UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended June 30, 2026

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from ____ to _____

Commission file number: 1-16525

CVD EQUIPMENT CORPORATION

(Name of Registrant in Its Charter)

New York

11-2621692

State or Other Jurisdiction of
Incorporation or Organization)

(I.R.S. Employer

Identification No.)

355 South Technology Drive Central Islip, New York 11722

(Address of principal executive offices)

(631) 981-7081
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		CVV		NASDAQ Capital Market

Indicate by check whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act).

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 6,951,203 shares of Common Stock, $0.01 par value at August 11, 2026.

CVD EQUIPMENT CORPORATION AND SUBSIDIARIES

Index

Part I - Financial Information

	Item 1 – Condensed Consolidated Financial Statements (Unaudited)

		Condensed Consolidated Balance Sheets at June 30, 2026 and December 31, 2025	3

		Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2026 and 2025	4

		Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2026 and 2025	5

		Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2026 and 2025	6

		Notes to Condensed Consolidated Financial Statements	7

	Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations		18

	Item 3 – Quantitative and Qualitative Disclosures About Market Risk		26

	Item 4 – Controls and Procedures		26

Part II - Other Information

	Item 1 – Legal Proceedings		27

	Item 1A-Risk Factors		27

	Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		27

	Item 3 – Defaults Upon Senior Securities		27

	Item 4 – Mine Safety Disclosures		27

	Item 5 – Other Information		27

	Item 6 – Exhibits		27

Signatures			28

PART 1 – FINANCIAL INFORMATION

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

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

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

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

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.

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):


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):

	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

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:

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”.

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.

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.

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

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):


Costs incurred on contracts in progress	$	20,582
Estimated earnings		9,254
		29,836
Billings to date		(28,632	)
Net cost in excess of billings		1,204

Deferred revenue related to non-system contracts		(348	)
	$	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.

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:

	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

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:

		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.

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.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Except 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. Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. These statements involve known and unknown risks and uncertainties that may cause our actual results or outcomes to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on various factors and are derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements. Important assumptions and other factors that could cause actual results to differ materially from those in the forward-looking statements, include, but are not limited to:

	●	uncertainty as to the receipt of and timing of future orders for our equipment;

	●	uncertainty as to the acceptance of our equipment launched in 2024 and 2025;

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

	●	competition in our existing and potential future product lines of business, including our aerospace equipment and PVT systems;

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

	●	our ability to obtain financing on acceptable terms if and when needed;

	●	our ability to attract and retain key personnel and employees;

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

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

Other factors and assumptions not identified above were also involved in the derivation of these forward-looking statements and the failure of such assumptions to be realized as well as other factors may also cause actual results to differ materially from those projected. We assume no obligation to update these forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting such forward-looking statements. Past performance is no guaranty of future results.

You should not place undue reliance on any forward-looking statements, which speak only as of the dates they are made. When used with this Report, the words “believes” “anticipates”, “expects”, “estimates”, “plans”, “intends”, “will” and similar expressions are intended to identify forward-looking statements.

Executive Summary

CVD 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.

On November 6, 2025, our Board of Directors approved a comprehensive strategy to transform our Company in response to the continued fluctuations in our order rates and the recent and continued decline in the bookings of our CVD Equipment division. As part of this strategy, we transitioned our operating model for our CVD Equipment business from vertically integrated fabrication to outsourced fabrication of certain components to reduce our fixed operating costs.

The transformation strategy also includes the exploration of strategic alternatives for remaining business and product lines, including the potential sale, divestiture or acquisition of assets or business lines.

On March 23, 2026, we entered into an asset purchase agreement with a third party to sell our SDC business division (“SDC”). The purchase price was approximately $17.4 million in cash, subject to customary purchase price adjustments. The transaction closed on April 1, 2026.

The net cash proceeds from the sale of SDC we received 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. Following the sale of SDC, the Company has $23.5 million in cash and no long-term debt as of June 30, 2026. We expect to use the proceeds from the transaction to enhance our financial flexibility as we continue to evaluate strategic opportunities for the CVD Equipment business, its product lines, and our facilities and possible acquisition of other product lines or businesses

We retained ownership of our Saugerties, New York facility following the sale of SDC, which is leased to the acquiring company for an initial term of two years at fair market value.

With the sale of our SDC business and the cessation of our MesoScribe business in 2024, we have one reportable segment consisting of our CVD Equipment division that manufactures chemical vapor deposition, physical vapor transport and thermal process equipment used to develop and produce materials and coatings for the aerospace, compound semiconductor, semiconductor, battery energy storage markets as well as advanced industrial applications, and research.

During the quarter ended June 30, 2026 (from continuing operations):

	●	Revenue decreased by $1.4 million or 42.6% as compared to the second quarter of 2025 from lower systems revenue due to reduced system bookings.

	●	Gross profit decreased by $0.2 million or 31.6% as compared to the second quarter of 2025 due to the lower system revenues.

	●	Total bookings for the second quarter of 2026 were approximately $1.2 million as compared to bookings of $1.5 million in the second quarter of 2025. Bookings for the second quarter of 2026 included one system order for $0.8 million with the balance consisting of non-system orders.

	●	Total bookings for the first half of 2026 were approximately $2.9 million as compared to bookings of $2.3 million in the first half of 2025.

	●	Backlog declined from $4.6 million at March 31, 2026 to $3.9 million at June 30, 2026 due to lower system orders.

	●	Cash and cash equivalents at June 30, 2026 were $23.5 million as compared to $8.7 million at December 31, 2025 as a result of the receipt of proceeds from the divestiture of SDC in April 2026.

Subsequent to quarter-end, the customer that placed the approximately $0.8 million system order filed a prepackaged Chapter 11 bankruptcy proceeding. The customer’s public disclosures indicate that general unsecured trade creditors are expected to be unimpaired under the proposed plan of reorganization; however, there can be no assurance that the customer will proceed with the purchase as originally contemplated or that the bankruptcy process will not adversely affect the order. The Company will be monitoring the proceedings and evaluating the potential impact, if any, on its backlog, financial position, results of operations, and cash flows.

Business Update

As of December 31, 2025, we classified certain manufacturing equipment as held for sale with a fair value of $0.5 million based on an agreement we entered into in January 2026 with a third-party to sell the equipment for this amount. We received the proceeds from the sale in the first quarter of 2026 and also sold additional equipment for $46,000 that was no longer necessary for our business.

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

In October 2025, we sold two PVT150™ units to Stony Brook University (SBU) for their new semiconductor research center - onsemi Silicon Carbide Crystal Growth Center. The recently launched research center will enable SBU faculty, scientists, and students to conduct research on silicon carbide crystal growth and other wide band gap (WBG) materials and device-enabling technologies critical to improving energy efficiency in power semiconductors and foster the next generation of skilled professionals in this field.

We have generally gained new customers through our industry reputation, as well as trade show attendance, digital marketing and print advertising. We have increased the number of trade shows and industry conferences we attend.

We continue to operate 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 our supply chain, costs, demand for our products, receipt of orders and results of operations. In addition, we face 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.

While our management continuously evaluates these conditions and has taken, and may take, actions intended to mitigate the potential adverse effects on our business, there can be no assurance that such actions will be successful. We are unable to predict the ultimate impact of these risks and uncertainties on our future results of our operations, financial position, or cash flows.

Results of Operations

Three Months Ended June 30, 2026 and 2025

The following table presents revenue and expense line items reported in our condensed consolidated statements of operations for the three months ended June 30, 2026 and 2025 and the period-over-period dollar and percentage changes for those line items (in thousands, except percentages).

	Three months ended June 30
	2026			2025			Change			Percent
Revenue	$	1,953		$	3,404		$	(1,451	)		(42.6	)%
Cost of revenue		1,624			2,923			(1,299	)		(44.4	)%

Gross profit		329			481			(152	)		(31.6	)%
Gross margin		16.8	%		14.1	%

Operating expenses: