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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

Form 10-Q

 

(Mark One)  
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
   
  For the quarterly period ended March 31, 2024
   
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
   
  For the transition period from ____ to _____

 

Commission file number: 1-16525

 

CVD EQUIPMENT CORPORATION

(Name of Registrant in Its Charter)

 

New York   11-2621692

State or Other Jurisdiction of

Incorporation or Organization)

  

(I.R.S. Employer

Identification No.)

 

355 South Technology Drive

Central Islip, New York 11722

(Address of principal executive offices)

 

(631) 981-7081

(Registrant’s Telephone Number, Including Area Code)

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 6,824,511 shares of Common Stock, $0.01 par value at May 10, 2024.

 

 

 

 
 

 

CVD EQUIPMENT CORPORATION AND SUBSIDIARIES

 

Index

 

 

Part I - Financial Information  
   
  Item 1 – Condensed Consolidated Financial Statements (Unaudited)  
       
    Condensed Consolidated Balance Sheets at March 31, 2024 and December 31, 2023 3
       
    Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023

4

       
 

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2024 and 2023

5

       
 

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023

6

       
    Notes to Condensed Consolidated Financial Statements 7
       
  Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations 20
       
  Item 3 – Quantitative and Qualitative Disclosures About Market Risk 28
       
  Item 4 – Controls and Procedures 28
       
Part II - Other Information  
   
  Item 1 – Legal Proceedings 29
       
  Item 1A- Risk Factors 29
       
  Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds 29
       
  Item 3 – Defaults Upon Senior Securities 29
       
  Item 4 – Mine Safety Disclosures 29
       
  Item 5 – Other Information 29
       
  Item 6 – Exhibits 29
     
Signatures 30
Exhibit Index

 

2
 

 

PART 1 – FINANCIAL INFORMATION

Item 1 – Financial Statements

CVD EQUIPMENT CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except share amounts)

(Unaudited)

 

   March 31, 2024   December 31, 2023 
ASSETS          
Current assets:          
Cash and cash equivalents  $11,893   $14,025 
Accounts receivable, net of allowance for credit losses   2,971    1,906 
Contract assets   2,689    1,604 
Inventories   4,925    4,454 
Other current assets   858    852 
Total current assets   23,336    22,841 
           
Property, plant and equipment, net   12,089    12,166 
Other assets   18    18 
Total assets  $35,443   $35,025 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable  $1,798   $1,203 
Accrued expenses   1,690    1,765 
Current maturities of long-term debt   83    81 
Deposit from purchaser of MesoScribe assets-Note 11   597    597 
Contract liabilities   6,030    4,908 
Total current liabilities   10,198    8,554 
           
Long-term debt, net of current portion   247    268 
           
Total liabilities   10,445    8,822 
           
Contingencies – Note 12   -     -  
           
Stockholders’ equity:          
Common stock - $0.01 par value – 20,000,000 shares authorized; 6,824,511 issued and outstanding at March 31, 2024 and December 31, 2023   68    68 
Additional paid-in capital   28,962    28,695 
Accumulated deficit   (4,032)   (2,560)
Total stockholders’ equity   24,998    26,203 
           
Total liabilities and stockholders’ equity  $35,443   $35,025 

 

 The accompanying notes are an integral part of these condensed consolidated financial statements

 

3
 

 

CVD EQUIPMENT CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands, except per share and share amounts)

(Unaudited)

 

   2024   2023 
   Three Months Ended March 31, 
   2024   2023 
Revenue  $4,922   $8,695 
Cost of revenue   4,063    6,261 
           
Gross profit   859    2,434 
           
Operating expenses:          
Research and development   746    602 
Selling   419    419 
General and administrative   1,317    1,600 
           
Total operating expenses   2,482    2,621 
           
Operating loss   (1,623)   (187)
           
Other income (expense):          
Interest income   157    120 
Interest expense   (6)   (6)
Foreign exchange income   -    27 
Other income   -    8 
           
Total other income, net   151    149 
           
Loss before income taxes   (1,472)   (38)
           
Income tax expense   -    2 
           
Net loss  $(1,472)  $(40)
           
Loss per common share - basic  $(0.22)  $(0.01)
Loss per common share - diluted  $(0.22)  $(0.01)
           
Weighted average common shares outstanding:          
Basic   6,809,283    6,773,285 
Diluted   6,809,283    6,773,285 

 

 The accompanying notes are an integral part of these condensed consolidated financial statements

 

4
 

 

CVD EQUIPMENT CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(in thousands, except share amounts)

(Unaudited)

 

Three months ended March 31, 2024 and 2023

 

   Shares   Par Value   Capital   Earnings   Total 
           (Accumulated     
   Common stock  

Additional

paid-in

  

Deficit)

Retained

     
   Shares   Par Value   Capital   Earnings   Total 
                     
Balance at January 1, 2024   6,824,511   $68   $28,695   $(2,560)  $26,203 
Net loss   -    -    -    (1,472)   (1,472)
Stock-based compensation   -    -    267    -    267 
Balance at March 31, 2024   6,824,511   $68   $28,962   $(4,032)  $24,998 
                          
Balance at January 1, 2023   6,760,938   $67   $27,712   $1,620   $29,399 
Net loss   -    -    -    (40)   (40)
Stock-based compensation   -    -    135    -    135 
Exercise of stock options and issuance of shares   17,500    -    73    -    73 
Balance at March 31, 2023   6,778,438   $67   $27,920   $1,580   $29,567 

 

 The accompanying notes are an integral part of these condensed consolidated financial statements

 

5
 

 

CVD EQUIPMENT CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

   2024   2023 
   Three Months Ended March 31, 
   2024   2023 
Cash flows from operating activities:          
Net loss  $(1,472)  $(40)
Adjustments to reconcile net loss to net cash used in operating activities:          
Stock-based compensation   267    135 
Depreciation and amortization   153    166 
Changes in assets and liabilities:          
Accounts receivable   (1,065)   1,420 
Contract assets   (1,085)   (1,537)
Inventories   (471)   (262)
Other current assets   (28)   119 
Accounts payable   611    (25)
Accrued expenses   (75)   (467)
Contract liabilities   1,122    (2,781)
Net cash used in operating activities   (2,043)   (3,272)
           
Cash flows from investing activities:          
Purchases of property and equipment   (70)   (146)
Net cash used in investing activities   (70)   (146)
           
Cash flows from financing activities:          
Repayments of long-term debt   (19)   (19)
Proceeds from exercise of stock options   -    73 
Net cash (used in) provided by financing activities   (19)   54 
           
Net decrease in cash and cash equivalents   (2,132)   (3,364)
           
Cash and cash equivalents at beginning of period   14,025    14,365 
           
Cash and cash equivalents at end of period  $11,893   $11,001 
           
Supplemental disclosure of cash flow information:          
Income taxes paid  $-   $8 
Interest paid  $6   $6 

 

 The accompanying notes are an integral part of these condensed consolidated financial statements

 

6
 

 

CVD EQUIPMENT CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

NOTE 1:

 

BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements for CVD Equipment Corporation and Subsidiaries (collectively “the Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. They do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary in order to make the interim financials not misleading have been included and all such adjustments are of a normal recurring nature. The operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that can be expected for the year ending December 31, 2024.

 

The condensed consolidated balance sheet as of December 31, 2023 has been derived from the audited consolidated financial statements at such date, as filed on Form 10-K with the SEC on March 28, 2024, but does not contain all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with that report.

 

All material intercompany balances and transactions have been eliminated in consolidation.

 

Reclassifications

 

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

 

Liquidity

 

At March 31, 2024, the Company had $11.9 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 condensed consolidated financial statements..

 

7
 

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

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 three months ended March 31, 2024 and 2023.

 

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.

 

8
 

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

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

 

Contract assets include unbilled amounts typically resulting from system sales under contracts and 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 three months ended March 31, 2024 and 2023, all system equipment sales were recorded over time by using an input method.

 

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.

 

9
 

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

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

 

Product Warranty

 

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

 

Recent Accounting Standards

 

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires public business entities to disclose additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes. It also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold. In addition to new disclosures associated with the rate reconciliation, the ASU requires information pertaining to taxes paid (net of refunds received) to be disaggregated for federal, state, and foreign taxes and further disaggregated for specific jurisdictions to the extent the related amounts exceed a quantitative threshold. The ASU also describes items that need to be disaggregated based on their nature, which is determined by reference to the item’s fundamental or essential characteristics, such as the transaction or event that triggered the establishment of the reconciling item and the activity with which the reconciling item is associated. The ASU eliminates the historic requirement that entities disclose information concerning unrecognized tax benefits having a reasonable possibility of significantly increasing or decreasing in the 12 months following the reporting date. This ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU should be applied on a prospective basis; however, retrospective application is permitted. We are currently evaluating the impact that ASU 2023 – 09 may have on our consolidated financial statements.

 

10
 

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segments,” which aims to improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. Currently, Topic 280 requires that a public entity disclose certain information about its reportable segments. For example, a public entity is required to report a measure of segment profit or loss that the CODM uses to assess segment performance and make decisions about allocating resources. Topic 280 also requires other specified segment items and amounts, such as depreciation, amortization, and depletion expense, to be disclosed under certain circumstances. The amendments in this ASU do not change or remove those disclosure requirements and do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact that ASU 2023 – 07 may have on our 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: CONCENTRATION OF CREDIT RISK

 

Cash and cash equivalents

 

The Company had cash and cash equivalents of $11.9 million and $14.0 million at March 31, 2024 and December 31, 2023, respectively. The Company invests excess cash in U.S. treasury bills, certificates of deposit or deposit accounts, all with maturities of less than three months. Cash equivalents were $11.1 million and $12.1 million at March 31, 2024 and December 31, 2023, 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 at risk at March 31, 2024 and December 31, 2023 was $0.3 million and $1.5 million, respectively.

 

11
 

 

NOTE 3: CONCENTRATION OF CREDIT RISK (continued)

 

Accounts receivable

 

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 consider 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 $36,000 as of both March 31, 2024 and December 31, 2023. 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 doubtful accounts could be material to our results of operations and financial condition.

 

At March 31, 2024, the accounts receivable balance included an amount from one customer that totaled 67.2% of total accounts receivable. As of December 31, 2023, the accounts receivable balance includes amounts from three customers that represented 37.6%, 13.0% and 12.8% of total accounts receivable.

 

Sales concentration

 

Revenue from a single customer in any one period can exceed 10% of our total revenues. During the three months ended March 31, 2024, two customers exceeded 10% of revenues, representing 29.6% and 13.1% of revenues, and during the three months ended March 31, 2023, three customers exceeded 10%, representing 28.3%, 15.9% and 10.6% of revenues.

 

12
 

 

NOTE 4: REVENUE RECOGNITION

 

The following table represents a disaggregation of revenue for the three months ended March 31, 2024 and 2023 (in thousands):

 

   Over time   Point in time   Total 
   Three months ended March 31, 2024 
             
   Over time   Point in time   Total 
Energy  $-   $18   $18 
Aerospace   1,802    332    2,134 
Industrial   1,259    483    1,742 
Research   861    167    1,028 
Total  $3,922   $1,000   $4,922 

 

   Over time   Point in time   Total 
   Three months ended March 31, 2023 
             
   Over time   Point in time   Total 
Energy  $2,516   $14   $2,530 
Aerospace   264    251    515 
Industrial   3,670    213    3,883 
Research   1,272    495    1,767 
Total  $7,722   $973   $8,695 

 

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. The research market principally represents customers that are universities and other research institutions.

 

The Company has unrecognized contract revenue of approximately $24.8 million at March 31, 2024, which it expects to substantially recognize as revenue within the next eighteen months.

 

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

 

Changes in estimates for sales of systems may occur for a variety of reasons, including but not limited to (i) build accelerations or delays, (ii) product cost forecast changes, (iii) cost related change orders or add-ons, or (iv) changes in other information used to estimate costs. Changes in estimates may have a material effect on the Company’s consolidated statements of operations.

 

13
 

 

NOTE 4: REVENUE RECOGNITION (continued)

 

Contract assets and liabilities

 

Contract assets and contract liabilities on input method type contracts in progress are summarized as follows as of March 31, 2024 (in thousands):

 

      
Costs incurred on contracts in progress  $10,024 
Estimated earnings   4,582 
Costs and estimated earnings on uncompleted contracts  $14,606 
Billings to date   (17,649)
Net cost in excess of billings   (3,043)

Deferred revenue related to non-system contracts and a system contract to be recognized at point in time

   (298)
Contract liability in excess of contract assets  $(3,341)

Included in accompanying condensed consolidated balance sheets under the following captions (in thousands):

     
Contract assets  $2,689 
Contract liabilities  $6,030 

 

Of the contract liability balances at December 31, 2023 and 2022 of $4.6 million and $4.1 million, respectively, $1.3 million and $2.9 million was recognized as revenue during the three months ended March 31, 2024 and 2023, respectively.

 

NOTE 5: INVENTORIES, NET

 

Inventories consist of:        
   March 31, 2024   December 31, 2023 
         
Raw materials  $2,507   $2,351 
Work-in-process   1,563    1,248 
Finished goods   855    855 
Total  $4,925   $4,454 

 

NOTE 6: LONG-TERM DEBT

 

In September 2022, the Company entered into a loan agreement to fund the acquisition of machinery. The loan amount of $432,000, is payable in 60 equal monthly installments of $8,352 and secured by equipment. The interest rate is 6%.

 

14
 

 

NOTE 7: EARNINGS PER SHARE

 

The calculation of basic and diluted weighted average common shares outstanding for the three months ended March 31, 2024 and 2023 is as follows:

 

   2024   2023 
   Three months ended March 31, 
   2024   2023 
         
Basic weighted average common shares outstanding   6,809,283    6,773,285 
Effect of potentially dilutive share-based awards   -    - 
Diluted weighted average shares outstanding   6,809,283    6,773,285 

 

At March 31, 2024, stock options to purchase 841,875 shares of common stock were outstanding and 395,625 were exercisable. At March 31, 2023, stock options to purchase 899,500 shares of common stock were outstanding and 252,375 were exercisable.

 

For the three months ended March 31, 2024 and 2023, 841,875 and 899,500 of stock options, respectively, were not included in the computation of diluted earnings per share because their effect was antidilutive.

 

NOTE 8: STOCK-BASED COMPENSATION EXPENSE

 

The Company recorded stock-based compensation for the three months ended March 31, 2024 and 2023, respectively, that were included in the following line items in our condensed consolidated statements of operations (in thousands):

 

   2024   2023 
   Three months ended March 31, 
   2024   2023 
         
Cost of revenue  $38   $19 
Research and development   47    20 
Selling   27    11 
General and administrative   155    85 
           
Total  $267   $135 

 

15
 

 

NOTE 8: STOCK-BASED COMPENSATION EXPENSE (continued)

 

Stock-based compensation expense included $50,000 and $40,000 for the three months ended March 31, 2024 and 2023, respectively, related to restricted stock awards that directors elected to receive pursuant to the Director Compensation plan. Under this plan, each of the five independent directors is entitled to an Annual Equity Retainer in the amount of $40,000, to be granted on the date of the Company’s annual meeting of shareholders.

 

For the three months ended March 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 weighted average fair value of stock options granted was $3.30 and is based upon weighted average assumptions below.

 

Stock price  $4.75 
Exercise price  $4.75 
Dividend yield   0%
Expected volatility   77%
Risk-free interest rate   4.12%
Expected life (in years)   6.00 

 

The following table summarizes stock options awards for the three months ended March 31, 2024:

 

       Weighted 
   Stock Option   Average 
   Awards   Exercise 
   (in shares)   Price 
Outstanding at January 1, 2024   846,875   $8.20 
Granted   5,000    4.75 
Forfeited   (10,000)   8.01 
           
Outstanding at March 31, 2024   841,875    8.18 

 

The following table summarizes information about the outstanding and exercisable options at March 31, 2024 by ranges of exercise prices:

 

   Options Outstanding   Options Exercisable 
       Weighted   Weighted           Weighted     
       Average   Average           Average     
Exercise  Number   Remaining   Exercise   Intrinsic   Number   Exercise   Intrinsic 
Price Range  Outstanding   Contractual   Price   Value   Exercisable   Price   Value 
$ 4.00-7.00   462,125    7.6   $4.55   $144,275    194,750   $4.48   $68,931 
$ 7.01-10.00   20,000    4.1   $8.07   $-    20,000   $8.07   $- 
$ 10.01-13.00   130,000    3.4   $10.62   $-    122,500   $10.55   $- 
$ 13.01-16.00   229,750    9.0   $14.11   $-    58,375   $14.11   $- 

 

16
 

 

NOTE 8: STOCK-BASED COMPENSATION EXPENSE (continued)

 

As of March 31, 2024, there was $2.2 million of unrecognized compensation costs related to stock options expected to be recognized over a weighted average period of 2.0 years.

 

NOTE 9: INCOME TAXES

 

As of March 31, 2024 and December 31, 2023, the Company has provided a full valuation allowance against its net deferred tax assets. This was based on management’s assessment, including operating losses in recent years, that it is more likely than not that the net deferred tax assets may not be realized in the future. Management continues to evaluate for potential utilization of the Company’s net deferred tax asset, which has been fully reserved for, on a quarterly basis, reviewing our economic models, including projections of future operating results.

 

NOTE 10: SEGMENT REPORTING

 

The Company operates through three segments: CVD Equipment, Stainless Design Concepts (“SDC”) and CVD Materials. The CVD Equipment segment manufactures and sells chemical vapor deposition, physical vapor transport and similar equipment. The SDC segment designs and manufactures ultra-high purity gas and chemical delivery control systems. The CVD Materials segment provides material coatings for aerospace, medical, electronic and other applications and is not considered a core business of the Company. The Company evaluates performance based on several factors, of which the primary financial measure is income (loss) before taxes.

 

The Company’s corporate administration activities are reported in the “Corporate” column. These activities primarily include expenses related to certain corporate officers and support staff, expenses related to the Company’s Board of Directors, stock option expense for options and shares of restricted stock granted to corporate administration employees and board members, certain consulting expenses, investor and shareholder relations activities, and all of the Company’s legal, auditing and professional fees.

 

Elimination entries included in the “Eliminations” column represent intersegment revenues and cost of revenues that are eliminated in consolidation. Intersegment sales for the three months ended March 31, 2024 and 2023 by the SDC segment to the CVD Equipment segment were $15,000 and $129,000, respectively.

 

17
 

 

NOTE 10: SEGMENT REPORTING (continued)

 

The following table presents certain information regarding the Company’s segments as of and for the three months ended March 31, 2024 and 2023 (in thousands):

 

   CVD Equipment   SDC  

CVD

Materials

   Eliminations   Corporate   Consolidated 
2024                        
   CVD Equipment   SDC  

CVD

Materials

   Eliminations   Corporate   Consolidated 
Assets  $31,412   $3,882   $183   $(34)  $-   $35,443 
                               
Revenue  $2,947   $1,931   $59   $(15)  $-   $4,922 
Operating (loss) income   (1,405)   632    (25)   -    (825)   (1,623)
Pretax (loss) income   (1,411)   632    (25)   -    (668)   (1,472)
Depreciation and amortization  $141   $12   $-   $-   $-   $153 
Purchase of property, plant & equipment   $76   $-   $-   $-   $-   $76 

 

   CVD Equipment   SDC   CVD
Materials		   Eliminations   Corporate   Consolidated 
2023                        
   CVD Equipment   SDC   CVD
Materials		   Eliminations   Corporate   Consolidated 
Assets  $28,509   $4,467   $1,783   $25   $-   $34,784 
                               
Revenue  $5,845   $2,312   $667   $(129)  $-   $8,695 
Operating (loss) income   (95)   631    81    -    (804)   (187)
Pretax (loss) income   (93)   631    108    -    (684)   (38)
Depreciation and amortization  $131   $12   $23   $-   $-   $166 
Purchase of property, plant & equipment   $136   $10   $-   $-   $-   $146 

 

18
 

 

NOTE 11: MESOSCRIBE SUBSIDIARY

 

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 will sell certain proprietary assets relating to its plasma spray technology and material deposition system and grant a non-exclusive license to use certain of the Company’s related intellectual property as more fully described in the Agreement, for an aggregate purchase price of $0.9 million. The purchase price is payable in several installments and contingent upon certain performance metrics and other milestones.

 

The Company will continue to fulfill remaining orders for MesoScribe products through the end of 2024 at which time it plans to cease the remaining operations of MesoScribe and dispose of any remaining equipment.

 

The Company received payments under the Agreement in the amount of $0.6 million which has been reflected as “deposit from purchaser” in the accompanying consolidated balance sheet as of March 31, 2024 and December 31, 2023. The Company expects the transaction to be completed in 2024 with the acceptance of the equipment by the purchaser.

 

The revenues and net loss of MesoScribe were $59,000 and ($25,000) for the three months ended March 31, 2024.

 

The total assets and total liabilities of the MesoScribe subsidiary were $0.2 million and $0.7 million, respectively, as of March 31, 2024 and $0.2 million and $0.7 million, respectively, as of December 31, 2023.

 

NOTE 12: 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:

 

  ●

Significant geopolitical developments across Europe and Asia (including the war in Ukraine) have and may continue to restrict the Company’s ability to procure raw materials and components such as nickel and integrated circuits, as well as impact the Company’s ability to sell its products into China, Russia and other Eastern European and Asian regions.

     
  ●

Supply chain disruptions have led to much longer lead times to acquire raw materials for production and has led to inflationary pressures in both materials and labor. These supply chain disruptions have impacted the Company’s ability to recognize revenue timelier as it delays the Company’s manufacturing processes.

 

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.

 

19
 

 

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

 

Except for historical information contained herein, this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains forward–looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. These statements involve known and unknown risks and uncertainties that may cause our actual results or outcomes to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on various factors and are derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements. Important assumptions and other factors that could cause actual results to differ materially from those in the forward-looking statements, include, but are not limited to:

 

  ● uncertainty as to our future profitability;
     
   ●

competition in our existing and potential future product lines of business, including our PVT150 / PVT200 systems;

     
   ●

uncertainty as to our ability to develop new products for the high power electronics market including our plan to develop a PVT200 to grow silicon carbide crystals for 200 mm wafers;

     
   ● our ability to obtain financing on acceptable terms if and when needed;
     
   ● our ability to attract and retain key personnel and employees; and
     
   ●

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

 

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

 

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

 

20
 

 

Executive Summary

 

We have served the advanced materials markets with chemical vapor and thermal process equipment for over 40 years. CVD designs, develops, and manufactures a broad range of chemical vapor deposition, gas control, and other state-of-the-art equipment and process solutions used to develop and manufacture materials and coatings for industrial applications and research. To learn more about CVD’s systems and offerings, visit www.cvdequipment.com.

 

During the three months ended March 31, 2024:

 

  ●

Revenue declined by $3.8 million or 43.4% as the first quarter of 2023 benefited from a large PVT150 order.

     
  ●

Gross margin declined by $1.6 million or 64.7% due to lower gross profit margins on contracts in progress and overall lower revenues as compared to the prior period quarter.

     
  ●

Total bookings for the first quarter of 2024 were approximately $13.6 million compared to bookings of $2.9 million in the first quarter of 2023.

     
  ●

Bookings in 2024 included a $10.0 million multisystem order from an industrial customer that will be used to deposit a silicon carbide protective coating on OEM components.

     
  ●

During the first quarter of 2024, we received an order from an additional customer for our new PVT200 system that will be used to grow silicon carbide crystals for the manufacture of 200 mm wafers.

     
  ● Increased our backlog from $18.4 million at December 31, 2023 to $27.1 million.
     
  ● Cash balance at March 31, 2024 was $11.9 million.

 

Business Update

 

Our core strategy is to focus on growth market applications in end markets related to the “electrification of everything,” aerospace and industrial applications. The phrase “electrification of everything” refers to the shift from fossil fuels to the use of electricity to power devices, buildings, electric vehicles (“EVs”), and many other 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 contributing to the decarbonization of that industry.

 

Our current strategy yielded multisystem orders of PVT150 equipment that was delivered to one company that manufactures silicon carbide wafers in 2023 and 2022.

 

In February 2024, we received an order from an additional customer for our new PVT200 system used to grow silicon carbide crystals for the manufacture of 200 mm wafers. This represents our second customer for our PVT equipment. This customer plans to evaluate our equipment for potential additional purchases of PVT equipment. We have also received orders from OneD Battery Materials in 2023, a company that is engaged in providing battery nanomaterials.

 

21
 

 

Both technologies are essential for the support of the EV market. These systems should provide us with standard product offering to continue to support the EV focused market as well as energy storage, power conversion and power transmission. We plan 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.

 

During 2022, we also received an order from an aerospace company for a production chemical vapor infiltration (CVI) system that will be used to manufacture CMCs for gas turbine jet engines. In 2023, we received an order from the same aerospace company for an additional three CVI systems.

 

In February 2024, we received a multisystem order from an industrial customer for approximately $10 million that will be used for depositing a silicon carbide protective coating on OEM components.

 

We have generally gained new customers through our industry reputation, as well as limited print advertising and trade show attendance. We have increased the number of trade shows and industry conferences. In addition, we added to our sales and marketing team in 2022 and expanded our sales team in early 2023.

 

During the three months ended March 31, 2024, new order bookings approximated $13.6 million, representing an increase of $10.7 million as compared to bookings of $2.9 million in three months ended March 31, 2023. Our backlog increased from $18.4 million at December 31, 2023 to $27.1 million at March 31, 2024 as revenues were in excess of orders by approximately $8.7 million.

 

Historically, our orders have fluctuated based on end user market conditions, adoption of our new products and acceptance of our products. The order rate as well as other factors in our manufacturing process ultimately impacts the timing of revenue recognition, whether accounted for over time or at a point in time. Accordingly, orders received from customers and the corresponding revenue recognized may fluctuate from quarter to quarter. The sales cycle for our equipment is typically six months, but can range up to twelve to eighteen months, depending on the application and product stage of the equipment. The order cycle to manufacture and test a system also will vary from six to eighteen months for our CVD Equipment segment and two to twelve months for our SDC segment, depending on system complexity and magnitude of the system.

 

22
 

 

Results of Operations

 

Three Months Ended March 31, 2024 and 2023

 

The following table presents revenue and expense line items reported in our condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023 and the period-over-period dollar and percentage changes for those line items (in thousands, except percentages).

 

   March 31     
   2024   2023   Change   Percent 
Revenue  $4,922   $8,695   $(3,773)   (43)%
                     
Cost of revenue   4,063    6,261    (2,198)   (35)%
                     
Gross profit   859    2,434    (1,575)   (65)%
Gross profit percentage   17.5%   28.0%          
                     
Operating expenses:                    
Research and development   746    602    144    24%
Selling   419    419    -    0%
General and administrative   1,317    1,600    (283)   (18)%
                     
Total operating expenses   2,482    2,621    (139)   (5)%
                     
Operating loss   (1,623)   (187)   (1,438)   (769)%
                     
Other income (expense):                    
Interest income   157    120    37    31%
Interest expense   (6)   (6)   -    - 
Foreign exchange income   -    27    (27)   * 
Other income   -    8    (8)   * 
Total other income, net   151    149    2    1%
                     
Loss before income taxes   (1,472)   (38)   (1,434)   * 
                     
Income tax expense   -    2    2    * 
                     
Net loss  $(1,472)  $(40)  $(1,432)   * 
Revenue                    
CVD Equipment  $2,947   $5,845   $(2,898)   (50)%
SDC   1,931    2,312    (381)   (16)%
CVD Materials   59    667    (608)   (91)%
Intersegment sales elimination   (15)   (129)   114    * 
Total  $4,922   $8,695   $(3,773)   (43)%

 

* Not meaningful

 

23
 

 

Revenue

 

Our revenue for the three months ended March 31, 2024 was $4.9 million compared to $8.7 million for the three months ended March 31, 2023, a decrease of 43%.

 

The decrease in revenue versus the prior year period was primarily attributable to lower revenue of $2.9 million from the CVD Equipment segment, a $0.3 million decrease in revenue from our SDC segment and a $0.6 million decrease from the CVD Materials segment due to the disposition of Tantaline in May 2023 and the wind down of MesoScribe’s operations. The decrease in CVD Equipment revenue in the period was principally the result of the recognition of revenue associated with our PVT150 systems in the prior period as compared to no such revenue in the current period. Revenue related to PVT150 systems sold to one customer for the three months ended March 31, 2023 represented 28.3% of our total revenues and 42.2% of CVD Equipment segment revenues. Revenue from one aerospace customer for the three months ended March 31, 2024 represented 29.6% of our total revenues and 49.5% of CVD Equipment segment revenues.

 

The revenue contributed by the CVD Equipment segment for the three months ended March 31, 2024 of $2.9 million represented 60% of overall revenue as compared to $5.8 million or 67% of overall revenue for the three months ended March 31, 2023. The decrease in revenues of $2.9 million or 50% resulted principally due to a contract for PVT150 systems which was completed in 2023.

 

The revenue contributed by the SDC segment for the three months ended March 31, 2024 of $1.9 million represented 40% of overall revenue as compared to $2.2 million or 25% of overall revenue for the three months ended March 31, 2023. Revenue for our SDC segment decreased by $0.3 million or 12% due to lower orders of SDC’s gas and chemical delivery system products as compared to the prior period.

 

The revenue contributed by the CVD Materials segment for the three months ended March 31, 2024 of $59,000 represented 1% of our overall revenue as compared to $0.7 million or 8% of overall revenue for the three months ended March 31, 2023. The decrease of $0.6 million was principally due to the disposition of Tantaline in May 2023 and the wind down of MesoScribe’s operations.

 

Our order backlog at March 31, 2024 was approximately $27.1 million as compared to December 31, 2023 of $18.4 million. Our backlog at March 31, 2024 consists of approximately $24.8 million related to remaining performance obligations of contracts in progress and not yet started that will be recognized over time with the balance of approximately $2.3 million representing other orders received from customers. Historically, our revenues and orders have fluctuated based on changes in order rate as well as other factors in our manufacturing process that impact the timing of revenue recognition. Accordingly, orders received from customers and revenue recognized may fluctuate from quarter to quarter.

 

24
 

 

Gross Profit

 

Gross profit for the three months ended March 31, 2024 was $0.9 million, with a gross profit margin of 17.5%, compared to a gross profit of $2.4 million and a gross profit margin of 28.0% for the three months ended March 31, 2023. The decrease in gross profit of $1.6 million was primarily the result of lower gross profit margins on contracts in progress during the current period as compared to the first quarter of 2023 which benefited from contracts with higher gross margins. In addition, lower CVD Equipment segment revenues reduced the Company’s ability to spread its fixed costs.

 

Research and Development

 

For the three months ended March 31, 2024, research and development expenses were $0.7 million, or 15.2% of revenue as compared to $0.6 million, or 6.9% for the three months ended March 31, 2023. The increase in 2024 was the result of less amounts charged to cost of goods sold as a result of lower revenues offset by reductions in personnel costs.

 

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 costs of goods sold when work is performed directly on a customer order.

 

Selling

 

Selling expenses were $0.4 million or 8.5% of the revenue for the three months ended March 31, 2024 as compared to $0.4 million or 4.8% for the three months ended March 31, 2023. Increase in marketing costs were offset by lower personnel costs.

 

General and Administrative

 

General and administrative expenses for the three months ended March 31, 2024 were $1.3 million or 26.8% of revenue compared to $1.6 million or 18.4% of revenue for the three months ended March 31, 2023, a decrease of $0.3 million. The decrease in expenses was principally due to lower personnel costs of $0.2 million due to a reduction of bonus accruals.

 

Other Income, Net

 

Other income, net was $151,000 for the three months ended March 31, 2024 as compared to other income, net of $149,000 for the three months ended March 31, 2023. Other income consists principally of interest earned on amounts invested in U.S. treasury securities.

 

Income Taxes

 

We continue to evaluate the 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.

 

25
 

 

Liquidity and Capital Resources

 

As of March 31, 2024, aggregate working capital was $13.1 million as compared to aggregate working capital of $14.3 million at December 31, 2023. Cash and cash equivalents at March 31, 2024 and December 31, 2023 were $11.9 million and $14.0 million, respectively.

 

Net cash used in operating activities for the three months ended March 31, 2024 was $2.0 million. This decrease was principally due to the net loss of $1.5 million, increase in contract assets of $1.1 million, increase in accounts receivable of $1.1 million, increase in inventories of $0.5 million, offset by an increase in contract liabilities of $1.1 million and non-cash items of $0.4 million.

 

Net cash used in investing activities for the three months ended March 31, 2024 consisted of capital expenditures of $70,000 related to purchases of equipment, building improvements and software.

 

Net cash used in financing activities for the three months ended March 31, 2024 consisted of repayments of an equipment loan.

 

We believe that our cash and cash equivalent positions and our projected cash flow from operations will be sufficient to meet our working capital and capital expenditure requirements for the next twelve months .from the filing of these condensed consolidated financial statements included in this Form 10-Q. We will continue to assess our operations and take actions anticipated to maintain our operating cash to support the working capital needs.

 

Critical Accounting Estimates

 

This discussion and analysis of the Company’s financial condition and results of operations is based on the Company’s consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America, or U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. In accordance with U.S. GAAP, the Company bases its estimates on historical experience and on various other assumptions the Company believes are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

 

We consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.

 

26
 

 

We believe that of our significant accounting policies, which are described in the notes to the consolidated financial statements, the following accounting policies involve a greater degree of judgments, estimates and assumptions and are considered critical accounting estimates.

 

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.

 

Incurred costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, 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 as required by the project’s engineering design. Cost based input methods of revenue recognition require us 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, we recognize the entire estimated loss in the period the loss becomes known and can be reasonably estimated.

 

There exist many inherent risks and uncertainties in estimating revenues, expenses and progress toward completion, particularly on larger or longer-term contracts. If we do not estimate the total sales, related costs, and progress toward completion on such contracts, the estimated gross margins may be significantly impacted, or losses may need to be recognized in future periods. Any such resulting changes in margins or contract losses could be material to our results of operations and financial condition.

 

27
 

 

Inventory Valuation

 

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. 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. Any such charge could be material to our results of operations and financial condition.

 

Long-Lived Assets

 

Long-lived assets consist primarily of property, plant and equipment. 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 pursuant to the requirements of ASC 360-10-35, “Impairment or Disposal of Long-Lived Assets.” If the asset is determined to be impaired, the impairment loss is measured on the excess of it carrying value over its fair value. Assets to be disposed of are reported at the lower of their carrying value or net realizable value. In the future, if we determine that our long-lived assets are impaired, we would be required to recognize a charge in our financial statements at the time of such determination. Any such charge could be material to our results of operations and financial condition.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

We maintain a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 13d-15(e) under the Exchange Act of 1934, as amended, (the “Exchange Act”)). As required by Rule 13a-15(b) under the Exchange Act, our management, under the direction of our Chief Executive Officer and Chief Financial Officer, reviewed and performed an evaluation of the effectiveness of design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Report”).

 

Based on that review and evaluation, our Chief Executive Officer and Chief Financial Officer, along with others in our management, have determined that as of the end of the period covered by this Report on Form 10-Q the disclosure controls and procedures were effective to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding disclosures.

 

Changes in Internal Controls

 

There were no changes in our internal controls over financial reporting as defined in Rule 13a-15(f) or Rule 15d-15(f) under the Exchange Act that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the internal controls over financial reporting.

 

Limitations on the Effectiveness of Controls

 

We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control systems are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

 

28
 

 

CVD EQUIPMENT CORPORATION

 

PART II OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

None.

 

Item 1A. Risk Factors.

 

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 28, 2024.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits

 

31.1* Certification of Emmanuel Lakios, Chief Executive Officer, dated May 13, 2024
   
31.2* Certification of Richard Catalano, Chief Financial Officer, dated May 13, 2024
   
32.1* Certification of Emmanuel Lakios, Chief Executive Officer, dated May 13, 2024, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
   
32.2* Certification of Richard Catalano, Chief Financial Officer, dated May 13, 2024, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
   
101.1** Inline XBRL Instance.
   
101.SCH** Inline XBRL Taxonomy Extension Schema.
   
101.CAL** Inline XBRL Taxonomy Extension Calculation.
   
101.DEF** Inline XBRL Taxonomy Extension Definition.
   
101.LAB** Inline XBRL Taxonomy Extension Labels.
   
101.PRE** Inline XBRL Taxonomy Extension Presentation.
   
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

 

* Filed herewith.

 

** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not to be filed or part of a registration statement of prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under these sections.

 

29
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 133h day of May 2024.

 

  CVD EQUIPMENT CORPORATION
     
  By: /s/ Emmanuel Lakios
    Emmanuel Lakios
    President and Chief Executive Officer
    (Principal Executive Officer)
     
  By: /s/ Richard Catalano
    Richard Catalano
    Vice President and Chief Financial Officer
    (Principal Financial and Accounting Officer)

 

30

 

Exhibit 31.1

 

Certifications of Principal Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Emmanuel Lakios, certify that:

 

1.I have reviewed this quarterly report on Form 10-Q of CVD Equipment Corporation;

 

2.Based upon my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based upon my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

 

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b.Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrants’ board of directors (or persons performing the equivalent functions):

 

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: May 13, 2024  
   
/s/ Emmanuel Lakios  
President and Chief Executive Officer  

 

 

 

Exhibit 31.2

 

Certifications of Principal Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Richard Catalano, certify that:

 

1.I have reviewed this quarterly report on Form 10-Q of CVD Equipment Corporation;

 

2.Based upon my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based upon my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

 

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

 

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b.Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrants’ board of directors (or persons performing the equivalent functions):

 

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

 

Dated: May 13, 2024  
   
/s/ Richard Catalano  
Richard Catalano  
Vice President and  
Chief Financial Officer  
(Principal Financial Officer)  

 

 

 

Exhibit 32.1

 

Certification of Principal Executive Officer

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

 

I, Emmanuel Lakios, President and Chief Executive Officer of CVD Equipment Corporation, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge, the quarterly report on Form 10-Q for the period ending March 31, 2024 of CVD Equipment Corporation (the “Form 10-Q”) fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934 and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of CVD Equipment Corporation.

 

Dated: May 13, 2024 /s/ Emmanuel Lakios
  Emmanuel Lakios
  President and Chief Executive Officer
  (Principal Executive Officer)

 

 

 

Exhibit 32.2

 

Certification of Principal Financial Officer

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

 

I, Richard Catalano, Chief Financial Officer of CVD Equipment Corporation, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge, the quarterly report on Form 10-Q for the period ending March 31, 2024 of CVD Equipment Corporation (the “Form 10-Q”) fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934 and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of CVD Equipment Corporation.

 

Dated: May 13, 2024 /s/ Richard Catalano
  Richard Catalano
  Vice President and
  Chief Financial Officer
  (Principal Financial Officer)

 

 

v3.24.1.1.u2
Cover - shares
 3 Months Ended
Mar. 31, 2024
May 10, 2024
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Mar. 31, 2024  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2024  
Current Fiscal Year End Date --12-31  
Entity File Number 1-16525  
Entity Registrant Name CVD EQUIPMENT CORPORATION  
Entity Central Index Key 0000766792  
Entity Tax Identification Number 11-2621692  
Entity Incorporation, State or Country Code NY  
Entity Address, Address Line One 355 South Technology Drive  
Entity Address, City or Town Central Islip  
Entity Address, State or Province NY  
Entity Address, Postal Zip Code 11722  
City Area Code (631)  
Local Phone Number 981-7081  
Title of 12(b) Security Common Stock  
Trading Symbol CVV  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   6,824,511
v3.24.1.1.u2
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
Current assets:    
Cash and cash equivalents $ 11,893 $ 14,025
Accounts receivable, net of allowance for credit losses 2,971 1,906
Contract assets 2,689 1,604
Inventories 4,925 4,454
Other current assets 858 852
Total current assets 23,336 22,841
Property, plant and equipment, net 12,089 12,166
Other assets 18 18
Total assets 35,443 35,025
Current liabilities:    
Accounts payable 1,798 1,203
Accrued expenses 1,690 1,765
Current maturities of long-term debt 83 81
Deposit from purchaser of MesoScribe assets-Note 11 597 597
Contract liabilities 6,030 4,908
Total current liabilities 10,198 8,554
Long-term debt, net of current portion 247 268
Total liabilities 10,445 8,822
Contingencies – Note 12
Stockholders’ equity:    
Common stock - $0.01 par value – 20,000,000 shares authorized; 6,824,511 issued and outstanding at March 31, 2024 and December 31, 2023 68 68
Additional paid-in capital 28,962 28,695
Accumulated deficit (4,032) (2,560)
Total stockholders’ equity 24,998 26,203
Total liabilities and stockholders’ equity $ 35,443 $ 35,025
v3.24.1.1.u2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares
Mar. 31, 2024
Dec. 31, 2023
Statement of Financial Position [Abstract]    
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 20,000,000 20,000,000
Common stock, shares issued 6,824,511 6,824,511
Common stock, shares outstanding 6,824,511 6,824,511
v3.24.1.1.u2
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Income Statement [Abstract]    
Revenue $ 4,922 $ 8,695
Cost of revenue 4,063 6,261
Gross profit 859 2,434
Operating expenses:    
Research and development 746 602
Selling 419 419
General and administrative 1,317 1,600
Total operating expenses 2,482 2,621
Operating loss (1,623) (187)
Other income (expense):    
Interest income 157 120
Interest expense (6) (6)
Foreign exchange income 27
Other income 8
Total other income, net 151 149
Loss before income taxes (1,472) (38)
Income tax expense 2
Net loss $ (1,472) $ (40)
Loss per common share - basic $ (0.22) $ (0.01)
Loss per common share - diluted $ (0.22) $ (0.01)
Weighted average common shares outstanding:    
Basic 6,809,283 6,773,285
Diluted 6,809,283 6,773,285
v3.24.1.1.u2
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($)
$ in Thousands
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Total
Balance at Dec. 31, 2022 $ 67 $ 27,712 $ 1,620 $ 29,399
Balance, shares at Dec. 31, 2022 6,760,938      
Net loss (40) (40)
Stock-based compensation 135 135
Exercise of stock options and issuance of shares 73 73
Exercise of stock options and issuance of shares, shares 17,500      
Balance at Mar. 31, 2023 $ 67 27,920 1,580 29,567
Balance, shares at Mar. 31, 2023 6,778,438      
Balance at Dec. 31, 2023 $ 68 28,695 (2,560) 26,203
Balance, shares at Dec. 31, 2023 6,824,511      
Net loss (1,472) (1,472)
Stock-based compensation 267 267
Balance at Mar. 31, 2024 $ 68 $ 28,962 $ (4,032) $ 24,998
Balance, shares at Mar. 31, 2024 6,824,511      
v3.24.1.1.u2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Cash flows from operating activities:    
Net loss $ (1,472) $ (40)
Adjustments to reconcile net loss to net cash used in operating activities:    
Stock-based compensation 267 135
Depreciation and amortization 153 166
Changes in assets and liabilities:    
Accounts receivable (1,065) 1,420
Contract assets (1,085) (1,537)
Inventories (471) (262)
Other current assets (28) 119
Accounts payable 611 (25)
Accrued expenses (75) (467)
Contract liabilities 1,122 (2,781)
Net cash used in operating activities (2,043) (3,272)
Cash flows from investing activities:    
Purchases of property and equipment (70) (146)
Net cash used in investing activities (70) (146)
Cash flows from financing activities:    
Repayments of long-term debt (19) (19)
Proceeds from exercise of stock options 73
Net cash (used in) provided by financing activities (19) 54
Net decrease in cash and cash equivalents (2,132) (3,364)
Cash and cash equivalents at beginning of period 14,025 14,365
Cash and cash equivalents at end of period 11,893 11,001
Supplemental disclosure of cash flow information:    
Income taxes paid 8
Interest paid $ 6 $ 6
v3.24.1.1.u2
BASIS OF PRESENTATION
 3 Months Ended
Mar. 31, 2024
Accounting Policies [Abstract]  
BASIS OF PRESENTATION

NOTE 1:

 

BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements for CVD Equipment Corporation and Subsidiaries (collectively “the Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. They do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary in order to make the interim financials not misleading have been included and all such adjustments are of a normal recurring nature. The operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that can be expected for the year ending December 31, 2024.

 

The condensed consolidated balance sheet as of December 31, 2023 has been derived from the audited consolidated financial statements at such date, as filed on Form 10-K with the SEC on March 28, 2024, but does not contain all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with that report.

 

All material intercompany balances and transactions have been eliminated in consolidation.

 

Reclassifications

 

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

 

Liquidity

 

At March 31, 2024, the Company had $11.9 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 condensed consolidated financial statements..

 

 
v3.24.1.1.u2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 3 Months Ended
Mar. 31, 2024
Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

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 three months ended March 31, 2024 and 2023.

 

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.

 

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

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

 

Contract assets include unbilled amounts typically resulting from system sales under contracts and 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 three months ended March 31, 2024 and 2023, all system equipment sales were recorded over time by using an input method.

 

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.

 

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

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

 

Product Warranty

 

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

 

Recent Accounting Standards

 

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires public business entities to disclose additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes. It also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold. In addition to new disclosures associated with the rate reconciliation, the ASU requires information pertaining to taxes paid (net of refunds received) to be disaggregated for federal, state, and foreign taxes and further disaggregated for specific jurisdictions to the extent the related amounts exceed a quantitative threshold. The ASU also describes items that need to be disaggregated based on their nature, which is determined by reference to the item’s fundamental or essential characteristics, such as the transaction or event that triggered the establishment of the reconciling item and the activity with which the reconciling item is associated. The ASU eliminates the historic requirement that entities disclose information concerning unrecognized tax benefits having a reasonable possibility of significantly increasing or decreasing in the 12 months following the reporting date. This ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU should be applied on a prospective basis; however, retrospective application is permitted. We are currently evaluating the impact that ASU 2023 – 09 may have on our consolidated financial statements.

 

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segments,” which aims to improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. Currently, Topic 280 requires that a public entity disclose certain information about its reportable segments. For example, a public entity is required to report a measure of segment profit or loss that the CODM uses to assess segment performance and make decisions about allocating resources. Topic 280 also requires other specified segment items and amounts, such as depreciation, amortization, and depletion expense, to be disclosed under certain circumstances. The amendments in this ASU do not change or remove those disclosure requirements and do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact that ASU 2023 – 07 may have on our 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.

 
v3.24.1.1.u2
CONCENTRATION OF CREDIT RISK
 3 Months Ended
Mar. 31, 2024
Risks and Uncertainties [Abstract]  
CONCENTRATION OF CREDIT RISK

NOTE 3: CONCENTRATION OF CREDIT RISK

 

Cash and cash equivalents

 

The Company had cash and cash equivalents of $11.9 million and $14.0 million at March 31, 2024 and December 31, 2023, respectively. The Company invests excess cash in U.S. treasury bills, certificates of deposit or deposit accounts, all with maturities of less than three months. Cash equivalents were $11.1 million and $12.1 million at March 31, 2024 and December 31, 2023, 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 at risk at March 31, 2024 and December 31, 2023 was $0.3 million and $1.5 million, respectively.

 

 

NOTE 3: CONCENTRATION OF CREDIT RISK (continued)

 

Accounts receivable

 

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 consider 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 $36,000 as of both March 31, 2024 and December 31, 2023. 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 doubtful accounts could be material to our results of operations and financial condition.

 

At March 31, 2024, the accounts receivable balance included an amount from one customer that totaled 67.2% of total accounts receivable. As of December 31, 2023, the accounts receivable balance includes amounts from three customers that represented 37.6%, 13.0% and 12.8% of total accounts receivable.

 

Sales concentration

 

Revenue from a single customer in any one period can exceed 10% of our total revenues. During the three months ended March 31, 2024, two customers exceeded 10% of revenues, representing 29.6% and 13.1% of revenues, and during the three months ended March 31, 2023, three customers exceeded 10%, representing 28.3%, 15.9% and 10.6% of revenues.

 

 
v3.24.1.1.u2
REVENUE RECOGNITION
 3 Months Ended
Mar. 31, 2024
Revenue from Contract with Customer [Abstract]  
REVENUE RECOGNITION

NOTE 4: REVENUE RECOGNITION

 

The following table represents a disaggregation of revenue for the three months ended March 31, 2024 and 2023 (in thousands):

 

   Over time   Point in time   Total 
   Three months ended March 31, 2024 
             
   Over time   Point in time   Total 
Energy  $-   $18   $18 
Aerospace   1,802    332    2,134 
Industrial   1,259    483    1,742 
Research   861    167    1,028 
Total  $3,922   $1,000   $4,922 

 

   Over time   Point in time   Total 
   Three months ended March 31, 2023 
             
   Over time   Point in time   Total 
Energy  $2,516   $14   $2,530 
Aerospace   264    251    515 
Industrial   3,670    213    3,883 
Research   1,272    495    1,767 
Total  $7,722   $973   $8,695 

 

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. The research market principally represents customers that are universities and other research institutions.

 

The Company has unrecognized contract revenue of approximately $24.8 million at March 31, 2024, which it expects to substantially recognize as revenue within the next eighteen months.

 

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

 

Changes in estimates for sales of systems may occur for a variety of reasons, including but not limited to (i) build accelerations or delays, (ii) product cost forecast changes, (iii) cost related change orders or add-ons, or (iv) changes in other information used to estimate costs. Changes in estimates may have a material effect on the Company’s consolidated statements of operations.

 

 

NOTE 4: REVENUE RECOGNITION (continued)

 

Contract assets and liabilities

 

Contract assets and contract liabilities on input method type contracts in progress are summarized as follows as of March 31, 2024 (in thousands):

 

      
Costs incurred on contracts in progress  $10,024 
Estimated earnings   4,582 
Costs and estimated earnings on uncompleted contracts  $14,606 
Billings to date   (17,649)
Net cost in excess of billings   (3,043)

Deferred revenue related to non-system contracts and a system contract to be recognized at point in time

   (298)
Contract liability in excess of contract assets  $(3,341)

Included in accompanying condensed consolidated balance sheets under the following captions (in thousands):

     
Contract assets  $2,689 
Contract liabilities  $6,030 

 

Of the contract liability balances at December 31, 2023 and 2022 of $4.6 million and $4.1 million, respectively, $1.3 million and $2.9 million was recognized as revenue during the three months ended March 31, 2024 and 2023, respectively.

 
v3.24.1.1.u2
INVENTORIES, NET
 3 Months Ended
Mar. 31, 2024
Inventory Disclosure [Abstract]  
INVENTORIES, NET

NOTE 5: INVENTORIES, NET

 

Inventories consist of:        
   March 31, 2024   December 31, 2023 
         
Raw materials  $2,507   $2,351 
Work-in-process   1,563    1,248 
Finished goods   855    855 
Total  $4,925   $4,454 

 
v3.24.1.1.u2
LONG-TERM DEBT
 3 Months Ended
Mar. 31, 2024
Debt Disclosure [Abstract]  
LONG-TERM DEBT

NOTE 6: LONG-TERM DEBT

 

In September 2022, the Company entered into a loan agreement to fund the acquisition of machinery. The loan amount of $432,000, is payable in 60 equal monthly installments of $8,352 and secured by equipment. The interest rate is 6%.

 

 
v3.24.1.1.u2
EARNINGS PER SHARE
 3 Months Ended
Mar. 31, 2024
Earnings Per Share [Abstract]  
EARNINGS PER SHARE

NOTE 7: EARNINGS PER SHARE

 

The calculation of basic and diluted weighted average common shares outstanding for the three months ended March 31, 2024 and 2023 is as follows:

 

   2024   2023 
   Three months ended March 31, 
   2024   2023 
         
Basic weighted average common shares outstanding   6,809,283    6,773,285 
Effect of potentially dilutive share-based awards   -    - 
Diluted weighted average shares outstanding   6,809,283    6,773,285 

 

At March 31, 2024, stock options to purchase 841,875 shares of common stock were outstanding and 395,625 were exercisable. At March 31, 2023, stock options to purchase 899,500 shares of common stock were outstanding and 252,375 were exercisable.

 

For the three months ended March 31, 2024 and 2023, 841,875 and 899,500 of stock options, respectively, were not included in the computation of diluted earnings per share because their effect was antidilutive.

 
v3.24.1.1.u2
STOCK-BASED COMPENSATION EXPENSE
 3 Months Ended
Mar. 31, 2024
Share-Based Payment Arrangement [Abstract]  
STOCK-BASED COMPENSATION EXPENSE

NOTE 8: STOCK-BASED COMPENSATION EXPENSE

 

The Company recorded stock-based compensation for the three months ended March 31, 2024 and 2023, respectively, that were included in the following line items in our condensed consolidated statements of operations (in thousands):

 

   2024   2023 
   Three months ended March 31, 
   2024   2023 
         
Cost of revenue  $38   $19 
Research and development   47    20 
Selling   27    11 
General and administrative   155    85 
           
Total  $267   $135 

 

 

NOTE 8: STOCK-BASED COMPENSATION EXPENSE (continued)

 

Stock-based compensation expense included $50,000 and $40,000 for the three months ended March 31, 2024 and 2023, respectively, related to restricted stock awards that directors elected to receive pursuant to the Director Compensation plan. Under this plan, each of the five independent directors is entitled to an Annual Equity Retainer in the amount of $40,000, to be granted on the date of the Company’s annual meeting of shareholders.

 

For the three months ended March 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 weighted average fair value of stock options granted was $3.30 and is based upon weighted average assumptions below.

 

Stock price  $4.75 
Exercise price  $4.75 
Dividend yield   0%
Expected volatility   77%
Risk-free interest rate   4.12%
Expected life (in years)   6.00 

 

The following table summarizes stock options awards for the three months ended March 31, 2024:

 

       Weighted 
   Stock Option   Average 
   Awards   Exercise 
   (in shares)   Price 
Outstanding at January 1, 2024   846,875   $8.20 
Granted   5,000    4.75 
Forfeited   (10,000)   8.01 
           
Outstanding at March 31, 2024   841,875    8.18 

 

The following table summarizes information about the outstanding and exercisable options at March 31, 2024 by ranges of exercise prices:

 

   Options Outstanding   Options Exercisable 
       Weighted   Weighted           Weighted     
       Average   Average           Average     
Exercise  Number   Remaining   Exercise   Intrinsic   Number   Exercise   Intrinsic 
Price Range  Outstanding   Contractual   Price   Value   Exercisable   Price   Value 
$ 4.00-7.00   462,125    7.6   $4.55   $144,275    194,750   $4.48   $68,931 
$ 7.01-10.00   20,000    4.1   $8.07   $-    20,000   $8.07   $- 
$ 10.01-13.00   130,000    3.4   $10.62   $-    122,500   $10.55   $- 
$ 13.01-16.00   229,750    9.0   $14.11   $-    58,375   $14.11   $- 

 

 

NOTE 8: STOCK-BASED COMPENSATION EXPENSE (continued)

 

As of March 31, 2024, there was $2.2 million of unrecognized compensation costs related to stock options expected to be recognized over a weighted average period of 2.0 years.

 
v3.24.1.1.u2
INCOME TAXES
 3 Months Ended
Mar. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 9: INCOME TAXES

 

As of March 31, 2024 and December 31, 2023, the Company has provided a full valuation allowance against its net deferred tax assets. This was based on management’s assessment, including operating losses in recent years, that it is more likely than not that the net deferred tax assets may not be realized in the future. Management continues to evaluate for potential utilization of the Company’s net deferred tax asset, which has been fully reserved for, on a quarterly basis, reviewing our economic models, including projections of future operating results.

 
v3.24.1.1.u2
SEGMENT REPORTING
 3 Months Ended
Mar. 31, 2024
Segment Reporting [Abstract]  
SEGMENT REPORTING

NOTE 10: SEGMENT REPORTING

 

The Company operates through three segments: CVD Equipment, Stainless Design Concepts (“SDC”) and CVD Materials. The CVD Equipment segment manufactures and sells chemical vapor deposition, physical vapor transport and similar equipment. The SDC segment designs and manufactures ultra-high purity gas and chemical delivery control systems. The CVD Materials segment provides material coatings for aerospace, medical, electronic and other applications and is not considered a core business of the Company. The Company evaluates performance based on several factors, of which the primary financial measure is income (loss) before taxes.

 

The Company’s corporate administration activities are reported in the “Corporate” column. These activities primarily include expenses related to certain corporate officers and support staff, expenses related to the Company’s Board of Directors, stock option expense for options and shares of restricted stock granted to corporate administration employees and board members, certain consulting expenses, investor and shareholder relations activities, and all of the Company’s legal, auditing and professional fees.

 

Elimination entries included in the “Eliminations” column represent intersegment revenues and cost of revenues that are eliminated in consolidation. Intersegment sales for the three months ended March 31, 2024 and 2023 by the SDC segment to the CVD Equipment segment were $15,000 and $129,000, respectively.

 

 

NOTE 10: SEGMENT REPORTING (continued)

 

The following table presents certain information regarding the Company’s segments as of and for the three months ended March 31, 2024 and 2023 (in thousands):

 

   CVD Equipment   SDC  

CVD

Materials

   Eliminations   Corporate   Consolidated 
2024                        
   CVD Equipment   SDC  

CVD

Materials

   Eliminations   Corporate   Consolidated 
Assets  $31,412   $3,882   $183   $(34)  $-   $35,443 
                               
Revenue  $2,947   $1,931   $59   $(15)  $-   $4,922 
Operating (loss) income   (1,405)   632    (25)   -    (825)   (1,623)
Pretax (loss) income   (1,411)   632    (25)   -    (668)   (1,472)
Depreciation and amortization  $141   $12   $-   $-   $-   $153 
Purchase of property, plant & equipment   $76   $-   $-   $-   $-   $76 

 

   CVD Equipment   SDC   CVD
Materials		   Eliminations   Corporate   Consolidated 
2023                        
   CVD Equipment   SDC   CVD
Materials		   Eliminations   Corporate   Consolidated 
Assets  $28,509   $4,467   $1,783   $25   $-   $34,784 
                               
Revenue  $5,845   $2,312   $667   $(129)  $-   $8,695 
Operating (loss) income   (95)   631    81    -    (804)   (187)
Pretax (loss) income   (93)   631    108    -    (684)   (38)
Depreciation and amortization  $131   $12   $23   $-   $-   $166 
Purchase of property, plant & equipment   $136   $10   $-   $-   $-   $146 

 

 
v3.24.1.1.u2
MESOSCRIBE SUBSIDIARY
 3 Months Ended
Mar. 31, 2024
Discontinued Operations and Disposal Groups [Abstract]  
MESOSCRIBE SUBSIDIARY

NOTE 11: MESOSCRIBE SUBSIDIARY

 

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 will sell certain proprietary assets relating to its plasma spray technology and material deposition system and grant a non-exclusive license to use certain of the Company’s related intellectual property as more fully described in the Agreement, for an aggregate purchase price of $0.9 million. The purchase price is payable in several installments and contingent upon certain performance metrics and other milestones.

 

The Company will continue to fulfill remaining orders for MesoScribe products through the end of 2024 at which time it plans to cease the remaining operations of MesoScribe and dispose of any remaining equipment.

 

The Company received payments under the Agreement in the amount of $0.6 million which has been reflected as “deposit from purchaser” in the accompanying consolidated balance sheet as of March 31, 2024 and December 31, 2023. The Company expects the transaction to be completed in 2024 with the acceptance of the equipment by the purchaser.

 

The revenues and net loss of MesoScribe were $59,000 and ($25,000) for the three months ended March 31, 2024.

 

The total assets and total liabilities of the MesoScribe subsidiary were $0.2 million and $0.7 million, respectively, as of March 31, 2024 and $0.2 million and $0.7 million, respectively, as of December 31, 2023.

 
v3.24.1.1.u2
RISKS AND UNCERTAINTIES
 3 Months Ended
Mar. 31, 2024
Risks And Uncertainties  
RISKS AND UNCERTAINTIES

NOTE 12: 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:

 

  ●

Significant geopolitical developments across Europe and Asia (including the war in Ukraine) have and may continue to restrict the Company’s ability to procure raw materials and components such as nickel and integrated circuits, as well as impact the Company’s ability to sell its products into China, Russia and other Eastern European and Asian regions.

     
  ●

Supply chain disruptions have led to much longer lead times to acquire raw materials for production and has led to inflationary pressures in both materials and labor. These supply chain disruptions have impacted the Company’s ability to recognize revenue timelier as it delays the Company’s manufacturing processes.

 

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.
v3.24.1.1.u2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
 3 Months Ended
Mar. 31, 2024
Accounting Policies [Abstract]  
Revenue Recognition

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 three months ended March 31, 2024 and 2023.

 

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.

 

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

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

 

Contract assets include unbilled amounts typically resulting from system sales under contracts and 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 three months ended March 31, 2024 and 2023, all system equipment sales were recorded over time by using an input method.

 
Inventories

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.

 

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

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

Product Warranty

 

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

 
Recent Accounting Standards

Recent Accounting Standards

 

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires public business entities to disclose additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes. It also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold. In addition to new disclosures associated with the rate reconciliation, the ASU requires information pertaining to taxes paid (net of refunds received) to be disaggregated for federal, state, and foreign taxes and further disaggregated for specific jurisdictions to the extent the related amounts exceed a quantitative threshold. The ASU also describes items that need to be disaggregated based on their nature, which is determined by reference to the item’s fundamental or essential characteristics, such as the transaction or event that triggered the establishment of the reconciling item and the activity with which the reconciling item is associated. The ASU eliminates the historic requirement that entities disclose information concerning unrecognized tax benefits having a reasonable possibility of significantly increasing or decreasing in the 12 months following the reporting date. This ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU should be applied on a prospective basis; however, retrospective application is permitted. We are currently evaluating the impact that ASU 2023 – 09 may have on our consolidated financial statements.

 

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segments,” which aims to improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. Currently, Topic 280 requires that a public entity disclose certain information about its reportable segments. For example, a public entity is required to report a measure of segment profit or loss that the CODM uses to assess segment performance and make decisions about allocating resources. Topic 280 also requires other specified segment items and amounts, such as depreciation, amortization, and depletion expense, to be disclosed under certain circumstances. The amendments in this ASU do not change or remove those disclosure requirements and do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact that ASU 2023 – 07 may have on our 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.
v3.24.1.1.u2
REVENUE RECOGNITION (Tables)
 3 Months Ended
Mar. 31, 2024
Revenue from Contract with Customer [Abstract]  
Schedule of Disaggregation of Revenue

The following table represents a disaggregation of revenue for the three months ended March 31, 2024 and 2023 (in thousands):

 

   Over time   Point in time   Total 
   Three months ended March 31, 2024 
             
   Over time   Point in time   Total 
Energy  $-   $18   $18 
Aerospace   1,802    332    2,134 
Industrial   1,259    483    1,742 
Research   861    167    1,028 
Total  $3,922   $1,000   $4,922 

 

   Over time   Point in time   Total 
   Three months ended March 31, 2023 
             
   Over time   Point in time   Total 
Energy  $2,516   $14   $2,530 
Aerospace   264    251    515 
Industrial   3,670    213    3,883 
Research   1,272    495    1,767 
Total  $7,722   $973   $8,695 
Schedule of Cost and Estimated Earnings in Excess of Billings

Contract assets and contract liabilities on input method type contracts in progress are summarized as follows as of March 31, 2024 (in thousands):

 

      
Costs incurred on contracts in progress  $10,024 
Estimated earnings   4,582 
Costs and estimated earnings on uncompleted contracts  $14,606 
Billings to date   (17,649)
Net cost in excess of billings   (3,043)

Deferred revenue related to non-system contracts and a system contract to be recognized at point in time

   (298)
Contract liability in excess of contract assets  $(3,341)

Included in accompanying condensed consolidated balance sheets under the following captions (in thousands):

     
Contract assets  $2,689 
Contract liabilities  $6,030 
v3.24.1.1.u2
INVENTORIES, NET (Tables)
 3 Months Ended
Mar. 31, 2024
Inventory Disclosure [Abstract]  
Schedule of Inventories, Net

 

Inventories consist of:        
   March 31, 2024   December 31, 2023 
         
Raw materials  $2,507   $2,351 
Work-in-process   1,563    1,248 
Finished goods   855    855 
Total  $4,925   $4,454 
v3.24.1.1.u2
EARNINGS PER SHARE (Tables)
 3 Months Ended
Mar. 31, 2024
Earnings Per Share [Abstract]  
Schedule of Basic and Diluted Weighted Average Common Shares Outstanding

The calculation of basic and diluted weighted average common shares outstanding for the three months ended March 31, 2024 and 2023 is as follows:

 

   2024   2023 
   Three months ended March 31, 
   2024   2023 
         
Basic weighted average common shares outstanding   6,809,283    6,773,285 
Effect of potentially dilutive share-based awards   -    - 
Diluted weighted average shares outstanding   6,809,283    6,773,285 
v3.24.1.1.u2
STOCK-BASED COMPENSATION EXPENSE (Tables)
 3 Months Ended
Mar. 31, 2024
Share-Based Payment Arrangement [Abstract]  
Schedule of Stock Based Compensation expense

 

   2024   2023 
   Three months ended March 31, 
   2024   2023 
         
Cost of revenue  $38   $19 
Research and development   47    20 
Selling   27    11 
General and administrative   155    85 
           
Total  $267   $135 
Schedule of Weighted Average Assumptions

 

Stock price  $4.75 
Exercise price  $4.75 
Dividend yield   0%
Expected volatility   77%
Risk-free interest rate   4.12%
Expected life (in years)   6.00 
Schedule of Stock Options Awards

The following table summarizes stock options awards for the three months ended March 31, 2024:

 

       Weighted 
   Stock Option   Average 
   Awards   Exercise 
   (in shares)   Price 
Outstanding at January 1, 2024   846,875   $8.20 
Granted   5,000    4.75 
Forfeited   (10,000)   8.01 
           
Outstanding at March 31, 2024   841,875    8.18 
Schedule of Outstanding and Exercisable Options Ranges of Exercise Prices

The following table summarizes information about the outstanding and exercisable options at March 31, 2024 by ranges of exercise prices:

 

   Options Outstanding   Options Exercisable 
       Weighted   Weighted           Weighted     
       Average   Average           Average     
Exercise  Number   Remaining   Exercise   Intrinsic   Number   Exercise   Intrinsic 
Price Range  Outstanding   Contractual   Price   Value   Exercisable   Price   Value 
$ 4.00-7.00   462,125    7.6   $4.55   $144,275    194,750   $4.48   $68,931 
$ 7.01-10.00   20,000    4.1   $8.07   $-    20,000   $8.07   $- 
$ 10.01-13.00   130,000    3.4   $10.62   $-    122,500   $10.55   $- 
$ 13.01-16.00   229,750    9.0   $14.11   $-    58,375   $14.11   $- 
v3.24.1.1.u2
SEGMENT REPORTING (Tables)
 3 Months Ended
Mar. 31, 2024
Segment Reporting [Abstract]  
Schedule of Segments

The following table presents certain information regarding the Company’s segments as of and for the three months ended March 31, 2024 and 2023 (in thousands):

 

   CVD Equipment   SDC  

CVD

Materials

   Eliminations   Corporate   Consolidated 
2024                        
   CVD Equipment   SDC  

CVD

Materials

   Eliminations   Corporate   Consolidated 
Assets  $31,412   $3,882   $183   $(34)  $-   $35,443 
                               
Revenue  $2,947   $1,931   $59   $(15)  $-   $4,922 
Operating (loss) income   (1,405)   632    (25)   -    (825)   (1,623)
Pretax (loss) income   (1,411)   632    (25)   -    (668)   (1,472)
Depreciation and amortization  $141   $12   $-   $-   $-   $153 
Purchase of property, plant & equipment   $76   $-   $-   $-   $-   $76 

 

   CVD Equipment   SDC   CVD
Materials		   Eliminations   Corporate   Consolidated 
2023                        
   CVD Equipment   SDC   CVD
Materials		   Eliminations   Corporate   Consolidated 
Assets  $28,509   $4,467   $1,783   $25   $-   $34,784 
                               
Revenue  $5,845   $2,312   $667   $(129)  $-   $8,695 
Operating (loss) income   (95)   631    81    -    (804)   (187)
Pretax (loss) income   (93)   631    108    -    (684)   (38)
Depreciation and amortization  $131   $12   $23   $-   $-   $166 
Purchase of property, plant & equipment   $136   $10   $-   $-   $-   $146 
v3.24.1.1.u2
BASIS OF PRESENTATION (Details Narrative) - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
Accounting Policies [Abstract]    
Cash and cash equivalents $ 11,893 $ 14,025
v3.24.1.1.u2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Accounting Policies [Abstract]    
Contract assets, impairment loss $ 0 $ 0
Standard product warranty description The Company typically provides standard warranty coverage on its systems for one year from the date of final acceptance or fifteen months from the date of shipment by providing labor and parts necessary to repair the systems during the warranty period. The Company records the estimated warranty cost when revenue is recognized on the related system. Warranty cost is included in “Cost of revenue” in the condensed consolidated statements of operations. The estimated warranty cost is based on the Company’s historical cost. The Company updates its warranty estimates based on actual costs incurred  
v3.24.1.1.u2
CONCENTRATION OF CREDIT RISK (Details Narrative) - USD ($)
 3 Months Ended 12 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Dec. 31, 2023
Concentration Risk [Line Items]      
Cash and cash equivalents $ 11,893,000   $ 14,025,000
Uninsured amount 300,000   1,500,000
Allowance for doubtful accounts $ 36,000   $ 36,000
Accounts Receivable [Member] | One Customer [Member] | Customer Concentration Risk [Member]      
Concentration Risk [Line Items]      
Concentration risk, percentage 67.20%   37.60%
Accounts Receivable [Member] | Two Customers [Member] | Customer Concentration Risk [Member]      
Concentration Risk [Line Items]      
Concentration risk, percentage     13.00%
Accounts Receivable [Member] | Three Customers [Member] | Customer Concentration Risk [Member]      
Concentration Risk [Line Items]      
Concentration risk, percentage     12.80%
Revenue Benchmark [Member] | One Customer [Member] | Customer Concentration Risk [Member]      
Concentration Risk [Line Items]      
Concentration risk, percentage 29.60% 28.30%  
Revenue Benchmark [Member] | Two Customers [Member] | Customer Concentration Risk [Member]      
Concentration Risk [Line Items]      
Concentration risk, percentage 13.10% 15.90%  
Revenue Benchmark [Member] | Three Customers [Member] | Customer Concentration Risk [Member]      
Concentration Risk [Line Items]      
Concentration risk, percentage   10.60%  
US Treasury Bill Securities [Member]      
Concentration Risk [Line Items]      
Cash equivalents $ 11,100,000   $ 12,100,000
v3.24.1.1.u2
Schedule of Disaggregation of Revenue (Details) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Disaggregation of Revenue [Line Items]    
Total $ 4,922 $ 8,695
Energy [Member]    
Disaggregation of Revenue [Line Items]    
Total 18 2,530
Aerospace [Member]    
Disaggregation of Revenue [Line Items]    
Total 2,134 515
Industrial [Member]    
Disaggregation of Revenue [Line Items]    
Total 1,742 3,883
Research [Member]    
Disaggregation of Revenue [Line Items]    
Total 1,028 1,767
Transferred over Time [Member]    
Disaggregation of Revenue [Line Items]    
Total 3,922 7,722
Transferred over Time [Member] | Energy [Member]    
Disaggregation of Revenue [Line Items]    
Total 2,516
Transferred over Time [Member] | Aerospace [Member]    
Disaggregation of Revenue [Line Items]    
Total 1,802 264
Transferred over Time [Member] | Industrial [Member]    
Disaggregation of Revenue [Line Items]    
Total 1,259 3,670
Transferred over Time [Member] | Research [Member]    
Disaggregation of Revenue [Line Items]    
Total 861 1,272
Transferred at Point in Time [Member]    
Disaggregation of Revenue [Line Items]    
Total 1,000 973
Transferred at Point in Time [Member] | Energy [Member]    
Disaggregation of Revenue [Line Items]    
Total 18 14
Transferred at Point in Time [Member] | Aerospace [Member]    
Disaggregation of Revenue [Line Items]    
Total 332 251
Transferred at Point in Time [Member] | Industrial [Member]    
Disaggregation of Revenue [Line Items]    
Total 483 213
Transferred at Point in Time [Member] | Research [Member]    
Disaggregation of Revenue [Line Items]    
Total $ 167 $ 495
v3.24.1.1.u2
Schedule of Cost and Estimated Earnings in Excess of Billings (Details) - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
Revenue from Contract with Customer [Abstract]    
Costs incurred on contracts in progress $ 10,024  
Estimated earnings 4,582  
Costs and estimated earnings on uncompleted contracts 14,606  
Billings to date (17,649)  
Net cost in excess of billings (3,043)  
Deferred revenue related to non-system contracts and a system contract to be recognized at point in time (298)  
Contract liability in excess of contract assets (3,341)  
Contract assets 2,689 $ 1,604
Contract liabilities $ 6,030 $ 4,908
v3.24.1.1.u2
REVENUE RECOGNITION (Details Narrative) - USD ($)
$ in Millions
 3 Months Ended 12 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Dec. 31, 2023
Dec. 31, 2022
Revenue from Contract with Customer [Abstract]        
Unrecognized contract revenue $ 24.8      
Contract liability $ 1.3 $ 2.9 $ 4.6 $ 4.1
v3.24.1.1.u2
Schedule of Inventories, Net (Details) - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
Inventory Disclosure [Abstract]    
Raw materials $ 2,507 $ 2,351
Work-in-process 1,563 1,248
Finished goods 855 855
Total $ 4,925 $ 4,454
v3.24.1.1.u2
LONG-TERM DEBT (Details Narrative) - Loan Agreement to Fund Machinery Acquisition [Member]
 1 Months Ended
Sep. 30, 2022
USD ($)
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Loan principal amount $ 432,000
Loan payment term 60
Loan, monthly installment amount $ 8,352
Loan interest rate 6.00%
v3.24.1.1.u2
Schedule of Basic and Diluted Weighted Average Common Shares Outstanding (Details) - shares
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Earnings Per Share [Abstract]    
Basic weighted average common shares outstanding 6,809,283 6,773,285
Effect of potentially dilutive share-based awards
Diluted weighted average shares outstanding 6,809,283 6,773,285
v3.24.1.1.u2
EARNINGS PER SHARE (Details Narrative) - shares
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Dec. 31, 2023
Earnings Per Share [Abstract]      
Stock option outstanding 841,875 899,500 846,875
Stock option exercisable 395,625 252,375  
Antidilutive sharesfrom computation of diluted earnings per share 841,875 899,500  
v3.24.1.1.u2
Schedule of Stock Based Compensation expense (Details) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]    
Total $ 267 $ 135
Cost of Revenue [Member]    
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]    
Total 38 19
Research and Development Expense [Member]    
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]    
Total 47 20
Selling Expense [Member]    
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]    
Total 27 11
General and Administrative Expense [Member]    
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]    
Total $ 155 $ 85
v3.24.1.1.u2
Schedule of Weighted Average Assumptions (Details)
 3 Months Ended
Mar. 31, 2024
$ / shares
Share-Based Payment Arrangement [Abstract]  
Stock price $ 4.75
Exercise price $ 4.75
Dividend yield 0.00%
Expected volatility 77.00%
Risk-free interest rate 4.12%
Expected life (in years) 6 years
v3.24.1.1.u2
Schedule of Stock Options Awards (Details)
 3 Months Ended
Mar. 31, 2024
$ / shares
shares
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Outstanding [Roll Forward]  
Stock option awards outstanding, beginning balance | shares 846,875
Stock option awards, granted | shares 5,000
Stock option awards, forfeited | shares (10,000)
Stock option awards outstanding, ending balance | shares 841,875
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]  
Weighted average exercise price outstanding, beginning balance | $ / shares $ 8.20
Weighted average exercise price, granted | $ / shares 4.75
Weighted average exercise price, forfeited | $ / shares 8.01
Weighted average exercise price outstanding, ending balance | $ / shares $ 8.18
v3.24.1.1.u2
Schedule of Outstanding and Exercisable Options Ranges of Exercise Prices (Details)
$ / shares in Units, $ in Thousands
 3 Months Ended
Mar. 31, 2024
USD ($)
$ / shares
shares
Exercise Price Range One [Member]  
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Exercise price range, lower limit $ 4.00
Exercise price range, upper limit $ 7.00
Number of options outstanding | shares 462,125
Number of options outstanding, weighted average remaining contractual term 7 years 7 months 6 days
Number of options outstanding, weighted average exercise price $ 4.55
Number of options outstanding, intrinsic value | $ $ 144,275
Number of options exercisable | shares 194,750
Number of options exercisable, weighted average exercise price $ 4.48
Number of options exercisable, intrinsic value | $ $ 68,931
Exercise Price Range Two [Member]  
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Exercise price range, lower limit $ 7.01
Exercise price range, upper limit $ 10.00
Number of options outstanding | shares 20,000
Number of options outstanding, weighted average remaining contractual term 4 years 1 month 6 days
Number of options outstanding, weighted average exercise price $ 8.07
Number of options outstanding, intrinsic value | $
Number of options exercisable | shares 20,000
Number of options exercisable, weighted average exercise price $ 8.07
Number of options exercisable, intrinsic value | $
Exercise Price Range Three [Member]  
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Exercise price range, lower limit $ 10.01
Exercise price range, upper limit $ 13.00
Number of options outstanding | shares 130,000
Number of options outstanding, weighted average remaining contractual term 3 years 4 months 24 days
Number of options outstanding, weighted average exercise price $ 10.62
Number of options outstanding, intrinsic value | $
Number of options exercisable | shares 122,500
Number of options exercisable, weighted average exercise price $ 10.55
Number of options exercisable, intrinsic value | $
Exercise Price Range Four [Member]  
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Exercise price range, lower limit $ 13.01
Exercise price range, upper limit $ 16.00
Number of options outstanding | shares 229,750
Number of options outstanding, weighted average remaining contractual term 9 years
Number of options outstanding, weighted average exercise price $ 14.11
Number of options outstanding, intrinsic value | $
Number of options exercisable | shares 58,375
Number of options exercisable, weighted average exercise price $ 14.11
Number of options exercisable, intrinsic value | $
v3.24.1.1.u2
STOCK-BASED COMPENSATION EXPENSE (Details Narrative) - USD ($)
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Stock based compensation expenses $ 267,000 $ 135,000
Stock option granted 5,000  
Weighted average fair value of stock options granted $ 4.75  
Five Directors [Member]    
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Annual equity retainer amount $ 40,000  
Restricted Stock [Member] | Director [Member]    
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Stock based compensation expenses $ 50,000 $ 40,000
Share-Based Payment Arrangement, Option [Member]    
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Stock option granted 5,000  
Stock option vesting percentage 25.00%  
Vesting period 4 years  
Expiration period 10 years  
Weighted average fair value of stock options granted $ 3.30  
Unrecognized compensation costs $ 2,200,000  
Unrecognized compensation costs, recoginition period 2 years  
v3.24.1.1.u2
Schedule of Segments (Details) - USD ($)
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Dec. 31, 2023
Segment Reporting Information [Line Items]      
Assets $ 35,443,000 $ 34,784,000 $ 35,025,000
Revenue 4,922,000 8,695,000  
Operating (loss) income (1,623,000) (187,000)  
Pretax (loss) income (1,472,000) (38,000)  
Depreciation and amortization 153,000 166,000  
Purchase of property, plant & equipment 76,000 146,000  
Operating Segments [Member] | CVD Equipment [Member]      
Segment Reporting Information [Line Items]      
Assets 31,412,000 28,509,000  
Revenue 2,947,000 5,845,000  
Operating (loss) income (1,405,000) (95,000)  
Pretax (loss) income (1,411,000) (93,000)  
Depreciation and amortization 141,000 131,000  
Purchase of property, plant & equipment 76,000 136,000  
Operating Segments [Member] | SDC [Member]      
Segment Reporting Information [Line Items]      
Assets 3,882,000 4,467,000  
Revenue 1,931,000 2,312,000  
Operating (loss) income 632,000 631,000  
Pretax (loss) income 632,000 631,000  
Depreciation and amortization 12,000 12,000  
Purchase of property, plant & equipment 10,000  
Operating Segments [Member] | CVD Materials [Member]      
Segment Reporting Information [Line Items]      
Assets 183,000 1,783,000  
Revenue 59,000 667,000  
Operating (loss) income (25,000) 81,000  
Pretax (loss) income (25,000) 108,000  
Depreciation and amortization 23,000  
Purchase of property, plant & equipment  
Intersegment Eliminations [Member]      
Segment Reporting Information [Line Items]      
Assets (34,000) 25,000  
Revenue (15,000) (129,000)  
Operating (loss) income  
Pretax (loss) income  
Depreciation and amortization  
Purchase of property, plant & equipment  
Segment Reporting, Reconciling Item, Corporate Nonsegment [Member]      
Segment Reporting Information [Line Items]      
Assets  
Revenue  
Operating (loss) income (825,000) (804,000)  
Pretax (loss) income (668,000) (684,000)  
Depreciation and amortization  
Purchase of property, plant & equipment  
v3.24.1.1.u2
SEGMENT REPORTING (Details Narrative)
 3 Months Ended
Mar. 31, 2024
USD ($)
Segment
Mar. 31, 2023
USD ($)
Segment Reporting Information [Line Items]    
Number of operating segments | Segment 3  
Revenue from contract with customer, including assessed tax $ 4,922,000 $ 8,695,000
Intersegment Eliminations [Member]    
Segment Reporting Information [Line Items]    
Revenue from contract with customer, including assessed tax $ (15,000) $ (129,000)
v3.24.1.1.u2
MESOSCRIBE SUBSIDIARY (Details Narrative) - USD ($)
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Dec. 31, 2023
Aug. 08, 2023
Deposits from purchaser of equipment $ 597,000   $ 597,000  
Revenues 4,922,000 $ 8,695,000    
Net loss (1,472,000) (40,000)    
Assets 35,443,000 $ 34,784,000 35,025,000  
Liabilities 10,445,000   8,822,000  
Meso Scribe Technologies Inc [Member]        
Aggregate purchase price       $ 900,000
Deposits from purchaser of equipment 600,000      
Revenues 59,000      
Net loss (25,000)      
Assets 200,000   200,000  
Liabilities $ 700,000   $ 700,000  
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