What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2026-03-30 compared with 2025-03-19 · 102 added, 109 removed, 149 unchanged (59% of the section changed)

16 unchanged sentences

used to develop and manufacture materials and coatings for industrial applications and research.

increased by $2.8 million or 11.5% as compared to the prior year due to increases in revenues

from aerospace and industrial contracts in progress and our SDC segment that was partially

offset by lower revenues of spare parts and lower revenues from Tantaline that was sold in

margin increased by $1.3 million or 24.8% as compared to the prior year due to higher revenues

and improved margins on contracts in process offset by a $1.3 million non-cash charge to

reduce certain PVT inventory to net realizable value.

decreased by $1.1 million or 4.1% as compared to the prior year due to decreases in revenues from aerospace and industrial contracts

in progress in our CVD segment, lower revenues in our SDC segment and the lower revenues related to the ceasing of MesoScribe’s

profit increased by $1.2 million or 20.4% as compared to the prior year due principally to a $1.6 million non-cash charge in 2024

to reduce certain inventory to net realizable value.

bookings for 2025 were approximately $13.0 million as compared to $28.1 million in 2024.

an increase of $2.3 million or 8.9%.

in 2024 included a $10.0 million multisystem order from an industrial customer that will

be used to deposit a silicon carbide protective coating on OEM components.

in 2024 also included a $3.5 million order from a major aerospace company for the production

of CVI systems.

This is the fifth system purchased by this customer that will be used by

our customer to manufacture CMCs for their gas turbine jet engines.

backlog increased from $18.4 million to $19.4 million, an increase of $0.8 million or 4.9%.

The decrease in bookings of $15.1 million

was related to a decrease in orders for systems in our CVD Equipment segment due in part to macroeconomic issues associated with

tariffs, reduction in university funding and the U.S.

government shutdown during 2025.

backlog declined from $19.4 million to $6.6 million due to the reduction in bookings, a decrease of $12.8 million or 66.0%.

balance at December 31, 2025 was $8.7 million as compared to $12.6 million at December 31, 2024

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.

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.

current strategy yielded multisystem orders of PVT150 equipment in 2023 and 2022 that were delivered to one company that planned to use

our systems to manufacture silicon carbide wafers.

Although we continue to invest in our vision for the “electrification of everything,”

we have observed lower-than-anticipated industrywide electric vehicle sales which may reduce demand for silicon carbide and impact sales

of our PVT systems.

In addition, the current global over capacity of 150 mm silicon carbide wafers has reduced the market for 150 mm

silicon carbide growth systems.

February 2024, we received an order from an additional customer for our new PVT200 system used to grow silicon carbide crystals for the

manufacture of 200 mm wafers.

This represents our second customer for our PVT equipment.

This customer plans to evaluate our equipment

for potential additional purchases of PVT equipment.

We shipped this unit to the customer in the third quarter of 2024.

technologies are essential for the support of the EV market.

These systems should provide us with standard product offerings to continue

to support the EV focused market as well as energy storage, power conversion and power transmission.

We plan to evaluate opportunities

to expand our product offerings in the power electronics market to build off the introduction of the PVT150 and PVT200 systems.

also evaluating our ability to provide other equipment used in the manufacturing process of silicon carbide wafers.

2022, we also received an order from an aerospace company for a production chemical vapor infiltration (CVI) system that will be used

to manufacture CMCs for gas turbine jet engines.

In 2023, we received an order from the same aerospace company for an additional three

CVI systems and in November 2024 we received an order from the same aerospace company for an additional CVI system.

February 2024, we received a multisystem order from an industrial customer for approximately $10.0 million that will be used for depositing

a silicon carbide protective coating on OEM components and the units are expected to be delivered over 18 to 24 months period.

On March 23, 2026, we

entered into a definitive agreement under which our SDC business division will be sold to a subsidiary of the Atlas Copco

The purchase price amounts to approximately $16.9 million in cash, subject to certain purchase price adjustments.

transaction is expected to close during the second quarter of 2026, subject to customary closing conditions.

We expect to use the proceeds

from the transaction to enhance financial flexibility and support initiatives aimed at creating shareholder value.

The expected net

cash proceeds after payment of transaction expenses and taxes are approximately $15.0 million, of which $900,000 will be held in escrow

to cover post-closing adjustments and indemnification obligations under the agreement.

CVD will retain ownership

of its Saugerties, New York facility, which will be leased to the acquiring company for an initial term of two years following

the closing of the transaction.

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 transitioned our

operating model for our CVD Equipment business from vertically integrated fabrication to outsourced fabrication of certain components

to reduce our fixed operating costs.

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.

completed the workforce reduction plan during the fourth quarter of 2025 and incurred approximately $0.1 million in severance and other

As of December 31, 2025, the Company classified certain manufacturing equipment as held for sale with a fair value of $0.5 million

based on an agreement the Company entered into in January 2026 with a third-party to sell the equipment for this amount.

recorded an impairment charge of $0.2 million related to this equipment and related capitalized software during the year ended December

core strategy remains focused on serving key markets related to aerospace, microelectronics/power electronics and industrial applications.

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.

October 2025, we received an order for two PVT150™ units 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.

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.

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.

have generally gained new customers through our industry reputation, as well as print advertising and trade show attendance.

increased the number of trade shows and industry conferences we attend.

Historically,

our orders have fluctuated based on end user market conditions, adoption of our new products and acceptance of our products.

rate as well as other factors in our manufacturing process ultimately impacts 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

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.

of Operations

2 unchanged sentences

31, 2025, and 2024 and the period-over-period dollar and percentage changes for those line items (in thousands, except percentages).

December 31, 2024

December 31, 2023

Cost of revenue

2 unchanged sentences

General and administrative

Gain on sales of equipment

Loss on disposition of Tantaline

Impairment charge

Impairment charges

on sales of equipment

Total operating expenses

3 unchanged sentences

Interest expense

Foreign exchange income

Total other income, net

Loss before income tax

Income tax expense (benefit)

Income tax expense

Not meaningful

December 31, 2023

CVD Equipment

Intersegment sales elimination

revenue for the year ended December 31, 2024 was $26.9 million compared to $24.1 million for the year ended December 31, 2023, an increase

Intersegment sales

revenue for the year ended December 31, 2025 was $25.8 million as compared to $26.9 million for the year ended December 31, 2024, a decrease

of $1.1 million or 4.1%.

increase in revenue versus the prior year period was primarily attributable to higher revenue of $1.9 million from our CVD Equipment

segment and a $1.3 million increase in revenue from our SDC segment, offset by lower Tantaline revenues of $0.5 million that was sold

Revenue from one aerospace customer for the year ended December 31, 2024 represented 29.5% of our total revenues and 43.4%

of CVD Equipment segment revenues.

revenue contributed by our CVD Equipment segment for the year ended December 31, 2024 of $18.3 million represented 68.1% of overall revenue

as compared to $16.2 million (net of intersegment sales of $0.1 million) or 67.8% of overall revenue for the year ended December 31,

The increase in external revenues of $2.1 million or 11.3% resulted principally from increases in revenues from aerospace and industrial

contracts in progress offset in part by lower revenue for PVT150/200 systems and spare parts.

decrease in revenue versus the prior year period was primarily attributable to lower revenue of $0.2 million from our CVD Equipment segment,

a $0.5 million decrease in revenue from our SDC segment and $0.7 million lower MesoScribe revenues which ceased operations in 2024.

from two customers for the year ended December 31, 2025 represented 27.6% and 13.7% of our consolidated revenues and 39.5% and 19.6%

of CVD Equipment segment revenues, respectively.

revenue contributed by our CVD Equipment segment for the year ended December 31, 2025 of $18.1 million (net of intersegment revenue of

$23,000) represented 70.0% of overall revenue as compared to $18.3 million (net of intersegment revenue of $8,000) or 68.0% of overall

revenue for the year ended December 31, 2024.

The decrease in external revenues of $0.2 million or 1.2% resulted principally from lower

system revenues due to lower orders during 2025 offset by higher non-system revenues, principally spare parts.

revenue contributed by our SDC segment for the year ended December 31, 2025 of $7.6 million (net of intersegment sales of $0.3 million)

1 unchanged sentence

for the year ended December 31, 2024.

External revenue for our SDC segment increased by $1.1 million or 16.4% due to higher demand for

gas delivery system products as compared to the prior period.

External revenue for our SDC segment decreased by $0.2 million or 2.6%.

revenue contributed by our MesoScribe segment for the year ended December 31, 2025 of $0.1 represented 0.4% of our overall revenue as

2 unchanged sentences

2024 and ceased operations.

Revenue in 2025 was principally a license fee.

order backlog at December 31, 2025 was approximately $6.6 million as compared to December 31, 2024 of $19.4 million.

3 unchanged sentences

As of December 31, 2025,

one industrial customer represented 41.8% of our backlog and one aerospace customer represented 27.1% of our backlog.

one aerospace customer represented 29.4% of our backlog and one industrial customer represented 15.4% of our backlog.

Historically, our

revenues and orders have fluctuated based on changes in order rate as well as other factors in our manufacturing process that impacts

revenues and orders have fluctuated based on changes in order rate and demand as well as factors in our manufacturing process that impacts

the timing of revenue recognition.

3 unchanged sentences

The increase in gross profit of $1.2 million

was primarily due to higher revenues as well as improved margins on CVD contracts in progress and final MesoScribe sales that was partially

offset by a $1.3 million non-cash charge to reduce certain PVT inventory to net realizable value.

was primarily due to higher gross margin for CVD Equipment due principally to a $1.6 million non-cash charge in 2024 to reduce certain

inventory to net realizable value.

This was offset by lower gross margins at our SDC and MesoScribe segments due principally to lower

and Development

1 unchanged sentence

or 9.8% for the year ended December 31, 2024.

There were no significant changes in research and development expenses as compared to

the prior year.

The increase was due to less time charged to contracts in progress partially offset by

lower personnel costs.

engineering support and expenses related to the development of more standard products and value-added development of existing products

4 unchanged sentences

ended December 31, 2024.

There were no significant changes in selling expenses as compared to the prior year.

The decrease was primarily due to lower personnel costs.

and Administrative

3 unchanged sentences

and lower professional fees.

December 31, 2025, we classified certain excess manufacturing equipment as held for sale with a fair value of $0.5 million based on an

agreement with a third-party to sell the equipment for this amount.

The Company recorded an impairment charge of $0.2 million related

to this equipment and related capitalized software during the year ended December 31, 2025.

on Sales of Equipment

2 unchanged sentences

We also recognized a gain of $42,000 on the sale of equipment by our CVD Equipment

on Disposition of Tantaline

expense of $162,000 represents the net loss on the sale of our Tantaline subsidiary including professional fees.

This disposition was

completed in 2023.

expense represents the loss on the impairment of certain assets of MesoScribe based on the decision to wind down its operations made

income, net was $0.5 million for the year ended December 31, 2024 as compared to other income, net of $0.7 million for the year ended

December 31, 2023.

Other income is principally interest income on treasury bills.

tax expense (benefit) for the years ended December 31, 2024 and 2023, was $24,000 and $(14,000) respectively.

We continue to evaluate

for potential utilization of our deferred tax asset, which has been fully reserved for, on a quarterly basis, by reviewing our economic

models, including projections of future operating results.

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.

tax expense for the years ended December 31, 2025 and 2024, was $3,000 and $24,000 respectively.

We continue to evaluate for potential

utilization of our deferred tax asset, which has been fully reserved for, on a quarterly basis, by reviewing our economic models, including

projections of future operating results.

and Supply Chain Matters

4 unchanged sentences

suppliers or components to attempt to mitigate the potential cost impacts.

In addition, we are utilizing our in-house flexible manufacturing

to attempt to further mitigate both potential schedule delivery delays and material cost increase.

While we have initiated actions to

mitigate the potential negative impacts to our revenue and profitability, there can be no assurance of the ultimate impact and the length

of time that the supply chain factors may impact our revenues and profitability.

While we have initiated actions to mitigate the potential

negative impacts to our revenue and profitability, there can be no assurance of the ultimate impact and the length of time that the supply

chain factors may impact our revenues and profitability.

has also had an impact on salaries and compensation.

6 unchanged sentences

Our cash and cash equivalents at December 31, 2025 and 2024 were $8.7 million and $12.6 million, respectively.

cash used in operating activities during 2024 was $1.5 million and was principally due to the net loss of $1.9 million and reductions

cash used in operating activities during 2025 was $3.7 million and was principally due to the net loss of $1.6 million and net increase

in contract assets and liabilities of $3.5 million, offset by a reduction in inventory of $0.5 million, and non-cash items of $1.6 million.

including a provision for excess and obsolete inventory of $1.6 million.

cash provided by investing activities for the year ended December 31, 2024 consisted of proceeds from the sales of equipment of $0.2

million offset by capital expenditures of $0.1 million.

cash used in investing activities for the year ended December 31, 2025 of $0.1 million consisted of purchases of equipment and investment

in captive insurance company.

cash used in financing activities for the year ended December 31, 2025 consisted of repayments of $0.1 million for an equipment loan.

18 unchanged sentences

on our financial condition or results of operations.

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

design, manufacture, and sell custom chemical vapor deposition equipment through contractual agreements.

35 unchanged sentences

and Qualitative Disclosures About Market Risk.

Financial Statements and Supplementary Data.

Statements and Supplementary Data.

consolidated financial statements required by this item are included in this Annual Report on Form 10-K beginning on page F-1.

1 unchanged sentence

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

What changed 10-K

Item 7. Management’s Discussion and Analysis