CVD EQUIPMENT CORP 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended September 30, 2025 ☐ 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: 1-16525 CVD EQUIPMENT CORPORATION (Name of Registrant in Its Charter) New York 11-2621692 State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.) 355 South Technology Drive Central Islip , New York 11722 (Address of principal executive offices) (631) 981-7081 (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 Common Stock CVV NASDAQ Capital Market 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. Yes ☒ No ☐ 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). Yes ☒ No ☐ 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 ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 6,937,338 shares of Common Stock, $ 0.01 par value at November 10, 2025. CVD EQUIPMENT CORPORATION AND SUBSIDIARIES Index Part I - Financial Information Item 1 – Condensed Consolidated Financial Statements (Unaudited) Condensed Consolidated Balance Sheets at September 30, 2025 and December 31, 2024 3 Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2025 and 2024 4 Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2025 and 2024 5 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024 6 Notes to Condensed Consolidated Financial Statements 7 Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations 21 Item 3 – Quantitative and Qualitative Disclosures About Market Risk 33 Item 4 – Controls and Procedures 33 Part II - Other Information Item 1 – Legal Proceedings 34 Item 1A–Risk Factors 34 Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds 34 Item 3 – Defaults Upon Senior Securities 34 Item 4 – Mine Safety Disclosures 34 Item 5 – Other Information 34 Item 6 – Exhibits 34 Signatures 35 2 PART 1 – FINANCIAL INFORMATION Item 1 – Financial Statements CVD EQUIPMENT CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets (in thousands, except share amounts) (Unaudited) September 30, 2025 December 31, 2024 ASSETS Current assets Cash and cash equivalents $ 8,358 $ 12,598 Accounts receivable, net of allowance for credit losses 2,674 2,149 Contract assets 4,952 2,226 Inventories 2,012 2,115 Other current assets 496 898 Total current assets 18,492 19,986 Property, plant and equipment, net 11,231 11,699 Other assets 52 1 Total assets $ 29,775 $ 31,686 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 1,110 $ 679 Accrued expenses 1,963 2,236 Current maturities of long-term debt 90 87 Contract liabilities 724 3,135 Total current liabilities 3,887 6,137 Long-term debt, net of current portion 113 181 Total liabilities 4,000 6,318 Stockholders’ equity: Common stock - $ 0.01 par value – authorized 20,000,000 shares; issued and outstanding 6,937,338 at September 30, 2025 and 6,881,838 at December 31, 2024 69 69 Additional paid-in capital 30,481 29,757 Accumulated deficit ( 4,775 ) ( 4,458 ) Total stockholders’ equity 25,775 25,368 Total liabilities and stockholders’ equity $ 29,775 $ 31,686 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) 2025 2024 2025 2024 Three months ended Nine months ended September 30, September 30, 2025 2024 2025 2024 Revenue $ 7,408 $ 8,194 $ 20,836 $ 19,462 Cost of revenue 4,987 6,430 14,646 15,371 Gross profit 2,421 1,764 6,190 4,091 Operating expenses Research and development 594 644 2,061 2,055 Selling and shipping 328 423 1,097 1,268 General and administrative 1,191 1,245 3,595 3,844 Gain on sale of equipment - ( 625 ) - ( 625 ) Total operating expenses 2,113 1,687 6,753 6,542 Operating income (loss) 308 77 ( 563 ) ( 2,451 ) Other income (expense): Interest income 79 136 272 438 Interest expense ( 3 ) ( 5 ) ( 10 ) ( 14 ) Other income - - - 2 Total other income, net 76 131 262 426 Income (loss) before income tax 384 208 ( 301 ) ( 2,025 ) Income tax expense - 5 16 5 Net income (loss) $ 384 $ 203 $ ( 317 ) $ ( 2,030 ) Income (loss) per common share-basic $ 0.06 $ 0.03 $ ( 0.05 ) $ ( 0.30 ) Income (loss) per common share-diluted $ 0.06 $ 0.03 $ ( 0.05 ) $ ( 0.30 ) Weighted average common shares Basic 6,881,989 6,825,495 6,867,971 6,817,220 Diluted 6,883,534 6,834,627 6,867,971 6,817,220 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) Shares Par Value Capital Deficit Total Three months ended September 30, 2025 and 2024 Additional Common stock paid-in Accumulated Shares Par Value Capital Deficit Total Balance at July 1, 2025 6,881,838 $ 69 $ 30,271 $ ( 5,159 ) $ 25,181 Net income - - - 384 384 Stock-based compensation 55,500 - 210 - 210 Balance at September 30, 2025 6,937,338 $ 69 $ 30,481 $ ( 4,775 ) $ 25,775 Balance at July 1, 2024 6,825,338 $ 68 $ 29,229 $ ( 4,793 ) $ 24,504 Net income - - - 203 203 Stock-based compensation 56,500 1 266 - 267 Balance at September 30, 2024 6,881,838 $ 69 $ 29,495 $ ( 4,590 ) $ 24,974 Nine months ended September 30, 2025 and 2024 Additional Common stock paid-in Accumulated Shares Par Value Capital Deficit Total Balance at January 1, 2025 6,881,838 $ 69 $ 29,757 $ ( 4,458 ) $ 25,368 Net loss - - - ( 317 ) ( 317 ) Stock-based compensation 55,500 - 724 - 724 Balance at September 30, 2025 6,937,338 $ 69 $ 30,481 $ ( 4,775 ) $ 25,775 Balance at January 1, 2024 6,824,511 $ 68 $ 28,695 $ ( 2,560 ) $ 26,203 Balance 6,824,511 $ 68 $ 28,695 $ ( 2,560 ) $ 26,203 Net loss - - - ( 2,030 ) ( 2,030 ) Net income (loss) - - - ( 2,030 ) ( 2,030 ) Stock-based compensation 57,327 1 800 - 801 Balance at September 30, 2024 6,881,838 $ 69 $ 29,495 $ ( 4,590 ) $ 24,974 Balance 6,881,838 $ 69 $ 29,495 $ ( 4,590 ) $ 24,974 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) 2025 2024 Nine months ended September 30, 2025 2024 Cash flows from operating activities: Net loss $ ( 317 ) $ ( 2,030 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation 724 801 Depreciation and amortization 517 476 Provision for excess and obsolete inventory - 1,253 Gain on sales of equipment - ( 625 ) Changes in assets and liabilities, net of effects of sale of equipment: Accounts receivable ( 525 ) ( 3,218 ) Contract assets ( 2,726 ) 256 Inventories 103 633 Other current assets 402 48 Other assets - 8 Accounts payable 431 140 Accrued expenses ( 273 ) 138 Contract liabilities ( 2,411 ) ( 1,620 ) Net cash used in operating activities ( 4,075 ) ( 3,740 ) Cash flows from investing activities: Purchases of property and equipment ( 49 ) ( 219 ) Investment in captive insurance company ( 51 ) - Net cash used in investing activities ( 100 ) ( 219 ) Cash flows from financing activities Payments of long-term debt ( 65 ) ( 61 ) Net cash used in financing activities ( 65 ) ( 61 ) Net decrease in cash and cash equivalents ( 4,240 ) ( 4,020 ) Cash and cash equivalents at beginning of period 12,598 14,025 Cash and cash equivalents at end of period $ 8,358 $ 10,005 Supplemental disclosure of cash flow information: Income taxes paid $ 26 $ 2 Interest paid $ 10 $ 14 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 “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 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 nine months ended September 30, 2025 are not necessarily indicative of the results that can be expected for the year ending December 31, 2025. The condensed consolidated balance sheet as of December 31, 2024 has been derived from the audited consolidated financial statements at such date, as filed on Form 10-K with the SEC on March 19, 2025, but does not contain all 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. Transformation Strategy On November 6, 2025, the Company’s Board of Directors approved a comprehensive strategy to transform the Company in response to the continued fluctuations in order rates and the recent decline in the bookings of the CVD Equipment division. As part of this strategy, the Company intends to transition the operating model for our CVD Equipment business from vertically integrated fabrication to outsourced fabrication of certain components. These actions are expected to reduce the Company’s fixed operating costs. Key initiatives of the plan include a reduction in the CVD Equipment division’s workforce, expected to reduce annual operating costs by approximately $ 2.0 million; outsourcing of the fabrication operations for certain components; and implementation of a revised sales strategy utilizing distributors and outside sales representatives to supplement internal sales efforts. The SDC division will not be impacted by these actions. The transformation strategy also includes the exploration of strategic alternatives for businesses and product lines, including the potential sale or divestiture of assets or business lines. The Company expects to complete the workforce reduction plan during the fourth quarter of 2025 and anticipates incurring approximately $ 0.1 million in severance and other charges. In connection with the transformation plan, the Company may incur non-cash impairment charges in future periods with respect to certain of its long-lived assets to the extent any such assets are disposed of for amounts less than their book values. 7 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Liquidity At September 30, 2025, the Company had $ 8.4 million in cash and cash equivalents. The Company believes that its existing cash and cash equivalents, together with anticipated cash flows from operations, collections of outstanding accounts receivable, revenue from its current backlog, sales of inventory on hand, and deposits and down payments on significant orders, will be sufficient to fund its working capital and capital equipment needs, as well as its expected cash requirements, for at least the next 12 months from the date of issuance of these condensed consolidated financial statements. 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 income (loss). 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: 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 8 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 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 no impairment losses recognized on contract assets during the three and nine months ended September 30, 2025 and 2024 . The timing of revenue recognition, billings and collections results in accounts receivables, unbilled receivables or contract assets and contract liabilities on our 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 represents 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”. 9 NOTE 2: 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 nine months ended September 30, 2025 and 2024, all system equipment sales were recorded over time by using an input method except a) one contract that was recorded as revenue at the point in time the equipment was transferred to the customer during the third quarter of fiscal year 2024 and b) one contract that was entered during 2024 was not recognized using over time revenue recognition until July 2025 when a contract modification was entered into with the customer to change certain contract provisions. Revenue and gross profit recognized for this modified contract was $ 1.0 million and $ 0.6 million, respectively for the three and nine months ended September 30, 2025. 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 The 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” in the condensed consolidated statements of operations. The estimated warranty cost is based on the Company’s historical cost. The Company updates its warranty estimates based on actual costs incurred. 10 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Recent Accounting Standards In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures. The amendments further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. This ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted, and should be applied either prospectively or retrospectively. The resulting new annual disclosures requirements will be reflected in the Company’s 2025 report on Form 10-K. 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 3: CONCENTRATION OF CREDIT RISK Cash and cash equivalents The Company had cash and cash equivalents of $ 8.4 million and $ 12.6 million at September 30, 2025 and December 31, 2024, respectively. The Company invests excess cash in U.S. treasury securities, certificates of deposit or deposit accounts, all with maturities of less than three months. Cash equivalents consisting of U.S. treasury securities were $ 7.6 million and $ 11.9 million at September 30, 2025 and December 31, 2024, respectively. 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. The amount at risk at September 30, 2025 and December 31, 2024 was $ 0.7 million and $ 0.4 million, respectively. 11 NOTE 3: CONCENTRATION OF CREDIT RISK (continued) 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 $ 23,000 and $ 48,000 as of September 30, 2025 and December 31, 2024, respectively. The 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 credit losses could be material to our results of operations and financial condition. At September 30, 2025, the accounts receivable balance included amounts from three customers that represented 47.4 %, 11.3 %, and 13.1 % of total accounts receivable. As of December 31, 2024, the accounts receivable balance includes amounts from three customers that represented 28.6 %, 14.0 % and 11.9 % of total accounts receivable. Sales concentration Revenue from a single customer in any one period can exceed 10 % of our total revenues. During the three months ended September 30, 2025, three customers exceeded 10 % of revenues, representing 22.7 %, 19.1 %, and 13.6 % of revenues, and during the nine months ended September 30, 2025, two customers represented 30.2 % and 16.7 % of revenues. During the three months ended September 30, 2024, two customers represented 29.1 % and 11.2 % of revenues, and during the nine months ended September 30, 2024, one customer represented 31.2 % of revenues. 12 NOTE 4: REVENUE RECOGNITION The following table represents a disaggregation of revenue for the three and nine months ended September 30, 2025, and 2024 (in thousands): SCHEDULE OF DISAGGREGATION OF REVENUE Over time Point in time Total Three months ended September 30, 2025 Over time Point in time Total Energy $ 67 $ 5 $ 72 Aerospace 1,553 368 1,921 Industrial 2,397 247 2,644 Research 2,318 453 2,771 Total $ 6,335 $ 1,073 $ 7,408 Over time Point in time Total Three months ended September 30, 2024 Over time Point in time Total Energy $ - $ 448 $ 448 Aerospace 3,814 969 4,783 Industrial 1,522 368 1,890 Research 927 146 1,073 Total $ 6,263 $ 1,931 $ 8,194 Over time Point in time Total Nine months ended September 30, 2025 Over time Point in time Total Energy $ 67 $ 19 $ 86 Aerospace 4,804 1,718 6,522 Industrial 8,434 970 9,404 Research 3,788 1,036 4,824 Total $ 17,093 $ 3,743 $ 20,836 Over time Point in time Total Nine months ended September 30, 2024 Over time Point in time Total Energy $ 216 $ 500 $ 716 Aerospace 8,285 1,488 9,773 Industrial 4,324 1,142 5,466 Research 2,963 544 3,507 Total $ 15,788 $ 3,674 $ 19,462 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. 13 NOTE 4: REVENUE RECOGNITION (continued) The Company has unrecognized contract revenue of approximately $ 5.3 million at September 30, 2025 of contracts in progress that it expects to substantially recognize as revenue within the next twelve months based on over time revenue recognition. 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 September 30, 2025 (in thousands): SCHEDULE OF COST AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS Costs incurred on contracts in progress $ 20,998 Estimated earnings 10,067 Costs and estimated earnings on uncompleted contracts 31,065 Billings to date ( 26,271 ) Net cost in excess of billings 4,794 Deferred revenue related to non-system contracts ( 566 ) Contract liability in excess of contract assets $ 4,228 Included in accompanying condensed consolidated balance sheet as of September 30, 2025 under the following captions (in thousands): Contract assets $ 4,952 Contract liabilities $ 724 Of the contract liability balances at December 31, 2024 and 2023, $ 2.4 million and $ 2.7 million was recognized as revenue during the nine months ended September 30, 2025 and 2024, respectively. Contract assets and contract liabilities at December 31, 2023 were $ 1.6 million and $ 4.9 million, respectively. 14 NOTE 5: INVENTORIES Inventories consist of: SCHEDULE OF INVENTORIES September 30, 2025 December 31, 2024 Raw materials $ 1,174 $ 1,217 Work-in-process 649 765 Finished goods 189 133 Total $ 2,012 $ 2,115 Included in our inventories are finished goods and raw materials related to PVT 150/200 systems that were purchased and built, respectively, in anticipation of future orders. As of September 30, 2025, the net amount of PVT 150/200 systems inventory is approximately $ 0.4 million. If future PVT 150/200 orders do not materialize and if the Company is not otherwise able to sell this inventory, the Company could incur additional charges to further reduce the carrying value of such inventory to net realizable value. Such charges may be material to the Company’s financial position and future results of operations. NOTE 6: LONG-TERM DEBT In September 2022, the Company entered into a loan agreement to fund the acquisition of machinery. The remaining loan balance of $ 203,000 is payable in equal monthly installments of $ 8,352 and secured by equipment. The interest rate is 6 %. NOTE 7: EARNINGS PER SHARE The calculation of basic and diluted weighted average common shares outstanding for the three and nine months ended September 30, 2025 and 2024 is as follows: SCHEDULE OF BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING Three months ended September 30, Nine months ended September 30, 2025 2024 2025 2024 Basic weighted average common shares outstanding 6,881,989 6,825,495 6,867,971 6,817,220 Dilutive effect of unvested restricted stock 1,545 9,132 - - Diluted weighted average shares outstanding 6,883,534 6,834,627 6,867,971 6,817,220 For the three and nine months ended September 30, 2025 and 2024, all stock options were excluded in the computation of diluted earnings per share because their effect was antidilutive. 15 NOTE 8: STOCK-BASED COMPENSATION EXPENSE The Company recorded stock-based compensation for the three and nine months ended September 30, 2025 and 2024, respectively, that were included in the following line items in our condensed consolidated statements of operations (in thousands): SCHEDULE OF STOCK BASED COMPENSATION EXPENSE Three months ended September 30, Nine months ended September 30, 2025 2024 2025 2024 Cost of revenue $ 23 $ 38 $ 76 $ 114 Research and development 36 47 128 141 Selling 18 27 65 81 General and administrative 133 155 455 465 Total $ 210 $ 267 $ 724 $ 801 Stock-based compensation expense for three months ended September 30, 2025 and 2024 included $ 50,000 and $ 50,000 , respectively, and for the nine month periods ended September 30, 2025 and 2024 included $ 150,000 and $ 153,736 , respectively, related to restricted stock awards that directors are entitled to receive pursuant to the Director Compensation Plan. Under this plan each of the five Company’s 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 following table summarizes stock options activity through September 30, 2025: SCHEDULE OF STOCK OPTIONS AWARDS Weighted Stock Option Average Awards Exercise (in shares) Price Outstanding at January 1, 2025 823,125 $ 8.24 Forfeited ( 15,500 ) 11.04 Outstanding at September 30, 2025 807,625 8.19 The following table summarizes information about the outstanding and exercisable options at September 30, 2025 by ranges of exercise prices: SCHEDULE OF OUTSTANDING AND EXERCISABLE OPTIONS RANGES OF EXERCISE PRICES Options Outstanding Options Exercisable Weighted Weighted Weighted Average Average Average Exercise Number Remaining Exercise Intrinsic Number Exercise Intrinsic Price Range Outstanding Contractual Price Value Exercisable Price Value $ 4.00 - 7.00 442,125 6.2 $ 4.54 $ - 385,125 $ 4.47 $ - $ 7.01 - 10.00 20,000 2.6 $ 8.07 $ - 20,000 $ 8.07 $ - $ 10.01 - 13.00 120,000 1.5 $ 10.52 $ - 120,000 $ 10.52 $ - $ 13.01 - 16.00 225,500 7.5 $ 14.11 $ - 112,000 $ 14.11 $ - 16 NOTE 8: STOCK-BASED COMPENSATION EXPENSE (continued) As of September 30, 2025, there was $ 0.9 million of unrecognized compensation costs related to stock options expected to be recognized over a weighted average period of 1.4 years. NOTE 9: INCOME TAXES As of September 30, 2025 and December 31, 2024, 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. Management continues to evaluate for potential utilization of the Company’s net deferred tax asset, which has been fully reserved for, on a quarterly basis, reviewing our economic models, including projections of future operating results. NOTE 10: SEGMENT REPORTING The Company has determined that it has three reportable segments, organized primarily based on product offerings, as follows: ● CVD Equipment – manufactures chemical vapor deposition, physical vapor transport and thermal process equipment. ● SDC – manufactures ultra-high purity gas and chemical delivery control systems. ● MesoScribe – provided electronic printing services and products (heaters, antennas, and sensors). The operations of MesoScribe were ceased during 2024. Both CVD Equipment and SDC also sell spares and parts and provide services related to the equipment each segment sells. 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 CODM considers actual-to-actual variances on a quarterly basis when making decisions about allocating capital and other resources to the segments and to assess the performance for each segment. Financial results for the reportable segments are prepared on a basis consistent with the internal disaggregation of financial information to assist the CODM in making internal operating decisions. 17 NOTE 10: SEGMENT REPORTING (continued) Certain income and expenses are excluded from segment net income (loss) and included in the unallocated amounts in the reconciliation of reportable segment net income (loss) to net income (loss). These items are not used by the CODM in allocating resources or evaluating the results of the segments and include the following: corporate expenses consisting of employment costs of executives, finance, information technology and human resources; board of director fees; professional fees; shareholder and investor relations expense; directors’ and officers’ insurance; interest income and income tax expense. Segment income (loss) from operations may not be consistent with measures used by other companies. The following provides segment information as described below (in thousands): SCHEDULE OF SEGMENT INFORMATION For the three months ended September 30, 2025 CVD SDC MesoScribe Total Segment revenue $ 5,677 $ 1,858 $ 6 $ 7,541 Less: Cost of revenue ( 3,867 ) ( 1,254 ) 1 ( 5,120 ) Research and development ( 558 ) ( 36 ) - ( 594 ) Selling ( 270 ) ( 58 ) - ( 328 ) General and administrative ( 203 ) ( 243 ) - ( 446 ) Gain on equipment Interest expense ( 3 ) - - ( 3 ) Segment net income $ 776 $ 267 $ 7 $ 1,050 Segment assets $ 18,982 $ 3,156 $ ( 2 ) $ 22,136 Capital expenditures $ - $ - $ - $ - Depreciation and amortization $ 150 $ 13 $ - $ 163 For the three months ended September 30, 2024 CVD SDC MesoScribe Total Segment revenue $ 5,683 $ 2,005 $ 661 $ 8,349 Less: Cost of revenue ( 5,233 ) ( 1,215 ) ( 138 ) ( 6,586 ) Research and development ( 597 ) ( 47 ) - ( 644 ) Selling ( 368 ) ( 50 ) ( 5 ) ( 423 ) General and administrative ( 315 ) ( 156 ) ( 39 ) ( 510 ) Gain on equipment - - 625 625 Interest expense ( 5 ) - - ( 5 ) Segment net income (loss) $ ( 835 ) $ 537 $ 1,104 $ 806 Segment assets $ 17,770 $ 3,805 $ 836 $ 22,411 Capital expenditures $ 31 $ 7 $ - $ 38 Depreciation and amortization $ 158 $ 12 $ - $ 170 18 NOTE 10: SEGMENT REPORTING (continued) The following provides segment information as described below (in thousands): For the nine months ended September 30, 2025 CVD SDC MesoScribe Total Segment revenue $ 15,396 $ 5,733 $ 37 $ 21,166 Less: Cost of revenue ( 11,325 ) ( 3,648 ) ( 3 ) ( 14,976 ) Research and development ( 1,931 ) ( 130 ) - ( 2,061 ) Selling ( 919 ) ( 178 ) - ( 1,097 ) General and administrative ( 734 ) ( 691 ) - ( 1,425 ) Interest expense ( 10 ) - - ( 10 ) Segment net income $ 477 $ 1,086 $ 34 $ 1,597 Capital expenditures $ 43 $ 6 $ - $ 49 Depreciation and amortization $ 477 $ 40 $ - $ 517 For the nine months ended September 30, 2024 CVD SDC MesoScribe Total Segment revenue $ 12,738 $ 6,252 $ 775 $ 19,765 Less: Cost of revenue ( 11,884 ) ( 3,516 ) ( 274 ) ( 15,674 ) Research and development ( 1,874 ) ( 181 ) - ( 2,055 ) Selling ( 1,116 ) ( 147 ) ( 5 ) ( 1,268 ) General and administrative ( 1,080 ) ( 523 ) ( 87 ) ( 1,690 ) Gain on Equipment 625 625 Other income 2 - - 2 Interest expense ( 14 ) - - ( 14 ) Segment net income (loss) $ ( 3,228 ) $ 1,885 $ 1,034 $ ( 309 ) Capital expenditures $ 209 $ 10 $ - $ 219 Depreciation and amortization $ 441 $ 35 $ - $ 476 Intersegment revenues are determined based on similar product sales to external customers of the Company. The following table presents a reconciliation of net income (loss) of reportable segments to consolidated net income (loss) (in thousands): SCHEDULE OF RECONCILIATION OF NET INCOME (LOSS) OF REPORTABLE SEGMENTS TO CONSOLIDATED NET LOSS Three months ended September 30, Nine months ended September 30, 2025 2024 2025 2024 Net income (loss) of reportable segments $ 1,050 $ 806 $ 1,597 $ ( 309 ) Unallocated amounts: Corporate expenses ( 745 ) ( 734 ) ( 2,170 ) ( 2,154 ) Interest income 79 136 272 438 Income tax (expense) - ( 5 ) ( 16 ) ( 5 ) Consolidated net income (loss) $ 384 $ 203 $ ( 317 ) $ ( 2,030 ) 19 NOTE 10: SEGMENT REPORTING (continued) The following table presents revenue by geographic area (in thousands): SCHEDULE OF REVENUE BY GEOGRAPHIC AREA Three months ended September 30, Nine months ended September 30, 2025 2024 2025 2024 United States $ 7,139 $ 6,610 $ 19,726 $ 16,753 North America, excluding US - 30 3 47 Europe, Middle East and Africa 136 1,355 699 1,698 Asia-Pacific 133 199 408 964 Consolidated total revenue $ 7,408 $ 8,194 $ 20,836 $ 19,462 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 11: RISKS AND CONTINGENCIES The Company operates in a challenging economic environment as the global economy continues to confront the impacts of recent executive orders by the U.S. federal administration regarding tariffs on imports from various countries including the European Union, Canada, Mexico, and China and the potential impact of actions taken by other countries in response to the announced tariffs, geopolitical conflicts and general inflationary pressures. Other economic challenges include the effects of the current U.S. government shutdown and the ongoing geopolitical developments across Europe and Asia including the war in Ukraine. The specific impacts on the Company have included: ● Tariffs may make the Company’s products less cost competitive and reduce gross margins. The impact on the Company’s business related to these or any other tariffs that may be imposed is uncertain and depends on multiple factors, including the duration and expansion of current tariffs, future changes to tariff rates, scope or enforcement, retaliatory measures by impacted trade partners, and related inflationary effects. In addition, economic uncertainties may potentially affect our future order rate. ● On September 30, 2025, the continuing resolution (CR) allowing U.S. government departments and agencies to operate through the end of the government fiscal year expired and the U.S. government shut down most of its operations. As a result of the U.S. government shutdown, our business and results of operations may be impacted by the disruptions to federal government offices, workers, and operations, including disruptions relating to the funding of research activities to both universities and companies that may result in delays in new orders or the loss of orders. We may also experience similar impacts in the event of a series of short-term continuing resolutions rather than full-year fiscal year 2026 appropriations. Generally, the significance of these impacts will primarily be based on the length of the shutdown and timing of passage of a new CR or a full budget. ● Significant geopolitical developments across Europe and Asia 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. While 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 may have on its future results of operations and cash flows. 20 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 future growth and return to consistent profitability; ● uncertainty as to our ability to execute on our transformation strategy; ● 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 PVT150 / PVT200 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; ● uncertainty as to the impact of the current U.S. Government shutdown; 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. 21 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 with our SDC division located in Saugerties, New York. We design, develop, and manufacture a broad range of equipment used to develop and produce materials and coatings for the aerospace, compound semiconductor, semiconductor, aerospace, battery energy storage markets as well as advanced industrial applications including nuclear, and research. We conduct our business through three reportable segments: (i) CVD Equipment that designs and manufactures chemical vapor deposition, physical vapor transport and thermal process equipment; (ii) SDC that designs and manufactures ultra-high purity gas and chemical delivery control systems; and (iii) MesoScribe that provided products related to advanced materials and coatings. The operations of MesoScribe were ceased during 2024. During the three months ended September 30, 2025 and 2024: ● Revenue decreased by $0.8 million or 9.6% as compared to the third quarter of 2024 due principally to lower MesoScribe revenue of $0.7 million which ceased operations in 2024. ● Gross profit increased by $0.7 million or 37.2% due to more profitable contract mix at CVD Equipment segment partially offset by lower MesoScribe revenues. ● Total bookings for the third quarter of 2025 were approximately $2.2 million as compared to bookings of $4.1 million in the third quarter of 2024. ● Total bookings for the nine months ended September 30, 2025 were approximately $9.5 million as compared to bookings of $21.0 million in the nine months ended September 30, 2024. ● Backlog declined from $13.2 million at June 30, 2025 to $8.0 million at September 30, 2025 due principally to lower orders in our CVD Equipment segment. ● Cash and cash equivalents at September 30, 2025 were $8.4 million as compared to $12.6 million at December 31, 2024. This decrease was principally due to the net loss during the period of $0.3 million, an increase in accounts receivable of $0.5 million, an increase in contract assets of $2.7 million, and a decrease in contract liabilities of $2.4 million which was partially offset by non-cash expenses of $1.2 million. 22 Business Update Our core strategy is to focus on growth end markets in applications related to aerospace, microelectronics including markets related to the “electrification of everything,” and industrial applications. 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. The phrase “electrification of everything” refers to the shift from fossil fuels to the use of electricity to power devices, buildings, electric vehicles (“EVs”), and many other applications. 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 decline in the bookings of our CVD Equipment division. As part of this strategy, we intend to transition the operating model for our CVD Equipment business from vertically integrated fabrication to outsourced fabrication of certain components. These actions are expected to reduce our fixed operating costs. Key initiatives of the plan include a reduction in the CVD Equipment division’s workforce, expected to reduce annual operating costs by approximately $2.0 million; outsourcing of the fabrication operations for certain components; and implementation of a revised sales strategy utilizing distributors and outside sales representatives to supplement internal sales efforts. Our SDC division will not be impacted by these actions. The transformation strategy also includes the exploration of strategic alternatives for businesses and product lines, including the potential sale or divestiture of assets or business lines. We expect to complete the workforce reduction plan during the fourth quarter of 2025 and anticipate incurring approximately $0.1 million in severance and other charges. In connection with the transformation plan, we may incur non-cash impairment charges in future periods with respect to certain of our long-lived assets to the extent that any such assets are disposed of for amounts less than their book values. In October 2025, we received an order for two PVT150™ Physical Vapor Transport Systems (PVT) from 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. Our PVT reactor design and control system architecture allows for precise process and temperature control enabling run-to-run repeatability and system-to-system matching. The PVT system platform is also being considered to process other WBG materials such as aluminum nitride (AlN) to support the development of emerging, high performance semiconductor materials. 23 Our PVT systems may provide us with standard product offerings to continue to support the EV focused market as well as energy storage, power conversion and power transmission. In addition, SiC semiconductors specifically help address the need for high energy efficiency and power density in the AC-DC stage in power supply units for AI data centers. We plan to evaluate the market conditions and opportunities to expand our product offerings in the power electronics market. In February 2024, we received an order from a customer for our PVT200 system used to grow silicon carbide crystals for the manufacture of 200 mm wafers. We shipped this unit to the customer in the third quarter of 2024 and it continues to be evaluated. We have generally gained new customers through our industry reputation, as well as print advertising and trade show attendance. We have increased the number of trade shows and industry conferences we attend. The global economy continues to confront the impacts of recent executive orders by the U.S. federal administration regarding tariffs on imports from various countries including the European Union, Canada, Mexico, and China and the potential impact of actions taken by other countries in response to the announced tariffs. Tariffs may make our products less cost competitive and reduce gross margins. The impact on our business related to these or any other tariffs that may be imposed, is uncertain and depends on multiple factors, including the duration and expansion of current tariffs, future changes to tariff rates, scope or enforcement, retaliatory measures by impacted trade partners, and related inflationary effects. On September 30, 2025, the continuing resolution (CR) allowing U.S. government departments and agencies to operate through the end of the government fiscal year expired and the U.S. government shut down most of its operations. As a result of the U.S. government shutdown, our business and results of operations may be impacted by the disruptions to federal government offices, workers, and operations, including disruptions relating to the funding of research activities to both universities and companies that may result in delays in new orders or the loss of orders. We may also experience similar impacts in the event of a series of short-term continuing resolutions rather than full-year fiscal year 2026 appropriations. Generally, the significance of these impacts will primarily be based on the length of the shutdown and timing of passage of a new CR or a full budget. On July 4, 2025, “An Act to Provide for Reconciliation Pursuant to Title II of the H. Con. Res. 14” (the Act) was enacted. The Act provides for several corporate tax changes including, but not limited to, restoring full expensing of domestic research and development costs, restoring immediate deductibility of certain capital expenditures, and changes in the computations of U.S. taxation on international earnings. Historically, our orders have fluctuated based on end user market conditions, adoption of our new products and acceptance of our products. The current economic uncertainty regarding tariffs may potentially affect our future order rate. The order rate as well as other factors in our manufacturing process ultimately impacts on the timing of revenue recognition, whether accounted for over time or at a point in time. Accordingly, orders received from customers and the corresponding revenue recognized may fluctuate from quarter to quarter. The sales cycle for our equipment is typically six months, but can range up to twelve to eighteen months, depending on the application and product stage of the equipment. The order cycle to manufacture and test a system also will vary from six to eighteen months for our CVD Equipment segment and two to twelve months for our SDC segment, depending on system complexity and magnitude of the system. 24 Results of Operations Three Months Ended September 30, 2025 and 2024 The following table presents revenue and expense line items reported in our condensed consolidated statements of operations for the three months ended September 30, 2025 and 2024 and the period-over-period dollar and percentage changes for those line items (in thousands, except percentages). Three months ended September 30 2025 2024 Change Percent Revenue $ 7,408 $ 8,194 $ (786 ) (9.6 )% Cost of revenue 4,987 6,430 (1,443 ) (22.4 )% Gross profit 2,421 1,764 657 37.2 % Gross margin 32.7 % 21.5 % Operating expenses: Research and development 594 644 (50 ) (7.8 )% Selling 328 423 (95 ) (22.5 )% General and administrative 1,191 1,245 (54 ) (4.3 )% Gain on sale of equipment - (625 ) 625 100.0 % Total operating expenses 2,113 1,687 426 25.3 % Operating income 308 77 231 300.0 % Other income (expense): Interest income 79 136 (57 ) (41.9 )% Interest expense (3 ) (5 ) 2 40.0 % Total other income, net 76 131 (55 ) (42.0 )% Income before income taxes 384 208 176 84.6 % Income tax expense - 5 (5 ) 100.0 % Net income $ 384 $ 203 $ 181 89.2 % 25 Three months ended September 30 2025 2024 Change Percent Revenues CVD Equipment $ 5,677 $ 5,684 $ (7 ) (0.1 )% SDC 1,858 2,005 (147 ) (7.3 )% MesoScribe 6 661 (655 ) (99.1 )% Intersegment sales elimination (133 ) (156 ) 23 14.7 % Total $ 7,408 $ 8,194 $ (786 ) (9.6 )% Revenue Our revenue for the three months ended September 30, 2025 was $7.4 million compared to $8.2 million for the three months ended September 30, 2024, a decrease of $0.8 million or 9.6%. The decrease in revenue versus the prior year period was primarily attributable to lower revenue of $0.7 million from our MesoScribe segment which ceased operations in 2024. Revenue from three customers for the quarter ended September 30, 2025 represented 22.7%, 19.1% and 13.6%, respectively, of our total revenues and 29.7%, 24.9%, and 17.5%, respectively, of CVD Equipment segment revenues. The revenue contributed by our CVD Equipment segment for the quarter ended September 30, 2025 of $5.7 million (net of intersegment revenue of $2,000) represented 76.6% of overall revenue as compared to $5.7 million (net of intersegment revenue of $5,000) or 69.3% of overall revenue for the quarter ended September 30, 2024. Lower revenues from system contracts in progress were offset by revenue recognized on one contract that was modified during the third quarter of 2025 to allow revenue to be recognized over time. Revenue recognized from this contract was approximately $1.0 million during the third quarter ended September 30, 2025. The revenue contributed by our SDC segment for the quarter ended September 30, 2025 of $1.7 million (net of intersegment sales of $130,000) represented 23.3% of overall revenue as compared to $1.9 million (net of intersegment sales of $151,000) or 22.6% of overall revenue for the quarter ended September 30, 2024. SDC segment revenue decreased by $0.1 million or 7.3% due to less contracts in progress during the quarter. Our order backlog at September 30, 2025 was approximately $8.0 million as compared to $13.2 million at June 30, 2025. Our order backlog at September 30, 2025 consists of approximately $6.8 million related to remaining performance obligations of contracts in progress and not yet started and the balance of approximately $1.2 million represents non-system orders received from customers. As of September 30, 2025, one industrial customer represented 23.8% of our backlog and one aerospace customer represented 24.7% 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 impact on the timing of revenue recognition. Accordingly, orders received from customers and revenue recognized may fluctuate from quarter to quarter. 26 Gross Profit Gross profit for the three months ended September 30, 2025 was $2.4 million, with a gross margin of 32.7%, compared to a gross profit of $1.8 million and a gross margin of 21.5% for the three months ended September 30, 2024. The increase in gross profit of $0.7 million was principally due to more profitable contract mix at CVD Equipment segment partially offset by lower MesoScribe revenues. The gross profit of our CVD Equipment segment includes $0.6 million related to the revenue recognized as the result of a contract modification. The gross profit of our SDC segment was negatively impacted by $0.1 million of non-recurring equipment certification costs. Research and Development For the three months ended September 30, 2025, research and development expenses were $0.6 million, or 8.0% of revenue as compared to $0.6 million, or 7.9% of revenue for the three months ended September 30, 2024, a decrease of $50,000 or 7.8%. The decrease in 2025 was the result of a reduction in personnel partially offset by less hours being charged to cost of revenue for contracts in progress. 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 $0.3 million or 4.4% of the revenue for the three months ended September 30, 2025 as compared to $0.4 million or 5.2% of revenue for the three months ended September 30, 2024, a decrease of $0.1 million or 22.5%. The decrease was the result of a reduction in personnel. General and Administrative General and administrative expenses for the three months ended September 30, 2025 were $1.2 million or 16.1% of revenue compared to $1.2 million or 15.2% of revenue for the three months ended September 30, 2024, a decrease of $0.1 million or 4.3%. There were no significant changes in general and administrative expenses. Gain on Sale of Equipment During the three months ended September 30, 2024, we recognized a gain of $0.6 million on the sale of equipment related to our MesoScribe subsidiary representing the sale price of $0.8 million less the costs of the equipment sold of $0.2 million. 27 Other Income (Expense), Net Other income (expense) consists principally of interest income on U.S. treasury securities and was lower than the prior year quarter due to less funds available for investment and lower interest rates. 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. Nine Months Ended September 30, 2025 versus September 30, 2024 The following table presents revenue and expense line items reported in our condensed consolidated statements of operations for the nine months ended September 30, 2025 and 2024 and the period-over-period dollar and percentage changes for those line items (in thousands, except percentages). Nine months ended September 30 2025 2024 Change Percent Revenue $ 20,836 $ 19,462 $ 1,374 7.1 % Cost of revenue 14,646 15,371 (725 ) (4.7 )% Gross profit 6,190 4,091 2,099 51.3 % Gross margin 29.7 % 21.0 % Operating expenses: Research and development 2,061 2,055 6 0.3 % Selling 1,097 1,268 (171 ) (13.5 )% General and administrative 3,595 3,844 (249 ) (6.5 )% Gain on sale of equipment - (625 ) 625 100.0 % Total operating expenses 6,753 6,542 211 3.2 % Operating loss (563 ) (2,451 ) 1,888 (77.0 )% Other income (expense): Interest income 272 438 (166 ) (37.9 )% Interest expense (10 ) (14 ) 4 (28.6 )% Other income - 2 (2 ) (100.0 )% Total other income, net 262 426 (164 ) (38.5 )% Loss before income taxes (301 ) (2,025 ) 1,724 85.1 % Income tax expense 16 5 11 220.0 % Net loss $ (317 ) $ (2,030 ) $ 1,713 84.4 % 28 Nine months ended September 30 2025 2024 Change Percent Revenue CVD Equipment $ 15,396 $ 12,738 $ 2,658 20.9 % SDC 5,734 6,252 (518 ) (8.3 )% MesoScribe 36 775 (739 ) (95.4 )% Intersegment sales elimination (330 ) (303 ) (27 ) (8.9 )% Total $ 20,836 $ 19,462 $ 1,374 7.1 % Revenue Our revenue for the nine months ended September 30, 2025 was $20.8 million compared to $19.5 million for the nine months ended September 30, 2024, an increase of $1.4 million or 7.1%. The increase in revenue versus the prior year period was primarily attributable to higher revenues of $2.7 million from our CVD Equipment segment offset by lower revenues of $0.7 million from our MesoScribe segment and $0.5 million from our SDC segment. Revenue from two customers for the nine months ended September 30, 2025 represented 30.2% and 16.7%, respectively, of our total revenues and 41.0% and 22.7%, respectively, of CVD Equipment segment revenues. The revenue contributed by the CVD Equipment segment for the nine months ended September 30, 2025 of $15.4 million (net of intersegment revenue of $13,000) represented 73.6% of overall revenue as compared to $12.7 million (net of intersegment revenue of $5,000) or 65.4% of overall revenue for the nine months ended September 30, 2024. The increase in revenues of $2.7 million or 20.9% was principally due to higher contract revenues from contracts in progress of $1.6 million and higher non-system revenues of $1.0 million. The revenue contributed by the SDC segment for the nine months ended September 30, 2025 of $5.4 million (net of intersegment revenue of $0.3 million) represented 26.0% of overall revenue as compared to $5.9 million (net of intersegment revenue of $0.3 million) or 30.6% of overall revenue for the nine months ended September 30, 2024. Revenue for our SDC segment decreased by $0.5 million or 8.3% due to less contracts in progress during the period. Gross Profit Gross profit for the nine months ended September 30, 2025 was $6.2 million, with a gross margin of 29.7%, compared to a gross profit of $4.1 million and a gross margin of 21.0% for the nine months ended September 30, 2024. The increase in gross profit of $2.1 million was principally due to higher system and non-system revenues in our CVD Equipment segment offset by lower revenues in our SDC and MesoScribe segments. The gross profit of our CVD Equipment segment includes $0.6 million related to the revenue recognized as the result of a contract modification. The gross profit of our SDC segment was negatively impacted by $0.1 million of non-recurring equipment certification costs. 29 Research and Development For the nine months ended September 30, 2025, research and development expenses were $2.1 million, or 9.9% of revenue as compared to $2.1 million, or 10.6% of revenue for the nine months ended September 30, 2024, an increase of $6,000 or 0.3%. Reductions in personnel was offset by less hours being charged to cost of revenue for contracts in progress. 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 $1.1 million or 5.3% of revenue for the nine months ended September 30, 2025 as compared to $1.3 million or 6.5% of revenue for the nine months ended September 30, 2024, a decrease of $0.1 million or 13.5%. The decrease was the result of a reduction in personnel. General and Administrative General and administrative expenses for the nine months ended September 30, 2025 were $3.6 million or 17.3% of revenue compared to $3.8 million or 19.8% of revenue for the nine months ended September 30, 2024, a decrease of $0.2 million or 6.5%. The decrease in expenses was principally due to lower professional fees, lower bonus accrual and the cessation of MesoScribe’s operations. Gain on Sale of Equipment During the nine months ended September 30, 2024, we recognized a gain of $0.6 million on the sale of equipment related to our MesoScribe subsidiary representing the sale price of $0.8 million less the costs of the equipment sold of $0.2 million. Other Income (Expense), Net Other income (expense) consists principally of interest income on U.S. treasury securities and was lower than the prior year period due to less funds available for investment and lower interest rates. 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. 30 Liquidity and Capital Resources As of September 30, 2025, aggregate working capital was $14.6 million as compared to aggregate working capital of $13.8 million at December 31, 2024. Cash and cash equivalents at September 30, 2025 and December 31, 2024 were $8.4 million and $12.6 million, respectively. Net cash used in operating activities for the nine months ended September 30, 2025 was $4.1 million. This decrease was principally due to the net loss of $0.3 million, an increase in accounts receivable of $0.5 million, an increase in contract assets of $2.7 million and a decrease in contract liabilities of $2.4 million which was partially offset by non-cash expenses of $1.2 million. Net cash used in investing activities for the nine months ended September 30, 2025 consisted of capital expenditures of $49,000 related to purchases of property and equipment and investment in a captive insurance company related to our self-insured health benefits program of $51,000. Net cash used in financing activities for the nine months ended September 30, 2025 consisted of repayments of $65,000 for an equipment loan. 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 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 Use of 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 2 – “Summary of Significant Accounting Policies” of our Consolidated Financial Statements for additional information regarding our accounting policies. 31 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. 32 Item 3. Quantitative and Qualitative Disclosures About Market Risk Not applicable. Item 4. Controls and Procedures . Evaluation of Disclosure Controls and Procedure s We maintain a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 13d-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. 33 CVD EQUIPMENT CORPORATION PART II OTHER INFORMATION Item 1. Legal Proceedings. None. Item 1A. Risk Factors. There have been no other 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 19, 2025. 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 November 10, 2025 31.2* Certification of Richard Catalano, Chief Financial Officer, dated November 10, 2025 32.1* Certification of Emmanuel Lakios, Chief Executive Officer, dated November 10, 2025, 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 November 10, 2025, 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. 34 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 10 th day of November 2025. 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) 35