CVD(CVV) - 2024 Q4 - Annual Report

Part I Business Description CVD Equipment Corporation, with over 40 years of experience, develops and manufactures advanced materials equipment, focusing on high-growth markets like aerospace and microelectronics Overview CVD Equipment Corporation specializes in advanced materials, offering chemical vapor deposition, physical vapor transport, and heat treatment equipment - CVD Equipment Corporation has over 40 years of experience in the advanced materials market, focusing on the development and manufacturing of chemical vapor deposition, physical vapor transport, and heat treatment equipment[17] - The company operates through three reporting segments: CVD Equipment (designs and manufactures equipment), SDC (designs and manufactures ultra-high purity gas and chemical delivery control systems), and MesoScribe (provides advanced materials and coating products, ceased operations in 2024)[19][52][53] - The company strategically sold its Tantaline subsidiary (May 2023) and closed its MesoScribe business (September 2024) to focus on the equipment business of the CVD Equipment and SDC segments[21][53] Key Company Strengths The company leverages over 40 years of experience, vertical integration, and proprietary software to transform emerging applications into mainstream manufacturing solutions - The company has over 40 years of equipment experience, utilizing its capabilities in process development, engineering, and vertical manufacturing to transform emerging applications into mainstream manufacturing solutions[22] - Proprietary real-time software enables rapid configuration, process optimization, and repeatable control, leading to reduced costs, improved quality, and shorter product delivery times[24] - The company operates application laboratories where customers can collaborate with company scientists and engineers to optimize process performance[24] Key Growth Strategies The core strategy involves focusing on high-growth markets and developing standardized products to complement custom systems - The core strategy is to focus on growth markets in aerospace, microelectronics, and industrial applications[27] - The company is developing a range of proprietary standardized products to complement its custom legacy systems, aiming for higher throughput, lower costs, and shorter delivery times[25] - In February 2024, the company received an approximately $10 million multi-system order from an industrial customer for depositing silicon carbide protective coatings on OEM components, with delivery expected within 18 to 24 months[29] Major Target Markets The company targets aerospace, microelectronics, and EV battery materials, providing specialized equipment for advanced applications - Major target markets include aerospace and defense, microelectronics/high-power electronics, and EV battery materials/energy storage[35] - In aerospace and defense, CVD is a leading manufacturer of preform CVI and fiber coating systems for ceramic matrix composites (CMCs) in aero gas turbine jet engines, securing multiple orders from major aerospace companies in 2022, 2023, and 2024[36][37] - In microelectronics/high-power electronics, the company offers PVT150 systems for 150mm silicon carbide wafers and launched the PVT200 system for 200mm wafers in 2023, receiving its first order in February 2024[39][55] - In EV battery materials/energy storage, increasing demand for nanomaterials like carbon nanotubes (CNTs), graphene, and silicon nanowires (Si-NWs) led to the 2021 launch of the PowderCoat-1100 production system for growing silicon nanowires on carbon nanoparticles[40][42] Bookings Total bookings increased by 8.9% in 2024, driven by significant aerospace and industrial orders Bookings Overview | Metric | 2024 Bookings | 2023 Bookings | | :--- | :--- | :--- | | Total Bookings | $28.1 million | $25.8 million | - 2024 bookings increased by 8.9%, primarily due to increased aerospace and industrial orders[44] - Significant 2024 orders include a $10 million multi-system order from an industrial customer and a $3.5 million CVI system order from a major aerospace company[162] Segments The company operates through CVD Equipment and SDC segments, having ceased MesoScribe operations in 2024 - CVD Equipment Segment: Provides advanced chemical vapor deposition and heat treatment equipment for high-growth production markets and R&D applications, including aerospace advanced materials, high-power electronics (silicon carbide and gallium nitride), and battery nanomaterials[45][46] - SDC Segment: Designs and manufactures ultra-high purity gas and chemical delivery control systems for semiconductor manufacturing, aerospace, solar cells, LEDs, and industrial applications, providing a competitive advantage to the CVD Equipment segment[51] - MesoScribe Segment: Provided direct-write printed electronics products and services; ceased operations on September 30, 2024, after selling certain assets and fulfilling remaining orders[52][53] Products and Technology The company offers CVD/CVI, PVT systems for SiC wafers, and other advanced thermal processing and gas control technologies - Chemical Vapor Deposition/Infiltration (CVD/CVI): Systems for material coating or growth at high temperatures through chemical decomposition and recombination, with CVI being a variant for coating inside porous materials[54] - Physical Vapor Transport (PVT): PVT150 systems (launched 2022) for 150mm silicon carbide crystal growth, and PVT200 systems (developed 2023, first order February 2024) for 200mm silicon carbide crystal growth[55] - Other Technologies: Include rapid thermal processing (RTP) systems for fast heating of semiconductor materials, annealing, diffusion, and low-pressure chemical vapor deposition (LPCVD) furnaces, ultra-high purity gas and liquid control systems, and in-house quartz fabrication[56][57][58][59] Intellectual Property The company protects its proprietary information through patents, trademarks, copyrights, and confidentiality agreements - The company protects its proprietary information and intellectual property through patents, trademarks, software copyrights, and confidentiality agreements[60] - The company believes future success primarily depends on the technical capabilities and innovative skills of its employees and the ability to commercialize next-generation intellectual property[62] Research and Development R&D focuses on new product development based on market needs and collaborations with universities for future opportunities - The company develops new products based on market analysis or customer needs, covering mechanical hardware, software and control systems, and overall configurations[63] - The company collaborates with leading universities and startups on research for silicon deposition, silicon carbide growth, carbon nanotubes, graphene, nanowire growth and infiltration, and aerospace manufacturing processes to capture future commercial opportunities[63] Markets and Marketing The company serves global emerging and mature markets through direct sales, industry events, and online promotion - The company serves global emerging and mature markets, including compound semiconductor high-power electronics, aerospace, defense, battery energy storage, silicon and other microelectronics and micro-mechanical devices, semiconductors, universities, and research centers[64] - Key marketing activities include direct sales, participation in industry associations and trade shows, and promotion through the company website, with increased trade show and industry conference participation in 2024[64] Customers The company serves a diverse global customer base, with significant revenue concentration from a single aerospace customer in 2024 - Customers include aerospace gas turbine jet engine component material producers, defense, compound semiconductor wafer manufacturers, battery energy storage, silicon and other microelectronics and micro-mechanical device manufacturers, semiconductors, universities, and research centers, with a customer base spanning domestic and international markets[65] Customer Concentration | Customer Concentration | 2024 | 2023 | | :--- | :--- | :--- | | One customer (of total revenues) | 29.5% | N/A | | Three customers (of total revenues) | N/A | 14.3%, 13.5%, 10.9% | Export Sales | Export Sales | 2024 | 2023 | | :--- | :--- | :--- | | % of Total Revenues | 4.3% | 17.2% | Competition The company faces intense competition, differentiating through expertise, technology, quality, and customer support - The company faces intense competition from domestic and international competitors in all product areas, including larger companies with more resources and smaller companies competing primarily on price[68][106] - The company competes primarily through expertise, technical performance, quality, delivery, price, and after-sales support, focusing on growth markets with technical and commercial competitive advantages[68] - SDC's gas management and chemical delivery control systems differentiate from competitors due to advanced technology and deep understanding of field applications[70] Sources of Supply The company sources most components from non-affiliated suppliers and leverages vertical manufacturing for competitive advantage - Most components are procured from non-affiliated suppliers, with no reliance on any single major supplier, and alternative suppliers are generally available[71] - The company has a well-equipped machine shop for in-house manufacturing of most metal components and sufficient quartz fabrication capabilities, considering vertical manufacturing integration a competitive advantage[73] - All procured and internally manufactured materials undergo stringent quality control processes to ensure they meet or exceed company and customer requirements[74] Backlog Backlog increased to $19.4 million by December 31, 2024, but does not guarantee future revenue Backlog Overview | Metric | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Backlog | $19.4 million | $18.4 million | - As of December 31, 2024, the backlog includes approximately $17.4 million in remaining performance obligations for system contracts and approximately $1.9 million in other non-system orders[75] - Backlog does not necessarily represent actual future revenue due to potential cancellations, delays, and changes in sales mix and contract timing[76] Government Regulations The company is subject to environmental, labor, and export control regulations, requiring continuous monitoring and compliance - The company is subject to federal, state, and local government regulations, including environmental, labor, and export control regulations (EAR)[77][80] - The company utilizes internal safety teams and consultants to continuously monitor and comply with environmental health and safety regulations related to its facilities and customer equipment installations[78] - The company continuously monitors and complies with U.S. Export Administration Regulations (EAR), particularly for sales to China and other international customers, to avoid penalties and restrictions on export capabilities[80] Product Liability Products involving hazardous materials and extreme temperatures pose potential product liability risks, despite insurance coverage - The company's products involve explosive, flammable, corrosive, and toxic gases, as well as extreme temperatures during manufacturing, posing potential risks of personal injury and property damage, which may lead to product liability claims[81] - Management annually reviews insurance coverage and believes it is sufficient for business risks, but cannot guarantee existing policies will cover all potential liabilities[81] Human Capital The company focuses on fostering a respectful work environment, employee development, and competitive compensation to attract and retain talent Employee Count | Employee Count | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Employees | 118 | 128 | | Manufacturing | 58 | N/A | | Engineering (R&D, product improvement) | 30 | N/A | | Field Service | 5 | N/A | | Sales and Marketing | 10 | N/A | | General Management, Maintenance, Admin | 15 | N/A | - The company is committed to fostering a work environment of respect, communication, goal orientation, and work-life balance, emphasizing employee development and training, with plans to establish succession planning for key positions[83] - The company maintains strict environmental, health, and safety protocols and reviews employee compensation plans to attract, retain, and motivate qualified and diverse professionals[84][86][87] Risk Factors The company faces risks from customer concentration, volatile sales, market demand fluctuations, international operations, and supply chain disruptions Risks related to sales and product development High customer concentration, long sales cycles, and rapid technological changes pose significant risks to sales and profitability - High customer concentration, with one customer accounting for 29.5% of total revenue in 2024, means changes in order patterns, delays, or cancellations could materially adversely affect business and operating results[90] - Long and variable sales cycles (several months to over a year) make sales volume and timing difficult to predict, increasing the risk of customer cancellations or non-contracting[91] - Product demand and profitability are highly volatile, influenced by global and regional economic developments, government budget constraints, capacity utilization, manufacturer capital resources, technological changes, and supply chain disruptions[96][102] - Reliance on international business (historically a significant portion of revenue) means operating results can be negatively affected by economic downturns, changes in trade policies, imposition of tariffs, and exchange rate fluctuations in various countries or regions[98][100][101] - The company may not keep pace with rapid technological changes, requiring continuous R&D investment and timely new product introductions to meet customer needs, otherwise, the business could be severely harmed[104][105] - Intense competition from larger, more financially robust diversified companies and smaller emerging companies offering lower prices could harm the company's pricing, customer orders, revenue, gross margins, and market share[106] Risks related to manufacturing and our supply chain Manufacturing disruptions, supply chain issues, inflation, and weather events can increase costs and hinder customer fulfillment - Manufacturing disruptions or delays can affect the company's ability to meet customer demand and lead to increased costs, often due to long lead times or single/limited suppliers for key components[108] - Geopolitical developments and supply chain disruptions have led to increased costs and delivery delays for certain components and materials, potentially impacting revenue recognition and reducing gross margins[111] - Inflation has adversely affected material, production, and labor costs, and fixed sales prices in customer contracts mean any cost increases could negatively impact gross margins and operating results[112] - Manufacturing facilities in Central Islip and Saugerties, NY, are susceptible to various weather risks, particularly the Central Islip facility facing hurricane risks, potentially causing production damage and inability to fulfill customer commitments[115] Risks related to cybersecurity, intellectual property and regulatory compliance Cybersecurity threats, inadequate IP protection, and non-compliance with export, anti-corruption, and environmental regulations pose significant financial and reputational risks - Cyberattacks could result in substantial costs for the company, potentially leading to significant liabilities, reputational damage, and operational disruptions if successful[116][117] - If the company cannot recoup R&D investments or protect its proprietary technology through patents and confidentiality agreements, its financial condition and operating results could be severely harmed[119][120][121] - Export sales are subject to U.S. Export Administration Regulations (EAR), and failure to obtain required export licenses or comply with regulations could result in substantial fines and restricted export capabilities[123] - Non-compliance with the U.S. Foreign Corrupt Practices Act and environmental regulations could lead to severe penalties, significant remediation liabilities, fines, or operational disruptions[124][125] - Regulations related to "conflict minerals" may increase expenses, complicate the supply chain, and potentially harm customer relationships[127] Risks related to financial and accounting matters Cyclical demand, lack of long-term contracts, sustained losses, internal control deficiencies, and acquisition risks can negatively impact financial performance - Cyclical fluctuations in product demand make it difficult for the company to accurately budget expense levels, leading to volatile operating results and potentially requiring timely adjustments to cost structures or increased manufacturing capacity[128][129] - The company does not have long-term volume production contracts with customers, and the timing and quantity of customer orders are beyond its control, potentially leading to underutilization of manufacturing facilities and infrastructure, negatively impacting financial condition and operating results[131] - Sustained operating losses may make it difficult for the company to obtain commercially reasonable financing, and issuing additional common stock to fund growth plans and operations could dilute existing shareholders' equity[132] - Future discovery of deficiencies in internal controls over financial reporting could adversely affect the company's ability to analyze, record, and report financial information free of material misstatement[133] - Acquisitions, as part of future growth strategies, involve numerous risks, including integration difficulties of personnel, operations, and technology, diversion of management attention, loss of key employees, insufficient synergies, and impairment of acquired assets due to technological advancements or underperformance[136][138][135] Risks related to product liability Product liability claims from hazardous materials and uncertain health impacts of nanotechnology pose significant risks - The company faces risks of product liability claims because its products involve toxic materials and extreme temperatures in operation, potentially causing personal injury or property damage[138] - Uncertainty regarding the health and environmental impacts of nanotechnology (particularly carbon nanotubes) could adversely affect the company's business expansion if these materials are deemed harmful[139][140] Risks related to our stock The company's common stock price is highly volatile and subject to various market and company-specific factors - The company's common stock price is highly volatile and could decline significantly due to macroeconomic conditions, geopolitical events, market uncertainties, capital issuances, order fluctuations, product performance issues, financial announcements, analyst recommendations, strategic transactions, and trading volume[142] - Historical volatility in the technology stock market suggests that the company's common stock price may continue to fluctuate in the future, potentially leading to securities class action lawsuits[143] General risks The company's success heavily relies on key personnel, and challenges in talent retention and recruitment pose a significant risk - The company's success is highly dependent on the technical, sales, marketing, and management contributions of key individuals, including the CEO and President, and faces challenges in retaining and recruiting qualified talent (especially engineers) in a competitive labor market[144][145][146] Unresolved Staff Comments There are no unresolved staff comments in this report - No unresolved staff comments[147] Cybersecurity CVD has implemented a risk-based cybersecurity approach with reasonable measures, regular testing, and board oversight - The company has implemented a risk-based approach to identify and assess cybersecurity threats that could affect its business and information systems, employing commercially reasonable measures, tools, and methods to manage cybersecurity risks[148] - Specific controls include endpoint threat detection, identity and access management (IAM), privileged access management (PAM), logging and monitoring, multi-factor authentication (MFA), firewalls and intrusion detection/prevention, and vulnerability and patch management[148] - The company conducts regular cybersecurity assessments, ongoing employee training, periodic phishing email simulations, and maintains incident response and IT continuity plans[149] - The Board of Directors and Audit Committee oversee the company's cybersecurity efforts, with the Director of Information Technology providing regular updates on the cybersecurity program[150] Properties The company owns two unmortgaged facilities in New York, serving as headquarters, R&D, and manufacturing sites Company Properties | Location | Size (sf) | Segment | Principal Use | Mortgage/Loan | | :--- | :--- | :--- | :--- | :--- | | Central Islip, NY | 128,000 | CVD Equipment / MesoScribe | Corporate headquarters; R&D; Manufacturing | No | | Saugerties, NY | 22,000 | SDC | Manufacturing; Administration | No | Legal Proceedings There are no applicable legal proceedings in this report - No applicable legal proceedings[152] Mine Safety Disclosures There are no applicable mine safety disclosures in this report - No applicable mine safety disclosures[152] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq, has never paid dividends, and has no recent unregistered sales or issuer equity purchases Market Information for Common Stock The company's common stock is traded on the Nasdaq Capital Market under the symbol "CVV" - The company's common stock is traded on the Nasdaq Capital Market under the ticker symbol "CVV"[153] Dividend Policy The company has never paid dividends and plans to retain earnings for business development - The company has never paid dividends on its common stock and currently does not intend to, planning to retain earnings for business development[154] - Future dividend policy will be at the discretion of the Board of Directors, depending on earnings, financial needs, and overall business conditions[154] Stockholders As of March 18, 2025, the company had approximately 55 record holders and 3,544 beneficial owners of common stock Stockholder Count | Metric | As of March 18, 2025 | | :--- | :--- | | Holders of Record | ~55 | | Beneficial Owners | ~3,544 | Recent Sales of Unregistered Securities There were no recent sales of unregistered securities - No recent sales of unregistered securities[156] Issuer Purchases of Equity Securities There were no issuer purchases of equity securities - No issuer purchases of equity securities[157] Reserved This item is reserved with no related information - Item 6 is reserved[158] Management's Discussion and Analysis of Financial Condition and Results of Operations In 2024, revenue grew 11.5% to $26.9 million, gross profit increased 24.8% to $6.3 million, and net loss narrowed 54.6% to $1.9 million, despite a $1.3 million PVT inventory write-down Executive Summary Revenue and gross profit increased in 2024, while net loss improved, driven by aerospace and industrial orders despite an inventory write-down Financial Highlights | Metric | 2024 | 2023 | Change | Percent Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $26.876 million | $24.109 million | +$2.767 million | +11.5% | | Gross Margin | $6.331 million | $5.071 million | +$1.260 million | +24.8% | | Total Bookings | $28.1 million | $25.8 million | +$2.3 million | +8.9% | | Backlog | $19.4 million | $18.4 million | +$0.8 million | +4.9% | | Net Loss | $(1.898) million | $(4.180) million | +$2.282 million | +54.6% (improvement) | | Cash Balance (Dec 31) | $12.6 million | $14.0 million | $(1.4) million | -10.0% | - Gross profit growth was due to increased revenue and improved margins on contracts under construction, partially offset by a $1.3 million non-cash expense for writing down certain PVT inventory to net realizable value[162] - 2024 orders include a $10 million multi-system order from an industrial customer and a $3.5 million CVI system order from a major aerospace company[162] Business Update The company focuses on high-growth markets, with PVT150 demand declining but new PVT200 and CVI orders secured - The company's core strategy is to focus on growth end markets in aerospace, microelectronics (including "electrification of everything"), and industrial applications[163] - Market demand for PVT150 systems has decreased due to lower-than-expected EV sales and global overcapacity of 150mm silicon carbide wafers[165] - In February 2024, the company received an order for a PVT200 system from a new customer for growing 200mm silicon carbide crystals, which shipped in Q3 2024[166] - The company secured additional CVI system orders from the same aerospace company in 2023 and 2024, and an approximately $10 million multi-system order from an industrial customer in February 2024[168][169] Results of Operations Operating results show increased revenue and gross profit, with a narrowed net loss, despite an inventory write-down Revenue Total revenue increased by 11.5% in 2024, driven by CVD Equipment and SDC segments, with one aerospace customer contributing significantly Revenue by Segment | Segment | 2024 Revenue ($ thousands) | 2023 Revenue ($ thousands) | Change ($ thousands) | Percent Change | | :--- | :--- | :--- | :--- | :--- | | CVD Equipment | 18,288 | 16,334 | 1,954 | 12.0% | | SDC | 8,444 | 7,139 | 1,305 | 18.3% | | MesoScribe | 778 | 722 | 56 | 7.8% | | Tantaline | 0 | 462 | (462) | (100.0%) | | Intersegment sales elimination | (634) | (548) | (86) | 15.7% | | Total Revenue | 26,876 | 24,109 | 2,767 | 11.5% | - Revenue growth was primarily attributable to increased revenue from the CVD Equipment segment ($1.9 million) and the SDC segment ($1.3 million), partially offset by reduced revenue following the sale of Tantaline[175] - In 2024, one aerospace customer accounted for 29.5% of total revenue and 43.4% of CVD Equipment segment revenue[175] Backlog by Type and Customer | Backlog | Dec 31, 2024 ($ millions) | Dec 31, 2023 ($ millions) | | :--- | :--- | :--- | | Total Backlog | 19.4 | 18.4 | | System Contracts | 17.4 | N/A | | Other Orders | 1.9 | N/A | | One industrial customer (% of backlog) | 41.8% | N/A | | One aerospace customer (% of backlog) | 27.1% | N/A | Gross Profit Gross profit increased by 24.8% to $6.3 million, with margin improvement, despite a $1.3 million inventory write-down Gross Profit and Margin | Metric | 2024 ($ millions) | 2023 ($ millions) | Change ($ millions) | Percent Change | | :--- | :--- | :--- | :--- | :--- | | Gross Profit | 6.3 | 5.1 | 1.2 | 24.8% | | Gross Profit Margin | 23.6% | 21.0% | +2.6 pp | N/A | - Gross profit increased due to higher revenue and improved margins on CVD contracts and final MesoScribe sales[181] - This was partially offset by a $1.3 million non-cash expense for writing down certain PVT inventory to net realizable value[181] Operating Expenses Total operating expenses decreased by 12.1% in 2024, primarily due to lower G&A and a gain on equipment sales Operating Expenses Summary | Operating Expense | 2024 ($ thousands) | 2023 ($ thousands) | Change ($ thousands) | Percent Change | | :--- | :--- | :--- | :--- | :--- | | Research and development | 2,627 | 2,596 | 31 | 1.2% | | Selling | 1,656 | 1,632 | 24 | 1.5% | | General and administrative | 5,181 | 5,451 | (270) | (5.0%) | | Gain on sales of equipment | (717) | 0 | (717) | * | | Loss on disposition of Tantaline | 0 | 162 | (162) | * | | Impairment charge | 0 | 111 | (111) | * | | Total Operating Expenses | 8,747 | 9,952 | (1,205) | (12.1%) | - General and administrative expenses decreased due to lower employee compensation and professional service fees[185] - The 2024 gain on sales of equipment primarily resulted from MesoScribe assets ($0.6 million) and CVD Equipment ($42 thousand)[186] Other Income, Net Total other income, net, decreased by 21.1% in 2024, primarily from interest income Other Income, Net Summary | Metric | 2024 ($ thousands) | 2023 ($ thousands) | Change ($ thousands) | Percent Change | | :--- | :--- | :--- | :--- | :--- | | Total Other Income, Net | 542 | 687 | (145) | (21.1%) | | Interest Income | 559 | 577 | (18) | (3.1%) | - Other income primarily consisted of interest income from U.S. Treasury bills[190] Net Loss Net loss improved by 54.6% in 2024 to $1.9 million, with basic and diluted loss per share at $(0.28) Net Loss and Income Tax | Metric | 2024 ($ thousands) | 2023 ($ thousands) | Change ($ thousands) | Percent Change | | :--- | :--- | :--- | :--- | :--- | | Net Loss | (1,898) | (4,180) | 2,282 | 54.6% (improvement) | | Income Tax Expense (Benefit) | 24 | (14) | 38 | * | Loss per Common Share | Loss per Common Share | 2024 | 2023 | | :--- | :--- | :--- | | Basic | $(0.28) | $(0.62) | | Diluted | $(0.28) | $(0.62) | Inflation and Supply Chain Matters Inflation and supply chain disruptions increased costs and delayed deliveries, impacting revenue and margins, prompting mitigation efforts - The company experienced increased material and component costs and delivery delays due to inflation and geopolitical developments, affecting revenue recognition and gross margins[192] - The company has taken measures to mitigate impacts, including extending order lead times, evaluating alternative suppliers, utilizing internal flexible manufacturing, and increasing sales prices[192] - Inflation led the company to review and adjust salaries and implement bonus incentives to remain competitive in employee recruitment and retention[193] - Significant increases in tariffs on purchased goods could negatively impact the company's business and operating results by raising product manufacturing costs[193] Liquidity and Capital Resources The company's cash and operating cash flow are expected to meet working capital and capital expenditure needs for the next 12 months Working Capital and Cash | Metric ($ millions) | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Working Capital | 13.9 | 14.3 | | Cash and Cash Equivalents | 12.6 | 14.0 | Cash Flow Activities | Cash Flow Activity | 2024 ($ millions) | 2023 ($ millions) | | :--- | :--- | :--- | | Net cash used in operating activities | (1.5) | (0.2) | | Net cash provided by (used in) investing activities | 0.1 | (0.1) | | Net cash used in financing activities | (0.1) | (0.0) | - Management believes existing cash and cash equivalents and anticipated operating cash flows will be sufficient to meet working capital and capital expenditure requirements for the next twelve months[198] Critical Accounting Estimates Key accounting estimates include long-term contract revenue, inventory valuation, deferred tax assets, and long-lived asset impairment - Critical accounting estimates include long-term contract revenue recognition (cost-to-cost method), inventory valuation, allowance for credit losses, deferred tax asset valuation allowance, estimated lives and impairment considerations for long-lived assets, and stock-based compensation valuation[201][328] - Revenue from sales of custom chemical vapor deposition equipment is recognized over time using the cost-to-cost method, which requires significant judgment in estimating total project costs[203][204] - Long-lived assets are reviewed for impairment when indicators or circumstances suggest, with impairment loss measured as the amount by which carrying value exceeds fair value, relying on estimates of future undiscounted cash flows[206] Quantitative and Qualitative Disclosures About Market Risk This item is not applicable - Item 7A is not applicable[208] Financial Statements and Supplementary Data The required consolidated financial statements are included starting on page F-1 of this annual report on Form 10-K - Consolidated financial statements are included starting on page F-1 of this annual report on Form 10-K[209] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There were no changes in accountants or disagreements on accounting and financial disclosure - No changes in accountants or disagreements with accountants on accounting and financial disclosure[210] Controls and Procedures Management assessed disclosure controls and internal controls over financial reporting as effective, with no significant changes in internal controls during the quarter Disclosure Controls and Procedures Management assessed the company's disclosure controls and procedures as effective as of December 31, 2024 - As of December 31, 2024, management, under the guidance of the Chief Executive Officer and Chief Financial Officer, assessed and determined the company's disclosure controls and procedures to be effective[211][212] - Disclosure controls and procedures are designed to provide reasonable assurance that information is accumulated and communicated to management in a timely manner for disclosure decisions[212] Changes in Internal Controls No significant changes in internal controls over financial reporting occurred during the most recent fiscal quarter - No significant changes in internal controls over financial reporting occurred or are reasonably likely to occur during the most recent fiscal quarter[213] Limitations on the Effectiveness of Controls Control systems, regardless of design, cannot provide absolute assurance of achieving objectives, and evaluations cannot detect all control issues or fraud - The company believes that no matter how well designed and operated, control systems cannot provide absolute assurance that control system objectives will be met, and no control evaluation can provide absolute assurance that all control issues and fraud within the company will be detected[214] Management's Annual Report on Internal Control Over Financial Reporting Management is responsible for internal controls and assessed them as effective, with no auditor attestation report included - Management is responsible for establishing and maintaining effective internal control over financial reporting[215] - Management assessed the effectiveness of internal control over financial reporting as of December 31, 2024, based on the COSO framework, and concluded it was effective[215] - This annual report does not include an attestation report of the registered public accounting firm regarding internal control over financial reporting, in accordance with SEC regulations[216] Other Information This item is not applicable - Item 9B is not applicable[217] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable - Item 9C is not applicable[218] Part III Directors, Executive Officers and Corporate Governance The Board comprises six diverse members, with independent oversight, and the company adheres to ethical and insider trading policies Background and Experience of Directors The Board consists of six members with diverse experience, focusing on ethics, independence, and industry expertise for director recommendations - The Board of Directors consists of six members (as of March 19, 2025), with diverse experience and skills in engineering, finance, and business[220][254] - The Nominating, Governance, and Compliance Committee primarily considers candidates' ethics, integrity, independence, and relevant industry experience when recommending directors[222] Directors and Executive Officers | Name | Age | Position(s) with the Company | | :--- | :--- | :--- | | Emmanuel Lakios | 63 | Chief Executive Officer, President, Director | | Lawrence J. Waldman | 78 | Chairman of the Board of Directors, Chairman-Audit Committee | | Robert M. Brill | 78 | Director, Chairman – Nominating, Governance, and Compliance Committee | | Ashraf Lotfi | 64 | Director, Chairman – Compensation Committee | | Debra Wasser | 60 | Director | | Andrew Africk | 58 | Director | | Richard A. Catalano | 65 | Chief Financial Officer, Executive Vice President, Secretary and Treasurer | | Kevin R. Collins | 59 | Vice President and General Manager of SDC | | Jeffrey A. Brogan | 55 | Vice President of Sales and Marketing | | Maxim S. Shatalov | 54 | Vice President of Engineering and Technology | | Warren D. Cheesman | 52 | Vice President of Manufacturing Operations | Board Leadership The Board ensures effective and independent oversight through executive sessions, independent committees, and an independent chairman - The Board ensures effective and independent oversight of management through executive sessions of independent directors, independent committee members, and the appointment of an independent Chairman (Mr. Waldman)[252][253][256] - CEO Emmanuel Lakios is responsible for implementing company strategy and leading performance discussions related to company strategy at the Board level[253] Code of Ethics The company has adopted a Code of Business Conduct and Ethics applicable to all employees, senior management, and the Board - The company has adopted a Code of Business Conduct and Ethics applicable to all employees, senior management, and the Board of Directors[255] Insider Trading Policy The company has an insider trading policy to regulate securities transactions by directors, officers, and employees - The company has adopted an insider trading policy to regulate the purchase, sale, and other dispositions of securities by directors, officers, and employees, ensuring compliance with insider trading laws and regulations[255] Audit Committee The Audit Committee, composed of independent directors, oversees the independent registered public accounting firm and financial statements - The Audit Committee consists of Lawrence J. Waldman (Chairman), Robert M. Brill, and Debra Wasser, all of whom meet Nasdaq Stock Market independence requirements[257] - The Audit Committee is responsible for the appointment, compensation, retention, and oversight of the independent registered public accounting firm, and reviews the company's annual audited financial statements and audit fees[257] - Mr. Lawrence J. Waldman is designated as an "audit committee financial expert" as defined by SEC rules[258] Section 16(a) Beneficial Ownership Reporting Compliance All Section 16(a) reports for officers, directors, and 10% shareholders were timely filed for the fiscal year ended December 31, 2024 - Based on review, all Section 16(a) reports for officers, directors, and 10% shareholders were timely filed for the fiscal year ended December 31, 2024[259] Executive Compensation Executive compensation decreased in 2024 due to no option awards, while non-employee directors received cash and equity retainers Summary Compensation Table Executive compensation decreased in 2024 for named executive officers, primarily due to the absence of option awards Executive Compensation Summary | Name and Principal Position | Year | Salary ($) | Bonus ($) | Option Awards ($) | Stock Awards ($) | All Other Compensation ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Emmanuel Lakios, President and CEO | 2024 | 415,000 | - | - | - | 20,744 | 435,744 | | | 2023 | 388,600 | - | 699,990 | - | 19,522 | 1,108,112 | | Richard Catalano, Secretary, CFO, EVP | 2024 | 283,800 | - | - | - | 26,772 | 310,572 | | | 2023 | 274,700 | - | 233,330 | - | 27,201 | 535,231 | | Jeffrey A. Brogan, VP Sales & Marketing | 2024 | 206,000 | 25,000 | - | - | 7,578 | 238,578 | | | 2023 | 203,300 | - | 139,998 | - | 7,863 | 351,161 | - No stock options were granted to named executive officers in 2024[262] Employment Agreements and Potential Payments Upon Termination or Change in Control Employment agreements outline base salary, bonus eligibility, and termination benefits for executives, including non-compete clauses - Emmanuel Lakios' employment agreement stipulates an initial annual base salary of $288,000 and participation in a bonus plan[263] - Upon termination, Mr. Lakios is entitled to unpaid base salary, expense reimbursements, severance, and vested stock option rights[264] - If terminated without cause by the company or for good reason by Mr. Lakios, he is entitled to a pro-rata bonus and nine months of continued base salary and medical benefits[266] - The agreement includes non-compete, non-solicitation, and confidentiality clauses favorable to the company[268] Equity Awards The company grants equity awards to employees and non-employee directors, with no grants to named executive officers in 2024 - The company grants equity awards (including stock options) to employees and non-employee directors, with new employee options typically granted in the quarter of hire and annual refresh options in the first quarter of each fiscal year[269] - Non-employee directors automatically receive initial and annual stock option awards[269] - No equity awards were granted to named executive officers during fiscal year 2024[271] Outstanding Equity Awards at December 31, 2024 Named executive officers hold significant unexercised stock options as of December 31, 2024 Outstanding Stock Options | Name | Number of Securities Underlying Options Exercisable | Number of Securities Underlying Options Unexercisable | Exercise Price | Expiration Date | | :--- | :--- | :--- | :--- | :--- | | Emmanuel Lakios | 18,750 | 56,250 | $14.11 | 3/23/2033 | | | 37,500 | 37,500 | $5.02 | 8/17/2032 | | | 75,000 | 25,000 | $4.26 | 6/1/2031 | | | 100,000 | - | $10.30 | 2/6/2027 | | Richard Catalano | 6,250 | 18,750 | $14.11 | 3/23/2033 | | | 10,000 | 10,000 | $5.42 | 8/30/2032 | | Jeffrey A. Brogan | 3,750 | 11,250 | $14.11 | 3/23/2033 | | | 7,500 | 7,500 | $5.02 | 8/17/2032 | | | 15,000 | 5,000 | $4.01 | 7/15/2021 | | | 20,000 | - | $11.61 | 10/31/2027 | 2024 Director Compensation Non-employee directors received annual cash and equity retainers, with additional compensation for committee chairs and the non-executive chairman Director Compensation Summary | Name | Fees Earned or Paid in Cash ($) | Option Awards ($) | Restricted Stock Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | | Lawrence J. Waldman | 40,000 | 153,000 | - | 113,000 | | Robert M. Brill | 40,000 | 90,000 | - | 50,000 | | Debra Wasser | 40,000 | 80,000 | - | 40,000 | | Ashraf Lotfi | 40,000 | 82,500 | - | 42,500 | | Andrew Africk | 23,738 | 47,474 | - | 23,763 | | Raymond A. Nielsen | 40,000 | 70,435 | - | 30,453 | - The Director Compensation Plan (effective October 1, 2021) provides each director with an annual cash retainer of $40,000 and an annual equity retainer of $40,000[277] - Committee chairs (Compensation/Nominating, Governance, and Compliance Committees) receive an additional $10,000 annual chair retainer, the Audit Committee Chair receives $25,000, and the Non-Executive Chairman receives $48,000[277] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Leviticus Partners and Andrew Africk are significant beneficial owners, and all directors and executive officers collectively own 28.0% of common stock Beneficial Ownership of Certain Beneficial Owners and Management Leviticus Partners and Andrew Africk are major beneficial owners, with all directors and executive officers collectively holding 28.0% of common stock Beneficial Ownership | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class (%) | | :--- | :--- | :--- | | 5% or Greater Shareholder: | | | | Leviticus Partners, L.P. | 617,832 | 9.0 | | Directors and Executive Officers: | | | | Andrew Africk / ADA Partners LP | 1,303,690 | 18.9 | | Emmanuel Lakios | 256,358 | 3.7 | | Kevin R. Collins | 102,437 | 1.5 | | Lawrence J. Waldman | 80,221 | 1.2 | | Jeffrey A. Brogan | 54,519 | * | | Robert M. Brill | 33,006 | * | | Maxim Shatalov | 30,000 | * | | Richard Catalano | 22,500 | * | | Warren Cheesman | 15,000 | * | | Ashraf Lotfi | 14,811 | * | | Debra Wasser | 14,306 | * | | All directors and executive officers and executive employees as a group (eleven persons) | 1,926,848 | 28.0 | - Percentages marked with "*" indicate less than 1% of the total outstanding common stock or voting power[280] Equity Compensation Plan Information As of December 31, 2024, 823,125 options were outstanding with a weighted-average exercise price of $8.24, and 183,128 securities remained available for future issuance Equity Compensation Plan Summary | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) | Weighted-average exercise price of outstanding options, warrants and rights (2) | Number of securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 823,125 | $8.24 | 183,128 | | Equity compensation plans not approved by security holders | — | N/A | — | | Total | 823,125 | $8.24 | 183,128 | - The calculation of the weighted-average exercise price does not include the value of any unvested restricted stock awards[284] Certain Relationships and Related Transactions and Director Independence There are no related party transactions, and several directors are deemed independent under Nasdaq rules - No transactions with related parties, promoters, or certain control persons[285] - Lawrence J. Waldman, Andrew Africk, Robert M. Brill, Debra Wasser, and Ashraf Lotfi are deemed "independent" directors under Nasdaq Stock Market Rule 4200[286] Principal Accountant Fees and Services Marcum, LLP's audit fees totaled $249,775 in 2024, a decrease from 2023, with all services pre-approved by the Audit Committee Fees for Professional Audit Services Total professional audit service fees decreased in 2024 to $249,775 Audit Fees Summary | Fee Type | 2024 ($) | 2023 ($) | | :--- | :--- | :--- | | Audit fees | 224,025 | 236,076 | | Audit-related fees | 25,750 | 55,002 | | All other fees | - | - | | Total fees | 249,775 | 291,078 | Audit Fees Audit fees cover quarterly reviews and the annual year-end audit - Audit fees include reviews of the first three quarters and the year-end audit[289] Audit-related Fees Audit-related fees include the 401(k) plan audit and services for registration statements and comfort letters - Audit-related fees include the audit of the company's 401(k) plan and fees related to registration statements and comfort letters[290] Audit Committee Approval All fees and services provided by the independent registered public accounting firm are pre-approved by the Audit Committee - The engagement of the company's independent registered public accounting firm and all billed fees and services provided are pre-approved by the Audit Committee[291][292] Part IV Exhibits and Financial Statement Schedules This section lists all exhibits and financial statement schedules filed as part of the 10-K report - Various exhibits and financial statement schedules are listed, including the certificate of incorporation, bylaws, description of securities, lease agreements, employment agreements, insider trading policy, list of subsidiaries, consent of Marcum, LLP, CEO and CFO certifications, and XBRL information[294][295] Signatures The report was officially signed by the CEO, CFO, and Board members on March 19, 2025 - The report was signed by President and Chief Executive Officer Emmanuel Lakios and Executive Vice President, Chief Financial Officer, and Secretary Richard Catalano on March 19, 2025[298] - Directors Lawrence J. Waldman, Andrew Africk, Robert M. Brill, Ashraf Lotfi, and Debra Wasser also signed the report[299] Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID Number 688) Marcum LLP issued an unqualified opinion on the consolidated financial statements, with revenue recognition as a key audit matter - Marcum LLP issued an unqualified opinion on the company's consolidated financial statements for 2024 and 2023, deeming them fairly presented in all material respects in accordance with U.S. GAAP[303] - A key audit matter identified was "Revenue Recognition – Estimation of Total Contract Costs," due to management's subjective judgments in estimating costs to complete long-term contracts[307][309] - Audit procedures included understanding management's cost estimation process, reviewing contracts, evaluating cost estimates against prior estimates, and testing estimated costs to complete for uncompleted system projects[311] Consolidated Balance Sheets as of December 31, 2024 and 2023 Total assets decreased to $31.7 million, driven by lower cash and inventory, while total liabilities also decreased to $6.3 million Consolidated Balance Sheets Summary | Metric ($ thousands) | Dec 31, 2024 | Dec 31, 2023 | Change | | :--- | :--- | :--- | :--- | | Total Assets | 31,686 | 35,025 | (3,339) | | Current Assets | 19,986 | 22,841 | (2,855) | | Cash and cash equivalents | 12,598 | 14,025 | (1,427) | | Inventories | 2,115 | 4,454 | (2,339) | | Total Liabilities | 6,318 | 8,822 | (2,504) | | Accounts payable | 679 | 1,203 | (524) | | Contract liabilities | 3,135 | 4,908 | (1,773) | | Total Stockholders' Equity | 25,368 | 26,203 | (835) | Consolidated Statements of Operations for the years ended December 31, 2024 and 2023 Revenue increased 11.5% to $26.9 million, gross profit rose 24.8% to $6.3 million, and net loss improved 54.6% to $1.9 million Consolidated Statements of Operations Summary | Metric ($ thousands) | 2024 | 2023 | Change | Percent Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | 26,876 | 24,109 | 2,767 | 11.5% | | Cost of revenue | 20,545 | 19,038 | 1,507 | 7.9% | | Gross profit | 6,331 | 5,071 | 1,260 | 24.8% | | Total operating expenses, net | 8,747 | 9,952 | (1,205) | (12.1%) | | Operating loss | (2,416) | (4,881) | 2,465 | 50.5% (improvement) | | Net loss | (1,898) | (4,180) | 2,282 | 54.6% (improvement) | | Basic Loss per Common Share | (0.28) | (0.62) | 0.34 | N/A | | Diluted Loss per Common Share | (0.28) | (0.62) | 0.34 | N/A | Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2024 and 2023 Total stockholders' equity decreased to $25.4 million, primarily due to net loss, partially offset by stock-based compensation Consolidated Statements of Changes in Stockholders' Equity Summary | Metric ($ thousands) | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Stockholders' Equity | 25,368 | 26,203 | | Net loss | (1,898) | (4,180) | | Stock-based compensation | 1,063 | 908 | Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023 Net cash used in operating activities increased to $1.5 million, leading to a $1.4 million decrease in cash and cash equivalents Consolidated Statements of Cash Flows Summary | Cash Flow Activity ($ thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | (1,489) | (206) | | Net cash provided by (used in) investing activities | 144 | (133) | | Net cash used in financing activities | (82) | (1) | | Net decrease in cash and cash equivalents | (1,427) | (340) | | Cash and cash equivalents at end of year | 12,598 | 14,025 | - Net cash used in operating activities in 2024 was primarily due to net loss and decreases in contract assets and liabilities, partially offset by a decrease in inventories and non-cash items like excess and obsolete inventory reserves[196] Notes to Consolidated Financial Statements The notes detail significant accounting policies, revenue recognition, inventory valuation, and the impact of economic uncertainties Note 1 – Business Description CVD Equipment Corporation designs and manufactures advanced equipment and process solutions for materials and coatings in industrial and research applications - CVD Equipment Corporation designs, develops, and manufactures various chemical vapor deposition, physical vapor transport, gas control, and other equipment and process solutions[322] - The company's products are used for material and coating development and manufacturing in industrial applications and research, serving both production environments and R&D centers[322] Note 2 - Summary of Significant Accounting Policies Financial statements are prepared under U.S. GAAP, involving key estimates for long-term contracts, inventory, deferred taxes, and asset impairment - Financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP), requiring management to make estimates and assumptions affecting reported amounts of assets and liabilities[323][327] - Significant accounting estimates include long-term contract revenue recognized using the cost-to-cost method, inventory valuation, allowance for credit losses, deferred tax asset valuation allowance, estimated lives and impairment considerations for long-lived assets, and stock-based compensation valuation[328] - The company adopted ASU 2023-07 (Segment Reporting) in 2024 and is evaluating ASU 2023-09 (Income Tax Disclosures) and ASU 2024-0