CVD EQUIPMENT CORP

Note 1 –Business Description

CVD Equipment Corporation and its subsidiaries (the “Company”) is a New York corporation. Its principal business activities include designing, developing, and manufacturing a broad range of chemical vapor deposition, physical vapor transport, gas control, and other equipment and process solutions used to develop and manufacture materials and coatings for industrial applications and research. The Company’s products are used in production environments as well as research and development centers, both academic and corporate.

On March 23, 2026, the Company entered into an agreement to sell its SDC business division to a subsidiary of the Atlas Copco Group. See Note 15 – Subsequent Event.

Note 2 -Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Liquidity

At December 31, 2025, the Company had $8.7 million in cash and cash equivalents. The Company anticipates that the existing cash and cash equivalents balance together with potential future income from operations, collections of existing accounts receivable, revenue from its existing backlog of products as of this filing date, the sale of inventory on hand, deposits and down payments against significant orders will be adequate to meet its working capital and capital equipment requirements, and its anticipated cash needs over the next 12 months from the date of issuance of these financial statements.

Reclassifications

Certain reclassifications have been made to the prior period consolidated financial statements to conform to the current period presentation. These reclassifications had no effect on net loss.

Principles of Consolidation

The consolidated financial statements include the accounts of CVD Equipment Corporation and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Company’s significant estimates are the accounting for certain items such as revenues on long-term contracts recognized on the input method, valuation of inventories at the lower of cost or net realizable value; allowance for credit losses; valuation allowances for deferred tax assets, estimated lives and impairment considerations of long-lived assets and valuation of stock-based compensation.

Revenue Recognition

In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606 - Revenue from Contracts with Customers (“ASC 606*”), the Company records revenue in an amount that reflects the consideration to which the Company expects to be entitled in exchange for goods or services promised to its customers. Under ASC 606,* the Company follows a five-step model to: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price for the contract; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue using one of the following two methods:

Over time

The Company designs, manufactures and sells custom chemical vapor deposition, thermal process equipment and other equipment through contractual agreements. These system sales require the Company to deliver functioning equipment that is generally completed within two to eighteen months from commencement of order acceptance. For systems sales that meet the criteria to recognize revenue over time, the Company recognizes revenue over time by using an input method based on costs incurred as it depicts the Company’s progress toward satisfaction of the performance obligation. For system sales that do not meet the criteria to recognize revenue over time based on the contract provisions, the Company recognizes revenue based on point in time.

Under the over time method, revenue arising from fixed price contracts is recognized as work is performed based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations. Incurred costs include all direct material and labor costs and those indirect costs related to contract performance, such as supplies, tools, repairs and depreciation costs. Contract material costs are included in incurred costs when the project materials have been purchased or moved to work-in-process, and installed, as required by the project’s engineering design. Cost based input methods of revenue recognition require the Company to make estimates of costs to complete the projects. In making such estimates, significant judgment is required to evaluate assumptions related to the costs to complete the projects, including materials, labor and other system costs. If the estimated total costs on any contract are greater than the net contract revenues, the Company recognizes the entire estimated loss in the period the loss becomes known and can be reasonably estimated. There were no material impairment losses recognized on contract assets during the years ended December 31, 2025 and 2024.

The timing of revenue recognition, billings and collections results in accounts receivables, unbilled receivables or contract assets and contract liabilities on our consolidated balance sheet. Under typical payment terms for our contracts accounted for over time, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones.

Under ASC 606, payments received from customers in excess of revenue recognized to-date results in a contract liability. These contract liabilities are not considered to represent a significant financing component of the contract because the Company believes these cash advances and deposits are generally used to meet working capital demands which can be higher in the earlier stages of a contract. Also, advanced payments and deposits provide the Company with some measure of assurance that the customer will perform on its obligations under the contract.

Contract assets include unbilled amounts typically resulting from system sales under contracts and represents revenue recognized that exceeds the amount billed to the customer.

Contract liabilities include advance payments and billings in excess of revenue recognized. The Company typically receives down payments upon receipt of order and progress payments as the system is manufactured.

Contract assets and contract liabilities are classified as current as these contracts in progress are expected to be substantially completed within the next twelve months.

Point in time

For non-system sales of products and services, revenue is recognized at the point in time when control of the promised products or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services (the transaction price). A performance obligation is a promise in a contract to transfer a distinct product or service to a customer and is the unit of account under ASC 606, “Revenue from Contracts with Customers.”

For any system equipment sales where the equipment would have an alternative use or where the contract provisions of the contract preclude the use of over time revenue recognition, revenue is recognized at the point in time when control of the equipment is transferred to the customer. For the years ended December 31, 2025 and 2024, all system equipment sales were recorded over time by using an input method except for a) one contract in 2025 and one contract in 2024 that was recorded as revenue at the point in time the equipment was transferred to the customer and b) one contract that was entered during 2024 and was not recognized as revenue using over time revenue recognition until July 2025 when a contract modification was entered into with the customer to change certain contract provisions.

Inventories

Inventories (raw materials, work-in-process and finished goods) are valued at the lower of cost (determined on the first-in, first-out method) or net realizable value. Work-in-process and finished goods inventory reflect all accumulated production costs, which are comprised of direct production costs and overhead, and is reduced by amounts recorded in cost of sales as the related revenue is recognized. Indirect costs relating to long-term contracts, which include expenses such as general and administrative, are charged to expense as incurred and are not included in our cost of sales or work-in-process and finished goods inventory.

Obsolete inventory or inventory in excess of management’s estimated usage requirement is written down to its estimated net realizable value if less than cost. The Company evaluates usage requirements by analyzing historical usage, anticipated demand, alternative uses of materials, and other qualitative factors. Unanticipated changes in demand for the Company’s products may require a write down of inventory, which would be reflected in cost of sales in the period the revision is made.

Product Warranty

The Company typically provides standard warranty coverage on its systems for one year from the date of final acceptance or fifteen months from the date of shipment by providing labor and parts necessary to repair the systems during the warranty period. The Company records the estimated warranty cost when revenue is recognized on the related system. Warranty cost is included in “Cost of revenue” in the consolidated statements of operations. The estimated warranty cost is based on the Company’s historical cost. The Company updates its warranty estimates based on actual costs incurred.

Income Taxes

Deferred tax assets and liabilities are determined based on the estimated future tax effects of temporary differences between the financial statements and tax bases of assets and liabilities, as measured by using the future enacted tax rates. Deferred tax expense (benefit) is the result of changes in the deferred tax assets and liabilities. The Company records a valuation allowance against deferred tax assets when it is more likely than not that future tax benefits will not be utilized based on a lack of sufficient positive evidence.

The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) the Company determines whether it is more likely than not the tax position will be sustained on examination by taxing authorities based on the technical merits of the position and (2) for those positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. The Company recognizes potential interest and penalties related to uncertain tax positions in income tax expense.

The Company’s policy for global intangible low taxed income (“GILTI”) is to treat such amounts as a period cost when incurred.

Impairment of Long-Lived Assets and Intangibles

Long-lived assets consist primarily of property, plant, and equipment. Intangibles consist of patents, copyrights and intellectual property, licensing agreements and certifications. Long-lived assets are reviewed for impairment whenever events or circumstances indicate their carrying value may not be recoverable. When such events or circumstances arise, an estimate of the future undiscounted cash flows produced by the asset, or the appropriate grouping of assets, is compared to the asset’s carrying value to determine if impairment exists. If the asset is determined to be impaired, the impairment loss is measured on the excess of its carrying value over its fair value. Assets to be disposed of are reported at the lower of their carrying value or net realizable value. See Note 5 for impairment of long-lived assets recorded during the year ended December 31, 2025.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Depreciation is determined on a straight-line basis for buildings and building improvements over 5 to 39 years and for machinery and equipment over 5 to 8 years. Depreciation and amortization of assets used in manufacturing are recorded in cost of revenue. Depreciation and amortization of all other assets are recorded as operating expenses.

Research and Development

Research and development costs are expensed as incurred and include charges for the development of new technology and transition of existing technology into new products.

Earnings Per Share

Basic earnings per common share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding during each period. When applicable, diluted earnings per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be adjusted upon exercise of common stock options, unvested restricted shares, and warrants.

Potential common shares issued are calculated using the treasury stock method, which recognizes the use of proceeds that could be obtained upon the exercise of options and warrants in computing diluted earnings per share. It assumes that any proceeds would be used to purchase common stock at the average market price of the common stock during the period.

Cash and Cash Equivalents

The Company had cash and cash equivalents of $8.7 million and $12.6 million at December 31, 2025 and 2024, respectively. The Company invests excess cash in treasury bills, certificates of deposit or deposit accounts, all with original maturities of less than three months. Cash equivalents were $8.2 million and $11.9 million at December 31, 2025 and 2024, respectively.

The Company places most of its temporary cash investments with financial institutions, which from time to time may exceed the Federal Deposit Insurance Corporation limit. The amount in excess of the limit at December 31, 2025 and 2024 was $0.2 million and $0.4 million, respectively.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, and accounts receivable. The Company places its cash equivalents with financial institutions and invests its excess cash primarily in treasury bills, certificates of deposit or deposit accounts. The Company has established guidelines relative to credit ratings and maturities that seek to maintain stability and liquidity.

The Company routinely assesses the financial strength of its customers*.* In accordance with the “expected credit loss” model, the carrying amount of accounts receivable is reduced by a valuation allowance that reflects the best estimate of the amounts the Company does not expect to collect. In addition to reviewing delinquent accounts receivable, the Company considers many factors in estimating our reserve, including types of customers and their credit worthiness, experience and historical data adjusted for current conditions and reasonable supportable forecasts*.*The Company records an allowance for credit losses based upon a specific review of all significant outstanding invoices. For those invoices not specifically reviewed, provisions are provided based upon the collection history, current economic trends and reasonable supportable forecasts.

Accounts receivable is presented net of an allowance for credit losses of $30,000, $48,000 and $36,000 as of December 31, 2025, 2024 and 2023, respectively. The allowance is based on prior experience and management’s evaluation of future economic conditions. Measurement of credit losses requires consideration of historical loss experience, including the need to adjust for changing business conditions, and judgments about the probable effects of relevant observable data, including present economic conditions such as delinquency rates and the financial health of specific customers. Future changes to the estimated allowance for credit losses could be material to our results of operations and financial condition. The (recovery) provision for bad debt expense was ($18,000) and $13,000 for the years ended December 31, 2025 and 2024, respectively.

The Company has accounts receivables from certain customers that exceed 10% of total accounts receivable. As of December 31, 2025, the accounts receivable balance includes amounts from three customers that represented 31.8%,19.8% and 15.7% of total accounts receivable, and as of December 31, 2024, the accounts receivable balance includes amounts from three customers that represented 28.6%,14.0% and 11.9% of total accounts receivable.

Sales Concentrations

Revenue for a single customer in any one year can exceed 10% of our total sales. There were two customers in the year ended December 31, 2025 that represented 27.6% and 13.7% of our revenues, while there was one customer that represented 29.5% of our revenues in the year ended December 31, 2024. The loss of a large customer could have a material adverse effect on the Company’s business and financial condition.

Export sales to customers represented approximately 5.4% and 4.3% of sales years ended December 31, 2025 and 2024 respectively. Export sales in both 2025 and 2024 were primarily to customers in Europe and Asia. The Company has not entered into any foreign exchange contracts.

Fair Value of Financial Instruments

The carrying amounts of financial instruments including cash and cash equivalents, accounts receivable, and accounts payable, approximate fair value due to the relatively short-term maturity of these instruments. The carrying value of long-term debt approximates fair value based on prevailing borrowing rates currently available for loans with similar terms and maturities.

Stock-Based Compensation

The Company records stock-based compensation in accordance with the provisions set forth in ASC 718, “Stock Compensation”. ASC 718 requires companies to recognize the cost of employee services received in exchange for awards of equity instruments based upon the grant date fair value of those awards over the vesting period. The Company uses the Black-Scholes option-pricing model to compute the estimated fair value of option awards and includes assumptions regarding expected volatility, expected option term, dividend yields and risk-free interest rates. The value of restricted stock awards are based on the fair value on the date of the grant.

Shipping and Handling

It is the Company’s policy to include freight charges billed to customers in total revenue. The amount included in revenue was $48,000 and $73,000 for the years ended December 31, 2025 and 2024, respectively.

Recently Adopted Accounting Standard

In December 2023, the FASB issued ASU 2023-09,Income Taxes (Topic 740):Improvement to Income Tax Disclosures. The amendments further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The expanded annual disclosures are effective for the year ended December 31, 2025 and were applied retrospectively. See Note 9 – Income Taxes.

Recently Issued Accounting Standards

In November 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statements Expenses (Subtopic 220-40),” to improve income statement expenses disclosure. The standard requires more detailed information related to the types of expenses, including (among other items) the amounts of purchases of inventory, employee compensation, depreciation and intangible asset amortization included within each interim and annual income statement’s expense caption, as applicable. This authoritative guidance can be applied prospectively or retrospectively and will be effective for financial statements issued for annual periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements.

The Company believes there is no additional new accounting guidance adopted, but not yet effective that is relevant to the readers of our financial statements. However, there are numerous new proposals under development which, if and when enacted, may have a significant impact on our financial reporting.

Note 3 –Revenue

The following table represents a disaggregation of revenue from contracts by end markets for the years ended December 31, 2025 and 2024 (in thousands):

The energy market includes customers involved in the manufacture of silicon carbide wafers and batteries. Aerospace market includes customers that manufacture aircraft engines. Industrial end market consists of various end customers in diverse industries. Research market principally represents customers that are universities and other research institutions.

The Company has unrecognized contract revenue of approximately $4.6 million at December 31, 2025, which it expects to substantially recognize as revenue within the next twelve months based on over time revenue recognition.

Judgment is required to evaluate assumptions including the amount of net contract revenues and the total estimated costs to determine the Company’s progress towards contract completion and to calculate the corresponding amount of revenue to recognize.

Changes in estimates for sales of systems occur for a variety of reasons, including but not limited to (i) build accelerations or delays, (ii) product cost forecast changes, (iii) cost related change orders or add-ons, or (iv) changes

in other information used to estimate costs. Changes in estimates may have a material effect on the Company’s consolidated financial position and results of operations.

Note 3 – Revenue (continued)

Contract assets and contract liabilities on input method type contracts in progress are summarized for the years ended December 31, 2025 and 2024 as follows (in thousands):

Of the contract liability balances at December 31, 2024 and December 31, 2023, $3.1 million and $4.9 million were recognized as revenue during the years ended December 31, 2025 and 2024, respectively. Contract assets and contract liabilities at December 31, 2023 were $1.6 million and $4.9 million, respectively.

Note 4 -Inventories

Inventories as of December 31 consist of (in thousands):

During the year ended December 31, 2024, the Company recorded a non-cash charge to reduce the net realizable value of its inventory by approximately $1.6 million. .

Note 5 –Property, Plant and Equipment and Assets Held for Sale

Major classes of property, plant and equipment consist of the following as of December 31 (in thousands):

Machinery and equipment also include furniture and fixtures and software.

Depreciation expense was $0.7 million and $0.7 million for the years ended December 31, 2025 and 2024, respectively.

During 2025 and 2024, two PVT units were transferred from inventory to property, plant and equipment totaling $0.2 million and $0.1 million, respectively. The unit transferred in 2025 is included in construction in progress at December 31, 2025. This equipment is and will be used internally to further the research and development of products used to grow silicon carbide crystals.

On November 6, 2025, the Company’s Board of Directors approved a comprehensive strategy to transform the Company in response to the continued fluctuations in order rates and the recent decline in the bookings of the Company’s CVD Equipment division. As part of this strategy, the Company transitioned the operating model for the CVD Equipment business from vertically integrated fabrication to outsourced fabrication of certain components. At December 31, 2025, the Company classified certain excess manufacturing equipment as held for sale with a fair value of $0.5 million based on an agreement the Company entered in January 2026 with a third-party to sell the equipment for this amount. The Company recorded an impairment charge of $0.2 million related to this equipment and related capitalized software during the year ended December 31, 2025.

The Company entered into an agreement with the Town of Islip Industrial Development Agency (Islip IDA) in July 2021 under which the Company was granted tax incentives whereby the Company agreed to make payments in lieu of all real estate taxes and assessments (PILOT payments). The agreement requires the Company to maintain certain employment levels at its Central Islip, New York facility. The agreement provides for the Islip IDA to recapture tax incentives provided to the Company in certain circumstances. Any recapture of such tax benefits could have a material adverse effect on the Company’s financial position and future results of operations and cash flows.

Note 6 –Accrued Expenses

Accrued expenses consist of the following as of December 31 (in thousands):

Note 7 –Long-term Debt

Long-term debt consists of the following as of December 31 (in thousands):

In September 2022*,*the Company entered into a loan agreement to fund the acquisition of equipment in the amount of $0.4 million payable in monthly repayment of $8,000 including interest at 6% per annum.

In February 2026, the Company repaid the loan in full in anticipation of selling the equipment as discussed in Note 5. Accordingly, the entire balance as of December 31, 2025 has been classified as a current liability.

Note 8 –Earnings per Share

The calculation of basic and diluted weighted average common shares outstanding for the years ended December 31, 2025 and 2024 is as follows (in thousands):

At December 31, 2025 and 2024, all stock options and unvested restricted stock were not included in the computation of diluted earnings per share because their effect was antidilutive.

Note 9 –Income Taxes

Loss before income taxes for the years ended December 31, 2025 and 2024 consist of the following (in thousands):

Significant components of income tax expense for the years ended December 31, 2025 and 2024 consist of the following (in thousands):

Income tax paid (net of refunds) were as follows (in thousands):

During the year ended December 31, 2025, we adopted ASU 2023-09 to enhance the income tax disclosures regarding income taxes paid and the rate reconciliation disclosure. The provision for income taxes reconciles to the amount computed by applying the U.S. federal statutory rate of 21% to income (loss) before income taxes as follows (in thousands):

Note 9 – Income Taxes (continued)

Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets for federal and state income taxes are as follows (in thousands):

Note 9 – Income Taxes (continued)

As required under ASU 2023-09, the Company has included only the portion of the valuation allowance related to federal deferred tax assets in the “change in valuation allowance” line of the rate reconciliation. The following table presents a reconciliation of the total change in the valuation allowance (in thousands):

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that the deferred tax assets will be realized. The ultimate realization of deferred tax assets is based on the assessment of available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the utilization of existing deferred tax assets. The Company considered all positive and negative evidence when determining the amount of the net deferred tax assets that are more likely than not to be realized. This evidence includes, but is not limited to, historical earnings, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the prior three-year period ended December 31, 2025. Such objective evidence limits the ability to consider subjective evidence such as our projections for future growth. Based on this assessment, we maintained a full valuation allowance against our net deferred tax assets as of December 31, 2025, and 2024. If these estimates and assumptions change in the future, we may be required to reduce our existing valuation allowance resulting in less income tax expense.

For the years ended December 31, 2025 and 2024 , the valuation allowance increased by approximately $0.2 million and $0.5 million, respectively, from the prior year primarily from current year operating losses for which no tax benefit was provided.

At December 31, 2025, the Company had $5.9 million of U.S. federal net operating loss carryforwards. These net operating losses have an indefinite carryforward period but are only available to offset 80% of future taxable income. The Company also has $1.7 million of federal research and development tax credits which expire in varying amounts in tax years 2028 through 2042.

The Company applies the applicable authoritative guidance which prescribes a comprehensive model for the manner in which a company should recognize, measure, present and disclose in its financial statements all material uncertain tax positions that the Company has taken or expects to take on a tax return. As of December 31, 2025 and 2024, the Company hadno uncertain tax positions.

On July 4, 2025, “An Act to Provide for Reconciliation Pursuant to Title II of the H. Con. Res. 14” (the Act) was enacted. The Act provides for several corporate tax changes including, but not limited to, restoring full expensing of domestic research and development costs, restoring immediate deductibility of certain capital expenditures, and changes in the computations of U.S. taxation on international earnings. The enacted legislation did not have a material impact on the Company’s effective tax rate for the year ended December 31, 2025.

Note 10 –Stock-Based Compensation

A summary of the Company’s Share Incentive Plans are as follows:

2007 Share Incentive Plan

On December 12, 2007, shareholders approved the Company’s 2007 Share Incentive Plan (“2017 Incentive Plan”), in connection therewith,750,000 shares of the Company’s common stock are reserved for issuance pursuant to options or restricted stock that may be granted under the 2017 Incentive Plan through December 12, 2017. The Plan expired in December 2017. As of December 31, 2025, there were 120,000 options outstanding under this plan.

2016 Share Incentive Plan

On December 9, 2016, shareholders approved the Company’s 2016 Share Incentive Plan (“2016 Incentive Plan”), in connection therewith,750,000 shares of the Company’s common stock are reserved for issuance pursuant to options or restricted stock that may be granted under the 2016 Incentive Plan through December 9, 2026. As of December 31, 2025, there were 420,375 options outstanding under this plan.

2022 Share Incentive Plan

On July 14, 2022, shareholders approved the Company’s 2022 Share Incentive Plan (“2022 Incentive Plan”), in connection therewith,515,000 shares of the Company’s common stock are reserved for issuance pursuant to options or restricted stock that may be granted under the 2022 Incentive Plan through July 14, 2032. As of December 31, 2025, there were 263,500 options outstanding under this plan.

Under the 2016 and 2022 Share Incentive Plans, the purchase price of the common stock under each option plan shall be determined by the Committee, provided, however, that such purchase price shall not be less than the fair market value of the shares on the date such option is granted. The stock options generally expire seven toten years after the date of grant.

As of December 31, 2025*,*there were 48,698 shares available for grant under the 2016 Equity Incentive Plan and 98,180 shares available for grant under the 2022 Equity Incentive Plan.

The Company recorded stock-based compensation of $0.9 million and $1.1 million for the years ended December 31, 2025 and 2024, respectively, that were included in the following line items in our Consolidated Statements of Operations (in thousands):

Stock-based compensation expense in both years included approximately $0.2 million related to restricted stock awards pursuant to the Director Compensation plan discussed below. The Company recognizes forfeitures of stock awards as they occur.

Note 10 – Stock-Based Compensation (continued)

For the year ended December 31, 2024, the Company granted 5,000 stock options, vesting 25% per year over four years, with a ten-year life. The Company determined the fair value of stock options granted based upon weighted average assumptions as provided below.

The expected life is the number of years the Company estimates that the awards will be outstanding based on the simplified method that considers the vesting period and contractual period of the option. The expected volatility is measured using historical daily price changes of the Company’s common stock over the respective expected term. The Company has 803,875 outstanding stock options under the three plans at December 31, 2025.

The following table summarizes stock options awards for the years ended December 31, 2025 and 2024:

At December 31, 2025 and 2024, stock options to purchase 645,375 and 485,000, respectively, shares of common stock were exercisable.

The following table summarizes information about the outstanding and exercisable options at December 31, 2025:

Note 10 – Stock-Based Compensation (continued)

As of December 31, 2025, there was $0.7 million of unrecognized compensation costs related to stock options expected to be recognized over a weighted average period of 1.2 years.

Restricted Stock Awards

Pursuant to the Director Compensation plan approved on October 11, 2021*,*each of the five independent directors is entitled to compensation for an annual equity retainer in the amount of $40,000 per director, to be automatically granted on the date of the Company’s annual meeting of shareholders.

The following table summarizes restricted stock awards for the years ended December 31, 2025 and 2024:

The fair value of the restricted stock awards is recorded as stock-based compensation expense over the one-year vesting period and totaled $0.2 million for both years ending December 31, 2025 and 2024, respectively.

Note 11 –Defined Contribution Plan

The Company maintains a 401(k) Plan for the benefit of all eligible employees. All employees as of the effective date of the 401(k) Plan became eligible. An employee is eligible to become a participant after three months of continuous service.

Participants may elect to contribute from their compensation any amount up to the maximum deferral allowed by the Internal Revenue Code. Employer contributions are optional.

Effective July 1, 2022, the Company implemented a matching contribution of 50% of an employee’s contributions up to 6% of their compensation. The Company recorded compensation expense of $240,000 and $235,000 during the years ended December 31, 2025 and 2024, respectively, for matching contributions to the 401(k) plan.

Note 12 -Reportable Segments

The Company has determined that it hasthree reportable segments, organized primarily based on product offerings, as follows:

Both CVD Equipment and SDC also sell spares and parts and provide services related to the equipment each segment sells.

The chief operating decision maker (“CODM”) of the Company is the Company’s chief executive officer. The CODM assesses performance and decides how to allocate resources, including employees, financial or capital resources, based on segment net income (loss). The CODM considers actual-to-actual variances on a quarterly basis when making decisions about allocating capital and other resources to the segments and to assess the performance for each segment.

Financial results for the reportable segments and other business are prepared on a basis consistent with the internal disaggregation of financial information to assist the CODM is making internal operating decisions.

Certain income and expenses are excluded from segment net income (loss) and included in the unallocated amounts in the reconciliation of reportable segment net income (loss) to net loss. These items are not used by the CODM in allocating resources or evaluating the results of the segments and include the following: corporate expenses consisting of employment costs of executives, finance, information technology and human resources; board of director fees; professional fees; shareholder and investor relations expense; directors’ and officers’ insurance; interest income and income tax expense. Segment income (loss) from operations may not be consistent with measures used by other companies.

The following provides segment information as described below (in thousands):

The following table presents a reconciliation of revenue of reportable segments to consolidated revenue (in thousands):

Intersegment revenues are determined based on similar product sales to external customers of the Company.

The following table presents a reconciliation of net income (loss) of reportable segments to consolidated net loss (in thousands):

The following table presents a reconciliation of total assets of reportable segments to consolidated total assets (in thousands):

The following table presents revenue by geographic area (in thousands):

For geographic reporting, revenues are attributed to the location in which in the customer facility is located. All of the Company’s long-lived assets are located in the United States.

Note 13 –MesoScribe and Tantaline

MesoScribe

On August 8, 2023, the Company entered into a Purchase and License Agreement (the “Agreement”) with a third-party. Pursuant to the Agreement, the Company sold certain proprietary equipment relating to its plasma spray technology and material deposition system and granted a non-exclusive license to use certain of the Company’s related intellectual property as more fully described in the Agreement, for an aggregate adjusted purchase price of $0.8 million. The purchase price was payable in several installments and contingent upon certain performance metrics and other milestones.

The Company fulfilled remaining orders for MesoScribe products during 2024 at which time it ceased operations of MesoScribe and recorded a $0.7 million gain upon the completion of the sale of the equipment during the year ended December 31, 2024.

The revenues and net income of MesoScribe were $0.1 million and $0.1 million for the year ended December 31, 2025 consisting principally of a license agreement fee.

Note 13 – MesoScribe and Tantaline (continued)

The revenues and net income of MesoScribe were $0.8 million and $1.1 million for the year ended December 31, 2024, including the gain on sale of equipment of $0.7 million. The total assets and total liabilities of the MesoScribe subsidiary were $0.6 million and $0, respectively, as of December 31, 2024.

Tantaline

On May 26, 2023, the Company sold its Tantaline subsidiary located in Nordborg, Denmark in exchange for a nominal amount at closing and an earn-out provision based on any net income that Tantaline may earn during the five-year period ending December 31, 2027. Any earn-out amounts will be recognized when and if any such amounts become probable of receipt. To date, the Company has received a $6,000 earn-out payment in 2024 based on the results of Tantaline’s operations for the year ended December 31, 2023.

Note 14 –Risks and Uncertainties

The Company currently operates in a challenging economic environment as the global economy continues to confront the remaining impacts from the pandemic, geopolitical conflicts, inflationary pressures, and adverse supply chain disruptions. The specific impacts on the Company have included:

The Company relies on suppliers to manufacture many of the components and subassemblies used in its products. Quality or performance failures of the Company’s products or changes in its manufacturers’ financial or business condition could disrupt the Company’s ability to supply quality products to its customers and thereby have a material and adverse effect on its business and operating results. Some of the components and technologies used in the Company’s products are purchased and licensed from a single source or a limited number of sources. The loss of any of these suppliers may cause the Company to incur additional transition costs, result in delays in the manufacturing and delivery of its products or cause it to carry excess or obsolete inventory and could cause it to redesign its products.

While management has initiated actions to mitigate the potential negative impacts to its revenue and profitability, the Company is unable to predict the impact that the above uncertainties may have on its future results of operations and cash flows.

Note 15 –Subsequent Event

On March 23, 2026, the Company entered into an Asset Purchase Agreement (the “APA”) with a subsidiary of the Atlas Copco Group (the “Buyer”) under which the Company agreed to sell to the Buyer all of the assets related to the Company’s SDC business and the Buyer will assume certain specified liabilities, in each case as set forth in the APA (collectively, the “Transaction”). The Company will retain ownership of its Saugerties, New York facility, which will be leased to the Buyer for an initial term of two years following the closing of the transaction.

The aggregate consideration payable to the Company will be approximately $16.9 million (the “Purchase Price”), subject to certain purchase price adjustments as defined in the APA.

At the closing of the Transaction (the “Closing”), the Buyer will place $900,000 of the Purchase Price in escrow to cover post-Closing adjustments and indemnification obligations under the APA. The escrow will be released as described in the APA.

The APA contains customary indemnification provisions pursuant to which the parties agree to indemnify each other for certain matters, including, among other things, breaches of certain representations, warranties and covenants in connection with the Transaction.

The APA contains customary representations, warranties and covenants of the parties, including, among other things, covenants regarding the operations of SDC between signing of the APA and the Closing, delivery of consents and approvals, and employee-related matters. The Closing is also subject to customary closing conditions, including the receipt of necessary third-party consents, the absence of any legal restraint prohibiting the transaction, and the satisfaction of other conditions customary for transactions of this nature.

The Buyer and the Company are required to use their reasonable best efforts to consummate the Transaction which is expected to occur during the second quarter of 2026.