CVD EQUIPMENT CORP 10-Q

Item 1 – Financial Statements CVD EQUIPMENT CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets (in thousands, except share amounts) (Unaudited) March 31, 2026 December 31, 2025 ASSETS Current assets: Cash and cash equivalents $ 8,196 $ 8,734 Accounts receivable, net of allowance for credit losses 677 1,293 Contract assets 3,347 2,853 Inventories 306 285 Current assets of discontinued operations 2,780 2,852 Assets held for sale – equipment - 510 Other current assets 390 357 Total current assets 15,696 16,884 Property, plant and equipment, net 10,421 10,529 Noncurrent assets of discontinued operations - 46 Other assets 97 50 Total assets $ 26,214 $ 27,509 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 213 $ 250 Accrued expenses 1,039 849 Current maturities of long-term debt - 181 Current liabilities of discontinued operations 1,154 944 Contract liabilities 526 560 Total current liabilities 2,932 2,784 Total liabilities 2,932 2,784 Contingencies – Note 12 - - Stockholders’ equity: Common stock - $ 0.01 par value – 20,000,000 shares authorized; 6,937,338 issued and outstanding at March 31, 2026 and December 31, 2025 69 69 Additional paid-in capital 30,919 30,699 Accumulated deficit ( 7,706 ) ( 6,043 ) Total stockholders’ equity 23,282 24,725 Total liabilities and stockholders’ equity $ 26,214 $ 27,509 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) 2026 2025 Three Months Ended March 31, 2026 2025 Revenue $ 1,844 $ 6,332 Cost of revenue 1,697 4,598 Gross profit 147 1,734 Operating expenses: Research and development 727 734 Selling 240 367 General and administrative 1,022 953 Gain on sale of equipment ( 46 ) - Total operating expenses 1,943 2,054 Operating loss from continuing operations ( 1,796 ) ( 320 ) Other income (expense): Interest income 71 110 Interest expense ( 1 ) ( 3 ) Total other income, net 70 107 Loss from continuing operations before income taxes ( 1,726 ) ( 213 ) Income tax expense - 16 Net loss from continuing operations ( 1,726 ) ( 229 ) Discontinued operations: Income from discontinued operations 499 589 Transaction costs on disposal of discontinued operations ( 436 ) - Income from discontinued operations, net of taxes 63 589 Net income (loss) $ ( 1,663 ) $ 360 Net income (loss) per share of common stock – basic and diluted: Loss from continuing operations per common share $ ( 0.25 ) $ ( 0.03 ) Income from discontinued operations per common share $ 0.01 $ 0.09 Net income (loss) per common share $ ( 0.24 ) $ 0.05 The accompanying notes are an integral part of these condensed consolidated financial statements 4 CVD EQUIPMENT CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Changes in Stockholders’ Equity (in thousands, except share amounts) (Unaudited) Three months ended March 31, 2026 and 2025 Shares Par Value Paid-in Capital Deficit Total Common stock Additional Accumulated Shares Par Value Paid-in Capital Deficit Total Balance at January 1, 2026 6,937,338 $ 69 $ 30,699 $ ( 6,043 ) $ 24,725 Net loss - - - ( 1,663 ) ( 1,663 ) Stock-based compensation - - 220 - 220 Balance at March 31, 2026 6,937,338 $ 69 $ 30,919 $ ( 7,706 ) $ 23,282 Balance at January 1, 2025 6,881,838 $ 69 $ 29,757 $ ( 4,458 ) $ 25,368 Net income - - - 360 360 Stock-based compensation - - 264 - 264 Balance at March 31, 2025 6,881,838 $ 69 $ 30,021 $ ( 4,098 ) $ 25,992 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) 2026 2025 Three Months Ended March 31, 2026 2025 Cash flows from operating activities: Net income (loss) $ ( 1,663 ) $ 360 Adjustments to reconcile net income (loss) to net cash used in operating activities: Stock-based compensation 220 264 Depreciation and amortization 123 185 Gain on sale of equipment ( 46 ) - Changes in assets and liabilities: Accounts receivable 222 743 Contract assets ( 298 ) ( 2,954 ) Inventories 317 78 Other assets ( 55 ) 271 Accounts payable 75 466 Accrued expenses 321 ( 372 ) Contract liabilities ( 68 ) ( 1,303 ) Net cash used in operating activities ( 852 ) ( 2,262 ) Cash flows from investing activities: Proceeds from assets held for sale and sale of equipment 556 - Investment in captive insurance company ( 48 ) ( 51 ) Purchases of property and equipment ( 13 ) ( 45 ) Net cash provided by (used in) investing activities 495 ( 96 ) Cash flows from financing activities: Repayments of long-term debt ( 181 ) ( 21 ) Net cash used in financing activities ( 181 ) ( 21 ) Net decrease in cash and cash equivalents ( 538 ) ( 2,379 ) Cash and cash equivalents at beginning of period 8,734 12,598 Cash and cash equivalents at end of period $ 8,196 $ 10,219 Supplemental disclosure of cash flow information: Income taxes paid $ 1 $ 6 Interest paid $ 1 $ 3 The accompanying notes are an integral part of these condensed consolidated financial statements 6 CVD EQUIPMENT CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE 1: BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements for CVD Equipment Corporation and Subsidiaries (collectively “the Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. They do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary in order to make the interim financials not misleading have been included and all such adjustments are of a normal recurring nature. The operating results for the three months ended March 31, 2026 are not necessarily indicative of the results that can be expected for the year ending December 31, 2026. The condensed consolidated balance sheet as of December 31, 2025 has been derived from the audited consolidated financial statements at such date, as filed on Form 10-K with the SEC on March 30, 2026, but does not contain all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with that report. All material intercompany balances and transactions have been eliminated in consolidation. On March 23, 2026, the Company entered into an agreement to sell its SDC business division to a third party. The sale was completed on April 1, 2026. Accordingly, the financial results of the SDC business division are reflected in the consolidated condensed financial statements as discontinued operations for all periods presented. Unless otherwise specified, disclosures in these condensed consolidated financial statements reflect continuing operations only. Prior period financial information related to discontinued operations has been reclassified and separately presented in the consolidated financial statements and accompanying notes to conform to the current period presentation. See Note 2 for further information regarding our discontinued operations. Reclassifications Certain reclassifications have been made to the prior period condensed consolidated financial statements to conform to the current period presentation. These reclassifications had no effect on net loss. Liquidity At March 31, 2026, the Company had $ 8.2 million in cash and cash equivalents. The Company also received net proceeds of approximately $ 14.8 million in April 2026 upon the sale of the SDC business division. The Company anticipates that the existing cash and cash equivalents balance together with collections of existing accounts receivable and contract assets, and revenue from its existing backlog of systems as of this filing date, will be adequate to meet its working capital and capital equipment requirements, and its anticipated cash needs over the next 12 months from the date of issuance of these condensed consolidated financial statements. 7 NOTE 2: DISCONTINUED OPERATIONS On March 23, 2026, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with a buyer to sell its SDC business division. On April 1, 2026, the Company completed the transaction whereby substantially all the assets related to SDC were sold. The aggregate consideration paid to the Company in connection with the transaction was $ 16.9 million and is subject to customary post-closing adjustments. At the closing, $ 0.9 million of the purchase price was placed in escrow to secure post-closing adjustments and indemnification obligations in accordance with the Asset Purchase Agreement. The Asset Purchase Agreement contains customary representations, warranties, covenants and indemnification provisions. The net cash proceeds from the sale of SDC received by the Company in April 2026, after payment of transaction costs and employee related liabilities, were $ 14.8 million, increasing the Company’s cash balance at the time to approximately $ 23 million. The Company retained ownership of its Saugerties, New York facility and entered into a lease agreement with the buyer of SDC, pursuant to which the buyer will lease such facility for an initial term of two years following the closing for an initial annual rent of $ 0.2 million, subject to customary adjustments. The transaction represents a single disposal plan that constitutes a strategic shift expected to have a material effect on our operations and financial results. Accordingly, the financial results of SDC are reflected in the condensed consolidated financial statements as discontinued operations for all periods presented and the SDC assets and liabilities are considered held for sale as of March 31, 2026. The following table represents the amounts of assets and liabilities of the discontinued operations of SDC (in thousands): SCHEDULE OF AMOUNTS OF ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS March 31, 2026 December 31, 2025 Assets: Accounts receivable, net of allowance for credit losses $ 1,415 $ 1,021 Contract assets 342 538 Inventories 945 1,284 Other current assets 33 9 Equipment, net 42 44 Other noncurrent assets 3 2 Total assets $ 2,780 $ 2,898 Liabilities: Accounts payable $ 503 $ 392 Accrued expenses 471 339 Contract liabilities 180 213 Total liabilities $ 1,154 $ 944 8 NOTE 2: DISCONTINUED OPERATIONS (continued) The following table represents statements of operations information for the discontinued operations of SDC (in thousands): 2026 2025 Three months ended March 31, 2026 2025 Revenue $ 2,365 $ 1,984 Cost of revenue 1,524 1,093 Gross profit 841 891 Operating expenses: Research and development 54 47 Selling 62 53 General and administrative 226 202 Total operating expenses 342 302 Income from discontinued operations 499 589 Transaction costs on disposal of discontinued operations ( 436 ) - Income from discontinued operations, net of taxes $ 63 $ 589 The significant components included in the accompanying condensed consolidated statements of cash flow for the discontinued operations of SDC are as follows (in thousands): 2026 2025 Three months ended March 31, 2026 2025 Net cash provided by operating activities $ 413 $ 654 Net cash used in investing activities ( 2 ) ( 5 ) Net cash provided by financing activities - - NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606 - Revenue from Contracts with Customers (“ASC 606 ” ), the Company records revenue in an amount that reflects the consideration to which the Company expects to be entitled in exchange for goods or services promised to its customers. Under ASC 606 , the Company follows a five-step model to: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price for the contract; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue using one of the following two methods: 9 NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Over time The Company designs, manufactures and sells custom chemical vapor deposition, thermal process equipment and other equipment through contractual agreements. These system sales require the Company to deliver functioning equipment that is generally completed within two to eighteen months from commencement of order acceptance. For systems sales that meet the criteria to recognize revenue over time, the Company recognizes revenue over time by using an input method based on costs incurred as it depicts the Company’s progress toward satisfaction of the performance obligation. For system sales that do not meet the criteria to recognize revenue over time based on the contract provisions, the Company recognizes revenue based on point in time. Under the over time method, revenue arising from fixed price contracts is recognized as work is performed based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations. Incurred costs include all direct material and labor costs and those indirect costs related to contract performance, such as supplies, tools, repairs and depreciation costs. Contract material costs are included in incurred costs when the project materials have been purchased or moved to work-in-process, and installed, as required by the project’s engineering design. Cost based input methods of revenue recognition require the Company to make estimates of costs to complete the projects. In making such estimates, significant judgment is required to evaluate assumptions related to the costs to complete the projects, including materials, labor and other system costs. If the estimated total costs on any contract are greater than the net contract revenues, the Company recognizes the entire estimated loss in the period the loss becomes known and can be reasonably estimated. There were no material impairment losses recognized on contract assets during the three months ended March 31, 2026 and 2025. 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 result 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 order and progress payments as the system is manufactured. Contract assets and contract liabilities are classified as current as these contracts in progress are expected to be substantially completed within the next twelve months. Point in time For non-system sales of products and services, revenue is recognized at the point in time when control of the promised products or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services (the transaction price). A performance obligation is a promise in a contract to transfer a distinct product or service to a customer and is the unit of account under ASC 606, “Revenue from Contracts with Customers.” 10 NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) For any system equipment sales where the equipment would have an alternative use or where the contract provisions of the contract preclude the use of over time revenue recognition, revenue is recognized at the point in time when control of the equipment is transferred to the customer. For the three months ended March 31, 2026 and 2025, all system equipment sales were recorded over time by using an input method except for one contract that was entered during 2024 and was not recognized as revenue using over time revenue recognition until July 2025 when a contract modification was entered into with the customer to change certain contract provisions. Inventories Inventories (raw materials, work-in-process and finished goods) are valued at the lower of cost (determined on the first-in, first-out method) or net realizable value. Work-in-process and finished goods inventory reflect all accumulated production costs, which are comprised of direct production costs and overhead, and is reduced by amounts recorded in cost of sales as the related revenue is recognized. Indirect costs relating to long-term contracts, which include expenses such as general and administrative, are charged to expenses 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. Assets Held for Sale and Discontinued Operations Assets and related liabilities of a qualifying business are classified as held for sale when the following conditions are met: (i) management has committed to a plan to sell the net assets, (ii) the net assets are available for immediate sale, (iii) there is an active program to locate a buyer, (iv) the sale and transfer of the net assets is probable within one year, (v) the net assets are being actively marketed for sale at a price that is reasonable in relation to the current fair value, and (vi) it is unlikely that significant changes will be made to the plan to sell the net assets. Assets and related liabilities which have been classified as held for sale are excluded from the net assets and liabilities of continuing operations in the period in which the held for sale criteria was met. A component of a business is classified as a discontinued operation when its disposal represents a strategic shift that has or will have a major effect on our operations and financial results. The results of discontinued operations are reported in income/loss from discontinued operations, net of tax on the consolidated statements of operations for all current and prior periods presented. The results of discontinued operations include direct costs attributable to the divested business and any gain or loss recognized in connection with the sale, or adjustment of the carrying amount to fair value less cost to sell while being held for sale, and excludes any indirect cost allocation associated with any shared-service or corporate functions not solely dedicated to the divested business. Adjustments to discontinued operations subsequent to the completion of a transaction or disposition are generally attributable to contingencies and indemnifications directly related to the disposal transaction, operations of the discontinued operations, or settlement of obligations directly related to the disposal. 11 NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Assets and liabilities of discontinued operations, including those that meet the held-for-sale criteria are presented separately in the consolidated balance sheets. Upon classification as held for sale, assets are measured at the lower of carrying amount or fair value less cost to sell, and depreciation and amortization cease. Any impairment losses or subsequent measurement adjustments are recognized in the results of discontinued operations in the period in which they are identified. Cash flows attributable to discontinued operations are presented separately in the consolidated statements of cash flows, or otherwise disclosed, for all periods presented. Recently Issued Accounting Standards In November 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statements Expenses (Subtopic 220-40),” to improve income statement expenses disclosure. The standard requires more detailed information related to the types of expenses, including (among other items) the amounts of purchases of inventory, employee compensation, depreciation and intangible asset amortization included within each interim and annual income statement’s expense caption, as applicable. This authoritative guidance can be applied prospectively or retrospectively and will be effective for financial statements issued for annual periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements. The Company believes there is no additional new accounting guidance adopted, but not yet effective, which is relevant to the readers of our financial statements. However, there are numerous new proposals under development which, if and when enacted, may have a significant impact on our financial reporting. NOTE 4: CONCENTRATION OF CREDIT RISK Cash and cash equivalents The Company had cash and cash equivalents of $ 8.2 million and $ 8.7 million at March 31, 2026 and December 31, 2025, respectively. The Company invests excess cash in U.S. treasury bills, certificates of deposit or deposit accounts, all with maturities of less than three months. Cash equivalents were $ 7.9 million and $ 8.2 million at March 31, 2026 and December 31, 2025, respectively. The Company places most of its temporary cash investments with financial institutions, which from time to time may exceed the Federal Deposit Insurance Corporation limit. There were no amounts at risk at March 31, 2026 and December 31, 2025. Accounts receivable The Company routinely assesses the financial strength of its customers . In accordance with the “expected credit loss” model, 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 $ 15,000 as of both March 31, 2026 and December 31, 2025. 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. 12 NOTE 4: CONCENTRATION OF CREDIT RISK (continued) At March 31, 2026, the accounts receivable balance included amounts from four customers that totaled 25.7 %, 18.1 %, 14.4 % and 11.6 % of total accounts receivable. As of December 31, 2025 , the accounts receivable balance included amounts from two customers that totaled 57.0 % and 28.2 % 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 March 31, 2026, three customers exceeded 10 % of revenues, representing 27.2 %, 21.7 % and 17.3 % of revenues, and during the three months ended March 31, 2025, three customers exceeded 10 % of revenues, representing 54.0 %, 18.4 % and 11.7 % of revenues NOTE 5: REVENUE RECOGNITION The following table represents a disaggregation of revenue for the three months ended March 31, 2026 and 2025 (in thousands): SCHEDULE OF DISAGGREGATION OF REVENUE Over time Point in time Total Three months ended March 31, 2026 Over time Point in time Total Energy $ - $ - $ - Aerospace 401 699 1,100 Industrial 322 89 411 Research 251 82 333 Total $ 974 $ 870 $ 1,844 Over time Point in time Total Three months ended March 31, 2025 Over time Point in time Total Energy $ - $ 7 $ 7 Aerospace 1,722 783 2,505 Industrial 3,419 281 3,700 Research 26 94 120 Total $ 5,167 $ 1,165 $ 6,332 The energy market includes customers involved in the manufacture of silicon carbide wafers and batteries. The aerospace market includes customers that manufacture aircraft engines. Industrial end market consists of various end customers in diverse industries. The research market principally represents customers that are universities and other research institutions. The Company has unrecognized contract revenue of approximately $ 2.6 million at March 31, 2026, which it expects to substantially recognize as revenue over time within the next eighteen months. Judgment is required to evaluate assumptions including the amount of net contract revenues and the total estimated costs to determine our progress toward 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 consolidated statements of operations. The Company recorded a cumulative catch up adjustment of $ 0.3 million to increase revenue during the three months ended March 31, 2026 as a result of a contract modification. 13 NOTE 5: REVENUE RECOGNITION (continued) Contract assets and liabilities Contract assets and contract liabilities on input method type contracts in progress are summarized as follows as of March 31, 2026 (in thousands): Schedule of Cost and Estimated Earnings in Excess of Billings Costs incurred on contracts in progress $ 20,898 Estimated earnings 9,574 Costs and estimated earnings on uncompleted contracts $ 30,472 Billings to date ( 27,394 ) Net cost in excess of billings 3,078 Deferred revenue related to non-system contracts ( 257 ) Contract liability in excess of contract assets $ 2,821 Included in accompanying condensed consolidated balance sheets under the following captions (in thousands): Contract assets $ 3,347 Contract liabilities $ 526 Of the contract liability balances at December 31, 2025 and 2024, $ 0.2 million and $ 1.3 million was recognized as revenue during the three months ended March 31, 2026 and 2025, respectively. Contract assets and contract liabilities at December 31, 2024 were $ 2.1 million and $ 3.0 million, respectively. NOTE 6: INVENTORIES Inventories consist of: Schedule of Inventories, net March 31, 2026 December 31, 2025 Raw materials $ 165 $ 137 Work-in-process 141 148 Finished goods - - Total $ 306 $ 285 NOTE 7: LONG-TERM DEBT In September 2022, the Company entered into a loan agreement to fund the acquisition of machinery. The loan amount of $ 432,000 was payable in 60 equal monthly installments of $ 8,352 and secured by equipment. The interest rate was 6 %. This loan was fully repaid during the three months ended March 31, 2026. NOTE 8: EARNINGS PER SHARE The calculation of basic and diluted weighted average common shares outstanding for the three months ended March 31, 2026 and 2025 is as follows: Schedule of Basic and Diluted Weighted Average Common Shares Outstanding 2026 2025 Three months ended March 31, 2026 2025 Basic weighted average common shares outstanding 6,937,492 6,867,713 Dilutive effect of stock options - - Dilutive effect of unvested restricted stock - - Diluted weighted average shares outstanding 6,937,492 6,867,713 14 NOTE 8: EARNINGS PER SHARE (continued) As the result of the losses from continuing operations for the three months ended March 31, 2026 and 2025, all stock options and unvested restricted stock were excluded from the computation diluted per share amounts for the loss from continuing operations, income from discontinued operations and net income (loss). NOTE 9: STOCK-BASED COMPENSATION EXPENSE The following table summarizes stock options awards for the three months ended March 31, 2026: SCHEDULE OF STOCK OPTIONS AWARDS Weighted Stock Option Average Awards Exercise (in shares) Price Outstanding at January 1, 2026 803,875 $ 8.17 Forfeited ( 6,250 ) 8.80 Outstanding at March 31, 2026 797,625 8.17 The following table summarizes information about the outstanding and exercisable options at March 31, 2026 by ranges of exercise prices: SCHEDULE OF OUTSTANDING AND EXERCISABLE OPTIONS RANGES OF EXERCISE PRICES Options Outstanding Options Exercisable Weighted Average Remaining Weighted Weighted Contractual Average Average Exercise Number Life in Exercise Intrinsic Number Exercise Intrinsic Price Range Outstanding Years Price Value Exercisable Price Value $ 4.00 - 7.00 437,125 5.7 $ 4.54 $ 18 392,000 $ 4.48 $ 18 $ 7.01 - 10.00 20,000 2.1 $ 8.07 $ - 20,000 $ 8.07 $ - $ 10.01 - 13.00 120,000 1.0 $ 10.52 $ - 120,000 $ 10.52 $ - $ 13.01 - 16.00 220,500 7.0 $ 14.11 $ - 165,375 $ 14.11 $ - As of March 31, 2026, there was $ 0.6 million of unrecognized compensation costs related to stock options expected to be recognized over a weighted average period of 0.9 years. 15 NOTE 9: STOCK-BASED COMPENSATION EXPENSE (continued) The Company recorded stock-based compensation expense for the three months ended March 31, 2026 and 2025, respectively, that were included in the following line items in our condensed consolidated statements of operations (in thousands): SCHEDULE OF STOCK BASED COMPENSATION 2026 2025 Three months ended March 31, 2026 2025 Cost of revenue $ 23 $ 26 Research and development 39 47 Selling 13 26 General and administrative 133 150 Total $ 208 $ 249 Stock-based related to discontinued operations were $ 12,000 and $ 15,000 for the three months ended March 31, 2026 and 2025, respectively. Stock-based compensation expense included $ 50,000 for both three months ended March 31, 2026 and 2025, related to restricted stock awards that directors elected to receive pursuant to the Director Compensation plan. Under this plan, each of the five independent directors is entitled to an Annual Equity Retainer in the amount of $ 40,000 , to be granted on the date of the Company’s annual meeting of shareholders. NOTE 10: INCOME TAXES As of March 31, 2026 and December 31, 2025, the Company has provided a full valuation allowance against its net deferred tax assets. This was based on management’s assessment, including operating losses in recent years, that it is more likely than not that the net deferred tax assets may not be realized in the future. Management continues to evaluate for potential utilization of the Company’s net deferred tax assets, which have been fully reserved for, on a quarterly basis, reviewing our economic models, including projections of future operating results. NOTE 11: SEGMENT REPORTING With the sale of the Company’s SDC business in 2026 and the cessation of its MesoScribe business in 2024, the Company has one reportable segment consisting of its CVD Equipment division that manufactures chemical vapor deposition, physical vapor transport, thermal process and related equipment. 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 budget-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. The following table presents revenue by geographic area (in thousands): SCHEDULE OF REVENUE BY GEOGRAPHIC AREA 2026 2025 Three months ended March 31, 2026 2025 United States $ 1,682 $ 6,231 North America, excluding US 1 3 Europe, Middle East and Africa 161 48 Asia-Pacific - 50 Consolidated total revenue $ 1,844 $ 6,332 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. 16 NOTE 12: RISKS AND CONTINGENCIES The Company operates in a challenging and uncertain global economic environment. Recent and potential actions by the U.S. federal administration, including changes in trade policy, export controls, and tariffs on imports from various countries and regions, as well as retaliatory or responsive actions by other governments, may adversely affect the Company’s supply chain, costs, demand for its products, receipt of orders and results of operations. In addition, the Company faces ongoing risks related to geopolitical instability, including conflicts and tensions in Europe, the Middle East, and Asia, which may further disrupt global economic conditions and financial markets. Other factors contributing to economic uncertainty include inflationary pressures, elevated interest rates, disruptions in global logistics, labor market challenges, and potential changes in fiscal, tax, or regulatory policies. These conditions may impact customer spending decisions, order rates, project timing, and the availability and cost of materials and components used in the Company’s products. While management continuously evaluates these conditions and has taken, and may take, actions intended to mitigate the potential adverse effects on the Company’s business, there can be no assurance that such actions will be successful. The Company is unable to predict the ultimate impact of these risks and uncertainties on its future results of operations, financial position, or cash flows. 17