CVV 10-K & 10-Q changes, risk factors and insider trading

Risks relatedRelated to salesSales and productProduct developmentDevelopment.

During 2024,2025, onetwo customercustomers represented 29.5%27.6% and 13.7% of our total revenues.revenues, respectively. The loss of a major customer would have to be replaced by others, and our inability to do so may have a material adverse effect on our business and financial condition. We expect that contracts or orders from a relatively limited number of customers will, at times, continue to account for a substantial portion of our business. The mix and type of customers, and sales to any single customer, may vary significantly from quarter to quarter and from year to year. If any major customer did not place orders, or if they substantially reduced, delayed, or cancelled orders, we may not be able to replace the business in a timely manner or at all, which can and has had a material adverse effect on our results of operations and financial condition.

The marketing, sale and manufacture of our products,products often requires a lengthy sales cyclecycle, ranging from several months to over one year before we can complete production and delivery. The lengthy sales cycle makes forecasting the volume and timing of sales difficult and raises additional risks that customers may cancel or decide not to enter into contracts. The length of the sales cycle depends on the size and complexity of the project, the customer’s in-depth evaluation of our products, and, in some cases, the protracted nature of a bidding process.

For these and other reasons, demand for our products may fluctuate significantly and, consequently, our results of operations for past periods may not necessarily be indicative of future operating results.

In response to the tariffs announced by the U.S., China and other countries have imposed or proposed additional tariffs on certain exports from the United States. There is current uncertainty about the future relationship between the United States and other countries with respect to trade policies, taxes, government regulations, and tariffs and we cannot predict whether, and to what extent, U.S. trade policies will change in the future, including as a result of changes by the new U.S. presidential administration.future. A significant proportion of our materials and components are manufactured in China and other regions outside of the United States. Accordingly, such U.S. policy changes have made it and may continue to make it difficult or more expensive for us to obtain certain products manufactured outside the United States, which could affect our revenue and profitability. Any of these factors could depress economic activity and restrict our access to suppliers or customers and could have a material adverse effect on our business, financial condition, and results of operations.

We provide complex products that often require substantial lead-time for design, ordering parts and materials, and for assembly and installation. The time required to design, order parts and materials and to manufacture, assemble and install our products,products may in turn lead to delays or shortages in the availability of some products. If a product is delayed or is the subject of shortage because of problems with our ability to design, manufacture or assemble the product on a timely basis, obtain necessary materials and components, or if a product or software otherwise fails to meet performance criteria, we may lose revenue opportunities entirely, or experience delays in revenue recognition associated with a product or service. In addition, we may incur higher operating expenses during the period required to correct the problem.

We believe that our continued success in the markets in which we operate depends, in part, on our ability to continually improve existing technologies and to develop and manufacture new products and product enhancements on a timely and cost-effective basis. We must be able to introduce these products and product enhancements into the market in a timely manner, in response to customer’scustomers’ demands for higher-performance research and assembly equipment, customized to address rapid technological advances in capital equipment designs.

Technological innovations are inherently complex and require long development cycles and appropriate professional staffing. Our future business success depends on our ability to develop and introduce new products, or new uses for existing products,products that successfully address changing customer needs. Our success also depends on our ability to achieve market acceptance of our new products. To maintain our success in the marketplace, we may have to substantially increase our expendituresexpenditure on research and development. If we do not develop and introduce new products, technologies technologies or uses for existing products in a timely manner and continually find ways to reduce the cost of developing and producing them in response to changing market conditions or customer requirements, our business could be seriously harmed.

Risks relatedRelated to manufacturingManufacturing and ourSupply supply chainChain

Manufacturing interruptions or delays could affect our ability to meet customer demand and lead to higher costs, while the failure to accurately estimate customer customer demand accurately could result in excess or obsolete inventory.

Geopolitical developments across EuropeEurope, Asia and AsiaMiddle East have and may continue to restrict our ability to procure raw materials and components such as nickel and integrated circuits. Since 2021, weWe have experienced increased costs on certain components as well as delays in supply chain delivery, which may also impact on our ability to recognize revenue and reduce our gross profit margins, as well as extend our manufacturing lead times and reduce our manufacturing efficiencies. In addition, political and trade tensions have resulted in the imposition of tariffs which may affect our supply chain and the costs of components and materials. . Any significant increases in tariffs on components and materials materials that we purchase could negatively affect our business and results of operations. We have begun placing orders with more lead time to help mitigate the manufacturing delays, as well as assessing other suppliers or components to attempt to mitigate the potential cost cost impactsimpacts. In addition, we are utilizing our in-house flexible manufacturing to attempt to further mitigate both potential schedule delivery delivery delays and material cost increase, as well as increasing sales prices. While we have taken actions to mitigate the potential negative negative impacts to our revenue and profitability, there can be no assurance of the ultimate impact and the length of time that the supply chain chain factors, including tariffs, may impact our revenues and profitability.

We use numerous unrelated suppliers of materials and components. Due to geopolitical developments across Europe and Asia, we are experiencing reduced availability of raw materials and components. In turn, any reduction in the availability of these materials and components may reduce our ability to obtain sufficient amounts in a cost-effective manner. We generally do not have guaranteed supply arrangements with our suppliers. Because of the variability and uniqueness of our customer’scustomers’ orders, we try to avoid maintaining an extensive inventory of materials and components for manufacturing. While we are not dependent on any principal or major supplier for most of our material and component needs, switching to an alternative supplier may take significant amounts of time and added expense, which could result in a disruption of our operations and adversely affect our business. It is not always practical or even possible to ensure that component parts are available from multiple suppliers; accordingly, we procure some key parts from a single supplier or a limited group of suppliers. At certain times, increases in demand for capital equipment can result in longer lead-times for many important system components, which may cause delays in meeting shipments to our customers. The delay in the shipment of even a few systems could cause significant variations in our quarterly revenue, operating results and the market value of our common stock.

We manage, store, and transmit proprietary information and sensitive data relating to our operations. We may be subject to breaches of the information technology systems we use for these purposes. Experienced computer programmers and hackers may be able to penetrate our network security and misappropriate and/or compromise our confidential information (and /or third-party confidential information), create system disruptions, or cause shutdowns. Computer programmers and hackers also may be able to develop and deploy viruses, worms, and other malicious software programs that attack our systems or our products, or that otherwise exploit any security vulnerabilities.

While we have an active security training program for all employees during the year, utilize intrusion prevention and detection systems, as well as hardware firewall and virus security, the costs to address the foregoing security problems and security vulnerabilities before or after a cyber-incident could be significant. Our remediation efforts may not be successful and could result in interruptions, delays, or cessation of service, and loss of existing or potential customers, impeding our sales, manufacturing, distribution, or other critical functions. In addition, breaches of our security measures and the unapproved dissemination of proprietary information or sensitive data about us, our customer, or other third parties, could expose us, our customers, or other third parties to a risk of loss or misuse of this information, resultresulting in litigation and potential liability for us, damage our reputation, or otherwise harm our business.

Our financial position and results of operations may be materially harmed if we are unable to recouprecover our investment in research and development.

Occasionally, we may receive communications from other parties asserting the existence of patent rights or other intellectual property rights that they believe cover certain of our products, processes, technologies, or information. In addition, it is possible we could have a dispute with a customer concerning the use of intellectual property utilized in their equipment. If such cases arise, we will evaluate our position and consider the available alternatives, which may include seeking licenses to use the technology in question on commercially reasonable terms, developing new alternative technology or defending our position. Nevertheless, we cannot ensure that we will be able to obtain licenses, or, if we are able to obtain licenses, which related terms will be acceptable, or that litigation or other administrative proceedings will not occur. Defending our intellectual property rights through litigation could be very costly. If we are not able tocannot negotiate the necessary necessary licenses on commercially reasonable terms or successfully defend our position, our ability to utilize such intellectual property could could substantially inhibit our access to certain markets and our ability to compete in these markets which could have a material adverse effect effect on our financial position and results of operations.

CyclicalVolatile demand for our products may make it difficult for us to accurately budget our expense levels, which are based in part on our projections of future revenues.

Historically, demand for our equipment and related consumable products have been volatile because of changes in supply and demand, our ability to market and sell our products and other factors in the manufacturing process. Our orders levels tend to be more volatile than our revenue, as any change in demand is reflected immediately in orders booked, which are net of cancellations, while revenue, tends to be recognized over multiple quarters because of procurement and production lead times, and the deferral of certain revenue under our revenue recognition policies. The fiscal period in which we can recognize revenue is also at times subject to the length of time that our customers require to evaluate the performance of our equipment. This could cause our quarterly operating results to fluctuate.

When cyclicalfluctuations fluctuationsin our order levels and backlog result in lower-than-expected revenue levels, operating results have been and may continue to be materially adversely affected affected, and cost reduction measures have been and may continue to be necessary for us to remain competitive and financially sound. During a down cycle, we must be able to make timely adjustments to our cost and expense structure to correspond to the prevailing market conditions. In addition, during periods of rapid growth, we must be able to increase manufacturing capacity and the number of our personnel to meet customer demand, which may require additional liquidity. We can provide no assurance,assurance that these objectives can be met in a timely manner in response to changes within the industry cycles in which we operate. If we fail to respond to these cyclical changes, our business could be seriously harmed.

As part of our long-term strategy, we have pursued acquisitions of other companies or assets, and may pursue future acquisitions of other companies or assets which could potentially increase our assets. Adverse changes in business conditions could materially impact our estimates of future operations and result in impairment charges to these assets. If our assets were impaired, our financial condition and results of operations could be materially and adversely affected.

RiskRisks relatedRelated to our stockStock

The stock market in general and the market for technology stocks hashave experienced volatility. If those industry-based market fluctuations continue, the trading price of our common shares could decline significantly independent of the overall market, and shareholders could lose all or a substantial part of their investment. The market price of our common shares could fluctuate significantly in response to several factors, including, among others:

OurWith core strategy is to focus on growth end markets in applications related to aerospace, microelectronics including markets related to the “electrification of everything,” and industrial applications. With respect to aerospace, our systems are being used by our customers to produce ceramic matrix composite materials (“CMCs”) that will be used in next generation gas turbine jet engines with the objective of reducing jet fuel consumption and to produce specialty coatings for advanced high temperature environments.

BothOur technologies are essential for the support of the EV market. ThesePVT systems shouldmay provide us with standard product offerings to continue to support the EV focused market as well as energy storage, power conversion and power transmission. In addition, SiC semiconductors specifically help address the need for high energy efficiency and power density in the AC-DC stage in power supply units for AI data centers. We plan to evaluate the market conditions and opportunities to expand our product offerings in the power electronics market to build off the introduction of the PVT150 and PVT200 systems. We are also evaluating our ability to provide other equipment used in the manufacturing process of silicon carbide wafers.market.

Our revenue for the year ended December 31, 20242025 was $26.9$25.8 million as compared to $24.1$26.9 million for the year ended December 31, 2023,2024, ana increasedecrease of $2.8$1.1 million or 11.5%.4.1%.

The increasedecrease in revenue versus the prior year period was primarily attributable to higherlower revenue of $1.9$0.2 million from our CVD Equipment segment, segment and a $1.3$0.5 million increasedecrease in revenue from our SDC segment,segment offsetand by$0.7 million lower TantalineMesoScribe revenues ofwhich $0.5ceased millionoperations that was sold in May 2023.2024. Revenue from onetwo aerospace customercustomers for the year ended December 31, 20242025 represented 29.5%27.6% and 13.7% of our totalconsolidated revenues and 43.4%39.5% and 19.6% of CVD Equipment segment revenues.revenues, respectively.

The revenue contributed by our CVD Equipment segment for the year ended December 31, 20242025 of $18.3 million represented 68.1% of overall revenue as compared to $16.2$18.1 million (net of intersegment salesrevenue of $0.1 million $23,000) orrepresented 67.8%70.0% of overall revenue as compared to $18.3 million (net of intersegment revenue of $8,000) or 68.0% of overall revenue for the year ended December 31, 2023. 2024. The increasedecrease in external revenues of $2.1$0.2 million or 11.3%1.2% resulted principally from increases inlower system revenues fromdue aerospaceto andlower industrial contractsorders induring progress2025 offset in part by lowerhigher revenuenon-system forrevenues, PVT150/200 systems andprincipally spare parts.

The revenue contributed by our MesoScribeSDC segment for the year ended December 31, 20242025 of $0.8$7.6 representedmillion 2.9%(net of ourintersegment overallsales revenueof as compared to $0.7$0.3 million) represented or 3.0%29.5% of overall revenue as compared to $7.8 million (net of intersegment sales of $0.6 million) or 29.1% of overall revenue for the year ended December 31, 2023.2024. MesoScribeExternal fulfilledrevenue itsfor finalour ordersSDC during 2024segment anddecreased ceasedby operations.$0.2 million or 2.6%.

Our order backlog at December 31, 20242025 was approximately $19.4$6.6 million as compared to December 31, 20232024 of $18.4$19.4 million. Our order backlog at December 31, 20242025 consists of approximately $17.4$4.9 million related to remaining performance obligations of contracts in progress and not yet started and the balance of approximately $1.9$1.7 million represents other orders received from customers. As of December 31, 2024,2025, one industrialaerospace customer represented 41.8%29.4% of our backlog and one aerospaceindustrial customer represented 27.1%15.4% of our backlog. Historically, our revenues and orders have fluctuated based on changes in order rate and demand as well as other factors in our manufacturing process that impacts the timing of revenue recognition. Accordingly, orders received from customers and revenue recognized may fluctuate from quarter to quarter.

Gross profit for the year ended December 31, 20242025 amounted to $6.3$7.3 million, with a gross profit margin of 23.6%,28.3%, compared to a gross profit of $5.1$6.1 million and a gross profit margin of 21.0%22.5% for the year ended December 31, 2023.2024. The increase in gross profit of $1.3$1.2 million was primarily due to higher revenuesgross asmargin well as improved margins onfor CVD contractsEquipment indue progressprincipally and final MesoScribe sales that was partially offset byto a $1.3$1.6 million non-cash charge in 2024 to reduce certain PVT inventory to net realizable value. This was offset by lower gross margins at our SDC and MesoScribe segments due principally to lower revenues.

For the year ended December 31, 2024,2025, research and development expenses were $2.6$2.8 million, or 9.8%10.8% of revenue as compared to $2.6 million, or 10.8%9.8% for the year ended December 31, 2023.2024. ThereThe wereincrease nowas significantdue changesto less time charged to contracts in researchprogress andpartially developmentoffset expensesby lower aspersonnel compared to the prior year.costs.

Selling expenses were $1.7$1.4 million or 6.2%5.6% of the revenue for the year ended December 31, 20242025 as compared to $1.6$1.7 million or 6.8%6.2% for the year ended December 31, 2023.2024. ThereThe weredecrease nowas significantprimarily changes in selling expenses as compareddue to thelower priorpersonnel year.costs.

During 2024, we recognized a gain of $0.6 million on the sale of equipment related to MesoScribe representing the sale price of $0.8 million less the costs of the equipment sold of $0.2 million. We also recognized a gain of $42,000 on the sale of equipment by our CVD Equipment.Equipment segment.

Income tax expense (benefit) for the years ended December 31, 20242025 and 2023,2024, was $24,000$3,000 and $(14,000)$24,000 respectively. We continue to evaluate for potential utilization of our deferred tax asset, which has been fully reserved for, on a quarterly basis, by reviewing our economic models, including projections of future operating results.

We experienced increased costs on certain materials and components as well as delays in supply chain delivery, which may also impact our ability to recognize revenue and reduce our gross profit margins, as well as extend our manufacturing lead times and reduce our manufacturing efficiencies. We have commenced placing orders with more lead time to help mitigate the manufacturing delays, as well as assessing other suppliers or components to attempt to mitigate the potential cost impacts. In addition, we are utilizing our in-house flexible manufacturing to attempt to further mitigate both potential schedule delivery delays and material cost increase. While we have initiated actions to mitigate the potential negative impacts to our revenue and profitability, there can be no assurance of the ultimate impact and the length of time that the supply chain factors may impact our revenues and profitability.

Net cash used in operating activities during 20242025 was $1.5$3.7 million and was principally due to the net loss of $1.9$1.6 million and reductionsnet increase in contract assets and liabilities of $2.4$3.5 million, offset by a reduction in inventory of $0.6$0.5 million, and non-cash items of $2.6 million including a provision for excess and obsolete inventory of $1.6 million.

Net cash providedused byin investing activities for the year ended December 31, 20242025 of $0.1 million consisted of proceeds from the salespurchases of equipment ofand $0.2investment millionin offsetcaptive byinsurance capital expenditures of $0.1 million.company.

We consider the following estimates within our significant accounting policies to be critical because of their complexity and the high degree of judgment involved in maintaining them. See Note 2 – “Summary of Significant Accounting Policies” of our Consolidated Financial Statements for additional information regarding our accounting policies Revenue Recognition We design, manufacture, and sell custom chemical vapor deposition equipment through contractual agreements. These system sales require us to deliver functioning equipment that is generally completed within two to eighteen months from commencement of order acceptance. We recognize revenue over time by using an input method based on costs incurred as it depicts our progress toward satisfaction of the performance obligation. Under this 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.

There have been no other material changes to the risk factors disclosed in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 30, 2026.

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 guaranteeguaranty 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.

CVD Equipment Corporation (“CVD” or the “Company”) 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 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 businessesremaining business and product lines, including the potential sale sale, divestiture or divestitureacquisition of assets or business lines.

The net cash proceeds from the sale of SDC we received in April 2026, after payment of transaction costs and employee related liabilities, were $14.8$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, CVDthe EquipmentCompany has approximately $23$23.5 million in cash and no long-term debt. 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 supportour initiativesfacilities aimedand 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 creatingfair shareholdermarket 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.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.

We have generally gained new customers through our industry reputation, as well as print advertising and trade show attendance.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, 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.

QuartersThree Months Ended MarchJune 31,30, 2026 and 2025

The following table presents revenue and expense line items reported in our condensed consolidated statements of operations for the quartersthree months ended MarchJune 31,30, 2026 and 2025 and the period-over-period dollar and percentage changes for those line items (in thousands, except percentages). Unless otherwise specified, our discussion below reflects continuing operations only. Prior period financial information related to discontinued operations has been reclassified and separately presented in the condensed consolidated financial statements and accompanying notes to conform to the current period presentation.

Our revenue for the quarterthree months ended MarchJune 31,30, 2026,2026 was $1.8$2.0 million compared to $6.3$3.4 million for the quarterthree months ended MarchJune 31,30, 2025, a decrease of 70.9%.$1.4 million or 42.6%.

The decrease in revenue versus the prior year period was primarily attributable to lower system revenue due to lower bookings.bookings The decrease wasbeing partially offset by $0.3an millionincrease benefitin fromnon-system a contract modification during the quarter.revenues. Revenue from threetwo customers represented 227.2%, 21.7%50.9% and 17.3%, respectively,24.3% of our totalrevenues, revenues.respectively.

Our order backlog at MarchJune 31,30, 2026,2026 was approximately $4.7$3.9 million as compared to December$4.6 million at March 31, 2025, of $4.7 million.2026. Our order backlog at atJune March30, 31, 2026,2026 consists of approximately $2.6$2.7 million related to remaining performance obligations of contracts in progress and notthe yet started and the balance of approximately $2.0$1.1 million represents other orders received from customers. As of MarchJune 31,30, 2026, one industrial customer represented 14.7% of our backlog and one aerospace customer represented 32.8%36.0% of our backlog. Historically, our revenues and orders have fluctuated based on changes in order rate as well as other factors in our manufacturing process that impacts the timing of revenue recognition. Accordingly, orders received from customers and revenue recognized may fluctuate from quarter to quarter.

Gross profit for the quarterthree months ended MarchJune 31,30, 2026,2026 was $0.1$0.3 million, with a gross profit margin of 8.0%,16.8%, compared to a gross profit of $1.7 $0.5 million and a gross profit margin of 27.4%14.1% for the quarterthree months ended MarchJune 31,30, 2025. The decrease in gross profit of $1.6$0.2 million was primarilyprincipally the result ofdue to lower system revenuerevenues andpartially lower absorption of fixed manufacturing costs. Gross profit during the quarter ended March 31, 2026, benefitedoffset by $0.3an millionincrease fromin anon-system contract modification.revenues.

For the quarterthree months ended MarchJune 31,30, 2026, research and development expenses were $0.7 million, or 39.4%35.1% of revenue as compared to $0.7$0.6 million, or 11.6%18.8% of revenue for the quarterthree months ended MarchJune 31,30, 2025.2025, Duringan increase of $46,000 or 7.2%. The increase in 2026 was the currentresult quarter there wasof less timehours being charged to cost of revenue for contracts in progress that waspartially offset by lowera personnelreduction costs.in personnel.

General engineering support and expenses related to the development of more standardized products and value-added development of existing products are reflected as part of research and development expense. General engineering support and expenses are charged to costcosts of revenuegoods sold when work is performed directly on a customer order.

Selling expenses were $0.2 million or 13.0%11.9% of the revenue for the quarterthree months ended MarchJune 31,30, 2026 as compared to $0.4$0.3 million or 5.8%8.4% of revenue for for the quarterthree months ended MarchJune 31,30, 2025.2025, a decrease of $50,000 or 17.7%. The decrease was primarilythe dueresult toof lowera personnelreduction costs.in personnel.

Other Income,Income (Expense), Net