CVV 10-Q
Cvd Equipment Corp (CVV)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. | |
For
the quarterly period ended
| |
| 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:
(Name of Registrant in Its Charter)
| State or Other Jurisdiction
of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate
by check 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.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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).
Indicate by check mark whether 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 ☐ | |
| 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
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: shares of Common Stock, $ par value at August 11, 2026.
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
Index
| 2 |
PART 1 – FINANCIAL INFORMATION
Item 1 – Financial Statements
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except share amounts)
(Unaudited)
| June 30, 2026 | December 31, 2025 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net of allowance for credit losses | ||||||||
| Contract assets | ||||||||
| Inventories | ||||||||
| Amount held in escrow | ||||||||
| Current assets of discontinued operations | ||||||||
| Assets held for sale | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Noncurrent assets of discontinued operations | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Income taxes payable | ||||||||
| Contract liabilities | ||||||||
| Current maturities of long-term debt | ||||||||
| Current liabilities of discontinued operations | ||||||||
| Total current liabilities | ||||||||
| Security deposit | ||||||||
| Total liabilities | ||||||||
| Contingencies – Note 12 | ||||||||
| Stockholders’ equity: | ||||||||
| Common stock - $ par value – authorized shares; issued and outstanding and at June 30, 2026 and December 31, 2025, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings (accumulated deficit) | ( | ) | ||||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements
| 3 |
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(in thousands, except per share and share amounts)
(Unaudited)
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | ||||||||||||||||
| Selling | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Gain on sale of equipment | ( | ) | ||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ||||||||||
| Rental income, net of expenses | ( | ) | ( | ) | ||||||||||||
| Total other income, net | ||||||||||||||||
| Loss from continuing operations before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| Net loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income from discontinued operations, net of income taxes (Note 2) | ||||||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Net income (loss) per share of common stock – basic and diluted | ||||||||||||||||
| Loss from continuing operations | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Income from discontinued operations | $ | $ | $ | $ | ||||||||||||
| Net income (loss) | $ | $ | ) | $ | $ | ) | ||||||||||
| Weighted-average number of common shares outstanding - basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements
| 4 |
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(in thousands, except share amounts)
(Unaudited)
Three months ended June 30, 2026 and 2025
| Additional | Retained Earnings | |||||||||||||||||||
| Common stock | Paid-in | (Accumulated | ||||||||||||||||||
| Shares | Par Value | Capital | Deficit) | Total | ||||||||||||||||
| Balance at April 1, 2026 | $ | | $ | $ | ( | ) | $ | |||||||||||||
| Net income | - | |||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | $ | ||||||||||||||||
| Balance at April 1, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
Six months ended June 30, 2026 and 2025
| Additional | Retained Earnings | |||||||||||||||||||
| Common stock | Paid-in | (Accumulated | ||||||||||||||||||
| Shares | Par Value | Capital | Deficit) | Total | ||||||||||||||||
| Balance at January 1, 2026 | $ | | $ | $ | ( | ) | $ | |||||||||||||
| Net income | - | |||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | $ | ||||||||||||||||
| Balance at January 1, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements
| 5 |
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
| Six months ended | ||||||||
| June 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Stock-based compensation | ||||||||
| Depreciation and amortization | ||||||||
| Gain on disposition of SDC, net of income taxes | ( | ) | ||||||
| Gain on sale of equipment | ( | ) | ||||||
| Provision for bad debts | ||||||||
| Changes in assets and liabilities, net of the effects of disposition: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Contract assets | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Other assets | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ( | ) | ( | ) | ||||
| Contract liabilities | ( | ) | ( | ) | ||||
| Security deposit | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Proceeds from disposition of SDC | ||||||||
| Proceeds from assets held for sale and sale of equipment | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Investment in captive insurance company | ( | ) | ( | ) | ||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash flows from financing activities | ||||||||
| Payments of long-term debt | ( | ) | ( | ) | ||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Income taxes paid | $ | $ | ||||||
| Interest paid | $ | $ | ||||||
| Non-cash activity – amount held in escrow | $ | $ | ||||||
| Non-cash activity – accrued income taxes on gain on sale of SDC | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements
| 6 |
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements for CVD Equipment Corporation and Subsidiaries (collectively “the Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. They do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. 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, 2026 are not necessarily indicative of the results that can be expected for the year ending December 31, 2026.
The condensed consolidated balance sheet as of December 31, 2025 has been derived from the audited consolidated financial statements at such date, as filed on Form 10-K with the SEC on March 30, 2026, 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. These unaudited condensed consolidated financial statements should be read in conjunction with that report.
All material intercompany balances and transactions have been eliminated in consolidation.
On March 23, 2026, the Company entered into an agreement to sell its SDC business division to a third party. The sale was completed on April 1, 2026. Accordingly, the financial results of the SDC business division are reflected in the consolidated condensed financial statements as discontinued operations for all periods presented.
Unless otherwise specified, disclosures in these condensed consolidated financial statements reflect continuing operations only. Prior period financial information related to discontinued operations has been reclassified and separately presented in the consolidated financial statements and accompanying notes to conform to the current period presentation. See Note 2 for further information regarding our discontinued operations.
Reclassifications
Certain reclassifications have been made to the prior period condensed consolidated financial statements to conform to the current period presentation. These reclassifications had no effect on net loss.
Liquidity
At
June 30, 2026, the Company had $
NOTE 2: DISCONTINUED OPERATIONS
On March 23, 2026, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with a buyer to sell its SDC business division. On April 1, 2026, the Company completed the transaction whereby substantially all the assets related to SDC were sold.
| 7 |
NOTE 2: DISCONTINUED OPERATIONS (continued)
The
aggregate consideration paid to the Company in connection with the transaction was $
The
Company retained ownership of its Saugerties, New York facility and entered into a lease agreement with the buyer of SDC, pursuant to
which the buyer will lease such facility for an initial term of two years following the closing for an initial annual rent of $
The transaction represents a single disposal plan that constitutes a strategic shift expected to have a material effect on our operations and financial results. Accordingly, the financial results of SDC are reflected in the condensed consolidated financial statements as discontinued operations for all periods presented.
The following table represents the gain on the disposition of SDC, net of income taxes, for the six months ended June 30, 2026 (in thousands):
| Sales proceeds received | $ | |||
| Amount held in escrow | ||||
| Total sales price | ||||
| Less: | ||||
| Net assets transferred to buyer | ( | ) | ||
| Transaction expenses | ( | ) | ||
| Income tax expense | ( | ) | ||
| Gain on disposition of SDC, net of income taxes | $ |
The following table represents the amounts of assets and liabilities of the discontinued operations of SDC as of December 31, 2025 (in thousands):
| December 31, 2025 | ||||
| Assets: | ||||
| Accounts receivable, net of allowance for credit losses | $ | |||
| Contract assets | ||||
| Inventories | ||||
| Other current assets | ||||
| Equipment, net | ||||
| Other noncurrent assets | ||||
| Total assets | $ | |||
| Liabilities: | ||||
| Accounts payable | $ | |||
| Accrued expenses | ||||
| Contract liabilities | ||||
| Total liabilities | $ | |||
| 8 |
NOTE 2: DISCONTINUED OPERATIONS (continued)
The following table represents statements of operations information for the discontinued operations of SDC (in thousands):
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | ||||||||||||||||
| Selling | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Income from discontinued operations | ||||||||||||||||
| Gain on disposition of SDC, net of income taxes | ||||||||||||||||
| Income from discontinued operations, net of income taxes | $ | $ | $ | $ | ||||||||||||
The significant components included in the accompanying condensed consolidated statements of cash flow for the discontinued operations of SDC are as follows (in thousands):
| Six months ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Net cash provided by operating activities | $ | $ | ||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
In accordance with FASB ASC 606 - Revenue from Contracts with Customers (“ASC 606”), the Company records revenue in an amount that reflects the consideration to which the Company expects to be entitled in exchange for goods or services promised to its customers. Under ASC 606, the Company follows a five-step model to: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price for the contract; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue using one of the following two methods:
| 9 |
NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Over time
The Company designs, manufactures and sells custom chemical vapor deposition equipment through contractual agreements. These system sales require the Company to deliver functioning equipment that is generally completed within two to eighteen months from commencement of order acceptance. For systems sales that meet the criteria to recognize revenue over time, the Company recognizes revenue over time by using an input method based on costs incurred as it depicts the Company’s progress toward satisfaction of the performance obligation. For system sales that do not meet the criteria to recognize revenue over time based on the contract provisions, the Company recognizes revenue based on point in time.
Under
the over time method, revenue arising from fixed price contracts is recognized as work is performed based on the ratio of costs incurred
to date to the total estimated costs at completion of the performance obligations. Incurred costs include all direct material and labor
costs and those indirect costs related to contract performance, such as supplies, tools, repairs and depreciation costs. Contract material
costs are included in incurred costs when the project materials have been purchased or moved to work in process, and installed, as required
by the project’s engineering design. Cost based input methods of revenue recognition require the Company to make estimates of costs
to complete the projects. In making such estimates, significant judgment is required to evaluate assumptions related to the costs to
complete the projects, including materials, labor and other system costs. If the estimated total costs on any contract are greater than
the net contract revenues, the Company recognizes the entire estimated loss in the period the loss becomes known and can be reasonably
estimated. There were
The timing of revenue recognition, billings and collections results in accounts receivables, unbilled receivables or contract assets and contract liabilities on our condensed consolidated balance sheet. Under typical payment terms for our contracts accounted for over time, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones.
Under ASC 606, payments received from customers in excess of revenue recognized to date results in a contract liability. These contract liabilities are not considered to represent a significant financing component of the contract because we believe these cash advances and deposits are generally used to meet working capital demands which can be higher in the earlier stages of a contract. Also, advanced payments and deposits provide us with some measure of assurance that the customer will perform on its obligations under the contract.
Contract assets include unbilled amounts typically resulting from system sales under contracts and represent revenue recognized that exceeds the amount billed to the customer.
Contract liabilities include advance payments and billings in excess of revenue recognized. The Company typically receives down payments upon receipt of orders and progress payments as the system is manufactured.
Contract assets and contract liabilities are classified as current as these contracts in progress are expected to be substantially completed within the next twelve months.
Point in time
For non-system sales of products and services, revenue is recognized at the point in time when control of the promised products or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services (the transaction price). A performance obligation is a promise in a contract to transfer a distinct product or service to a customer and is the unit of account under ASC 606, “Revenue from Contracts with Customers”.
| 10 |
NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
For any system equipment sales where the equipment would have an alternative use or where the contract provisions of the contract preclude the use of over time revenue recognition, revenue is recognized at the point in time when control of the equipment is transferred to the customer. For the three and six months ended June 30, 2026 and 2025, all system equipment sales were recorded over time by using an input method except for one contract that was entered into during 2024 and was not recognized as revenue using over time revenue recognition until July 2025 when a contract modification was entered into with the customer to change certain contract provisions.
Inventories
Inventories (raw materials, work-in-process and finished goods) are valued at the lower of cost (determined on the first-in, first-out method) or net realizable value. Work-in-process and finished goods inventory reflect all accumulated production costs, which are comprised of direct production costs and overhead, and is reduced by amounts recorded in cost of sales as the related revenue is recognized. Indirect costs relating to long-term contracts, which include expenses such as general and administrative, are charged to expense as incurred and are not included in our cost of sales or work-in-process and finished goods inventory.
Obsolete inventory or inventory in excess of management’s estimated usage requirement is written down to its estimated net realizable value if less than cost. The Company evaluates usage requirements by analyzing historical usage, anticipated demand, alternative uses of materials and other qualitative factors. Unanticipated changes in demand for the Company’s products may require a write down of inventory, which would be reflected in cost of sales in the period the revision is made.
Product Warranty
Assets Held for Sale and Discontinued Operations
Assets and related liabilities of a qualifying business are classified as held for sale when the following conditions are met: (i) management has committed to a plan to sell the net assets, (ii) the net assets are available for immediate sale, (iii) there is an active program to locate a buyer, (iv) the sale and transfer of the net assets is probable within one year, (v) the net assets are being actively marketed for sale at a price that is reasonable in relation to the current fair value, and (vi) it is unlikely that significant changes will be made to the plan to sell the net assets. Assets and related liabilities which have been classified as held for sale are excluded from the net assets and liabilities of continuing operations in the period in which the held for sale criteria was met. A component of a business is classified as a discontinued operation when its disposal represents a strategic shift that has or will have a major effect on our operations and financial results. The results of discontinued operations are reported in income/loss from discontinued operations, net of tax on the consolidated statements of operations for all current and prior periods presented. The results of discontinued operations include direct costs attributable to the divested business and any gain or loss recognized in connection with the sale, or adjustment of the carrying amount to fair value less cost to sell while being held for sale, and excludes any indirect cost allocation associated with any shared-service or corporate functions not solely dedicated to the divested business. Adjustments to discontinued operations subsequent to the completion of a transaction or disposition are generally attributable to contingencies and indemnifications directly related to the disposal transaction, operations of the discontinued operations, or settlement of obligations directly related to the disposal.
| 11 |
NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Assets and liabilities of discontinued operations, including those that meet the held-for-sale criteria, are presented separately in the consolidated balance sheets. Upon classification as held for sale, assets are measured at the lower of carrying amount or fair value less cost to sell, and depreciation and amortization cease. Any impairment losses or subsequent measurement adjustments are recognized in the results of discontinued operations in the period in which they are identified. Cash flows attributable to discontinued operations are presented separately in the consolidated statements of cash flows, or otherwise disclosed, for all periods presented.
Recent Accounting Standards
In November 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statements Expenses (Subtopic 220-40),” to improve income statement expenses disclosure. The standard requires more detailed information related to the types of expenses, including (among other items) the amounts of purchases of inventory, employee compensation, depreciation and intangible asset amortization included within each interim and annual income statement’s expense caption, as applicable. This authoritative guidance can be applied prospectively or retrospectively and will be effective for financial statements issued for annual periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements.
The Company believes there is no additional new accounting guidance adopted, but not yet effective, which is relevant to the readers of our financial statements. However, there are numerous new proposals under development which, if and when enacted, may have a significant impact on our financial reporting.
NOTE 4: CONCENTRATION OF CREDIT RISK
Cash and cash equivalents
The
Company had cash and cash equivalents of $
The Company’s cash balances are held in United States financial institutions, which from time to time may exceed the Federal Deposit Insurance Corporation limit. There were no amounts at risk at June 30, 2026 and December 31, 2025.
Accounts receivable
The Company routinely assesses the financial strength of its customers. In accordance with the “expected credit loss” model of ASC 326, the carrying amount of accounts receivable is reduced by a valuation allowance that reflects the best estimate of the amounts the Company does not expect to collect. In addition to reviewing delinquent accounts receivable, the Company considers many factors in estimating our reserve, including types of customers and their credit worthiness, experience and historical data adjusted for current conditions and reasonable supportable forecasts. The Company records an allowance for credit losses based upon a specific review of all significant outstanding invoices. For those invoices not specifically reviewed, provisions are provided based upon the collection history, current economic trends and reasonable supportable forecasts.
Accounts
receivable is presented net of an allowance for credit losses of $
| 12 |
NOTE 4: CONCENTRATION OF CREDIT RISK (continued)
At
June 30, 2026, the accounts receivable balance included amounts from two customers that represented
Sales concentration
Revenue
from a single customer in any one period can exceed 10% of our total revenues. During the three months ended June 30, 2026, two
customers represented
During
the three months ended June 30, 2025, three customers represented
NOTE 5: REVENUE RECOGNITION
The following table represents a disaggregation of revenue for the three and six months ended June 30, 2026, and 2025 (in thousands):
| Three months ended June 30, 2026 | ||||||||||||
| Over time | Point in time | Total | ||||||||||
| Energy | $ | $ | $ | |||||||||
| Aerospace | ||||||||||||
| Industrial | ||||||||||||
| Research | ||||||||||||
| Total | $ | $ | $ | |||||||||
| Three months ended June 30, 2025 | ||||||||||||
| Over time | Point in time | Total | ||||||||||
| Energy | $ | ( | ) | $ | $ | |||||||
| Aerospace | ||||||||||||
| Industrial | ||||||||||||
| Research | ||||||||||||
| Total | $ | $ | $ | |||||||||
| Six months ended June 30, 2026 | ||||||||||||
| Over time | Point in time | Total | ||||||||||
| Energy | $ | $ | $ | |||||||||
| Aerospace | ||||||||||||
| Industrial | ||||||||||||
| Research | ||||||||||||
| Total | $ | $ | $ | |||||||||
| 13 |
NOTE 5: REVENUE RECOGNITION (continued)
| Six months ended June 30, 2025 | ||||||||||||
| Over time | Point in time | Total | ||||||||||
| Energy | $ | ( | ) | $ | $ | |||||||
| Aerospace | ||||||||||||
| Industrial | ||||||||||||
| Research | ||||||||||||
| Total | $ | $ | $ | |||||||||
The energy market includes customers involved in the manufacture of silicon carbide wafers and batteries. The aerospace market includes customers that manufacture aircraft engines. The industrial end market consists of various end customers in diverse industries. The research market principally represents customers such as universities and other research institutions.
The
Company has unrecognized contract revenue of approximately $
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.
Changes in estimates for sales of systems may occur for a variety of reasons, including but not limited to (i) build accelerations or delays, (ii) product cost forecast changes, (iii) cost related change orders or add-ons, or (iv) changes in other information used to estimate costs. Changes in estimates may have a material effect on the Company’s condensed consolidated statements of operations.
Contract assets and liabilities
Contract assets and contract liabilities on input method type contracts in progress are summarized as follows as of June 30, 2026 (in thousands):
| Costs incurred on contracts in progress | $ | |||
| Estimated earnings | ||||
| Billings to date | ( | ) | ||
| Deferred revenue related to non-system contracts | ( | ) | ||
| $ | ||||
| Included in accompanying condensed consolidated balance sheet as of June 30, 2026 under the following captions: | ||||
| Contract assets | $ | |||
| Contract liabilities | $ |
Of
the contract liability balances at December 31, 2025 and 2024, $
| 14 |
NOTE 6: INVENTORIES
Inventories consist of:
| June 30, 2026 | December 31, 2025 | |||||||
| Raw materials | $ | $ | | |||||
| Work-in-process | ||||||||
| Finished goods | ||||||||
| Total | $ | $ | ||||||
NOTE 7: LONG-TERM DEBT
In
September 2022, the Company entered into a loan agreement to fund the acquisition of machinery. The loan amount of $
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Basic weighted average common shares outstanding | ||||||||||||||||
| Dilutive effect of options and unvested restricted stock | ||||||||||||||||
| Diluted weighted average shares outstanding | ||||||||||||||||
For the three and six months ended June 30, 2026 and 2025, all stock options were excluded in the computation of diluted earnings per share because their effect was antidilutive.
The Company recorded stock-based compensation for the three and six months ended June 30, 2026 and 2025, respectively, that were included in the following line items in our condensed consolidated statements of operations (in thousands):
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Cost of revenue | $ | $ | $ | $ | ||||||||||||
| Research and development | ||||||||||||||||
| Selling | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| 15 |
NOTE 9: STOCK-BASED COMPENSATION EXPENSE (continued)
Stock-based compensation related to discontinued operations were $ and $ for the three months ended June 30, 2026 and 2025, respectively, and $ and $ for the six months ended June 30, 2026 and 2025, respectively. Stock-based compensation expense for three months ended June 30, 2026 and 2025 included $ and $, respectively, and for the six month periods June 30, 2026 and 2025 included $ and $, respectively, related to restricted stock awards that directors are entitled to receive pursuant to the Director Compensation Plan. Under this plan each of the Company’s independent directors is entitled to an Annual Equity Retainer in the amount of $, to be granted on the date of the Company’s annual meeting of shareholders.
| Weighted | ||||||||
| Stock Option | Average | |||||||
| Awards | Exercise | |||||||
| (in shares) | Price | |||||||
| Outstanding at January 1, 2026 | $ | | ||||||
| Exercised | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Outstanding at June 30, 2026 | ||||||||
| Options Outstanding | Options Exercisable | |||||||||||||||||||||||||||||
| Weighted | Weighted | Weighted | ||||||||||||||||||||||||||||
| Exercise | Average | Average | Average | |||||||||||||||||||||||||||
| Price | Number | Remaining | Exercise | Intrinsic | Number | Exercise | Intrinsic | |||||||||||||||||||||||
| Range | Outstanding | Contractual | Price | Value | Exercisable | Price | Value | |||||||||||||||||||||||
| $ | - | $ | $ | $ | $ | |||||||||||||||||||||||||
| $ | - | $ | $ | $ | $ | |||||||||||||||||||||||||
| $ | - | $ | $ | $ | $ | |||||||||||||||||||||||||
| $ | - | $ | $ | $ | $ | |||||||||||||||||||||||||
As of June 30, 2026, there was $ million of unrecognized compensation costs related to stock options expected to be recognized over a weighted average period of years.
NOTE 10: INCOME TAXES
For
the three and six months ended June 30, 2026, the Company recorded income tax expense of $
| 16 |
NOTE 11: SEGMENT REPORTING
With
the sale of the Company’s SDC business in 2026 and the cessation of its MesoScribe business in 2024, the Company has
The chief operating decision maker (“CODM”) of the Company is the Company’s chief executive officer. The CODM assesses performance and decides how to allocate resources, including employees, financial or capital resources, based on segment net income (loss).
The following table presents revenue by geographic area (in thousands):
| Three months ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| United States | $ | $ | ||||||
| North America, excluding US | ||||||||
| Europe, Middle East and Africa | ||||||||
| Asia-Pacific | ||||||||
| Consolidated total revenue | $ | $ | ||||||
| Six months ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| United States | $ | $ | ||||||
| North America, excluding US | ||||||||
| Europe, Middle East and Africa | ||||||||
| Asia-Pacific | ||||||||
| Consolidated total revenue | $ | $ | ||||||
For geographical reporting, revenues are attributed to the location in which the customer facility is located. All the Company’s long-lived assets are located in the United States.
NOTE 12: RISKS AND CONTINGENCIES
The Company operates in a challenging and uncertain global economic environment. Recent and potential actions by the U.S. federal administration, including changes in trade policy, export controls, and tariffs on imports from various countries and regions, as well as retaliatory or responsive actions by other governments, may adversely affect the Company’s supply chain, costs, demand for its products, receipt of orders and results of operations. In addition, the Company faces ongoing risks related to geopolitical instability, including conflicts and tensions in Europe, the Middle East, and Asia, which may further disrupt global economic conditions and financial markets.
Other factors contributing to economic uncertainty include inflationary pressures, elevated interest rates, disruptions in global logistics, labor market challenges, and potential changes in fiscal, tax, or regulatory policies. These conditions may impact customer spending decisions, order rates, project timing, and the availability and cost of materials and components used in the Company’s products.
While management continuously evaluates these conditions and has taken, and may take, actions intended to mitigate the potential adverse effects on the Company’s business, there can be no assurance that such actions will be successful. The Company is unable to predict the ultimate impact of these risks and uncertainties on its future results of operations, financial position, or cash flows.
| 17 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Except for historical information contained herein, this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains 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. Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. These statements involve known and unknown risks and uncertainties that may cause our actual results or outcomes to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on various factors and are derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements. Important assumptions and other factors that could cause actual results to differ materially from those in the forward-looking statements, include, but are not limited to:
| ● | uncertainty as to the receipt of and timing of future orders for our equipment; | |
| ● | uncertainty as to the acceptance of our equipment launched in 2024 and 2025; | |
| ● | uncertainty as to the general state of the silicon carbide wafer end market; | |
| ● | competition in our existing and potential future product lines of business, including our aerospace equipment and PVT systems; | |
| ● | uncertainty as to our ability to identify and develop new products for growth markets; | |
| ● | our ability to obtain financing on acceptable terms if and when needed; | |
| ● | our ability to attract and retain key personnel and employees; | |
| ● | uncertainty as to changes to international trade policies including the imposition of tariffs; and | |
| ● | uncertainty as to our ability to adequately obtain raw materials and on commercially reasonable terms. |
Other factors and assumptions not identified above were also involved in the derivation of these forward-looking statements and the failure of such assumptions to be realized as well as other factors may also cause actual results to differ materially from those projected. We assume no obligation to update these forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting such forward-looking statements. Past performance is no guaranty of future results.
You should not place undue reliance on any forward-looking statements, which speak only as of the dates they are made. When used with this Report, the words “believes” “anticipates”, “expects”, “estimates”, “plans”, “intends”, “will” and similar expressions are intended to identify forward-looking statements.
Executive Summary
CVD has served the advanced materials markets with chemical vapor deposition, physical vapor transport and thermal process equipment for over 40 years. We are headquartered in Central Islip, New York.
On November 6, 2025, our Board of Directors approved a comprehensive strategy to transform our Company in response to the continued fluctuations in our order rates and the recent and continued decline in the bookings of our CVD Equipment division. As part of this strategy, we transitioned our operating model for our CVD Equipment business from vertically integrated fabrication to outsourced fabrication of certain components to reduce our fixed operating costs.
| 18 |
The transformation strategy also includes the exploration of strategic alternatives for remaining business and product lines, including the potential sale, divestiture or acquisition of assets or business lines.
On March 23, 2026, we entered into an asset purchase agreement with a third party to sell our SDC business division (“SDC”). The purchase price was approximately $17.4 million in cash, subject to customary purchase price adjustments. The transaction closed on April 1, 2026.
The net cash proceeds from the sale of SDC we received in April 2026, after payment of transaction costs and employee related liabilities, were $15.7 million. The Company expects to pay approximately $0.7 million in estimated income taxes related to the gain on the sale of SDC in the third quarter of 2026. Following the sale of SDC, the Company has $23.5 million in cash and no long-term debt as of June 30, 2026. We expect to use the proceeds from the transaction to enhance our financial flexibility as we continue to evaluate strategic opportunities for the CVD Equipment business, its product lines, and our facilities and possible acquisition of other product lines or businesses
We retained ownership of our Saugerties, New York facility following the sale of SDC, which is leased to the acquiring company for an initial term of two years at fair market value.
With the sale of our SDC business and the cessation of our MesoScribe business in 2024, we have one reportable segment consisting of our CVD Equipment division that manufactures chemical vapor deposition, physical vapor transport and thermal process equipment used to develop and produce materials and coatings for the aerospace, compound semiconductor, semiconductor, battery energy storage markets as well as advanced industrial applications, and research.
During the quarter ended June 30, 2026 (from continuing operations):
| ● | Revenue decreased by $1.4 million or 42.6% as compared to the second quarter of 2025 from lower systems revenue due to reduced system bookings. | |
| ● | Gross profit decreased by $0.2 million or 31.6% as compared to the second quarter of 2025 due to the lower system revenues. | |
| ● | Total bookings for the second quarter of 2026 were approximately $1.2 million as compared to bookings of $1.5 million in the second quarter of 2025. Bookings for the second quarter of 2026 included one system order for $0.8 million with the balance consisting of non-system orders. | |
| ● | Total bookings for the first half of 2026 were approximately $2.9 million as compared to bookings of $2.3 million in the first half of 2025. | |
| ● | Backlog declined from $4.6 million at March 31, 2026 to $3.9 million at June 30, 2026 due to lower system orders. | |
| ● | Cash and cash equivalents at June 30, 2026 were $23.5 million as compared to $8.7 million at December 31, 2025 as a result of the receipt of proceeds from the divestiture of SDC in April 2026. |
Subsequent to quarter-end, the customer that placed the approximately $0.8 million system order filed a prepackaged Chapter 11 bankruptcy proceeding. The customer’s public disclosures indicate that general unsecured trade creditors are expected to be unimpaired under the proposed plan of reorganization; however, there can be no assurance that the customer will proceed with the purchase as originally contemplated or that the bankruptcy process will not adversely affect the order. The Company will be monitoring the proceedings and evaluating the potential impact, if any, on its backlog, financial position, results of operations, and cash flows.
Business Update
As of December 31, 2025, we classified certain manufacturing equipment as held for sale with a fair value of $0.5 million based on an agreement we entered into in January 2026 with a third-party to sell the equipment for this amount. We received the proceeds from the sale in the first quarter of 2026 and also sold additional equipment for $46,000 that was no longer necessary for our business.
Our core strategy remains focused on serving key markets related to aerospace, microelectronics/power electronics and industrial applications.
| 19 |
With respect to aerospace, our systems are being used by our customers to produce ceramic matrix composite materials (“CMCs”) that will be used in next generation gas turbine jet engines with the objective of reducing jet fuel consumption and to produce specialty coatings for advanced high temperature environments.
In October 2025, we sold two PVT150™ units to Stony Brook University (SBU) for their new semiconductor research center - onsemi Silicon Carbide Crystal Growth Center. The recently launched research center will enable SBU faculty, scientists, and students to conduct research on silicon carbide crystal growth and other wide band gap (WBG) materials and device-enabling technologies critical to improving energy efficiency in power semiconductors and foster the next generation of skilled professionals in this field.
We have generally gained new customers through our industry reputation, as well as trade show attendance, digital marketing and print advertising. We have increased the number of trade shows and industry conferences we attend.
We continue to operate in a challenging and uncertain global economic environment. Recent and potential actions by the U.S. federal administration, including changes in trade policy, export controls, and tariffs on imports from various countries and regions, as well as retaliatory or responsive actions by other governments, may adversely affect our supply chain, costs, demand for our products, receipt of orders and results of operations. In addition, we face ongoing risks related to geopolitical instability, including conflicts and tensions in Europe, the Middle East, and Asia, which may further disrupt global economic conditions and financial markets.
Other factors contributing to economic uncertainty include inflationary pressures, elevated interest rates, disruptions in global logistics, labor market challenges, and potential changes in fiscal, tax, or regulatory policies. These conditions may impact customer spending decisions, order rates, project timing, and the availability and cost of materials and components used in our products.
While our management continuously evaluates these conditions and has taken, and may take, actions intended to mitigate the potential adverse effects on our business, there can be no assurance that such actions will be successful. We are unable to predict the ultimate impact of these risks and uncertainties on our future results of our operations, financial position, or cash flows.
| 20 |
Results of Operations
Three Months Ended June 30, 2026 and 2025
The following table presents revenue and expense line items reported in our condensed consolidated statements of operations for the three months ended June 30, 2026 and 2025 and the period-over-period dollar and percentage changes for those line items (in thousands, except percentages).
| Three months ended June 30 | ||||||||||||||||
| 2026 | 2025 | Change | Percent | |||||||||||||
| Revenue | $ | 1,953 | $ | 3,404 | $ | (1,451 | ) | (42.6 | )% | |||||||
| Cost of revenue | 1,624 | 2,923 | (1,299 | ) | (44.4 | )% | ||||||||||
| Gross profit | 329 | 481 | (152 | ) | (31.6 | )% | ||||||||||
| Gross margin | 16.8 | % | 14.1 | % | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | 685 | 639 | 46 | 7.2 | % | |||||||||||
| Selling | 232 | 282 | (50 | ) | (17.7 | )% | ||||||||||
| General and administrative | 971 | 931 | 40 | 4.3 | % | |||||||||||
| Total operating expenses | 1,888 | 1,852 | 36 | 1.9 | % | |||||||||||
| Operating loss from continuing operations | (1,559 | ) | (1,371 | ) | (188 | ) | 13.7 | % | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 190 | 82 | 108 | 131.7 | % | |||||||||||
| Interest expense | - | (3 | ) | 3 | * | |||||||||||
| Rental income, net of expenses | (3 | ) | - | (3 | ) | * | ||||||||||
| Total other income, net | 187 | 79 | 108 | 136.7 | % | |||||||||||
| Loss from continuing operations before income taxes | (1,372 | ) | (1,292 | ) | (80 | ) | 6.2 | % | ||||||||
| Income tax expense | - | - | - | * | ||||||||||||
| Net loss from continuing operations | (1,372 | ) | (1,292 | ) | (80 | ) | 6.2 | % | ||||||||
| Income from discontinued operations, net of income taxes | 13,937 | 231 | 13,706 | * | ||||||||||||
| Net income (loss) | $ | 12,565 | $ | (1,061 | ) | $ | 13,626 | * | ||||||||
* Not meaningful
Revenue
Our revenue for the three months ended June 30, 2026 was $2.0 million compared to $3.4 million for the three months ended June 30, 2025, a decrease of $1.4 million or 42.6%.
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The decrease in revenue versus the prior year period was primarily attributable to lower system revenue due to lower bookings being partially offset by an increase in non-system revenues. Revenue from two customers represented 50.9% and 24.3% of our revenues, respectively.
Our order backlog at June 30, 2026 was approximately $3.9 million as compared to $4.6 million at March 31, 2026. Our order backlog at June 30, 2026 consists of approximately $2.7 million related to remaining performance obligations of contracts in progress and the balance of approximately $1.1 million represents other orders received from customers. As of June 30, 2026, one aerospace customer represented 36.0% of our backlog.
Historically, our revenues and orders have fluctuated based on changes in order rate as well as other factors in our manufacturing process that impacts the timing of revenue recognition. Accordingly, orders received from customers and revenue recognized may fluctuate from quarter to quarter.
Gross Profit
Gross profit for the three months ended June 30, 2026 was $0.3 million, with a gross margin of 16.8%, compared to a gross profit of $0.5 million and a gross margin of 14.1% for the three months ended June 30, 2025. The decrease in gross profit of $0.2 million was principally due to lower system revenues partially offset by an increase in non-system revenues.
Research and Development
For the three months ended June 30, 2026, research and development expenses were $0.7 million, or 35.1% of revenue as compared to $0.6 million, or 18.8% of revenue for the three months ended June 30, 2025, an increase of $46,000 or 7.2%. The increase in 2026 was the result of less hours being charged to cost of revenue for contracts in progress partially offset by a reduction in personnel.
General engineering support and expenses related to the development of more standardized products and value-added development of existing products are reflected as part of research and development expense. General engineering support and expenses are charged to costs of goods sold when work is performed directly on a customer order.
Selling
Selling expenses were $0.2 million or 11.9% of the revenue for the three months ended June 30, 2026 as compared to $0.3 million or 8.4% of revenue for the three months ended June 30, 2025, a decrease of $50,000 or 17.7%. The decrease was the result of a reduction in personnel.
General and Administrative
General and administrative expenses for the three months ended June 30, 2026 were $1.0 million or 49.7% of revenue compared to $0.9 million or 27.4% of revenue for the three months ended June 30, 2025, an increase of $40,000 or 4.3%. The increase in 2026 was due principally to higher professional fees.
Other Income (Expense), Net
Other income (expense) consists principally of interest income on U.S. treasury securities and increased as the result of investment of the proceeds from the divestiture of SDC.
Income Taxes
We continue to evaluate the potential utilization of our net deferred tax asset, which has been fully reserved for, on a quarterly basis, by reviewing our economic models, including projections of future operating results.
| 22 |
Discontinued Operations – SDC
Income from discontinued operations for the second quarter consists solely of the gain on the divestiture of the SDC of $13.9 million, net of income tax expense of $0.7 million. We incurred $0.4 million of transaction costs in the first quarter of 2026 resulting in a total net gain of $13.5 million on the divestiture of SDC.
Six Months Ended June 30, 2026 versus June 30, 2025
The following table presents revenue and expense line items reported in our condensed consolidated statements of operations for the six months ended June 30, 2025 and 2024 and the period-over-period dollar and percentage changes for those line items (in thousands, except percentages).
| Six months ended June 30 | ||||||||||||||||
| 2026 | 2025 | Change | Percent | |||||||||||||
| Revenue | $ | 3,798 | $ | 9,737 | $ | (5,939 | ) | (61.0 | )% | |||||||
| Cost of revenue | 3,321 | 7,451 | (4,130 | ) | (55.4 | )% | ||||||||||
| Gross profit | 477 | 2,286 | 1,809 | (79.1 | )% | |||||||||||
| Gross margin | 12.6 | % | 23.5 | % | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | 1,413 | 1,373 | 40 | 2.9 | % | |||||||||||
| Selling | 472 | 649 | (177 | ) | (27.3 | )% | ||||||||||
| General and administrative | 1,992 | 1,954 | 38 | 1.9 | % | |||||||||||
| Gain on sale of equipment | (46 | ) | - | (46 | ) | * | ||||||||||
| Total operating expenses | 3,831 | 3,976 | (145 | ) | (3.6 | )% | ||||||||||
| Operating loss from continuing operations | (3,354 | ) | (1,690 | ) | (1,664 | ) | 98.5 | % | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 261 | 192 | 69 | 35.9 | % | |||||||||||
| Interest expense | (1 | ) | (7 | ) | 6 | (85.7 | )% | |||||||||
| Rental income, net of expenses | (3 | ) | - | (3 | ) | * | ||||||||||
| Total other income, net | 257 | 185 | 72 | 38.9 | % | |||||||||||
| Loss from continuing operations before income taxes | (3,097 | ) | (1,505 | ) | (1,592 | ) | 105.8 | % | ||||||||
| Income tax expense | - | 16 | (16 | ) | * | |||||||||||
| Net loss from continuing operations | (3,097 | ) | (1,521 | ) | (1,576 | ) | 103.6 | % | ||||||||
| Income from discontinued operations, net of income taxes | 13,999 | 820 | 13,179 | * | ||||||||||||
| Net income (loss) | $ | 10,902 | $ | (701 | ) | $ | 11,603 | * | ||||||||
* Not meaningful
| 23 |
Revenue
Our revenue for the six months ended June 30, 2026 was $3.8 million compared to $9.7 million for the six months ended June 30, 2025, a decrease of $5.9 million or 61.0%. The decrease was partially offset by $0.3 million benefit from a contract modification during the six months ended June 30, 2026.
The decrease in revenue versus the prior year period was primarily attributable to lower system revenue due to lower bookings. Revenue from three customers represented 39.4%, 20.9% and 14.3% of our revenues, respectively.
Gross Profit
Gross profit for the six months ended June 30, 2026 was $0.5 million, with a gross margin of 12.6%, compared to a gross profit of $2.3 million and a gross margin of 23.5% for the six months ended June 30, 2025. The decrease in gross profit of $1.8 million was principally due to lower system revenues.
Research and Development
For the six months ended June 30, 2026, research and development expenses were $1.4 million, or 37.2% of revenue as compared to $1.4 million, or 14.1% of revenue for the six months ended June 30, 2025, an increase of $40,000 or 2.9%. The increase in 2026 was the result of less hours being charged to cost of revenue for contracts in progress being partially offset by a reduction in personnel.
General engineering support and expenses related to the development of more standardized products and value-added development of existing products are reflected as part of research and development expense. General engineering support and expenses are charged to costs of goods sold when work is performed directly on a customer order.
Selling
Selling expenses were $0.5 million or 12.4% of the revenue for the six months ended June 30, 2026 as compared to $0.6 million or 6.7% of revenue for the six months ended June 30, 2025, a decrease of $0.2 million or 27.3%. The decrease was the result of a reduction in personnel.
General and Administrative
General and administrative expenses for the six months ended June 30, 2026 were $2.0 million or 52.4% of revenue compared to $2.0 million or 20.1% of revenue for the six months ended June 30, 2025, an increase of $38,000 or 1.9%. The increase was principally due to higher professional fees.
Gain on Sales of Equipment
We recognized a gain of $46,000 on the sale of equipment that was no longer necessary for our business during the first quarter of 2026.
Other Income (Expense), Net
Other income (expense) consists principally of interest income on U.S. treasury securities and increased as the result of investment of the proceeds from the divestiture of SDC.
Income Taxes
We continue to evaluate the potential utilization of our deferred tax asset, which has been fully reserved for, on a quarterly basis, by reviewing our economic models, including projections of future operating results.
| 24 |
Discontinued Operations – SDC
Income from discontinued operations consists of $0.5 million from the operations of SDC during the first quarter of 2026 and the gain on the sale of the divestiture of SDC of $13.5 million. The gain is net of related income tax expense of $0.7 million.
Liquidity and Capital Resources
As of June 30, 2026, aggregate working capital was $25.8 million as compared to aggregate working capital of $14.1 million at December 31, 2025. Cash and cash equivalents at June 30, 2026 and December 31, 2025 were $23.5 million and $8.7 million, respectively.
Net cash used in operating activities for the six months ended June 30, 2026 was $1.3 million. This use of net cash was principally due to the net loss from continuing operations of $3.1 million, a $0.9 million increase in accounts receivable and a $0.3 million reduction in accounts payable. These decreases were partially offset by non-cash expense items of $0.7 million, decrease in contract assets of $1.7 million, and a decrease in inventory of $0.4 million.
Net cash provided by investing activities for the six months ended June 30, 2026 principally consisted of net proceeds from the divestiture of SDC of $15.6 million and proceeds from the sale of assets held for sale and equipment of $0.6 million. The Company expects to pay approximately $0.7 million in estimated income taxes related to the gain on the sale of SDC in the third quarter of 2026.
Net cash used in financing activities for the six months ended June 30, 2026 consisted of the full repayment of an equipment loan in the amount of $181,000. As of June 30, 2026, we have no outstanding debt.
We believe that our cash and cash equivalent positions and our projected cash flow from operations will be sufficient to meet our working capital and capital expenditure requirements for the next twelve months from the filing of these financial condensed consolidated financial statements included in this Form 10-Q. We will continue to assess our operations and take actions anticipated to maintain our operating cash to support the working capital needs.
Critical Accounting Estimates
This discussion and analysis of the Company’s financial condition and results of operations is based on the Company’s consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America, or U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods.
In accordance with U.S. GAAP, we base our estimates on historical experience and on various other assumptions the Company believes are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
We consider the following estimates within our significant accounting policies to be critical because of their complexity and the high degree of judgment involved in maintaining them. See Note 3 – “Summary of Significant Accounting Policies” of our Consolidated Financial Statements for additional information regarding our accounting policies.
| 25 |
Revenue Recognition
We design, manufacture, and sell custom chemical vapor deposition equipment through contractual agreements. These system sales require us to deliver functioning equipment that is generally completed within two to eighteen months from commencement of order acceptance. We recognize revenue over time by using an input method based on costs incurred as it depicts our progress toward satisfaction of the performance obligation. Under this method, revenue arising from fixed price contracts is recognized as work is performed based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations.
Incurred costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. Contract material costs are included in incurred costs when the project materials have been purchased or moved to work-in-process as required by the project’s engineering design. Cost based input methods of revenue recognition require us to make estimates of costs to complete the projects. In making such estimates, significant judgment is required to evaluate assumptions related to the costs to complete the projects, including materials, labor, and other system costs. If the estimated total costs on any contract are greater than the net contract revenues, we recognize the entire estimated loss in the period the loss becomes known and can be reasonably estimated.
We have been engaged in the production and delivery of goods on a continual basis under contractual arrangements for many years. Historically, we have demonstrated an ability to accurately estimate total revenues and total expenses relating to our long-term contracts. However, there exist many inherent risks and uncertainties in estimating revenues, expenses, and progress toward completion, particularly on larger or longer-term contracts. If we do not estimate the total sales, related costs, and progress toward completion on such contracts, the estimated gross margins may be significantly impacted, or losses may need to be recognized in future periods. Any such resulting changes in margins or contract losses could be material to our results of operations and financial condition.
Long-Lived Assets
Long-lived assets consist primarily of property, plant and equipment. Long-lived assets are reviewed for impairment whenever events or circumstances indicate their carrying value may not be recoverable. When such events or circumstances arise, an estimate of the future undiscounted cash flows produced by the asset, or the appropriate grouping of assets, is compared to the asset’s carrying value to determine if impairment exists pursuant to the requirements of ASC 360-10-35, “Impairment or Disposal of Long-Lived Assets.” If the asset is determined to be impaired, the impairment loss is measured on the excess of it carrying value over its fair value. Assets to be disposed of are reported at the lower of their carrying value or net realizable value. Assets to be disposed of are reported at the lower of their carrying value or net realizable value. It is not possible for us to predict the likelihood of any possible future impairments or, if such an impairment were to occur, the magnitude of any impairment.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act of 1934, as amended, (the “Exchange Act”)). As required by Rule 13a-15(b) under the Exchange Act, our management, under the direction of our Chief Executive Officer and Chief Financial Officer, reviewed and performed an evaluation of the effectiveness of design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Report”).
Based on that review and evaluation, our Chief Executive Officer and Chief Financial Officer, along with others in our management, have determined that as of the end of the period covered by this Report on Form 10-Q the disclosure controls and procedures were effective to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding disclosures.
Changes in Internal Controls
There were no changes in our internal controls over financial reporting as defined in Rule 13a-15(f) or Rule 15d-15(f) under the Exchange Act that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the internal controls over financial reporting.
Limitations on the Effectiveness of Controls
We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control systems are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
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CVD EQUIPMENT CORPORATION
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 30, 2026.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
| Item 6. | Exhibits | |
| 31.1* | Certification of Emmanuel Lakios, Chief Executive Officer, dated August 12, 2026 | |
| 31.2* | Certification of Richard Catalano, Chief Financial Officer, dated August 12, 2026 | |
| 32.1* | Certification of Emmanuel Lakios, Chief Executive Officer, dated August 12, 2026, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2* | Certification of Richard Catalano, Chief Financial Officer, dated August 12, 2026, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.1** | Inline XBRL Instance. | |
| 101.SCH** | Inline XBRL Taxonomy Extension Schema. | |
| 101.CAL** | Inline XBRL Taxonomy Extension Calculation. | |
| 101.DEF** | Inline XBRL Taxonomy Extension Definition. | |
| 101.LAB** | Inline XBRL Taxonomy Extension Labels. | |
| 101.PRE** | Inline XBRL Taxonomy Extension Presentation. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
* Filed herewith.
** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not to be filed or part of a registration statement of prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under these sections.
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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, this 12th day of August 2026.
| CVD EQUIPMENT CORPORATION | ||
| By: | /s/ Emmanuel Lakios | |
| Emmanuel Lakios | ||
| President and Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| By: | /s/ Richard Catalano | |
| Richard Catalano | ||
| Executive Vice President and | ||
| Chief Financial Officer | ||
(Principal Financial and Accounting Officer) | ||
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