What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-12 compared with 2025-05-13 · 176 added, 108 removed, 120 unchanged (70% of the section changed)

Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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

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When used with this

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

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

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

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

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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.

semiconductor, semiconductor, aerospace, battery energy storage markets as well as advanced industrial applications including nuclear,

and research.

conduct our business through three reportable segments:

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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.

The operations of MesoScribe were closed

down during 2024.

the quarter ended June 30, 2025:

decreased by $1.2 million or 19.4% as compared to the second quarter of 2025 due to lower system revenues at both our CVD Equipment

and SDC segments.

profit decreased by $0.5 million or 30.4% due to lower revenues.

bookings for the second quarter of 2025 were approximately $4.5 million as compared to bookings of $3.2 million in the second

quarter of 2024.

bookings for the first half of 2025 were approximately $7.3 million as compared to bookings of $16.9 million in the first half of

declined from $13.8 million at March 31, 2025 to $13.2 million at June 30, 2025 due to lower orders in our CVD Equipment

and cash equivalents at June 30, 2025 was $7.0 million as compared to $12.6 million at December 31, 2024.

core strategy is to focus on growth end markets in applications related to aerospace, microelectronics including markets related to the

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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.

addition, SiC semiconductors specifically help address the need for high energy efficiency and power density in the AC-DC stage in power

supply units for AI data centers.

We plan to evaluate the market conditions and opportunities to expand our product offerings in the

power electronics market.

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

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

July 2025, we shipped the first of the CVD4000™ SiC coating reactor systems to our industrial customer.

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

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of Operations

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).

Months Ended June 30, 2025 and 2024

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

months ended June 30, 2025 and 2024 and the period-over-period dollar and percentage changes for those line items (in thousands, except

percentages).

months ended June 30

Cost of revenue

Gross profit percentage

Operating expenses:

Research and development

General and administrative

Total operating expenses

Operating income (loss)

and development

and administrative

operating expenses

Other income (expense):

Interest income

Interest expense

Total other income, net

Income before income taxes

Income tax expense

Net income (loss)

* Not meaningful

CVD Equipment

Intersegment sales elimination

income (expense)

other income, net

Loss before income taxes

Not meaningful

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 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.

months ended June 30

sales elimination

revenue for the three months ended June 30, 2025 was $5.1 million compared to $6.3 million for the three months ended June 30, 2024,

a decrease of $1.2 million or 19.4%.

decrease in revenue versus the prior year period was primarily attributable to lower revenue of $0.7 million from our CVD Equipment segment

and lower revenue of $0.6 million from our SDC segment.

Revenue from one industrial customer for the quarter ended June 30, 2025 represented

23.4% of our total revenues and 35.2% of CVD Equipment segment revenues.

Revenue from one aerospace customer for the quarter ended June

30, 2025 represented 17.7% of our total revenues and 26.6% of CVD Equipment segment revenues.

revenue contributed by our CVD Equipment segment for the quarter ended June 30, 2025 of $3.4 million (net of intersegment revenue of

$8,000) represented 66.4% of overall revenue as compared to $4.1 million (net of intersegment revenue of $0) or 64.7% of overall revenue

for the quarter ended June 30, 2024.

The decrease in revenues of $0.7 million or 17.4% resulted principally from lower revenues from

system contracts in progress of $1.1 million offset by an increase in non-system revenue of $0.4 million.

revenue contributed by our SDC segment for the quarter ended June 30, 2025 of $1.7 million (net of intersegment sales of $27,000) represented

33.4% of overall revenue as compared to $2.2 million (net of intersegment sales of $132,000) or 34.4% of overall revenue for the year

quarter ended June 30, 2025.

SDC segment revenue decreased by $0.6 million or 25.1% due to less contracts in progress during the quarter.

order backlog at June 30, 2025 was approximately $13.2 million as compared to $13.8 million at March 31, 2025.

Our order backlog at June

30, 2025 consists of approximately $12.0 million related to remaining performance obligations of contracts in progress and not yet started

and the balance of approximately $1.2 million represents non-system orders received from customers.

As of June 30, 2025, one industrial

customer represented 25.6% of our backlog and one aerospace customer represented 25.7% of our backlog.

Historically, our revenues and

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

profit for the three months ended June 30, 2025 was $1.1 million, with a gross margin of 20.9%, compared to a gross profit of

$1.6 million and a gross margin of 24.3% for the three months ended June 30, 2024.

The decrease in gross profit of $0.5 million

was principally due to lower system revenues in our CVD Equipment and SDC segments offset by higher non-system revenues in our CVD Equipment

and Development

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.

the three months ended June 30, 2025, research and development expenses were $0.7 million, or 13.1% of revenue as compared to $0.7 million,

or 10.5% of revenue for the three months ended June 30, 2024, an increase of $21,000 or 3.1%.

The increase in 2025 was the result of

less hours being charged to cost of revenue for contracts in progress offset by a reduction in personnel.

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 cost of revenue when

work is performed directly on a customer order.

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.

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

when work is performed directly on a customer order.

expenses were $0.3 million or 6.8% of the revenue for the three months ended June 30, 2025 as compared to $0.4 million or 6.7% of revenue

for the three months ended June 30, 2024, a decrease of $0.1 million or 18.1%.

The decrease was the result of a reduction in personnel.

and Administrative

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 administrative expenses for the three months ended June 30, 2025 were $1.2 million or 24% of revenue compared to $1.4 million or

23.0% of revenue for the three months ended June 30, 2024, a decrease of $0.2 million or 12.7%.

The decrease in 2025 was due principally

to a lower professional costs.

Income (Expense), Net

income (expense) consist principally of interest income on U.S.

treasury securities and was lower than the prior year quarter due to

less funds available for investment.

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 June 30, 2025 versus June 30, 2024

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

ended June 30, 2025 and 2024 and the period-over-period dollar and percentage changes for those line items (in thousands, except percentages).

months ended June 30

Cost of revenue

Operating expenses:

and development

and administrative

operating expenses

Other income (expense):

other income, net

Loss before income taxes

Not meaningful

months ended June 30

sales elimination

revenue for the six months ended June 30, 2025 was $13.4 million compared to $11.3 million for the six months ended June 30, 2024, an

increase of $2.2 million or 19.2%.

increase in revenue versus the prior year period was primarily attributable to higher revenues of $2.7 million from our CVD Equipment

segment offset by lower revenues of $0.4 million from our SDC segment.

Revenue from one industrial customer for the six months ended

June 30, 2025 represented 34.3% of our total revenues and 47.6% of CVD Equipment segment revenues.

Revenue from one aerospace customer

for the six months ended June 30, 2025 represented 15.4% of our total revenues and 21.4% of CVD Equipment segment revenues.

revenue contributed by the CVD Equipment segment for the six months ended June 30, 2025 of $9.7 million (net of intersegment revenue

of $12,000) represented 72.3% of overall revenue as compared to $7.1 million (net of intersegment revenue of $0) or 62.6% of overall

revenue for the six months ended June 30, 2024.

The increase in revenues of $2.6 million or 37.8% resulted principally due higher contract

revenues from contracts in progress of $1.7 million and higher non-system revenues of $1.0 million.

revenue contributed by the SDC segment for the six months ended June 30, 2025 of $3.7 million (net of intersegment revenue of $0.2 million)

represented 27.5% of overall revenue as compared to $4.2 million (net of intersegment revenue of $0.1 million) or 36.4% of overall revenue

for the six months ended June 30, 2024.

Revenue for our SDC segment decreased by $0.4 million or 8.7% due to due to less contracts in

progress during the period.

profit for the six months ended June 30, 2025 was $3.7 million, with a gross margin of 28.1%, compared to a gross profit of $2.3

million and a gross margin of 20.7% for the six months ended June 30, 2024.

The increase in gross profit of $1.4 million was principally

due to higher system and non-system revenues in our CVD Equipment segment offset by lower revenues in our SDC segment.

and Development

the six months ended June 30, 2025, research and development expenses were $1.4 million, or 10.9% of revenue as compared to $1.4 million,

or 12.5% of revenue for the six months ended June 30, 2024, an increase of $57,000 or 4%.

The increase in 2025 was the result of less

hours being charged to cost of revenue for contracts in progress offset by a reduction in personnel.

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 $0.7 million or 5.7% of the revenue for the six months ended June 30, 2025 as compared to $0.8 million or 7.4% of revenue

for the six months ended June 30, 2024, a decrease of $0.1 million or 8.9%.

The decrease was the result of a reduction in personnel.

and Administrative

and administrative expenses for the six months ended June 30, 2025 were $2.4 million or 18.2% of revenue compared to $2.6 million or

23% of revenue for the six months ended June 30, 2024, a decrease of $0.2 million or 4.4%.

The decrease in expenses was principally due

lower professional fees and lower bonus accrual.

Income (Expense), Net

income (expense) consist principally of interest income on U.S.

treasury securities and was lower than the prior year quarter due to

less funds available for investment.

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 Capital Resources

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 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.

of June 30, 2025, aggregate working capital was $13.9 million as compared to aggregate working capital of $13.8 million at December 31,

Cash and cash equivalents at June 30, 2025 and December 31, 2024 were $7.0 million and $12.6 million, respectively.

cash used in operating activities for the six months ended June 30, 2025 was $5.4 million.

This decrease was principally due to the net

loss of $0.7 million, an increase in accounts receivable of $2.8 million, an increase in contract assets of $1.5 million and a decrease

in contract liabilities of $1.1 million offset by non-cash items of $0.9 million.

cash used in investing activities for the six months ended June 30, 2025 consisted of capital expenditures of $49,000 related to purchases

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

cash used in financing activities for the six months ended June 30, 2025 consisted of repayments of $43,000 for 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 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.

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

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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.

GAAP, we base our estimates on historical experience and on various other assumptions the Company believes are reasonable

under the circumstances.

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

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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.

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.

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

It is not possible for us to predict the likelihood

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

and Qualitative Disclosures About Market Risk

Assets to be disposed of are reported at the

lower of their carrying value or net realizable value.

It is not possible for us to predict the likelihood of any possible future impairments

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

Quantitative 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