CVD(CVV) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1 – Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, credit risk, revenue recognition, inventories, debt, earnings per share, stock-based compensation, income taxes, segment reporting, and risks and contingencies for CVD Equipment Corporation and its subsidiaries Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time Metric (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change (vs. Dec 31, 2024) | | :-------------------- | :------------ | :---------------- | :------------------------ | | Cash and cash equivalents | $7,023 | $12,598 | $(5,575) | | Total current assets | $18,499 | $19,986 | $(1,487) | | Total assets | $29,945 | $31,686 | $(1,741) | | Total current liabilities | $4,628 | $6,137 | $(1,509) | | Total liabilities | $4,764 | $6,318 | $(1,554) | | Total stockholders' equity | $25,181 | $25,368 | $(187) | Condensed Consolidated Statements of Operations This section presents the company's financial performance over specific periods, including revenues, expenses, and net loss Metric (in thousands) | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change (YoY) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change (YoY) | | :-------------------- | :------------------------------- | :------------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | Revenue | $5,111 | $6,345 | (19.4%) | $13,427 | $11,267 | 19.2% |\n| Gross profit | $1,073 | $1,542 | (30.4%) | $3,769 | $2,326 | 61.9% |\n| Gross margin | 21.0% | 24.3% | (3.3 pp) | 28.1% | 20.7% | 7.4 pp |\n| Operating loss | $(1,140) | $(898) | (26.9%) | $(870) | $(2,526) | 65.5% |\n| Net loss | $(1,061) | $(761) | (39.4%) | $(701) | $(2,233) | 68.1% |\n| Loss per common share - basic | $(0.15) | $(0.11) | (36.4%) | $(0.10) | $(0.33) | 69.7% | Condensed Consolidated Statements of Changes in Stockholders' Equity This section details changes in the company's equity accounts, reflecting net loss and stock-based compensation over specific periods Metric (in thousands) | Metric (in thousands) | Balance at April 1, 2025 | Net Loss (Q2 2025) | Stock-based Compensation (Q2 2025) | Balance at June 30, 2025 | | :-------------------- | :----------------------- | :----------------- | :--------------------------------- | :----------------------- | | Total Stockholders' Equity | $25,992 | $(1,061) | $250 | $25,181 | | Metric (in thousands) | Balance at January 1, 2025 | Net Loss (H1 2025) | Stock-based Compensation (H1 2025) | Balance at June 30, 2025 | | :-------------------- | :------------------------- | :----------------- | :--------------------------------- | :----------------------- | | Total Stockholders' Equity | $25,368 | $(701) | $514 | $25,181 | Condensed Consolidated Statements of Cash Flows This section outlines the company's cash inflows and outflows from operating, investing, and financing activities over specific periods Metric (in thousands) | Metric (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(5,432) | $(3,772) |\n| Net cash used in investing activities | $(100) | $(182) |\n| Net cash used in financing activities | $(43) | $(40) |\n| Net decrease in cash and cash equivalents | $(5,575) | $(3,994) |\n| Cash and cash equivalents at end of period | $7,023 | $10,031 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements NOTE 1: BASIS OF PRESENTATION This section outlines the basis of preparation for the unaudited interim financial statements and their indicative nature - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim information and Form 10-Q instructions, with all necessary normal recurring accruals included. Operating results for the three and six months ended June 30, 2025, are not necessarily indicative of the full year's results[16] - As of June 30, 2025, the Company had $7.0 million in cash and cash equivalents and believes these, along with anticipated cash flows, receivables, backlog, inventory sales, and deposits, will be sufficient to fund working capital and capital equipment needs for at least the next 12 months[20] NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This section outlines the key accounting principles and methods used in preparing the financial statements, including revenue recognition and inventory valuation - Revenue for custom chemical vapor deposition equipment sales is recognized 'over time' using an input method based on costs incurred, as it reflects progress towards satisfying performance obligations. For non-system sales, revenue is recognized 'at a point in time' when control of products or services transfers to the customer[23][24][30] - Inventories are valued at the lower of cost (FIFO method) or net realizable value, with work-in-process and finished goods reflecting accumulated production costs. Obsolete or excess inventory is written down to its estimated net realizable value[32][33] - The Company provides a standard one-year warranty on systems from final acceptance or fifteen months from shipment, with estimated warranty costs recorded at revenue recognition and included in 'Cost of revenue'[34] - The Company is evaluating the impact of new accounting standards ASU 2023-09 (Income Taxes) and ASU 2024-03 (Disaggregation of Income Statements Expenses), effective for annual periods beginning after December 15, 2024, and December 15, 2026, respectively[35][36] NOTE 3: CONCENTRATION OF CREDIT RISK This section details the company's exposure to credit risk, particularly concerning cash, cash equivalents, and accounts receivable concentrations - Cash and cash equivalents decreased from $12.6 million at December 31, 2024, to $7.0 million at June 30, 2025, with $5.9 million in U.S. treasury securities at the latter date. The amount at risk exceeding FDIC limits was $0.7 million at June 30, 2025[38][39] - Accounts receivable, net of a $48 thousand allowance for credit losses, included 31.5% from one customer at June 30, 2025. At December 31, 2024, three customers represented 28.6%, 14.0%, and 11.9% of total accounts receivable[41][42] - Sales concentration for the three months ended June 30, 2025, showed two customers exceeding 10% of revenues, representing 23.4% and 17.7%. For the six months ended June 30, 2025, two customers represented 34.3% and 15.4% of revenues[44] NOTE 4: REVENUE RECOGNITION This section disaggregates revenue by market and recognition method, and discusses unrecognized contract revenue Revenue Disaggregation by Market and Recognition Method (in thousands) | Market | Three months ended June 30, 2025 (Over time) | Three months ended June 30, 2025 (Point in time) | Three months ended June 30, 2025 (Total) | | :-------- | :------------------------------------------- | :----------------------------------------------- | :--------------------------------------- | | Energy | $ - | $ 7 | $ 7 | | Aerospace | $ 1,412 | $ 562 | $ 1,974 | | Industrial| $ 1,912 | $ 316 | $ 2,228 | | Research | $ 716 | $ 186 | $ 902 | | Total | $ 4,040 | $ 1,071 | $ 5,111 | | Market | Six months ended June 30, 2025 (Over time) | Six months ended June 30, 2025 (Point in time) | Six months ended June 30, 2025 (Total) | | :-------- | :----------------------------------------- | :--------------------------------------------- | :------------------------------------- | | Energy | $ - | $ 14 | $ 14 | | Aerospace | $ 3,251 | $ 1,350 | $ 4,601 | | Industrial| $ 6,036 | $ 723 | $ 6,759 | | Research | $ 1,470 | $ 583 | $ 2,053 | | Total | $ 10,757 | $ 2,670 | $ 13,427 | - The Company has approximately $10.9 million in unrecognized contract revenue at June 30, 2025, which is expected to be substantially recognized within the next twelve months using the over-time revenue recognition method[48] NOTE 5: INVENTORIES This section provides a breakdown of inventory categories and highlights risks associated with specific inventory items Inventories (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------- | :------------ | :---------------- | | Raw materials | $1,134 | $1,217 | | Work-in-process | $1,005 | $765 | | Finished goods | $189 | $133 | | Total | $2,328 | $2,115 | - Included in inventories is approximately $0.4 million related to PVT 150/200 systems, purchased and built in anticipation of future orders. The Company faces a risk of additional charges to reduce carrying value if these orders do not materialize[52][54] NOTE 6: LONG-TERM DEBT This section details the company's long-term debt obligations, including loan agreements and repayment terms - The Company has a loan agreement from September 2022 for $432 thousand, secured by equipment, with a 6% interest rate, payable in 60 equal monthly installments of $8,352[55] NOTE 7: EARNINGS PER SHARE This section presents the calculation of basic and diluted earnings per share, including the weighted average common shares outstanding Weighted Average Common Shares Outstanding | Period | Basic Weighted Average Common Shares Outstanding | Diluted Weighted Average Shares Outstanding | | :----- | :--------------------------------------------- | :------------------------------------------ | | Q2 2025 | 6,867,868 | 6,867,868 | | Q2 2024 | 6,816,956 | 6,816,956 | | H1 2025 | 6,860,846 | 6,860,846 | | H1 2024 | 6,813,127 | 6,813,127 | - All stock options were excluded from the computation of diluted earnings per share for the three and six months ended June 30, 2025 and 2024, because their effect was antidilutive[56] NOTE 8: STOCK-BASED COMPENSATION EXPENSE This section details the stock-based compensation expense recognized across various line items and unrecognized compensation costs Stock-Based Compensation Expense (in thousands) | Line Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenue | $26 | $38 | $52 | $76 | | Research and development | $45 | $47 | $92 | $94 | | Selling | $21 | $27 | $48 | $54 | | General and administrative| $158 | $155 | $322 | $310 | | Total | $250 | $267 | $514 | $534 | - As of June 30, 2025, there was $1.1 million of unrecognized compensation costs related to stock options, expected to be recognized over a weighted average period of 1.6 years[59] NOTE 9: INCOME TAXES This section explains the company's income tax position, including the valuation allowance against net deferred tax assets - The Company has provided a full valuation allowance against its net deferred tax assets as of June 30, 2025, and December 31, 2024, due to management's assessment that it is more likely than not that these assets may not be realized in the future, primarily based on four years of operating losses[60] NOTE 10: SEGMENT REPORTING This section provides financial information by reportable segment and geographic area, detailing revenue contributions - The Company operates through three reportable segments: CVD Equipment (chemical vapor deposition, physical vapor transport, and thermal process equipment), SDC (ultra-high purity gas and chemical delivery control systems), and MesoScribe (electronic printing services and products, operations closed during 2024)[61][64] Segment Revenue (in thousands) | Segment | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | CVD Equipment | $3,403 | $4,107 | $9,718 | $7,054 | | SDC | $1,734 | $2,315 | $3,876 | $4,246 | | MesoScribe | $9 | $55 | $31 | $114 | | Total Segment Revenue | $5,146 | $6,477 | $13,625 | $11,414 | Revenue by Geographic Area (in thousands) | Geographic Area | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $4,630 | $5,822 | $12,585 | $10,143 | | North America, excluding US | $ - | $16 | $3 | $16 | | Europe, Middle East and Africa | $386 | $220 | $564 | $343 | | Asia-Pacific | $95 | $287 | $275 | $765 | | Consolidated Total Revenue | $5,111 | $6,345 | $13,427 | $11,267 | NOTE 11: RISKS AND CONTINGENCIES This section outlines various risks and contingencies impacting the company, including tariffs and geopolitical conflicts - The Company faces risks from tariffs on imports, which may reduce gross margins and affect future order rates. Geopolitical conflicts (e.g., war in Ukraine) restrict raw material procurement (nickel, integrated circuits) and impact sales into certain regions (China, Russia, Eastern European, and Asian regions)[70][72] Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial performance and condition, including an executive summary, business updates, detailed analysis of results of operations for the three and six months ended June 30, 2025 and 2024, liquidity and capital resources, and critical accounting estimates. It highlights key financial changes, strategic focus areas, and operational challenges Executive Summary This section provides an overview of CVD Equipment Corporation's business, core strategy, and focus on advanced materials markets - CVD Equipment Corporation designs, develops, and manufactures equipment for advanced materials markets, including aerospace, compound semiconductor, battery energy storage, and industrial applications. The core strategy focuses on growth end markets related to aerospace, microelectronics (electrification of everything), and industrial applications[77][78][80] Business Update This section highlights recent business developments, key financial metrics, significant orders, and strategic market evaluations Key Business Metrics (Q2 2025 vs Q2 2024) | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | Change (YoY) | | :-------------- | :-------------------- | :-------------------- | :----------- | | Revenue | $5.1 | $6.3 | (19.4%) | | Gross profit | $1.1 | $1.5 | (30.4%) | | Total bookings | $4.5 | $3.2 | 40.6% | | Backlog (end of period) | $13.2 | N/A | (4.3%) (vs Mar 31, 2025) | | Cash & cash equivalents (end of period) | $7.0 | N/A | (44.5%) (vs Dec 31, 2024) | - The Company received significant orders in 2024, including a PVT200 system for 200mm silicon carbide wafers (shipped Q3 2024), a $10.0 million multisystem order for SiC protective coating (first unit shipped July 2025), and a follow-on CVI 3500 system for ceramic matrix composites in aerospace[83][84][85] - The Company is evaluating market conditions to expand product offerings in the power electronics market, particularly for SiC semiconductors used in high energy efficiency applications like EVs and AI data centers[83] Results of Operations - Three Months Ended June 30, 2025 and 2024 This section analyzes the company's financial performance for the three-month periods, focusing on revenue, gross profit, and net loss changes Financial Performance (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :---------------------- | :------ | :------ | :--------- | :--------- | | Revenue | $5,111 | $6,345 | $(1,234) | (19.4%) | | Cost of revenue | $4,038 | $4,803 | $(765) | (15.9%) | | Gross profit | $1,073 | $1,542 | $(469) | (30.4%) | | Gross margin | 21.0% | 24.3% | | | | Total operating expenses| $2,213 | $2,440 | $(227) | (9.3%) | | Operating loss | $(1,140)| $(898) | $(242) | (26.9%) | | Net loss | $(1,061)| $(761) | $(300) | (39.4%) | - The decrease in revenue was primarily due to lower system revenues from both the CVD Equipment segment (down $0.7 million or 17.4%) and the SDC segment (down $0.6 million or 25.1%), partially offset by an increase in non-system revenue for CVD Equipment[94][95][96] - Order backlog declined from $13.8 million at March 31, 2025, to $13.2 million at June 30, 2025, mainly due to lower orders in the CVD Equipment segment. Backlog includes $12.0 million for contracts in progress/not started and $1.2 million for non-system orders[97] Results of Operations - Six Months Ended June 30, 2025 versus June 30, 2024 This section analyzes the company's financial performance for the six-month periods, focusing on revenue, gross profit, and net loss changes Financial Performance (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :---------------------- | :------- | :------- | :--------- | :--------- | | Revenue | $13,427 | $11,267 | $2,160 | 19.2% | | Cost of revenue | $9,658 | $8,941 | $717 | 8.0% | | Gross profit | $3,769 | $2,326 | $1,443 | 61.9% | | Gross margin | 28.1% | 20.7% | | | | Total operating expenses| $4,639 | $4,852 | $(213) | (4.4%) | | Operating loss | $(870) | $(2,526) | $1,656 | 65.5% | | Net loss | $(701) | $(2,233) | $1,532 | 68.1% | - The increase in revenue was primarily driven by higher revenues from the CVD Equipment segment (up $2.7 million or 37.8%), mainly from increased contract and non-system revenues, partially offset by lower revenues from the SDC segment (down $0.4 million or 8.7%)[110][111][112] - Gross profit increased by $1.4 million, and gross margin improved from 20.7% to 28.1%, primarily due to higher system and non-system revenues in the CVD Equipment segment[113] Liquidity and Capital Resources This section assesses the company's ability to meet its short-term and long-term obligations, including cash positions and working capital Liquidity and Cash Flow (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Working capital | $13,900 | $13,800 | | Cash and cash equivalents | $7,000 | $12,600 | | Cash Flow Activity (Six months ended June 30, 2025) | Amount (in thousands) | | :------------------------------------------------ | :-------------------- | | Net cash used in operating activities | $(5,432) | | Net cash used in investing activities | $(100) | | Net cash used in financing activities | $(43) | - The Company believes its current cash and cash equivalent positions, along with projected cash flow from operations, will be sufficient to meet working capital and capital expenditure requirements for the next twelve months[124] Critical Accounting Estimates This section discusses the significant judgments and assumptions used in financial reporting, particularly for revenue recognition and asset impairment - The preparation of financial statements requires significant estimates and assumptions, particularly for revenue recognition on custom equipment contracts (over-time method based on costs incurred) and the evaluation of long-lived assets for impairment[125][128][129][131] - Inaccuracies in estimating total sales, related costs, and progress toward completion on long-term contracts could materially impact gross margins or lead to future loss recognition[130] Item 3 – Quantitative and Qualitative Disclosures About Market Risk This section states that there are no quantitative or qualitative disclosures about market risk applicable to the Company for the reported period - The Company has no applicable quantitative and qualitative disclosures about market risk for this reporting period[132] Item 4 – Controls and Procedures Management, under the direction of the CEO and CFO, evaluated the effectiveness of the Company's disclosure controls and procedures, concluding they were effective as of June 30, 2025. No material changes in internal controls over financial reporting occurred during the quarter - The Company's disclosure controls and procedures were evaluated and determined to be effective as of June 30, 2025, providing reasonable assurance that information is accumulated and communicated appropriately[133][134] - There were no changes in internal controls over financial reporting during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, these controls[135] PART II - OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits Item 1 – Legal Proceedings This section states that there are no legal proceedings to report for the Company - There are no legal proceedings to report[138] Item 1A-Risk Factors This section indicates that there have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K - No material changes to the risk factors disclosed in the Annual Report on Form 10-K filed on March 19, 2025[139] Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds This section reports that there were no unregistered sales of equity securities or use of proceeds to disclose - There were no unregistered sales of equity securities or use of proceeds to report[140] Item 3 – Defaults Upon Senior Securities This section confirms that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities to report[141] Item 4 – Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[142] Item 5 – Other Information This section indicates that there is no other information to report - There is no other information to report[143] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from the CEO and CFO, and Inline XBRL data files - Exhibits include certifications from the Chief Executive Officer and Chief Financial Officer (31.1, 31.2, 32.1, 32.2) and various Inline XBRL Taxonomy Extension files (101.1, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[144][146] SIGNATURES This section formally concludes the report with the required signatures from the company's principal officers Signatures The report is duly signed on August 12, 2025, by Emmanuel Lakios, President and Chief Executive Officer, and Richard Catalano, Executive Vice President and Chief Financial Officer, on behalf of CVD Equipment Corporation - The report was signed on August 12, 2025, by Emmanuel Lakios, President and Chief Executive Officer, and Richard Catalano, Executive Vice President and Chief Financial Officer[149][150]