% and 12.0% of revenues.

During the three and nine months ended September 30, 2019, two customers represented 42.8% and 28.1% of revenues, respectively.

Accounts receivable

2 unchanged sentences

The Company also maintains allowances for anticipated losses.

At June 30, 2020 four customers exceeded 10% of the accounts receivable balance, representing 66.0% in total, and at December 31, 2019 three customers represented approximately 61% of the accounts receivable balance.

At September 30, 2020, two customers exceeded 10% of the accounts receivable balance, representing 25.7% in total, and at December 31, 2019 three customers represented approximately 61% of the accounts receivable balance.

REVENUE DISAGGREGATION

The following table represents a disaggregation of revenue for the three and six months ended June 30, 2020 and 2019 (in thousands):

Three Months Ending June 30, 2020

The following table represents a disaggregation of revenue for the three and nine months ended September 30, 2020 and 2019 (in thousands):

Three Months Ending September 30, 2020

Point in time

Three Months ending June 30, 2019

Three Months ending September 30, 2019

Point in time

Six Months Ending June 30, 2020

Nine Months Ending September 30, 2020

Point in time

Six Months ending June 30, 2019

Nine Months ending September 30, 2019

Point in time

REVENUE DISAGGREGATION (continued)

The Company has unrecognized contract revenue of approximately $1.6 million at June 30, 2020, which it expects to recognize as revenue within the next twelve months.

The Company has unrecognized contract revenue of approximately $2.7 million at September 30, 2020, which it expects to recognize as revenue within the next twelve months.

Judgment is required to evaluate assumptions including the amount of net contract revenues and the total estimated costs to determine our progress towards contract completion and to calculate the corresponding amount of revenue to recognize.

5 unchanged sentences

Contract liabilities consist of customer advances and billings in excess of revenue recognized.

During the six months ended June 30, 2020 and 2019, the increase in contract assets of approximately $.4 million and $.3 million, respectively, was the result of work performed in excess of billings which are based upon project milestones.

During the six months ended June 30, 2020 and 2019, the decrease in contract liabilities of ($.4 million) and ($.4 million), respectively, was primarily due to timing of invoicing for those projects.

During the nine months ended September 30, 2020 and 2019, the increase in contract assets of approximately $.5 million and $1.2 million, respectively, was the result of work performed in excess of billings which are based upon project milestones.

During the nine months ended September 30, 2020 and 2019, the decrease in contract liabilities of ($.8 million) and ($.4 million), respectively, was primarily due to timing of invoicing for those projects.

INVENTORIES, NET

Inventories consist of:

September 30,

Raw materials

1 unchanged sentence

ACCOUNTS RECEIVABLE, NET

Accounts receivable are presented net of an allowance for doubtful accounts of approximately $104,000 and $24,000 as of June 30, 2020 and December 31, 2019, respectively.

Accounts receivable are presented net of an allowance for doubtful accounts of approximately $144,000 and $24,000 as of September 30, 2020 and December 31, 2019, respectively.

The allowance is based on prior experience and management’s evaluation of the collectability of accounts receivable.

4 unchanged sentences

The loan is payable in 120 consecutive equal monthly installments of $25,000 in principal plus interest and a final balloon payment upon maturity in March 2022.

The balances as of June 30, 2020 and December 31, 2019 were approximately $2.2 million and $2.4 million respectively.

Interest accrues on the loan, at our option, at the variable rate of LIBOR plus 1.75% or Prime less 0.5% (1.93% and 3.49% at June 30, 2020 and December 31, 2019, respectively).

The balances as of September 30, 2020 and December 31, 2019 were approximately $2.1 million and $2.4 million respectively.

Interest accrues on the loan, at our option, at the variable rate of LIBOR plus 1.75% or Prime less 0.5% (1.90% and 3.49% at September 30, 2020 and December 31, 2019, respectively).

On November 30, 2017, the Company purchased the premises located at 555 North Research Place, Central Islip, NY.

3 unchanged sentences

The Note is payable in 60 consecutive equal monthly installments of $62,481 including interest and a final balloon payment upon maturity in December 2022.

The balance outstanding as of June 30, 2020 and December 31, 2019 were approximately $9.5 million and $9.7 million respectively.

The balance outstanding as of September 30, 2020 and December 31, 2019 were approximately $9.4 million and $9.7 million respectively.

The Note bears interest for each Interest Period (as defined in the Note), at the fixed rate of 3.9148%.

As a condition of the Bank making the Loan, the Company was required to guaranty Assignee’s obligations under the Loan pursuant that certain Unlimited Guaranty, dated November 30, 2017 (the “Guaranty”).

On May 31, 2019, the Company entered into two sublease agreements for a portion of the CVD Materials facility.

On May 31, 2019, the Company entered into two sublease agreements for a portion of the CVD Materials facility, located at 555 North Research Place.

On October 30, 2019, the Tenant exercised its right to terminate the eastside Lease, which termination was effective as of December 31, 2019 (the “Termination”).

On June 12, 2020 the same Tenant signed a new short-term lease for the six-month period July 1, 2020 to December 31, 2020.

During the three and six months ended June 30, 2020 the Company recognized $108,000 and $219,000, respectively, of rental income which commenced in June 2019.

During the three and nine months ended September 30, 2020 the Company recognized $175,000 and $395,000, respectively, of rental income which commenced in June 2019.

The Tenant has exercised its first option to renew the westside lease for a term of one year beginning July 1, 2020 and ending June 30, 2021.

LONG-TERM DEBT (continued)

On August 5, 2019, the Company entered into a Mortgage Modification Agreement which replaced the former covenant with a Minimum Liquid Assets covenant.

The Company is in compliance with its financial covenant under the mortgage at June 30, 2020.

On August 5, 2019, the Company entered into a Mortgage Modification Agreement which replaced the former covenant with a Minimum Liquid Assets (“MLC”) covenant, and on October 22, 2020, the Company entered into a Second Mortgage Modification Agreement modifying certain MLC balances.

The Company is in compliance with its financial covenant under the mortgage at September 30, 2020.

On April 21, 2020, the Company entered into a loan agreement (the “Loan Agreement”) with HSBC Bank USA, National Association pursuant to which the Company was granted a loan in the principal amount of $2,415,970, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted by the United States Congress on March 27, 2020.

1 unchanged sentence

The note may be prepaid by the Company at any time prior to maturity with no prepayment penalties.

Under the terms of the PPP, all or a portion of the Loan may be forgiven, based upon payments made in the first eight weeks following receipt of the proceeds, related to payroll costs, continue group health care benefits, utilities and mortgage interest on other debt obligations incurred before February 15, 2020.

Under the terms of the PPP, all or a portion of the Loan may be forgiven, based upon payments made in the first twenty-four weeks following receipt of the proceeds, related to payroll costs, continue group health care benefits, utilities and mortgage interest on other debt obligations incurred before February 15, 2020.

STOCK-BASED COMPENSATION EXPENSE

The Company recorded as part of general and administrative expense $69,000 and $141,000 during the three and six months ended June 30, 2020, respectively, and during the three and six months ended June 30, 2019, $179,000 and $378,000, respectively, for the cost of employee and director services received in exchange for equity instruments based on the grant-date fair value of those instruments.

As of June 30, 2020 and December 31, 2019, the Company has provided a full valuation allowance against all of the net deferred tax assets.

The Company recorded as part of general and administrative expense $65,000 and $206,000 during the three and nine months ended September 30, 2020, respectively, and during the three and nine months ended September 30, 2019, $99,000 and $476,000, respectively, for the cost of employee and director services received in exchange for equity instruments based on the grant-date fair value of those instruments.

As of September 30, 2020 and December 31, 2019, the Company has provided a full valuation allowance against all of the net deferred tax assets.

This was based on management’s assessment, including the last two years of operating losses, that it is more likely than not that the net deferred tax assets may not be realized in the future.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted by the United States Congress.

As a result of the enactment of the CARES Act, net operating losses (“NOL’s”) can now be carried back for five years and resulted in the Company recognizing approximately $1.5 million of a tax receivable.

We continue to evaluate for potential utilization of the Company’s deferred tax asset, which has been fully reserved for, on a quarterly basis, reviewing our economic models, including projections and timing of orders, the commencement of operations of the CVD Materials segment and cost containment measures.

2 unchanged sentences

The computation of diluted earnings per share is similar to basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued.

Stock options to purchase 417,000 shares of common stock were outstanding and 292,000 were exercisable during the three and six months ended June 30, 2020.

Stock options to purchase 467,930 shares were outstanding and 227,930 were exercisable during the three and six months ended June 30, 2019.

For the three and six months ended June 30, 2020, 417,000 stock options, and for the three and six months ended June 30, 2019, 467,930 stock options were not included in the computation of diluted earnings per share as their effect would have been anti-dilutive.

Stock options to purchase 417,000 shares of common stock were outstanding and 292,000 were exercisable during the three and nine months ended September 30, 2020.

Stock options to purchase 447,930 shares were outstanding and 267,930 were exercisable during the three and nine months ended September 30, 2019.

For the three and nine months ended September 30, 2020, 417,000 stock options, and for the three and nine months ended September 30, 2019, 447,930 stock options were not included in the computation of diluted earnings per share as their effect would have been anti-dilutive.

The dilutive potential common shares on options is calculated in accordance with the treasury stock method, which assumes that proceeds from the exercise of all options are used to repurchase common stock at market value.

10 unchanged sentences

SEGMENT REPORTING (continued)

Three Months Ended June 3 0 ,

Three Months Ended September 3 0 ,

( In thousands )

Eliminations* and

Operating income/(loss)

Pretax income/(loss)

Operating loss

Operating income/(loss)

Pretax income/(loss)

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

11 unchanged sentences

In particular, the aerospace sector, for which we rely on a significant part of our business, has been faced with significant reductions to its business due to lack of air travel.

The Company’s new order levels during the first half of 2020 and into the third quarter of 2020 have seen substantial reductions which have materially and adversely affected revenues commencing in our second quarter of 2020, and is anticipated to continue towards the end of 2020.

While the financial results for the Company’s first quarter of 2020 reflected the initial impact of COVID-19, and the second quarter of 2020 reflected a substantial effect, we are unable to predict the extent of the impact the pandemic will have on our financial position and operating results for the remainder of 2020 and into 2021 due to numerous uncertainties, but the impact could be material during any future period affected either directly or indirectly by this pandemic.

The Company’s new order levels during the first nine months of 2020 and into the fourth quarter of 2020 have seen substantial reductions which have materially and adversely affected revenues commencing in our second quarter of 2020, and is anticipated to continue towards the end of 2020.

While the financial results for the Company’s first quarter of 2020 reflected the initial impact of COVID-19, and the nine months ended September 30, 2020 reflected a substantial adverse effect, we are unable to predict the extent of the impact the pandemic will have on our financial position and operating results for the remainder of 2020 and into 2021 due to numerous uncertainties, but the impact could be material during any future period affected either directly or indirectly by this pandemic.

The Company intends to continue to evaluate the various government sponsored plans and programs put in place in response to the COVID-19 pandemic and further plans to take advantage of any such government benefits reasonably available to it.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements