What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-13 compared with 2024-11-13 · 151 added, 267 removed, 77 unchanged (84% of the section changed)

1 unchanged sentence

for historical information contained herein, this “Management’s Discussion and Analysis of Financial Condition and Results

of Operations” contains forward–looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended

and Section 21E of the Securities Exchange Act of 1934, as amended.

of Operations” contains forward – looking statements within the meaning of Section 27A of the Securities Act of 1933,

as amended and Section 21E of the Securities Exchange Act of 1934, as amended.

Readers are cautioned not to place undue reliance on forward-looking

8 unchanged sentences

to differ materially from those in the forward-looking statements, include, but are not limited to:

as to our future profitability;

as to the general state of the silicon carbibe wafer end market;

in our existing and potential future product lines of business, including our PVT150 / PVT200 systems;

as to our future growth and return to consistent profitability;

as to the general state of the silicon carbide wafer end market;

in our existing and potential future product lines of business, including our aerospace equipment and PVT150 / PVT200 systems;

as to our ability to identify and develop new products for growth markets;

1 unchanged sentence

ability to attract and retain key personnel and employees;

as to changes to international trade policies including the imposition of tariffs;

as to our ability to adequately obtain raw materials and on commercially reasonable terms.

6 unchanged sentences

When used with this

Report, the words “believes” “anticipates”, “expects”, “estimates”, “plans”,

“intends”, “will” and similar expressions are intended to identify forward-looking statements.

have served the advanced materials markets with chemical vapor and thermal process equipment for over 40 years.

CVD designs, develops,

and manufactures a broad range of chemical vapor deposition, gas control, and other state-of-the-art equipment and process solutions

used to develop, produce and grow materials and coatings for commercial applications and research.

To learn more about CVD’s systems

and offerings, visit www.cvdequipment.com.

the three and nine months ended September 30, 2024 and 2023:

increased by $2.0 million or 31.4% for the third quarter as compared to the prior year period due to increases in revenues from aerospace

contracts in progress, our SDC segment and final sales by our MesoScribe subsidiary partially offset by lower revenues of spare parts.

margin increased by $0.2 million or 14.8% in the third quarter as compared to the prior period quarter due to higher revenues and

improved margins on contracts in process offset by a $1.0 million non-cash charge to reduce certain PVT inventory to net realizable

bookings for the third quarter of 2024 were approximately $4.1 million as compared to $4.4 million in the prior year period.

bookings for the nine months ended September 30, 2024 were $21.0 million as compared to $15.8 million in the prior year period.

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 2023 included $8.7 million of multiple systems orders from an aerospace customer and a battery nanomaterial production system

of $1.8 million.

the first quarter of 2024, we received an order from an additional customer for our new PVT200 system that will be used to grow silicon

carbide crystals for the manufacture of 200 mm wafers.

This unit was shipped to the customer in the third quarter of 2024.

backlog increased from $18.4 million at December 31, 2023 to $19.8 million at September 30, 2024.

balance at September 30, 2024 was $10.0 million as compared to $14.0 million at December 31, 2023

core strategy is to focus on growth end markets in applications related to aerospace, 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.

Report, the words “ believes ” , “ anticipates ” , “ expects ” ,

“ estimates ” , “ plans ” , “ intends ” , “ will ”

and similar expressions are intended to identify forward-looking statements.

has served the advanced materials markets with chemical vapor deposition, physical vapor transport and thermal process equipment for

over 40 years.

We are headquartered in Central Islip, New York with our SDC division located in Saugerties, New York.

design, develop, and manufacture a broad range of equipment used to develop and produce materials and coatings for the aerospace, compound

semiconductor, semiconductor, aerospace, battery energy storage markets as well as advanced industrial applications, and research.

conduct our business through three reportable segments:

(i) CVD Equipment that designs and manufactures chemical vapor deposition, physical

vapor transport and thermal process equipment;

(ii) SDC that designs and manufactures ultra-high purity gas and chemical delivery control

and (iii) MesoScribe that provided products related to advanced materials and coatings.

the quarter ended March 31, 2025:

Revenue increased by $3.3 million or 69.0% as the first quarter of 2025 benefited from revenues from aerospace and industrial contracts in progress and from our SDC segment.

Gross margin increased by $1.8 million or 238.1% due to overall higher revenues, improved absorption of overhead and improved margins on contracts in progress.

Total bookings for the first quarter of 2025 were approximately $2.8 million as compared to bookings of $13.6 million in the first quarter of 2024.

Bookings in the first quarter of 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.

Backlog declined from $19.4 million at December 31, 2024 to $13.8 million at March 31, 2025 due to lower orders in our CVD Equipment segment.

In early April 2025, we received a $1.2 million semiconductor system order.

Cash and cash equivalents at March 31, 2025 was $10.2 million.

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 manufactures

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 adoption rates which may reduce demand for silicon carbide and impact sales of our

In addition, the recent 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.

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

200 mm wafers.

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

have also received orders from OneD Battery Materials in 2023, a company that is engaged in providing battery nanomaterials.

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 for an additional CVI system.

PVT150 / PVT200 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.

plan to evaluate the market conditions and opportunities to expand our product offerings in the power electronics market.

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.

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

November 2024, we received a follow-on order from an aerospace company for an additional CVI 3500 system that will be used by our customer

to produce ceramic matrix composite materials.

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.

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.

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

economic uncertainty regarding tariffs may potentially affect our future order rate.

The order rate as well as other factors in our manufacturing

process ultimately impacts the timing of revenue recognition, whether accounted for over time or at a point in time.

Accordingly, orders

received from customers and the corresponding revenue recognized may fluctuate from quarter to quarter.

The sales cycle for our equipment

is typically six months, but can range up to twelve to eighteen months, depending on the application and product stage of the equipment.

The order cycle to manufacture and test a system also will vary from six to eighteen months for our CVD Equipment segment and two to

twelve months for our SDC segment, depending on system complexity and magnitude of the system.

of Operations

Months Ended September 30, 2024 and 2023

following table presents revenue and expense line items reported in our condensed consolidated statements of operations for the three

months ended September 30, 2024 and 2023 and the period-over-period dollar and percentage changes for those line items (in thousands,

except percentages).

Ended March 31, 2025 and 2024

following table presents revenue and expense line items reported in our condensed consolidated statements of operations for the quarters

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

Cost of revenue

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General and administrative

on sale of equipment

Total operating expenses

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Interest expense

Total other income,

Income (loss) before income taxes

Total other income, net

Income before income taxes

Income tax expense

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* Not meaningful

CVD Materials

CVD Equipment

Intersegment sales elimination

Not meaningful

revenue for the three months ended September 30, 2024 was $8.2 million compared to $6.2 million for the three months ended September

30, 2023, an increase of 31.4%.

increase in revenue versus the prior year period was primarily attributable to higher revenue of $0.9 million from our CVD Equipment

segment, a $0.4 million increase in revenue from our SDC segment, and a $0.6 million increase from our CVD Materials segment.

Revenue from one aerospace customer for the three months ended September 30, 2024 represented 29.1% of our total revenues and 42.0%

revenue for the quarter ended March 31, 2025 was $8.3 million compared to $4.9 million for the quarter ended March 31, 2024, an increase

increase in revenue versus the prior year period was primarily attributable to higher revenue of $3.4 million from the CVD Equipment

Revenue from one industrial customer for the quarter ended March 31, 2025 represented 41.1% of our total revenues and 54.1%

of CVD Equipment segment revenues.

revenue contributed by the CVD Equipment segment for the three months ended September 30, 2024 of $5.7 million represented 69.3% of overall

revenue as compared to $4.8 million or 76.3% of overall revenue for the three months ended September 30, 2023.

The increase in revenues

of $0.9 million or 18.5% resulted principally from increases in revenues from aerospace contracts in progress offset in part by lower

revenue for PVT150/200 systems and spare parts.

were certain customer contracts in 2023 where the revenue was to be recognized at the point in time when the equipment is

transferred to the customer based on contract terms.

These contracts were modified during the three months ended September 30, 2023

such that the revenue under these contracts is now being recognized over time using the input method.

The Company and CVD Equipment

segment revenues for the three months ended September 30, 2023 include $0.8 million of revenue that was deferred as of June 30, 2023

and recognized on the date of the contract modification.

revenue contributed by the SDC segment for the three months ended September 30, 2024 of $2.0 million represented 22.6% of overall revenue

as compared to $1.6 million or 22.3% of overall revenue for the three months ended September 30, 2023.

Revenue for our SDC segment increased

by $0.4 million or 27.5% due to higher demand for gas delivery system products as compared to the prior period.

revenue contributed by the CVD Materials segment for the three months ended September 30, 2024 of $0.6 represented 8.1% of our overall

revenue as compared to $0.1 million or 1.4% of overall revenue for the three months ended September 30, 2023.

The increase of $0.6 million

was due to the final sales to an aerospace company and MesoScribe ceased operations as of September 30, 2024.

order backlog at September 30, 2024 was approximately $19.8 million as compared to December 31, 2023 of $18.4 million.

Our backlog at

September 30, 2024 consists of approximately $17.0 million related to remaining performance obligations of contracts in progress and

not yet started that will be recognized over time with the balance of approximately $2.8 million representing other orders received from

Historically, our revenues and orders have fluctuated based on changes in order rate as well as other factors in our manufacturing

process that impact the timing of revenue recognition.

Accordingly, orders received from customers and revenue recognized may fluctuate

from quarter to quarter.

profit for the three months ended September 30, 2024 was $1.8 million, with a gross profit margin of 22.4%, compared to a gross profit

of $1.6 million and a gross profit margin of 25.6% for the three months ended September 30, 2023.

The increase in gross profit of $0.2

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 $1.0 million non-cash charge to reduce certain PVT inventory to net realizable value.

Revenue from one aerospace customer for the quarter ended March 31, 2025 represented 14.0% of our

total revenues and 18.5% of CVD Equipment segment revenues.

revenue contributed by our CVD Equipment segment for the quarter ended March 31, 2025 of $6.3 million (net of intersegment sales of $4,000)

represented 75.9% of overall revenue as compared to $2.9 million or 59.9% of overall revenue for the quarter ended March 31, 2024.

increase in external revenues of $3.4 million or 114.1% resulted principally from increases in revenues from aerospace and industrial

contracts in progress and from the sales of parts and spares.

revenue contributed by our SDC segment for the quarter ended March 31, 2025 of $2.0 million (net of intersegment sales of $0.2 million)

represented 23.9% of overall revenue as compared to $1.9 million (net of intersegment sales of $15,000) or 38.9% of overall revenue for

the year quarter ended March 31, 2024.

External revenue for our SDC segment increased by $0.1 million or 3.5% as customer demand for

gas delivery system products was consistent with the prior year quarter.

order backlog at March 31, 2025 was approximately $13.8 million as compared to December 31, 2024 of $19.4 million.

Our order backlog

at March 31, 2025 consists of approximately $12.3 million related to remaining performance obligations of contracts in progress and not

yet started and the balance of approximately $1.5 million represents other orders received from customers.

As of March 31, 2025, one

industrial customer represented 32.7% of our backlog and one aerospace customer represented 30.1% 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 the timing

of revenue recognition.

Accordingly, orders received from customers and revenue recognized may fluctuate from quarter to quarter.

profit for the quarter ended March 31, 2025 was $2.7 million, with a gross profit margin of 32.4%, compared to a gross profit of $0.8

million and a gross profit margin of 16.2% for the quarter ended March 31, 2024.

The increase in gross profit of $1.9 million was primarily

the result of higher overall revenues, improved absorption of overhead as well as improved margins on contracts in progress as compared

to contracts in progress in the prior year quarter.

and Development

the three months ended September 30, 2024, research and development expenses were $0.6 million, or 7.9% of revenue as compared to

$0.7 million, or 11.3% of revenue for the three months ended September 30, 2023, a decrease of $0.1 million or 8.5%.

The decrease in

2024 was due to more engineering time being charged to cost of revenue based on contracts in progress.

the quarter ended March 31, 2025, research and development expenses were $0.8 million, or 9.4% of revenue as compared to $0.7 million,

or 15.2% for the quarter ended March 31, 2024.

The increase in 2025 of 4.7% was the result of less amounts charged to cost of revenue

during the quarter.

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

are reflected as part of research and development expense.

General engineering support and expenses are charged to costs of revenue when

General engineering support and expenses are charged to cost of revenue when

work is performed directly on a customer order.

expenses were $0.4 million or 5.2% of the revenue for the three months ended September 30, 2024 as compared to $0.4 million or 7.0% for

the three months ended September 30, 2023.

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

and Administrative

and administrative expenses for the three months ended September 30, 2024 were $1.3 million or 16.1% of revenue compared to $1.4 million

or 23.3% of revenue for the three months ended September 30, 2023.

The decrease in 2024 was due principally to a reduction of employee

compensation and lower professional fees as compared to the prior year quarter.

on Sale of Equipment

the three months ended September 30, 2024, we recognized a gain of $0.6 million on the sale of equipment related to our MesoScribe subsidiary

representing the sale price of $0.8 million less the costs of the equipment sold of $0.2 million.

Income (Expense), Net

income (expense), net was $0.1 million and $0.2 million for three months ended September 30, 2024 and 2023, respectively.

is principally interest income on treasury bills.

Interest income was lower than the prior period due to less amounts invested and lower

interest rates.

continue to evaluate the 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.

Months Ended September 30, 2024 versus September 30, 2023

following table presents revenue and expense line items reported in our condensed consolidated statements of operations for the nine

months ended September 30, 2024 and 2023 and the period-over-period dollar and percentage changes for those line items (in thousands,

except percentages).

Cost of revenue

Gross profit percentage

Operating expenses:

Research and development

General and administrative

Gain on sale of equipment

Loss on disposition of

Total operating expenses

Operating loss

Other income (expense):

Interest income

Interest expense

Foreign exchange income

Total other income,

Loss before income taxes

Income tax expense

Not meaningful

CVD Equipment

CVD Materials

Intersegment sales elimination

Not meaningful

revenue for the nine months ended September 30, 2024 was $19.5 million compared to $20.0 million for the nine months ended September

30, 2023, a decrease of 2.7%.

decrease in revenue versus the prior year period was primarily attributable to lower revenues of $1.0 million from our CVD Equipment

segment and $0.3 million from our CVD Materials segment, offset in part by a $0.6 million increase in revenue from our SDC segment.

from one aerospace customer for the nine months ended September 30, 2024 represented 31.2% of our total revenues and 47.7% of CVD Equipment

segment revenues.

revenue contributed by the CVD Equipment segment for the nine months ended September 30, 2024 of $12.7 million represented 65.2% of overall

revenue as compared to $13.8 million or 68.4% of overall revenue for the nine months ended September 30, 2023.

The decrease in revenues

of $1.0 million or 7.5% resulted principally from lower PVT150 systems and revenue from spares and parts offset by increases in revenues

from aerospace contracts in progress.

revenue contributed by the SDC segment for the nine months ended September 30, 2024 of $6.3 million represented 30.6% of overall revenue

as compared to $5.7 million or 26.1% of overall revenue for the nine months ended September 30, 2023.

Revenue for our SDC segment increased

by $0.6 million or 10.1% due to higher demand for gas delivery system products as compared to the prior period.

revenue contributed by the CVD Materials segment for the nine months ended September 30, 2024 of $0.8 million represented 4.0% of our

overall revenue as compared to $1.1 million or 5.5% of overall revenue for the nine months ended September 30, 2023.

The decrease of

$0.3 million was principally due to the disposition of Tantaline in May 2023 and the wind down of MesoScribe’s operations.

profit for the nine months ended September 30, 2024 was $4.3 million, with a gross profit margin of 22.1%, compared to a gross profit

of $5.4 million and a gross profit margin of 27.1% for the nine months ended September 30, 2023.

The decrease in gross profit of $1.1

million was primarily the result of lower revenue and lower gross margins on CVD Equipment contracts and a $1.0 million non-cash charge

to reduce certain PVT inventory to net realizable value partially offset by improved in gross margins on SDC revenues and final MesoScribe

and Development

the nine months ended September 30, 2024, research and development expenses were $2.1 million, or 10.6% of revenue as compared to $1.9

million, or 9.3% for the nine months ended September 30, 2023, an increase of $0.2 million or 10.2%.

The increase in 2024 was the result

of lower costs allocated to cost of revenue and a recruitment fee for engineering staff.

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

are reflected as part of research and development expense.

General engineering support and expenses are charged to costs of goods sold

when work is performed directly on a customer order.

expenses were $1.3 million or 6.5% of revenue for the nine months ended September 30, 2024 as compared to $1.3 million or 6.4% for the

nine months ended September 30, 2023.

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

expenses were $0.4 million or 5.1% of revenue for the quarter ended March 31, 2025 was consistent with such expenses of $0.4 million

or 8.5% of revenue for the quarter ended March 31, 2024.

and Administrative

and administrative expenses for the nine months ended September 30, 2024 were $4.1 million or 20.8% of revenue compared to $4.4 million

or 22.1% of revenue for the nine months ended September 30, 2023, a decrease of $0.4 million.

The decrease in expenses was principally

due to lower salaries of $0.1 million due to sale of Tantaline, lower bonuses and commissions of $0.1 million and lower professional

fees of $0.1 million, offset by higher stock-based compensation expense of $0.1 million.

on Sale of Equipment

the three months ended September 30, 2024, we recognized a gain of $0.6 million on the sale of equipment related to our MesoScribe subsidiary

representing the sale price of $0.8 million less the costs of the equipment sold of $0.2 million.

on disposition of Tantaline

item represents the net loss on the sale of our Tantaline subsidiary including professional fees.

item represents the loss on the impairment of certain assets of MesoScribe based on the decision to dispose of the subsidiary.

Income (Expense), Net

income (expense), net was $0.4 million and $0.5 million for the nine month periods ended September 30, 2024 and 2023, respectively.

Other income is principally interest income on treasury bills.

The reduction in other income, net was due to foreign exchange gain

recorded and interest income on the employee retention credit received in 2023.

continue to evaluate the 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 administrative expenses were $1.2 million or 14.7% of revenue for the quarter ended March 31, 2025 was consistent with such expenses

of $1.3 million or 25.5% of revenue for the quarter ended March 31, 2024.

income, net was $107,000 for the quarter ended March 31, 2025 as compared to other income, net of $151,000 for the quarter ended March

Other income consists principally of interest earned on amounts invested in U.S.

treasury securities and was lower than the

prior period due to less funds available for investment.

continue to evaluate the potential utilization of our net deferred tax asset, which has been fully reserved for, on a quarterly basis,

by reviewing our economic models, including projections of future operating results.

and Capital Resources

of September 30, 2024, aggregate working capital was $13.3 million as compared to aggregate working capital of $14.3 million at December

Cash and cash equivalents at September 30, 2024 and December 31, 2023 were $10.0 million and $14.0 million, respectively.

cash used in operating activities for the nine months ended September 30, 2024 was $3.7 million.

This decrease was principally due to

the net loss of $2.0 million, an increase in accounts receivable of $3.2 million, reduction in contract liabilities of $1.6 million offset

by a reduction in inventory of $0.6 million and non-cash items of $2.5 million including a provision for excess and obsolete inventory

of March 31, 2025, aggregate working capital was $14.5 million as compared to aggregate working capital of $13.8 million at December

Cash and cash equivalents at March 31, 2025 and December 31, 2024 were $10.2 million and $12.6 million, respectively.

cash used in operating activities for the quarter ended March 31, 2025 was $2.3 million.

This decrease was principally due to the increase

in contract assets of $3.0 million and a decrease in contract liabilities of $1.3 million due to revenue recognized on contracts in progress.

These decreases were offset by net income of $0.4 million, non-cash expense items of $0.4 million and a decrease in accounts receivable

of $0.7 million.

cash used in investing activities for the three months ended September 30, 2024 consisted of capital expenditures of $0.2 million related

to purchases of equipment, building improvements and software.

cash used in financing activities for the three months ended September 30, 2024 consisted of repayments of $0.1 million for an equipment

cash used in investing activities for the quarter ended March 31, 2025 consisted of capital expenditures of $29,000 related to purchases

of property and equipment and investment in a captive insurance company related to our health insurance program of $51,000.

cash used in financing activities for the quarter ended March 31, 2025 consisted of repayments of an equipment loan.

believe that our cash and cash equivalent positions and our projected cash flow from operations will be sufficient to meet our working

capital and capital expenditure requirements for the next twelve months from the filing of this Form 10-Q.

We will continue to assess

our operations and take actions anticipated to maintain our operating cash to support the working capital needs.

capital and capital expenditure requirements for the next twelve months from the filing of these condensed consolidated financial statements

included in this Form 10-Q.

We will continue to assess our operations and take actions anticipated to maintain our operating cash to

support the working capital needs.

Accounting Estimates

4 unchanged sentences

of revenue and expenses during the reported periods.

In accordance with U.S.

GAAP, the Company bases its estimates on historical experience

and on various other assumptions the Company believes are reasonable under the circumstances.

Actual results may differ from these estimates

under different assumptions or conditions.

consider an accounting estimate to be critical if:

(1) the accounting estimate requires us to make assumptions about matters that were

highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from

period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact

on our financial condition or results of operations.

believe that of our significant accounting policies, which are described in the notes to the consolidated financial statements, the following

accounting policies involve a greater degree of judgments, estimates and assumptions and are considered critical accounting estimates.

accordance with U.S.

GAAP, the Company bases its estimates on historical experience and on various other assumptions the Company believes

are reasonable under the circumstances.

Actual results may differ from these estimates under different assumptions or conditions.

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.

4 unchanged sentences

incurred to date to the total estimated costs at completion of the performance obligations.

costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies,

tools, repairs and depreciation costs.

Contract material costs are included in incurred costs when the project materials have been purchased

or moved to work-in-process as required by the project’s engineering design.

Cost based input methods of revenue recognition require

us to make estimates of costs to complete the projects.

In making such estimates, significant judgment is required to evaluate assumptions

related to the costs to complete the projects, including materials, labor, and other system costs.

If the estimated total costs on any

contract are greater than the net contract revenues, we recognize the entire estimated loss in the period the loss becomes known and

can be reasonably estimated.

exist many inherent risks and uncertainties in estimating revenues, expenses and progress toward completion, particularly on larger or

longer-term contracts.

Changes in estimates of the total sales, related costs, and progress toward completion on such contracts may significantly

impact the estimated gross margins, or losses may need to be recognized in future periods.

Any such resulting changes in margins or contract

losses could be material to our results of operations and financial condition.

(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.

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.

Any such charge

could be material to our results of operations and financial condition.

costs include all direct material and labor costs, and those indirect costs related to contract performance, such as indirect labor,

supplies, tools, repairs and depreciation costs.

Contract material costs are included in incurred costs when the project materials have

been purchased or moved to work-in-process as required by the project’s engineering design.

Cost based input methods of revenue

recognition require us to make estimates of costs to complete the projects.

In making such estimates, significant judgment is required

to evaluate assumptions related to the costs to complete the projects, including materials, labor, and other system costs.

If the estimated

total costs on any contract are greater than the net contract revenues, we recognize the entire estimated loss in the period the loss

becomes known and can be reasonably estimated.

have been engaged in the production and delivery of goods on a continual basis under contractual arrangements for many years.

Historically,

we have demonstrated an ability to accurately estimate total revenues and total expenses relating to our long-term contracts.

there exist many inherent risks and uncertainties in estimating revenues, expenses, and progress toward completion, particularly on larger

or longer-term contracts.

If we do not estimate the total sales, related costs, and progress toward completion on such contracts, the

estimated gross margins may be significantly impacted, or losses may need to be recognized in future periods.

Any such resulting changes

in margins or contract losses could be material to our results of operations and financial condition.

assets consist primarily of property, plant and equipment.

6 unchanged sentences

be disposed of are reported at the lower of their carrying value or net realizable value.

In the future, if we determine that our long-lived

assets are impaired, we would be required to recognize a charge in our financial statements at the time of such determination.

charge could be material to our results of operations and financial condition.

It is not possible for us to predict the likelihood

of any possible future impairments or, if such an impairment were to occur, the magnitude of any impairment.

and Qualitative Disclosures About Market Risk

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis