What changed in this filing

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Item 1. Financial Statements

2024-05-13 compared with 2023-11-14 · 261 added, 311 removed, 181 unchanged (76% of the section changed)

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thousands, except share amounts)

and cash equivalents

receivable, net

Current assets:

current assets

retention credit receivable

plant and equipment, net

AND STOCKHOLDERS’ EQUITY

maturities of long-term debt

from purchaser of MesoScribe assets – note 11

Cash and cash

Accounts receivable, net

of allowance for credit losses

Contract assets

Other current assets

Total current assets

Property, plant and equipment, net

LIABILITIES AND STOCKHOLDERS’

Current liabilities:

debt, net of current portion

Stockholders’

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

issued and outstanding 6,820,665 at September 30, 2023 and

6,760,938 at December 31, 2022

paid-in capital

earnings (accumulated deficit)

Accounts payable

Accrued expenses

Current maturities of long-term

Deposit from purchaser

of MesoScribe assets-Note 11

Contract liabilities

Total current liabilities

Long-term debt, net of current portion

Total liabilities

Contingencies – Note 12

Stockholders’ equity:

liabilities and stockholders’ equity

Common stock - $ 0.01 par

value – 20,000,000 shares authorized;

6,824,511 issued and outstanding at March 31, 2024 and December 31, 2023

Additional paid-in capital

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

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

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thousands, except per share and share amounts)

Three months ended

Nine months ended

September 30,

Months Ended March 31,

Cost of revenue

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Research and development

General and administrative

Loss on disposition of Tantaline

Impairment charge

and administrative

Total operating expenses

Operating income (loss)

Operating loss

Other income (expense):

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Interest expense

Foreign exchange income (expense)

Total other income (expense), net

Income (loss) before income tax

Foreign exchange income

Total other income,

Loss before income taxes

Income tax expense

Net income (loss)

Income (loss) per common share - basic

Income (loss) per common share - diluted

Weighted average common shares

Loss per common share - basic

Loss per common share - diluted

Weighted average common shares outstanding:

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

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thousands, except share amounts)

months ended September 30, 2023 and 2022

at July 1, 2023

of stock options and issuance of shares

at September 30, 2023

at July 1, 2022

at September 30, 2022

months ended September 30, 2023 and 2022

Additional paid-in

months ended March 31, 2024 and 2023

Balance at January 1, 2024

Stock-based compensation

Exercise of stock options and issuance of shares

Balance at September 30, 2023

Balance at March 31, 2024

Balance at January 1, 2023

Stock-based compensation

Balance at September 30, 2022

Exercise of stock options and issuance

Balance at March 31, 2023

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

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Consolidated Statements of Cash Flows

Nine months ended

September 30,

Months Ended March 31,

Cash flows from operating activities:

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

Loss on disposition of Tantaline

Impairment charge

Adjustments to reconcile

net loss to net cash used in operating activities:

Stock-based compensation

Depreciation and amortization

Changes in assets and liabilities, net of effects of disposition of Tantaline:

Changes in assets and liabilities:

Accounts receivable

Contract assets

Tax receivable

Employee retention credit receivable

Other current assets

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Accrued expenses

Contract liabilities

Net cash used in operating activities

Net cash used in operating

Cash flows from investing activities:

Net cash used in connection with disposition of Tantaline

Deposits from purchaser of MesoScribe assets

Purchases of property and equipment

Capitalized patents costs

Net proceeds from sale of assets

Net cash used in investing activities

of property and equipment

Net cash used in investing

Cash flows from financing activities:

Proceeds from exercise of stock options

Payments of long-term debt

Net cash provided by (used in) financing activities

Repayments of long-term

from exercise of stock options

Net cash (used in) provided

by financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

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 investing and financing activities:

Loan obtained for new equipment

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

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to Condensed Consolidated Financial Statements

BASIS OF PRESENTATION

OF PRESENTATION

accompanying unaudited condensed consolidated financial statements for CVD Equipment Corporation and Subsidiaries (collectively “the

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The operating results for the

three and nine months ended September 30, 2023 are not necessarily indicative of the results that can be expected for the year ending

December 31, 2023.

three months ended March 31, 2024 are not necessarily indicative of the results that can be expected for the year ending December 31,

condensed consolidated balance sheet as of December 31, 2023 has been derived from the audited consolidated financial statements at such

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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 income (loss).

September 30, 2023, the Company had $ 14.3 million in cash and cash equivalents.

The Company anticipates that the existing cash and cash

equivalents balance together with potential future income from operations, collections of existing accounts receivable, revenue from

its existing backlog of products as of this filing date, the sale of inventory on hand, deposits and down payments against significant

orders will be adequate to meet its working capital and capital equipment requirements, and its anticipated cash needs over the next

12 months from the date of issuance of the accompanying Form 10-Q.

These reclassifications had no effect on net loss.

March 31, 2024, the Company had $ 11.9 million in cash and cash equivalents.

The Company anticipates that the existing cash and cash equivalents

balance together with potential future income from operations, collections of existing accounts receivable, revenue from its existing

backlog of products as of this filing date, the sale of inventory on hand, deposits and down payments against significant orders will

be adequate to meet its working capital and capital equipment requirements, and its anticipated cash needs over the next 12 months from

the date of issuance of these condensed consolidated financial statements..

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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:

accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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;

(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:

Company designs, manufactures and sells custom chemical vapor deposition, thermal process equipment and other 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 recognize revenue based on point in time.

and (5) recognize

revenue using one of the following two methods:

Company designs, manufactures and sells custom chemical vapor deposition, thermal process equipment and other equipment through contractual

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.

the over time method, revenue arising from fixed price contracts is recognized as work is performed based on the ratio of costs incurred

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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

There were no material impairment losses recognized on contract assets during the three

and nine months ended September 30, 2023 and 2022 .

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 no material impairment losses recognized on contract assets during the

three months ended March 31, 2024 and 2023.

timing of revenue recognition, billings and collections results in accounts receivables, unbilled receivables or contract assets and

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product or service to a customer and is the unit of account under ASC 606, “Revenue from Contracts with Customers.”

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 nine months ended September 30, 2023 and 2022, all system equipment sales were

recorded over time by using an input method.

There was one system equipment contract in 2023 where the revenue was to be recognized

at the point in time when the equipment is transferred to the customer.

This contract was modified during the three months ended

September 30, 2023 such that the revenue under this contract will now be recognized over time using an input method based on the revised contract provisions and the fact that the equipment does not have an alternative use.

the three months ended September 30, 2023 includes $ 0.8

million of revenue that was deferred as of June 30, 2023 and recognized on the date of the contract modification.

are valued at the lower of cost (determined on the first-in, first-out method) or net realizable value.

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 months ended March 31, 2024 and 2023, all system equipment sales were recorded over time by using an input

(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.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Company typically provides standard warranty coverage on its systems for one

year from the date of final acceptance or fifteen

months from the date of shipment by providing labor and parts necessary to repair the systems during the warranty period.

records the estimated warranty cost when revenue is recognized on the related system.

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.

Company typically provides standard warranty coverage on its systems for one year from the date of final acceptance or fifteen months

from the date of shipment by providing labor and parts necessary to repair the systems during the warranty period.

The Company records

the estimated warranty cost when revenue is recognized on the related system.

Warranty cost is included in “Cost of revenue”

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Accounting Standards

June 2016, the FASB issued Accounting Standard Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic

326), which require that financial assets measured at amortized cost be presented at the net amount expected to be collected.

The allowance

for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset to present the net carrying

value at the amount expected to be collected.

The income statement reflects the measurement of credit losses for newly recognized financial

assets, as well as the increase or decrease of expected credit losses that have taken place during the period.

The measurement of expected

credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability

of the reported amount.

On November 15, 2019, the FASB delayed the effective date for smaller reporting companies.

The amendments in

this update are effective for fiscal years beginning after December 15, 2022 and interim periods within those annual periods.

of the ASU 2016-3 as of January 1, 2023 did not have a material impact on the Company’s financial position.

Company believes there is no additional new accounting guidance adopted, but not yet effective that is relevant to the readers of its

December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, “ Income Taxes (Topic 740):

Improvements to Income Tax Disclosures ,” which requires public business entities to disclose additional information in specified

categories with respect to the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income

It also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those

items exceeds a specified threshold.

In addition to new disclosures associated with the rate reconciliation, the ASU requires information

pertaining to taxes paid (net of refunds received) to be disaggregated for federal, state, and foreign taxes and further disaggregated

for specific jurisdictions to the extent the related amounts exceed a quantitative threshold.

The ASU also describes items that need

to be disaggregated based on their nature, which is determined by reference to the item’s fundamental or essential characteristics,

such as the transaction or event that triggered the establishment of the reconciling item and the activity with which the reconciling

item is associated.

The ASU eliminates the historic requirement that entities disclose information concerning unrecognized tax benefits

having a reasonable possibility of significantly increasing or decreasing in the 12 months following the reporting date.

effective for annual periods beginning after December 15, 2024.

Early adoption is permitted for annual financial statements that have

not yet been issued or made available for issuance.

This ASU should be applied on a prospective basis;

however, retrospective application

is permitted.

We are currently evaluating the impact that ASU 2023 – 09 may have on our consolidated financial statements.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

November 2023, the FASB issued ASU 2023-07, “ Segment Reporting (Topic 280):

Improvements to Reportable Segments ,”

which aims to improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for

all public entities to enable investors to develop more decision-useful financial analyses.

Currently, Topic 280 requires that a public

entity disclose certain information about its reportable segments.

For example, a public entity is required to report a measure of segment

profit or loss that the CODM uses to assess segment performance and make decisions about allocating resources.

Topic 280 also requires

other specified segment items and amounts, such as depreciation, amortization, and depletion expense, to be disclosed under certain circumstances.

The amendments in this ASU do not change or remove those disclosure requirements and do not change how a public entity identifies its

operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December

Early adoption is permitted.

We are currently evaluating the impact that ASU 2023 – 07 may have on our consolidated financial

Company believes there is no additional new accounting guidance adopted, but not yet effective that is relevant to the readers of our

financial statements.

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and cash equivalents

Company had cash and cash equivalents of $ 14.3 million and $ 14.4 million at September 30, 2023 and December 31, 2022, respectively.

Company invests excess cash in U.S.

treasury bills, certificates of deposit or deposit accounts, all with maturities of less than three

Cash equivalents consisting of U.S.

treasury bills were $ 13.4 million and $ 11.7 million at September 30, 2023 and December 31,

2022, respectively.

Company had cash and cash equivalents of $ 11.9 million and $ 14.0 million at March 31, 2024 and December 31, 2023, respectively.

invests excess cash in U.S.

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

Cash equivalents were $ 11.1 million and $ 12.1 million at March 31, 2024 and December 31, 2023, respectively.

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 March 31, 2024 and December 31, 2023 was $ 0.3 million and $ 1.5 million, respectively.

CONCENTRATION OF CREDIT RISK (continued)

Company places most of its temporary cash investments in the United States with financial institutions, which from time to time may exceed

the Federal Deposit Insurance Corporation limit.

The amount at risk at September 30, 2023 and December 31, 2022 was $ 0.8 million and

$ 1.5 million, respectively.

The Company’s cash balance at its Tantaline subsidiary based

in Denmark exceeded the government guarantee limit by approximately $ 0.5 million at December 31, 2022.

Company sells products and services to various companies across several industries in the ordinary course of business.

The Company performs

ongoing credit evaluations to assess the probability of accounts receivable collection based on a number of factors, including past transaction

experience, evaluation of their credit history and review of the invoicing terms of the contract to determine the financial strength

of its customers.

receivable are presented net of an allowance for doubtful accounts of approximately $ 36,000 at both September 30, 2023 and December 31,

The allowance is based on prior experience and management’s evaluation of future economic conditions.

of credit losses requires consideration of historical loss experience, including the need to adjust for changing business conditions,

and judgments about the probable effects of relevant observable data, including present economic conditions such as delinquency rates

and the financial health of specific customers.

Future changes to the estimated allowance for doubtful accounts could be material to

our results of operations and financial condition.

September 30, 2023, the accounts receivable balance included amounts from three customers that totaled 53.6 % of total accounts receivable

and at December 31, 2022, the accounts receivable balance included amounts from two customers that totaled 66 % of total accounts receivable.

Company routinely assesses the financial strength of its customers .

In accordance with the “expected credit loss”

model, 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 consider 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.

receivable is presented net of an allowance for credit losses of $ 36,000 as of both March 31, 2024 and December 31, 2023.

allowance is based on prior experience and management’s evaluation of future economic conditions.

Measurement of credit losses

requires consideration of historical loss experience, including the need to adjust for changing business conditions, and judgments about

the probable effects of relevant observable data, including present economic conditions such as delinquency rates and the financial health

of specific customers.

Future changes to the estimated allowance for doubtful accounts could be material to our results of operations

and financial condition.

March 31, 2024, the accounts receivable balance included an amount from one customer that totaled 67.2 % of total accounts receivable.

As of December 31, 2023, the accounts receivable balance includes amounts from three customers

that represented 37.6 %, 13.0 % and 12.8 % of total accounts receivable .

concentration

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

During the three months ended September 30, 2023, two

customers represented 40.3 % and 10.3 % of revenues, respectively, and during the nine months ended September 30, 2023, three customers

represented 16.7 %, 13.9 % and 11.7 % of revenues, respectively.

the three months ended September 30, 2022, one customer represented 44.6 % of revenues, and during the nine months ended September 30,

2022, one customer represented 28.6 % of revenues.

During the three months ended March 31, 2024, two customers

exceeded 10% of revenues, representing 29.6 % and 13.1 % of revenues, and during the three months ended March 31, 2023, three customers

exceeded 10%, representing 28.3 %, 15.9 % and 10.6 % of revenues.

REVENUE RECOGNITION

following table represents a disaggregation of revenue for the three and nine months ended September 30, 2023 and 2022 (in thousands):

OF DISAGGREGATION OF REVENUE

Point in time

Three months ended September 30, 2023

Point in time

Three months ended September 30, 2022

Point in time

Nine months ended September 30, 2023

Point in time

Nine months ended September 30, 2022

Point in time

REVENUE RECOGNITION (continued)

following table represents a disaggregation of revenue for the three months ended March 31, 2024 and 2023 (in thousands):

Schedule of Disaggregation of Revenue

months ended March 31, 2024

months ended March 31, 2023

energy market includes customers involved in the manufacture of silicon carbide wafers and batteries.

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Industrial end market consists of various end customers in diverse industries.

Research market principally

represents customers that are universities and other research institutions.

Company has unrecognized contract revenue of approximately $ 15.5 million at September 30, 2023, which it expects to substantially recognize

as revenue within the next twelve months based on over time revenue recognition.

The Company also has orders of approximately $ 1.1 million

for contracts that it expects to recognize with the next twelve months based on point in time revenue recognition.

The research market

principally represents customers that are universities and other research institutions.

Company has unrecognized contract revenue of approximately $ 24.8 million at March 31, 2024, which it expects to substantially recognize

as revenue within the next eighteen months.

is required to evaluate assumptions including the amount of net contract revenues and the total estimated costs to determine our progress

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(ii) product cost forecast changes, (iii) cost related change orders or add-ons, or (iv) changes in other information used to estimate

Changes in estimates may have a material effect on the Company’s condensed consolidated statements of operations.

Changes in estimates may have a material effect on the Company’s consolidated statements of operations.

REVENUE RECOGNITION (continued)

assets and liabilities

assets and contract liabilities on input method type contracts in progress are summarized as follows as of September 30, 2023 (in thousands):

OF COST AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS

Costs incurred on contracts in progress

Estimated earnings

assets and contract liabilities on input method type contracts in progress are summarized as follows as of March 31, 2024 (in thousands):

Schedule of Cost and Estimated Earnings in Excess of Billings

Costs incurred

on contracts in progress

Costs and estimated earnings

on uncompleted contracts

Billings to date

Net cost in excess of billings

Deferred revenue related to non-system contracts

revenue related to non-system contracts and a system contract to be recognized at point in

liability in excess of contract assets

Included in accompanying condensed consolidated balance sheet as of September 30, 2023 under the following captions (in thousands):

Contract assets

Contract liabilities

REVENUE RECOGNITION (continued)

in accompanying condensed consolidated balance sheets under the following captions (in thousands):

the contract liability balances at December 31, 2023 and 2022 of $ 4.6 million and $ 4.1 million, respectively, $ 1.3 million and $ 2.9 million

was recognized as revenue during the nine months ended September 30, 2023 and 2022, respectively.

was recognized as revenue during the three months ended March 31, 2024 and 2023, respectively.

INVENTORIES, NET

Schedule of Inventories, Net

Inventories consist of:

OF INVENTORIES NET

September 30, 2023

December 31, 2022

Raw materials

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September 2022, the Company entered into a loan agreement to fund the acquisition of machinery.

The loan amount of $ 0.4 million, is payable

The loan amount of $ 432,000 , is payable

in 60 equal monthly installments of $ 8,352 and secured by equipment.

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EARNINGS PER SHARE

calculation of basic and diluted weighted average common shares outstanding for the three and nine months ended September 30, 2023 and

2022 is as follows:

OF BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

Three months ended

September 30,

Nine months ended

September 30,

calculation of basic and diluted weighted average common shares outstanding for the three months ended March 31, 2024 and 2023 is as

Schedule of Basic and Diluted Weighted Average Common Shares Outstanding

months ended March 31,

Basic weighted average common shares outstanding

Dilutive effect of options and unvested restricted stock

Effect of potentially

dilutive share-based awards

Diluted weighted average shares outstanding

September 30, 2023, stock options to purchase 873,875 shares of common stock were outstanding and 349,375 were exercisable.

March 31, 2024, stock options to purchase 841,875 shares of common stock were outstanding and 395,625 were exercisable.

2023, stock options to purchase 899,500 shares of common stock were outstanding and 252,375 were exercisable.

for the three months ended September 30, 2022, all stock options were excluded in the computation of diluted earnings per share because

their effect was antidilutive.

the three months ended March 31, 2024 and 2023, 841,875 and 899,500 of stock options, respectively, were not included in the computation

of diluted earnings per share because their effect was antidilutive.

STOCK-BASED COMPENSATION EXPENSE

Company recorded stock-based compensation for the three and nine months ended September 30, 2023 and 2022, respectively, that were included

in the following line items in our condensed consolidated statements of operations (in thousands):

OF STOCK BASED COMPENSATION

and development

and administrative

compensation expense in three-month periods ended September 30, 2023 and 2022 included approximately $ 44,783 and $ 40,000 , respectively,

related to restricted stock awards that directors are entitled to receive pursuant to

Company recorded stock-based compensation for the three months ended March 31, 2024 and 2023, respectively, that were included in the

following line items in our condensed consolidated statements of operations (in thousands):

of Stock Based Compensation expense

months ended March 31,

Cost of revenue

Research and development

General and administrative

STOCK-BASED COMPENSATION EXPENSE (continued)

compensation expense included $ 50,000 and $ 40,000 for the three months ended March 31, 2024 and 2023, respectively, related to restricted

stock awards that directors elected to receive pursuant to

the Director Compensation plan.

Stock-based compensation expense in both nine-month periods ended

September 30, 2023 and 2022 included approximately $ 0.1 million related to restricted stock awards that directors are entitled to receive

pursuant to the Director Compensation plan.

Under this plan each of the independent directors is entitled to an Annual Equity

Retainer in the amount of $ 40,000 , to be granted on the date of the Company’s annual meeting of shareholders or upon appointment

to the board of directors and vest quarterly over the following year.

following table summarizes restricted stock awards through September 30, 2023:

OF RESTRICTED STOCK AWARDS

Unvested restricted stock awards at January 1, 2023

Unvested restricted stock awards at September 30, 2023

the nine months ended September 30, 2023, the Company granted 254,000 stock options, vesting 25 % per year over four years , with a ten-year

Under this plan, each of the five independent directors is entitled to an Annual Equity Retainer in the

amount of $ 40,000 , to be granted on the date of the Company’s annual meeting of shareholders.

the three months ended March 31, 2024, the Company granted 5,000 stock options, vesting 25 % per year over four years , with a ten-year

The Company determined the weighted average fair value of stock options granted was $ 3.30 and is based upon weighted average assumptions

OF WEIGHTED AVERAGE ASSUMPTIONS

interest rate

life (in years)

STOCK-BASED COMPENSATION EXPENSE (continued)

following table summarizes stock options awards through September 30, 2023:

OF STOCK OPTIONS AWARDS

at January 1, 2023

at September 30, 2023

following table summarizes information about the outstanding and exercisable options at September 30, 2023 by ranges of exercise prices:

OF OUTSTANDING AND EXERCISABLE OPTIONS RANGES OF EXERCISE PRICES

Options Outstanding

Options Exercisable

$ 4.00 - 7.00

$ 7.01 - 10.00

Schedule of Weighted Average Assumptions

Exercise price

Dividend yield

Expected volatility

Risk-free interest rate

Expected life (in years)

following table summarizes stock options awards for the three months ended March 31, 2024:

Schedule of Stock Options Awards

Outstanding at January 1, 2024

Outstanding at March

following table summarizes information about the outstanding and exercisable options at March 31, 2024 by ranges of exercise prices:

Schedule of Outstanding and Exercisable Options Ranges of Exercise Prices

10.01 - 13.00

13.01 - 16.00

of September 30, 2023, there was $ 2.7 million of unrecognized compensation costs related to stock options expected to be recognized over

STOCK-BASED COMPENSATION EXPENSE (continued)

of March 31, 2024, there was $ 2.2 million of unrecognized compensation costs related to stock options expected to be recognized over

a weighted average period of 2.0 years.

of September 30, 2023 and December 31, 2022, the Company has provided a full valuation allowance against its net deferred tax assets.

This was based on management’s assessment, including the last four years of operating losses, that it is more likely than not that

the net deferred tax assets may not be realized in the future.

of March 31, 2024 and December 31, 2023, the Company has provided a full valuation allowance against its net deferred tax assets.

was based on management’s assessment, including operating losses in recent years, that it is more likely than not that the net

deferred tax assets may not be realized in the future.

Management continues to evaluate for potential utilization of the Company’s

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aerospace, medical, electronic and other applications and is not considered a core business of the Company.

See Note 11 for the disposition

of the Tantaline subsidiary and planned disposition of the MesoScribe subsidiary which comprise the CVD Materials segment.

Company evaluates performance based on several factors, of which the primary financial measure is income (loss) before taxes.

The Company evaluates

performance based on several factors, of which the primary financial measure is income (loss) before taxes.

Company’s corporate administration activities are reported in the “Corporate” column.

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expenses related to certain corporate officers and support staff, expenses related to the Company’s Board of Directors, stock option

expense for options and shares of restricted stock granted to corporate administration employees, certain consulting expenses, investor

and shareholder relations activities, and all of the Company’s legal, auditing and professional fees.

expense for options and shares of restricted stock granted to corporate administration employees and board members, certain consulting

expenses, investor and shareholder relations activities, and all of the Company’s legal, auditing and professional fees.

entries included in the “Eliminations” column represent intersegment revenues and cost of revenues that are eliminated in

consolidation.

Intersegment sales by the SDC segment to the CVD Equipment segment for the three months ended September 30, 2023 and 2022

were $ 0.2 million and $ 72,000 , respectively, and $ 0.6 million and $ 0.5 million for the nine months ended September 30, 2023 and 2022,

respectively.

Intersegment sales by the CVD Equipment segment to the SDC segment for the three months and nine months ended September

30, 2023 were $ 39,000 and $ 0.1 million, respectively.

There were no intersegment sales by the CVD Equipment segment to the SDC segment

SEGMENT REPORTING (continued)

following table presents certain information regarding the Company’s segments as of and for the three months ended September 30,

2023 and 2022 (in thousands):

Operating (loss) income

Pretax (loss) income

Depreciation and amortization

Purchase of property, plant

Operating (loss) income

Pretax (loss) income

Depreciation and amortization

Purchase of property, plant

& equipment **

** Includes $ 0.4 million

of purchased equipment financed with a loan.

Intersegment sales for the three months ended March 31, 2024 and 2023 by the SDC segment to the CVD Equipment segment

were $ 15,000 and $ 129,000 , respectively.

SEGMENT REPORTING (continued)

following table presents certain information regarding the Company’s segments as of and for the nine months ended September 30,

following table presents certain information regarding the Company’s segments as of and for the three months ended March 31, 2024

and 2023 (in thousands):

Schedule of Segments

Operating (loss) income

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Depreciation and amortization

Purchase of property, plant

Purchase of property, plant & equipment

Operating (loss) income

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Depreciation and amortization

Purchase of property, plant

& equipment **

loss on sale of Tantaline of $ 0.2

million and an impairment charge related to MesoScribe fixed assets of $ 0.1

** Includes $ 0.4 million

of purchased equipment financed with a loan.

CVD MATERIALS – TANTALINE AND MESOCRIBE SUBSIDIAIRES

May 26, 2023, the Company sold its Tantaline subsidiary located in Nordborg, Denmark in exchange for a nominal amount at closing and

an earn-out provision based on any net income that Tantaline may earn during the five-year period ending December 31, 2027.

recorded a loss of $ 0.2 million upon the sale.

Any earn-out amounts will be recognized when and if any such amounts become probable of

decision to sell Tantaline was based on the Company’s ongoing strategy to focus on the equipment business consisting of the CVD

Equipment and SDC segments and reduce its focus on the non-core CVD Materials business.

the loss on disposition of $ 0.2 million, the revenues and net income of Tantaline were $ 0.5 million and $ 0.1 million, respectively, for

the nine months ended September 30, 2023.

The total assets and total liabilities of the Tantaline subsidiary were $ 1.1 million and $ 0.1

million as of December 31, 2022.

Purchase of property, plant & equipment

MESOSCRIBE SUBSIDIARY

August 8, 2023, the Company entered into a Purchase and License Agreement (the “Agreement”) with a third-party.

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certain performance metrics and other milestones.

Company will continue to fulfill remaining orders for MesoScribe products through the end of 2024 at which time it plans to cease

the remaining operations of MesoScribe and dispose of any remaining equipment.

During the three and nine months ended September 30,

2023, the Company recorded an impairment charge of none and $ 0.1

million, respectively, for certain equipment of MesoScribe based on its decision to cease the operations of MesoScribe upon

fulfillment of remaining orders.

There were no impairment charges recorded in 2022.

the three months ended September 30, 2023, the Company received payments under the Agreement in the amount of $ 0.6 million which has

been reflected as “deposits from purchaser” in the accompanying condensed consolidated balance sheet.

expects to be completed during the next three months with the shipment of the equipment to the purchaser.

revenues and net loss of MesoScribe were $ 90,000 and ($ 30,000 ) for the three months ended September 30, 2023.

The revenue and net income

were $ 0.6 million and $ 49,000 respectively, for the nine months ended September 30, 2023, including the impairment charge of $ 0.1

CVD MATERIALS – TANTALINE AND MESOCRIBE SUBSIDIAIRES (continued)

total assets and total liabilities of the MesoScribe subsidiary were $ 0.2 million and $ 0.7 million, respectively, as of September 30,

Company will continue to fulfill remaining orders for MesoScribe products through the end of 2024 at which time it plans to cease the

remaining operations of MesoScribe and dispose of any remaining equipment.

Company received payments under the Agreement in the amount of $ 0.6 million which has been reflected as “deposit from purchaser”

in the accompanying consolidated balance sheet as of March 31, 2024 and December 31, 2023.

The Company expects the transaction to be

completed in 2024 with the acceptance of the equipment by the purchaser.

revenues and net loss of MesoScribe were $ 59,000 and ($ 25,000 ) for the three months ended March 31, 2024.

total assets and total liabilities of the MesoScribe subsidiary were $ 0.2 million and $ 0.7 million, respectively, as of March 31, 2024

and $ 0.2 million and $ 0.7 million, respectively, as of December 31, 2023.

RISKS AND UNCERTAINTIES

Company currently operates in a challenging economic environment as the global economy continues to confront the impacts from the pandemic,

geopolitical conflicts, inflationary pressures and adverse supply chain disruptions.

The specific impacts on the Company have included:

geopolitical developments across Europe and Asia (including the war in Ukraine) have and may continue to restrict the Company’s

ability to procure raw materials and components such as nickel, graphite and integrated circuits, as well as impact the Company’s

ability to sell its products into China, Russia and other Eastern European and Asian regions.

Company currently operates in a challenging economic environment as the global economy continues to confront the remaining impacts from

the pandemic, geopolitical conflicts, inflationary pressures, and adverse supply chain disruptions.

The specific impacts on the Company

have included:

geopolitical developments across Europe and Asia (including the war in Ukraine) have and may continue to restrict the

Company’s ability to procure raw materials and components such as nickel and integrated circuits, as well as impact the

Company’s ability to sell its products into China, Russia and other Eastern European and Asian regions.

chain disruptions have led to much longer lead times to acquire raw materials for production and has led to inflationary pressures

in both materials and labor.

These supply chain disruptions have impacted the Company’s ability to recognize revenue more timely

These supply chain disruptions have impacted the Company’s ability to recognize revenue timelier

as it delays the Company’s manufacturing processes.

management has initiated actions to mitigate the potential negative impacts to its revenue and profitability, the Company is unable to

predict the impact that the above uncertainties will have on its future results of operations and cash flows.

predict the impact that the above uncertainties may have on its future results of operations and cash flows.

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