CVD EQUIPMENT CORP 10-Q

Item 1 – Financial Statements CVD EQUIPMENT CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets (in thousands, except share amounts) (Unaudited) June 30, 2026 December 31, 2025 ASSETS Current assets Cash and cash equivalents $ 23,483 $ 8,734 Accounts receivable, net of allowance for credit losses 1,771 1,293 Contract assets 1,397 2,853 Inventories 247 285 Amount held in escrow 900 - Current assets of discontinued operations - 2,852 Assets held for sale - 510 Other current assets 350 357 Total current assets 28,148 16,884 Property, plant and equipment, net 10,276 10,529 Noncurrent assets of discontinued operations - 46 Other assets 99 50 Total assets $ 38,523 $ 27,509 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 155 $ 250 Accrued expenses 1,060 849 Income taxes payable 688 - Contract liabilities 541 560 Current maturities of long-term debt - 181 Current liabilities of discontinued operations - 944 Total current liabilities 2,444 2,784 Security deposit 30 - Total liabilities 2,474 2,784 Contingencies – Note 12 - - Stockholders’ equity: Common stock - $ 0.01 par value – authorized 20,000,000 shares; issued and outstanding 6,946,703 and 6,937,338 at June 30, 2026 and December 31, 2025, respectively 69 69 Additional paid-in capital 31,121 30,699 Retained earnings (accumulated deficit) 4,859 ( 6,043 ) Total stockholders’ equity 36,049 24,725 Total liabilities and stockholders’ equity $ 38,523 $ 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 2026 2025 Three months ended Six months ended June 30, June 30, 2026 2025 2026 2025 Revenue $ 1,953 $ 3,404 $ 3,798 $ 9,737 Cost of revenue 1,624 2,923 3,321 7,451 Gross profit 329 481 477 2,286 Operating expenses: Research and development 685 639 1,413 1,373 Selling 232 282 472 649 General and administrative 971 931 1,992 1,954 Gain on sale of equipment - - ( 46 ) - Total operating expenses 1,888 1,852 3,831 3,976 Operating loss from continuing operations ( 1,559 ) ( 1,371 ) ( 3,354 ) ( 1,690 ) Other income (expense): Interest income 190 82 261 192 Interest expense - ( 3 ) ( 1 ) ( 7 ) Rental income, net of expenses ( 3 ) - ( 3 ) - Total other income, net 187 79 257 185 Loss from continuing operations before income taxes ( 1,372 ) ( 1,292 ) ( 3,097 ) ( 1,505 ) Income tax expense - - - 16 Net loss from continuing operations ( 1,372 ) ( 1,292 ) ( 3,097 ) ( 1,521 ) Income from discontinued operations, net of income taxes (Note 2) 13,937 231 13,999 820 Net income (loss) $ 12,565 $ ( 1,061 ) $ 10,902 $ ( 701 ) Net income (loss) per share of common stock – basic and diluted Loss from continuing operations $ ( 0.20 ) $ ( 0.19 ) $ ( 0.45 ) $ ( 0.22 ) Income from discontinued operations $ 2.01 $ 0.03 $ 2.02 $ 0.12 Net income (loss) $ 1.81 $ ( 0.15 ) $ 1.58 $ ( 0.10 ) Weighted-average number of common shares outstanding - basic and diluted 6,927,388 6,867,868 6,918,614 6,860,846 The accompanying notes are an integral part of these condensed consolidated financial statements 4 CVD EQUIPMENT CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Changes in Stockholders’ Equity (in thousands, except share amounts) (Unaudited) Three months ended June 30, 2026 and 2025 Shares Par Value Capital Deficit) Total Additional Retained Earnings Common stock Paid-in (Accumulated Shares Par Value Capital Deficit) Total Balance at April 1, 2026 6,937,338 $ 69 $ 30,919 $ ( 7,706 ) $ 23,282 Net income - - - 12,565 12,565 Stock-based compensation 9,365 - 202 - 202 Balance at June 30, 2026 6,946,703 $ 69 $ 31,121 $ 4,859 $ 36,049 Balance at April 1, 2025 6,881,838 $ 69 $ 30,021 $ ( 4,098 ) $ 25,992 Net loss - - - ( 1,061 ) ( 1,061 ) Stock-based compensation - - 250 - 250 Balance at June 30, 2025 6,881,838 $ 69 $ 30,271 $ ( 5,159 ) $ 25,181 Six months ended June 30, 2026 and 2025 Additional Retained Earnings Common stock Paid-in (Accumulated Shares Par Value Capital Deficit) Total Balance at January 1, 2026 6,937,338 $ 69 $ 30,699 $ ( 6,043 ) $ 24,725 Net income - - - 10,902 10,902 Stock-based compensation 9,365 - 422 - 422 Balance at June 30, 2026 6,946,703 $ 69 $ 31,121 $ 4,859 $ 36,049 Balance at January 1, 2025 6,881,838 $ 69 $ 29,757 $ ( 4,458 ) $ 25,368 Net loss - - - ( 701 ) ( 701 ) Stock-based compensation - - 514 - 514 Balance at June 30, 2025 6,881,838 $ 69 $ 30,271 $ ( 5,159 ) $ 25,181 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 Six months ended June 30, 2026 2025 Cash flows from operating activities: Net income (loss) $ 10,902 $ ( 701 ) Adjustments to reconcile net income (loss) to net cash used in operating activities: Stock-based compensation 422 514 Depreciation and amortization 268 354 Gain on disposition of SDC, net of income taxes ( 13,500 ) - Gain on sale of equipment ( 46 ) - Provision for bad debts 14 - Changes in assets and liabilities, net of the effects of disposition: Accounts receivable ( 886 ) ( 2,844 ) Contract assets 1,651 ( 1,542 ) Inventories 376 ( 213 ) Other assets ( 15 ) 511 Accounts payable ( 297 ) 260 Accrued expenses ( 144 ) ( 653 ) Contract liabilities ( 52 ) ( 1,118 ) Security deposit 30 - Net cash used in operating activities ( 1,277 ) ( 5,432 ) Cash flows from investing activities: Proceeds from disposition of SDC 15,715 - Proceeds from assets held for sale and sale of equipment 556 - Purchases of property and equipment ( 14 ) ( 49 ) Investment in captive insurance company ( 50 ) ( 51 ) Net cash provided by (used in) investing activities 16,207 ( 100 ) Cash flows from financing activities Payments of long-term debt ( 181 ) ( 43 ) Net cash used in financing activities ( 181 ) ( 43 ) Net increase (decrease) in cash and cash equivalents 14,749 ( 5,575 ) Cash and cash equivalents at beginning of period 8,734 12,598 Cash and cash equivalents at end of period $ 23,483 $ 7,023 Supplemental disclosure of cash flow information: Income taxes paid $ 3 $ 16 Interest paid $ 3 $ 7 Non-cash activity – amount held in escrow $ 900 $ - Non-cash activity – accrued income taxes on gain on sale of SDC $ 710 $ - The accompanying notes are an integral part of these condensed consolidated financial statements 6 NOTE 1: BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements for CVD Equipment Corporation and Subsidiaries (collectively “the Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. They do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary in order to make the interim financials not misleading have been included and all such adjustments are of a normal recurring nature. The operating results for the three and six months ended June 30, 2026 are not necessarily indicative of the results that can be expected for the year ending December 31, 2026. The condensed consolidated balance sheet as of December 31, 2025 has been derived from the audited consolidated financial statements at such date, as filed on Form 10-K with the SEC on March 30, 2026, but does not contain all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with that report. All material intercompany balances and transactions have been eliminated in consolidation. On March 23, 2026, the Company entered into an agreement to sell its SDC business division to a third party. The sale was completed on April 1, 2026. Accordingly, the financial results of the SDC business division are reflected in the consolidated condensed financial statements as discontinued operations for all periods presented. Unless otherwise specified, disclosures in these condensed consolidated financial statements reflect continuing operations only. Prior period financial information related to discontinued operations has been reclassified and separately presented in the consolidated financial statements and accompanying notes to conform to the current period presentation. See Note 2 for further information regarding our discontinued operations. Reclassifications Certain reclassifications have been made to the prior period condensed consolidated financial statements to conform to the current period presentation. These reclassifications had no effect on net loss. Liquidity At June 30, 2026, the Company had $ 23.5 million in cash and cash equivalents. 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. NOTE 2: DISCONTINUED OPERATIONS On March 23, 2026, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with a buyer to sell its SDC business division. On April 1, 2026, the Company completed the transaction whereby substantially all the assets related to SDC were sold. 7 NOTE 2: DISCONTINUED OPERATIONS (continued) The aggregate consideration paid to the Company in connection with the transaction was $ 17.4 million. At 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 $ 15.7 million. The Company expects to pay approximately $ 0.7 million in estimated income taxes related to the gain on the sale of SDC in the third quarter of 2026. The net gain on the sale of SDC, including related income tax expense, was $ 13.5 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. The following table represents the gain on the disposition of SDC, net of income taxes, for the six months ended June 30, 2026 (in thousands): SCHEDULE OF GAIN ON THE DISPOSITION OF DISCONTINUED OPERATIONS Sales proceeds received $ 16,499 Amount held in escrow 900 Total sales price 17,399 Less: Net assets transferred to buyer ( 2,405 ) Transaction expenses ( 784 ) Income tax expense ( 710 ) Gain on disposition of SDC, net of income taxes $ 13,500 The following table represents the amounts of assets and liabilities of the discontinued operations of SDC as of December 31, 2025 (in thousands): SCHEDULE OF AMOUNTS OF ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS December 31, 2025 Assets: Accounts receivable, net of allowance for credit losses $ 1,021 Contract assets 538 Inventories 1,284 Other current assets 9 Equipment, net 44 Other noncurrent assets 2 Total assets $ 2,898 Liabilities: Accounts payable $ 392 Accrued expenses 339 Contract liabilities 213 Total liabilities $ 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 2026 2025 Three months ended June 30, Six months ended June 30, 2026 2025 2026 2025 Revenue $ - $ 1,707 $ 2,364 $ 3,690 Cost of revenue - 1,115 1,524 2,207 Gross profit - 592 840 1,483 Operating expenses: Research and development - 47 53 94 Selling - 67 62 120 General and administrative - 247 226 449 Total operating expenses - 361 341 663 Income from discontinued operations - 231 499 820 Gain on disposition of SDC, net of income taxes 13,937 - 13,500 - Income from discontinued operations, net of income taxes $ 13,937 $ 231 $ 13,999 $ 820 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 Six months ended June 30, 2026 2025 Net cash provided by operating activities $ 60 $ 1,113 Net cash provided by (used in) investing activities 15,715 ( 5 ) Net cash provided by financing activities - - NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition In accordance with FASB ASC 606 - Revenue from Contracts with Customers (“ASC 606”), the Company records revenue in an amount that reflects the consideration to which the Company expects to be entitled in exchange for goods or services promised to its customers. Under ASC 606, the Company follows a five-step model to: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price for the contract; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue using one of the following two methods: 9 NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Over time The Company designs, manufactures and sells custom chemical vapor deposition equipment through contractual agreements. These system sales require the Company to deliver functioning equipment that is generally completed within two to eighteen months from commencement of order acceptance. For systems sales that meet the criteria to recognize revenue over time, the Company recognizes revenue over time by using an input method based on costs incurred as it depicts the Company’s progress toward satisfaction of the performance obligation. For system sales that do not meet the criteria to recognize revenue over time based on the contract provisions, the Company recognizes revenue based on point in time. Under the over time method, revenue arising from fixed price contracts is recognized as work is performed based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations. Incurred costs include all direct material and labor costs and those indirect costs related to contract performance, such as supplies, tools, repairs and depreciation costs. Contract material costs are included in incurred costs when the project materials have been purchased or moved to work in process, and installed, as required by the project’s engineering design. Cost based input methods of revenue recognition require the Company to make estimates of costs to complete the projects. In making such estimates, significant judgment is required to evaluate assumptions related to the costs to complete the projects, including materials, labor and other system costs. If the estimated total costs on any contract are greater than the net contract revenues, the Company recognizes the entire estimated loss in the period the loss becomes known and can be reasonably estimated. There were no impairment losses recognized on contract assets during the three and six months ended June 30, 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 condensed consolidated balance sheet. Under typical payment terms for our contracts accounted for over time, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones. Under ASC 606, payments received from customers in excess of revenue recognized to date results in a contract liability. These contract liabilities are not considered to represent a significant financing component of the contract because we believe these cash advances and deposits are generally used to meet working capital demands which can be higher in the earlier stages of a contract. Also, advanced payments and deposits provide us with some measure of assurance that the customer will perform on its obligations under the contract. Contract assets include unbilled amounts typically resulting from system sales under contracts and represent revenue recognized that exceeds the amount billed to the customer. Contract liabilities include advance payments and billings in excess of revenue recognized. The Company typically receives down payments upon receipt of orders and progress payments as the system is manufactured. Contract assets and contract liabilities are classified as current as these contracts in progress are expected to be substantially completed within the next twelve months. Point in time For non-system sales of products and services, revenue is recognized at the point in time when control of the promised products or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services (the transaction price). A performance obligation is a promise in a contract to transfer a distinct product or service to a customer and is the unit of account under ASC 606, “Revenue from Contracts with Customers”. 10 NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) For any system equipment sales where the equipment would have an alternative use or where the contract provisions of the contract preclude the use of over time revenue recognition, revenue is recognized at the point in time when control of the equipment is transferred to the customer. For the three and six months ended June 30, 2026 and 2025, all system equipment sales were recorded over time by using an input method except for one contract that was entered into during 2024 and was not recognized as revenue using over time revenue recognition until July 2025 when a contract modification was entered into with the customer to change certain contract provisions. Inventories Inventories (raw materials, work-in-process and finished goods) are valued at the lower of cost (determined on the first-in, first-out method) or net realizable value. Work-in-process and finished goods inventory reflect all accumulated production costs, which are comprised of direct production costs and overhead, and is reduced by amounts recorded in cost of sales as the related revenue is recognized. Indirect costs relating to long-term contracts, which include expenses such as general and administrative, are charged to expense as incurred and are not included in our cost of sales or work-in-process and finished goods inventory. Obsolete inventory or inventory in excess of management’s estimated usage requirement is written down to its estimated net realizable value if less than cost. The Company evaluates usage requirements by analyzing historical usage, anticipated demand, alternative uses of materials and other qualitative factors. Unanticipated changes in demand for the Company’s products may require a write down of inventory, which would be reflected in cost of sales in the period the revision is made. Product Warranty 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. Recent Accounting Standards In November 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statements Expenses (Subtopic 220-40),” to improve income statement expenses disclosure. The standard requires more detailed information related to the types of expenses, including (among other items) the amounts of purchases of inventory, employee compensation, depreciation and intangible asset amortization included within each interim and annual income statement’s expense caption, as applicable. This authoritative guidance can be applied prospectively or retrospectively and will be effective for financial statements issued for annual periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements. The Company believes there is no additional new accounting guidance adopted, but not yet effective, which is relevant to the readers of our financial statements. However, there are numerous new proposals under development which, if and when enacted, may have a significant impact on our financial reporting. NOTE 4: CONCENTRATION OF CREDIT RISK Cash and cash equivalents The Company had cash and cash equivalents of $ 23.5 million and $ 8.7 million at June 30, 2026 and December 31, 2025, 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 $ 23.3 million and $ 8.2 million at June 30, 2026 and December 31, 2025, 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. There were no amounts at risk at June 30, 2026 and December 31, 2025. Accounts receivable The Company routinely assesses the financial strength of its customers . In accordance with the “expected credit loss” model of ASC 326, the carrying amount of accounts receivable is reduced by a valuation allowance that reflects the best estimate of the amounts the Company does not expect to collect. In addition to reviewing delinquent accounts receivable, the Company considers many factors in estimating our reserve, including types of customers and their credit worthiness, experience and historical data adjusted for current conditions and reasonable supportable forecasts . The Company records an allowance for credit losses based upon a specific review of all significant outstanding invoices. For those invoices not specifically reviewed, provisions are provided based upon the collection history, current economic trends and reasonable supportable forecasts. Accounts receivable is presented net of an allowance for credit losses of $ 15,000 and $ 30,000 as of June 30, 2026 and December 31, 2025, 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. 12 NOTE 4: CONCENTRATION OF CREDIT RISK (continued) At June 30, 2026, the accounts receivable balance included amounts from two customers that represented 53.2 % and 27.3 % of total accounts receivable. As of December 31, 2025, the accounts receivable balance includes amounts from two customers that represented 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 June 30, 2026, two customers represented 50.9 % and 24.3 % of revenues, and during the six months ended June 30, 2026, three customers represented 39.4 %, 20.9 %, and 14.3 % of revenues. During the three months ended June 30, 2025, three customers represented 34.9 %, 21.0 % and 11.8 % of revenues, and during the six months ended June 30, 2025, three customers represented 47.3 %, 21.3 % and 10.9 % of revenues. NOTE 5: REVENUE RECOGNITION The following table represents a disaggregation of revenue for the three and six months ended June 30, 2026, and 2025 (in thousands): SCHEDULE OF DISAGGREGATION OF REVENUE Over time Point in time Total Three months ended June 30, 2026 Over time Point in time Total Energy $ - $ - $ - Aerospace 351 804 1,155 Industrial 475 210 685 Research 94 19 113 Total $ 920 $ 1,033 $ 1,953 Over time Point in time Total Three months ended June 30, 2025 Over time Point in time Total Energy $ ( 4 ) $ 11 $ 7 Aerospace 1,371 560 1,931 Industrial 1,197 46 1,243 Research 174 49 223 Total $ 2,738 $ 666 $ 3,404 Over time Point in time Total Six months ended June 30, 2026 Over time Point in time Total Energy $ - $ - $ - Aerospace 752 1,503 2,255 Industrial 796 299 1,095 Research 348 100 448 Total $ 1,896 $ 1,902 $ 3,798 13 NOTE 5: REVENUE RECOGNITION (continued) Over time Point in time Total Six months ended June 30, 2025 Over time Point in time Total Energy $ ( 4 ) $ 19 $ 15 Aerospace 3,093 1,343 4,436 Industrial 4,616 327 4,943 Research 200 143 343 Total $ 7,905 $ 1,832 $ 9,737 The energy market includes customers involved in the manufacture of silicon carbide wafers and batteries. The aerospace market includes customers that manufacture aircraft engines. The industrial end market consists of various end customers in diverse industries. The research market principally represents customers such as universities and other research institutions. The Company has unrecognized contract revenue of approximately $ 2.7 million at June 30, 2026 which 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 June 30, 2026 (in thousands): SCHEDULE OF COST AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS Costs incurred on contracts in progress $ 20,582 Estimated earnings 9,254 Costs and estimated earnings on uncompleted contracts 29,836 Billings to date ( 28,632 ) Net cost in excess of billings 1,204 Deferred revenue related to non-system contracts ( 348 ) Contract liability in excess of contract assets $ 856 Included in accompanying condensed consolidated balance sheet as of June 30, 2026 under the following captions: Contract assets $ 1,397 Contract liabilities $ 541 Of the contract liability balances at December 31, 2025 and 2024, $ 0.3 million and $ 2.1 million was recognized as revenue during the six months ended June 30, 2026 and 2025, respectively. Contract assets and contract liabilities at December 31, 2024 were $ 2.1 million and $ 3.0 million, respectively. 14 NOTE 6: INVENTORIES Inventories consist of: SCHEDULE OF INVENTORIES, NET June 30, 2026 December 31, 2025 Raw materials $ 89 $ 137 Work-in-process 158 148 Finished goods - - Total $ 247 $ 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 and six months ended June 30, 2026 and 2025 is as follows: SCHEDULE OF BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2026 2025 2026 2025 Three months ended June 30, Six months ended June 30, 2026 2025 2026 2025 Basic weighted average common shares outstanding 6,927,388 6,867,868 6,918,614 6,860,846 Dilutive effect of options and unvested restricted stock - - - - Diluted weighted average shares outstanding 6,927,388 6,867,868 6,918,614 6,860,846 For the three and six months ended June 30, 2026 and 2025, all stock options were excluded in the computation of diluted earnings per share because their effect was antidilutive. NOTE 9: STOCK-BASED COMPENSATION EXPENSE The Company recorded stock-based compensation for the three and six months ended June 30, 2026 and 2025, respectively, that were included in the following line items in our condensed consolidated statements of operations (in thousands): SCHEDULE OF STOCK BASED COMPENSATION 2026 2025 2026 2025 Three months ended June 30, Six months ended June 30, 2026 2025 2026 2025 Cost of revenue $ 23 $ 26 $ 45 $ 53 Research and development 33 45 71 92 Selling 13 21 27 47 General and administrative 133 145 266 295 Total $ 202 $ 237 $ 409 $ 487 15 NOTE 9: STOCK-BASED COMPENSATION EXPENSE (continued) Stock-based compensation related to discontinued operations were $ 0 and $ 13,000 for the three months ended June 30, 2026 and 2025, respectively, and $ 13,000 and $ 27,000 for the six months ended June 30, 2026 and 2025, respectively. Stock-based compensation expense for three months ended June 30, 2026 and 2025 included $ 50,000 and $ 50,000 , respectively, and for the six month periods June 30, 2026 and 2025 included $ 100,000 and $ 100,000 , respectively, related to restricted stock awards that directors are entitled to receive pursuant to the Director Compensation Plan. Under this plan each of the Company’s independent directors is entitled to an Annual Equity Retainer in the amount of $ 40,000 , to be granted on the date of the Company’s annual meeting of shareholders. The following table summarizes stock options awards through June 30, 2026: SCHEDULE OF STOCK OPTIONS AWARDS Weighted Stock Option Average Awards Exercise (in shares) Price Outstanding at January 1, 2026 803,875 $ 8.17 Exercised ( 31,875 ) 4.41 Forfeited ( 19,750 ) 7.64 Outstanding at June 30, 2026 752,250 8.35 The following table summarizes information about the outstanding and exercisable options at June 30, 2026 by ranges of exercise prices: SCHEDULE OF OUTSTANDING AND EXERCISABLE OPTIONS RANGES OF EXERCISE PRICES Options Outstanding Options Exercisable Weighted Weighted Weighted Exercise Average Average Average Price Number Remaining Exercise Intrinsic Number Exercise Intrinsic Range Outstanding Contractual Price Value Exercisable Price Value $ 4.00 - 7.00 395,500 5.4 $ 4.55 $ 1,216,200 354,125 $ 4.49 $ 1,158,099 $ 7.01 - 10.00 20,000 1.8 $ 8.07 $ - 20,000 $ 8.07 $ - $ 10.01 - 13.00 120,000 0.7 $ 10.52 $ - 120,000 $ 10.52 $ - $ 13.01 - 16.00 216,750 6.7 $ 14.11 $ - 165,375 $ 14.11 $ - As of June 30, 2026, there was $ 0.4 million of unrecognized compensation costs related to stock options expected to be recognized over a weighted average period of 0.7 years. NOTE 10: INCOME TAXES For the three and six months ended June 30, 2026, the Company recorded income tax expense of $ 0.7 million that was related to the gain on the divestiture of SDC. As of June 30, 2026 and December 31, 2025, the Company has provided a full valuation allowance against its net deferred tax asset. 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 asset 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. 16 NOTE 11: SEGMENT REPORTING With the sale of the Company’s SDC business in 2026 and the cessation of its MesoScribe business in 2024, the Company has 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 following table presents revenue by geographic area (in thousands): SCHEDULE OF REVENUE BY GEOGRAPHIC AREA 2026 2025 Three months ended June 30, 2026 2025 United States $ 1,903 $ 3,129 North America, excluding US - - Europe, Middle East and Africa 50 248 Asia-Pacific - 27 Consolidated total revenue $ 1,953 $ 3,404 2026 2025 Six months ended June 30, 2026 2025 United States $ 3,586 $ 9,178 North America, excluding US 1 3 Europe, Middle East and Africa 211 419 Asia-Pacific - 137 Consolidated total revenue $ 3,798 $ 9,737 For geographical reporting, revenues are attributed to the location in which the customer facility is located. All the Company’s long-lived assets are located in the United States. NOTE 12: RISKS AND CONTINGENCIES The Company operates in a challenging and uncertain global economic environment. Recent and potential actions by the U.S. federal administration, including changes in trade policy, export controls, and tariffs on imports from various countries and regions, as well as retaliatory or responsive actions by other governments, may adversely affect the Company’s supply chain, costs, demand for its products, receipt of orders and results of operations. In addition, the Company faces ongoing risks related to geopolitical instability, including conflicts and tensions in Europe, the Middle East, and Asia, which may further disrupt global economic conditions and financial markets. Other factors contributing to economic uncertainty include inflationary pressures, elevated interest rates, disruptions in global logistics, labor market challenges, and potential changes in fiscal, tax, or regulatory policies. These conditions may impact customer spending decisions, order rates, project timing, and the availability and cost of materials and components used in the Company’s products. While management continuously evaluates these conditions and has taken, and may take, actions intended to mitigate the potential adverse effects on the Company’s business, there can be no assurance that such actions will be successful. The Company is unable to predict the ultimate impact of these risks and uncertainties on its future results of operations, financial position, or cash flows. 17