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What changed in CVD EQUIPMENT CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of CVD EQUIPMENT CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+205 added−221 removedSource: 10-K (2024-03-28) vs 10-K (2023-03-27)

Top changes in CVD EQUIPMENT CORP's 2023 10-K

205 paragraphs added · 221 removed · 167 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

79 edited+12 added−18 removed28 unchanged
Biggest changeOther Markets CVD Equipment Products: - Universal liquid and gas storage cabinets, management, and delivery systems (SDC segment) - Production MOCVD Super Conducting Tape system -Silicon Quality Control system - ET-3000: MOCVD for compound semiconductor R&D - ET-3000 for graphene - ET-6000: Multi-Tube Chemical Vapor Deposition Tube furnace (metals, oxides and nitrides) - PowderCoat-300 for powder material R&D (including battery anode) - TMD: cluster tool for advanced material development 8 Our wholly owned subsidiary, CVD Materials Corporation, includes our Tantaline and MesoScribe product lines.
Biggest changeDeposits Si on machined gas turbine jet engine CMC components and other OEM components. - Chemical Vapor Deposition/ Chemical Vapor Infiltration production coating system for multi-layer CMC coatings on SiC fiber preforms. 6 Other Markets CVD Equipment Products: - Universal liquid and gas storage cabinets, management, and delivery systems (SDC segment). - Production MOCVD Super Conducting Tape system. - ET-3000: MOCVD for compound semiconductor R&D. - ET-3000 for graphene. - ET-6000: Multi-Tube Chemical Vapor Deposition Tube furnace (metals, oxides and nitrides). - PowderCoat-300 for powder material R&D (including battery anode). - TMD: cluster tool for advanced material development.
Our system design allows for automatic or manual control from both a local and remote location. These subsystems and components are provided to the general market as well support the CVD Equipment segment. Quartzware: The majority of our process equipment solutions, utilize quartz components which we partially manufacturer internally.
Our system design allows for automatic or manual control from both a local and remote location. These subsystems and components are provided to the general market as well as support the CVD Equipment segment. Quartzware – The majority of our process equipment solutions, utilize quartz components which we partially manufacturer internally.
We attempt to protect our trade secrets and other proprietary information through non-disclosure agreements with our customers, suppliers, employees and consultants and other security measures. 10 Research and Development We develop new products based on market analysis or by customer request. The technology included in our product development includes mechanical hardware, software and controls systems and overall configuration.
We attempt to protect our trade secrets and other proprietary information through non-disclosure agreements with our customers, suppliers, employees and consultants and other security measures. Research and Development We develop new products based on market analysis or by customer request. The technology included in our product development includes mechanical hardware, software and controls systems and overall configuration.
The product group also consists of legacy products serving the production and R&D applications such as semiconductors, LEDs, carbon nanotubes, nanowires, solar cells and a number of other industrial & research applications. Our developments and opportunities for the carbon composite business come from achievements in our Applications Laboratory.
The product group also consists of legacy products serving the production and R&D applications such as semiconductors, LEDs, carbon nanotubes, nanowires, solar cells and a number of other industrial & research applications. 7 Our developments and opportunities for the carbon composite business come from achievements in our Applications Laboratory.
We continue to monitor, review, and maintain ongoing compliance with EAR with respect to our export sales. Product Liability Our products are used in our customers’ manufacturing processes, which in some cases contain explosive, flammable, corrosive, and toxic gases.
We continue to monitor, review, and maintain ongoing compliance with the EAR with respect to our export sales. Product Liability Our products are used in our customers’ manufacturing processes, which in some cases contain explosive, flammable, corrosive, and toxic gases.
We design, develop, and manufacture a broad range of equipment to develop and manufacture materials and coatings for the compound semiconductor, semiconductor, aerospace, battery energy storage markets as well as advanced industrial applications, and research.
We design, develop, and manufacture a broad range of equipment used to develop and manufacture materials and coatings for the compound semiconductor, semiconductor, aerospace, battery energy storage markets as well as advanced industrial applications, and research.
Utilizing our 40 years of expertise in the design and manufacture of chemical vapor deposition and thermal process equipment, we provide material processing capability and control at a competitive cost of ownership.
Utilizing our over 40 years of expertise in the design and manufacture of chemical vapor deposition and thermal process equipment, we provide material processing capability and control at a competitive cost of ownership.
Our major targeted markets are further described as follows (the term “legacy product” refers to products and systems within our product offer that we have produced in our history) : Major Target Markets: Description and Growth Drivers: CVD Equipment Products and Services: High Power Electronics The shift to electrification has the objectives of reducing emissions and reducing dependency on fossil fuels.
Our major targeted markets are further described as follows (the term “legacy product” refers to products and systems within our product offerings that we have produced in our history): Major Target Markets: Description and Growth Drivers: CVD Equipment Products and Services: High Power Electronics The shift to electrification has the objectives of reducing emissions and reducing dependency on fossil fuels.
The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. 14
The process takes days to over a week to complete and yield a SiC crystal ready for further processing into wafers. 11 Rapid Thermal Processing ( “ RTP ” ) – Used to heat semiconductor materials to elevated temperatures of up to 1,200° Celsius at rapid rates of up to 200° Celsius per second.
The process takes days to over a week to complete and yield a SiC crystal ready for further processing into wafers. 9 Rapid Thermal Processing (RTP) – Used to heat semiconductor materials to elevated temperatures of up to 1,200 ° Celsius at rapid rates of up to 200° Celsius per second.
We have no duty to update or revise any forward-looking statements in this Annual Report or in other reports filed with the SEC, whether as a result of new information, future events or otherwise, unless we are required to do so by law.
We have no duty to update or revise any forward-looking statements in this Annual Report on Form 10-K or in other reports filed with the SEC, whether as a result of new information, future events or otherwise, unless we are required to do so by law.
For the year ended December 31, 2022, approximately $4.4 million or 17% of our revenues were generated by sales to customers outside the U.S., compared to approximately $4.3 million or 26% for the year ended December 31, 2021. Competition We can experience intense direct competition from both domestic and international competitors in all our product segments.
For the year ended December 31, 2023, approximately $4.1 million or 17% of our revenues were generated by sales to customers outside the U.S., compared to approximately $4.4 million or 17% for the year ended December 31, 2022. Competition We can experience intense direct competition from both domestic and international competitors in all our product segments.
Products and Technology Chemical Vapor Deposition/Infiltration – A method of coating or growing material through a chemical recombination at elevated temperatures onto or within pours of a substrate material.
Products and Technology Chemical Vapor Deposition/Infiltration – Chemical vapor deposition is a method of coating or growing material through a chemical recombination at elevated temperatures onto or within pores of a substrate material.
We believe that we have obtained all necessary permits to operate our business and that we are in material compliance with all laws and regulations applicable to us. These regulations change on an ongoing basis and the effect of these changes could materially impact our business in certain technology areas and regions.
We believe that we have obtained all necessary permits to operate our business and that we are in material compliance with all laws and regulations applicable to us. These regulations are subject to change and the effect of these changes could materially impact our business in certain technology areas and regions.
Overview CVD has served the advanced materials markets with chemical vapor deposition, physical vapor transport and thermal process equipment for over 40 years. We are headquartered in Central Islip, New York with other locations in Saugerties, New York and Nordborg, Denmark.
Overview CVD has served the advanced materials markets with chemical vapor deposition, physical vapor transport and thermal process equipment for over 40 years. We are headquartered in Central Islip, New York with one other location in Saugerties, New York.
Definitions The use of the words “CVD,” “we,” “us” or “our” refers to CVD Equipment Corporation, a New York corporation incorporated on October 13, 1982, and its wholly owned subsidiaries, CVD Materials Corporation (including its wholly owned subsidiaries CVD Tantaline ApS, and CVD MesoScribe Technologies Corporation) collectively “CVD Materials”), FAE Holdings 411519R LLC and 555 N Research Corporation except where the context otherwise requires.
Definitions The use of the words “CVD,” “we,” “us,” or “our,” refers to CVD Equipment Corporation, a New York corporation incorporated on October 13, 1982, and its wholly owned subsidiaries, CVD Materials Corporation (including its wholly owned subsidiaries, and CVD MesoScribe Technologies Corporation and Tantaline CVD Holding ApS, collectively “CVD Materials”), and FAE Holdings 411519R LLC except where the context otherwise requires.
The Applications Laboratory, along with the sales and marketing team continue to explore carbon-based products and applications that can be made from our CNT, infiltrated carbon/CVI and carbon nano fiber technology (CNF).
The Applications Laboratory, along with the sales and marketing team continue to explore carbon-based products and applications that can be made from our CNT, infiltrated carbon/CVI and carbon nano fiber technology (CNF). Some applications include CNT and infiltrated carbon/CVI based battery material and CNF capacitors for 5G technology.
We have gained this understanding as a result of having designed and built complex process gas systems for our CVD Equipment group as well as for a number of the world’s leading semiconductor, aerospace, medical, solar manufacturers, research laboratories and universities. CVD Materials consists of our Tantaline and MesoScribe subsidiaries.
We have gained this understanding as a result of having designed and built complex process gas systems for our CVD Equipment group as well as for a number of the world’s leading semiconductor, aerospace, medical, solar manufacturers, research laboratories and universities. CVD Materials consists of our MesoScribe subsidiary. There is no viable direct competitor for the MesoScribe services.
Through December 31, 2022, we have received orders for 30 of our PVT150 physical vapor transport systems from a customer, which uses our systems to grow silicon carbide crystals that are made into 150mm silicon carbide wafers for use in power electronics.
Through December 31, 2023, we have received and delivered orders for 30 of our PVT150 physical vapor transport systems from one customer, which uses our systems to grow silicon carbide crystals that are made into 150 mm silicon carbide wafers for use in power electronics.
We believe we must offer wages that are competitive and consistent with employee positions, skill levels, experience, and knowledge, and in order to do so we may work with a nationally recognized outside compensation and benefits consulting firm to independently evaluate the effectiveness of our executive and non-executive compensation and benefit programs and to provide benchmarking against our peers within our industry. 16 Diversity and Inclusion We are committed to building and sustaining a culture of diversity encourage all of our employees to reach their full potential.
We believe we must offer wages that are competitive and consistent with employee positions, skill levels, experience, and knowledge, and in order to do so we may work with a nationally recognized outside compensation and benefits consulting firm to independently evaluate the effectiveness of our executive and non-executive compensation and benefit programs and to provide benchmarking against our peers within our industry.
While patent, copyright and trademark protections for our intellectual property are important to different degrees for our various products and solutions, we believe our future success in highly dynamic markets is most dependent upon the technical competence and creative skills of our personnel and our ability to accelerate the commercialization of next generation intellectual properties.
We also maintain certain trademarks relating to certain of our products and product lines and claim copyright protection for certain proprietary software and documentation. 8 While patent, copyright and trademark protections for our intellectual property are important to different degrees for our various products and solutions, we believe our future success in highly dynamic markets is most dependent upon the technical competence and creative skills of our personnel and our ability to accelerate the commercialization of next generation intellectual properties.
A 200mm version is under development and planned for launch in 2023. The crystal growth technique utilized a high temperature furnace to vaporize from seed granular material of SiC and further deposit out in an ordered crystal structure onto substrate wafer.
The crystal growth technique utilized a high temperature furnace to vaporize from seed granular material of SiC and further deposit out in an ordered crystal structure onto substrate wafer.
The implementation of our business strategy depends on our ability to hire, train, and retain qualified and diverse professionals, and we must emphasize employee development and training in order to do so.
None of our employees were subject to a collective bargaining agreement. 13 The implementation of our business strategy depends on our ability to hire, train, and retain qualified and diverse professionals, and we must emphasize employee development and training in order to do so.
We are always striving to attract talented individuals from a diverse candidate pool. Available Information Our website address is www.cvdequipment.com and the contents of our website, including our investor relations website, is not incorporated by reference into this filing or any other report we file with or furnish to the SEC.
Available Information Our website address is www.cvdequipment.com and the contents of our website, including our investor relations website, is not incorporated by reference into this filing or any other report we file with or furnish to the SEC.
Our bookings increased in the SDC segment but declined in our CVD Materials segment which includes the Tantaline and MesoScribe product lines. Segments CVD Equipment segment supplies state-of-the-art chemical vapor deposition and thermal process equipment targeting growth production markets as well as systems for use in research, development. This includes systems marketed under the FirstNano product brand.
Segments CVD Equipment - supplies state-of-the-art chemical vapor deposition and thermal process equipment targeting growth production markets as well as systems for use in research and development. This includes systems marketed under the FirstNano product brand.
To date, we believe that each of our product and service segments has been able to compete favorably in markets that include these competitors, primarily based on know-how, technical performance, quality, delivery, price and aftermarket support.
To date, we believe that each of our product and service segments has been able to compete favorably in markets that include these competitors, primarily based on know-how, technical performance, quality, delivery, price and aftermarket support. We continue to focus on products, which serve markets that are growing and where we have a technical and commercially competitive advantage.
We maintain strong environmental, health and safety protocols that focus on implementing policies and training programs, as well as performing self-audits to ensure our colleagues and partners leave the workplace safely on a daily basis. Our highest priorities throughout the pandemic were, and continue to be, the health and well-being of our employees, customers, suppliers, and stakeholders.
We maintain strong environmental, health and safety protocols that focus on implementing policies and training programs, as well as performing self-audits to ensure our colleagues and partners leave the workplace safely on a daily basis.
Customers Our systems and products are used in both production applications and advanced materials research. We market and sell primarily to companies that are the engaged in producing compound semiconductor wafers, aerospace gas turbine jet engine component material, defense, battery energy storage, silicon and other microelectronic and micromechanical devices, semiconductor, universities and research centers.
We market and sell primarily to companies that are the engaged in producing compound semiconductor wafers, aerospace gas turbine jet engine component material, defense, battery energy storage, silicon and other microelectronic and micromechanical devices, semiconductor, universities and research centers. We have both a domestic and international customer base.
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.
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. 4 Our current strategy yielded multisystem orders of PVT150 equipment that was delivered to one company that manufactures silicon carbide wafers.
Our backlog at December 31, 2022 consists of approximately $16.2 million remaining performance obligations for contracts in progress and the balance of approximately $1.6 million represents orders received from customers.
Backlog As of December 31, 2023, our backlog was approximately $18.4 million, compared to $17.8 million as of December 31, 2022, an increase of $0.6 million. Our backlog at December 31, 2023 consists of approximately $16.3 million remaining performance obligations for contracts in progress and the balance of approximately $2.1 million represents orders received from customers.
We believe that our systems are among the most advanced available for the targeted market and coupled with our vertical integration in engineering and manufacturing, we believe that we can compete effectively. SDC ’ s gas management and chemical delivery control systems are among the most advanced available.
Due to budgetary and funding constraints, many customers are price sensitive. We believe that our systems are among the most advanced available for the targeted market and coupled with our vertical integration in engineering and manufacturing, we believe that we can compete effectively. 11 SDC’s gas management and chemical delivery control systems are among the most advanced available.
EV Battery Materials / Energy Storage We have experienced increased interest and demand for nanotechnology materials including carbon nanotubes (CNTs), graphene and silicon nanowires (Si-NWs) to support the development and manufacturing for battery materials used in electric vehicles.
We plan to expand our marketing and future product development for the PVT product line as well as expand our product offerings to manufacturers of silicon carbide wafers. 5 EV Battery Materials / Energy Storage We have experienced increased interest and demand for nanotechnology materials including carbon nanotubes (CNTs), graphene and silicon nanowires (Si-NWs) to support the development and manufacturing for battery materials used in electric vehicles.
We have built a library of design expertise, know-how and innovative solutions to assist our customers in developing these intricate processes and to accelerate their production and commercialization.
We have built a library of design expertise, know-how and innovative solutions to assist our customers in developing these intricate processes and to accelerate their production and commercialization. This library of equipment design solutions, along with our manufacturing and systems integration facilities, allows us to provide application-specific design, process, and manufacturing solutions to our customers.
This internal supply of chemical and gas delivery systems and components provide a competitive advantage for our CVD Equipment group over its competition. SDC operates from a 22,000 square foot facility fitted with a clean room manufacturing space located in Saugerties, New York. CVD Materials segment continues to be a non-core business with several elements and product groups.
Our SDC products are sold on a stand-alone basis and are also integrated into certain CVD equipment. This internal supply of chemical and gas delivery systems and components provide a competitive advantage for our CVD Equipment group over its competition. SDC operates from a 22,000 square foot facility fitted with a clean room manufacturing space located in Saugerties, New York.
In addition, we added to our sales and marketing team in 2022 and expanded our sales team in early 2023. Major Target Markets Our major target markets are high power electronics, EV battery materials / energy storage and aerospace and defense – all of which have the objective of improving energy efficiency.
Major Target Markets Our major target markets are high power electronics, EV battery materials / energy storage and aerospace, defense and industrial applications – all of which have the objective of improving energy efficiency.
Since the acquisition of the MesoPlasma technology, the business has primarily been funded by external defense, government and private contracts. 12 Markets and Marketing We serve multiple emerging and mature global markets including compound semiconductor high power electronics, aerospace, defense, battery energy storage, silicon and other microelectronic and micromechanical devices, semiconductor, universities, and research centers.
Markets and Marketing We serve multiple emerging and mature global markets including compound semiconductor high power electronics, aerospace, defense, battery energy storage, silicon and other microelectronic and micromechanical devices, semiconductor, universities, and research centers.
Key Growth Strategies Our core strategy is to focus on growth market applications in end markets related to the “electrification of everything” and aerospace. 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.
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.
SDC segment designs and manufactures ultra-high purity gas and chemical delivery control systems for state-of-the-art semiconductor fabrication processes, aerospace, solar cells, LEDs, carbon nanotubes, nanowires, and a number of industrial applications. Our SDC products are sold on a stand-alone basis and are also integrated into certain CVD equipment.
CVD Equipment segment operates from our 135,000 sq. ft. facility in Central Islip, New York. SDC - designs and manufactures ultra-high purity gas and chemical delivery control systems for state-of-the-art semiconductor fabrication processes, aerospace, solar cells, LEDs, carbon nanotubes, nanowires, and a number of industrial applications.
The systems are sold under the CVD and FirstNano product brands. Physical Vapor Transport (PVT) – While the PVT150 was officially launched for production in 2022, we have sold PVT systems in prior years and have pioneered both resistive heating and more effectively inductively heated PVT systems.
Physical Vapor Transport (PVT) – While the PVT150 was officially launched for production in 2022, we have sold PVT systems in prior years and have pioneered both resistive heating and more effectively inductively heated PVT systems. The PVT150 system was specifically designed to address the SiC crystal growth market for 150 mm substrates or wafers.
Management reviews its insurance coverage on an annual basis or more frequently, if appropriate, and we believe we have the types and amounts of insurance coverage that are sufficient for our business. 15 Human Capital We consider our employees a vital asset to our business and strive to ensure we foster a work environment of respect, communication, objective orientation, and personal life balance.
Management reviews its insurance coverage on an annual basis or more frequently, if appropriate, and we believe we have the types and amounts of insurance coverage that are sufficient for our business.
R&D Applications: - ET-3000: Versatile CNT growth system for research and development 7 Aerospace & Defense Next generation gas turbine jet engines are incorporating CMC material for the hot section or exhaust of the engine to improve fuel efficiency. Production and R&D Applications: - Fiber tow coat system.
Aerospace, Defense and Industrial Next generation gas turbine jet engines are incorporating CMC material for the hot section or exhaust of the engine to improve fuel efficiency. Silicon carbide coating is use as a protective barrier in many OEM components used in LED and other applications. Production and R&D Applications: - Fiber tow coat system.
Since early 2021, all sales and technical support has been consolidated into our European facility located in Nordborg, Denmark. MesoScribe Technologies provides MesoPlasma™ printing services and products (heaters, antennas, and sensors) to aerospace, satellite, power generation, defense, and other markets requiring high performance. MesoScribe operations are located at our main facility in Central Islip, New York.
CVD Materials - consist of MesoScribe’s direct write printed electronics business. MesoScribe provides MesoPlasma™ printing services and products (heaters, antennas, and sensors) to aerospace, satellite, power generation, defense, and other markets requiring high performance. MesoScribe operations are located at our main facility in Central Islip, New York.
Materials procured from suppliers and/or manufactured internally undergo a rigorous quality control process to ensure that the parts meet or exceed our requirements and those of our customers.
We believe our vertical manufacturing integration is a competitive advantage. Materials procured from suppliers and/or manufactured internally undergo a rigorous quality control process to ensure that the parts meet or exceed our requirements and those of our customers. Upon final assembly, all equipment undergoes a final series of complete testing to ensure maximum product performance.
We continue to work at diversifying our customer base away from any one customer as we focus on new opportunities with new and existing customers within our existing marketplaces and in new applications. The timing for completion of backlog varies depending on the product mix and can be as long as two years or as short as 30-60 days.
We continue to work at diversifying our customer base away from any one customer as we focus on new opportunities with new and existing customers within our existing marketplaces and in new applications.
Other products under development include an annealing furnace and epitaxy system, both of which are used in the manufacturing process of silicon carbide wafers. 5 Also during 2022, we 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.
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.
CVD equipment group provide process development value through our Application Laboratory where our personnel interact directly with the scientists and engineers of our customer base to develop solutions to tomorrow’s challenges today. CVD Equipment segment operates from our 135,000 sq. ft. facility in Central Islip, New York.
To support new emerging applications, we provide equipment to and collaborate with laboratory scientists to bring state-of-the-art processes from the research laboratory into production. CVD Equipment group provides process development value through our Application Laboratory where our personnel interact directly with the scientists and engineers of our customer base to develop solutions to tomorrow’s challenges today.
Sources of Supply Many of the components used in producing our products are purchased from unrelated suppliers. We have OEM status with our suppliers, but we are not obligated to purchase a pre-determined quantity. We are not dependent on a principal or major supplier and alternate suppliers are available.
There are technology competitors in the direct write applications and other additive manufacturing technologies competing for the same contracts and business opportunity. Sources of Supply Many of the components used in producing our products are purchased from unrelated suppliers. We have OEM status with our suppliers, but we are not obligated to purchase a pre-determined quantity.
We had 69 employees in manufacturing, 34 in engineering (including research and development and efforts related to product improvement) 4 in field service, 10 in sales and marketing and 19 in general management, maintenance and administration, compared to 111 employees as of December 31, 2021. None of our employees were subject to a collective bargaining agreement.
We had 70 employees in manufacturing, 30 in engineering (including research and development and efforts related to product improvement), 5 in field service, 9 in sales and marketing and 14 in general management, maintenance and administration, compared to 136 employees as of December 31, 2022.
As a result of these contingencies, we may adjust our backlog if we determine that such orders are no longer firm.
The actual amount and timing of any revenue is subject to various contingencies, many of which are beyond our control, such as cancellations and delays. As a result of these contingencies, we may adjust our backlog if we determine that such orders are no longer firm.
Our proprietary real-time software allows for rapid configuration, and provides our customers with enabling tools to understand, optimize and repeatedly control their processes. These factors reduce cost, improve quality, and reduce the time it takes between customers’ orders and the shipment of our products.
These factors reduce cost, improve quality, and reduce the time it takes between customers’ orders and the shipment of our products. Our Application Laboratory allows customers the option to bring their process tools to our laboratory and to work collaboratively with our scientists and engineers to optimize process performance.
This has driven the demand for electric vehicle and associated high power electronics used in charging and motor power conversion.
This has driven the demand for electric vehicle and associated high power electronics used in charging and motor power conversion. Production Applications: - PVT150 SiC crystal growth system launched in 2022. - PVT200 SiC crystal growth system launched in 2023. - HVPE400: polycrystalline GaN (legacy product).
During 2022, we received an order for a production CVI system valued at approximately $3.7 million. The system will be used to manufacture CMCs for aerospace gas turbine jet engines. We believe this order may reflect the beginnings of a recovery in aircraft manufacturing as well as the need of jet engine manufacturers to develop more fuel-efficient engines.
During 2022, we received an order for a production CVI system valued at approximately $3.7 million. We received an additional order for three CVI systems during 2023 from the same customer. These systems will be used to manufacture CMCs for aerospace gas turbine jet engines.
We have both a domestic and international customer base. Given the complexity and magnitude of the systems we sell, revenue from a single customer in any one year can exceed 10% of our total sales.
Given the complexity and magnitude of the systems we sell, revenue from a single customer in any one year can exceed 10% of our total sales. During the year ended December 31, 2023, three customers represented 14.3%, 13.5% and 10.9% of our revenues, while in 2022 one customer represented 29.2% of our revenues.
We expanded our machine shop in 2022 to allow us to expand our ability to fabricate parts. Our quartz fabrication capability is currently sufficient to meet our quartzware needs. We believe our vertical manufacturing integration is a competitive advantage.
We maintain a fully equipped machine shop that we use to fabricate a significant portion of our metal components in-house, including the most intricately designed parts of our equipment. We expanded our machine shop in 2022 to allow us to expand our ability to fabricate parts. Our quartz fabrication capability is currently sufficient to meet our quartzware needs.
This library of equipment design solutions, along with our manufacturing and systems integration facilities, allows us to provide application-specific design, process, and manufacturing solutions to our customers. 4 Our core competencies in equipment and software design, manufacturing and process development are used to engineer our finished products and to accelerate the commercialization path of our customer base.
Our core competencies in equipment and software design, manufacturing and process development are used to engineer our finished products and to accelerate the commercialization path of our customer base. Our proprietary real-time software allows for rapid configuration, and provides our customers with enabling tools to understand, optimize and repeatedly control their processes.
Chemical vapor deposition is the process of depositing or growing on a substrate and the process of depositing or growing material into the pours of materials. Both processes are accomplished by combining appropriate gases in a reaction chamber, of the kind we manufacture, at elevated temperatures (typically 500 to 2,500° Celsius).
Both processes are accomplished by combining appropriate gases in a reaction chamber, of the kind we manufacture, at elevated temperatures (typically 500° to 2,500° Celsius). Our chemical vapor deposition and CVI systems are complete and include all necessary heating techniques, precise control instrumentation, gas delivery and abatement subsystems and components and include state-of-the-art proprietary process control software.
These systems, which we market and sell under the CVD, FirstNano and EasyTube® product names, are sold to commercial companies, universities, research laboratories, in the United States and throughout the world. Sales of our proprietary standard systems, custom systems and process solutions have been driven by our installed customer base, which includes many Fortune 500 companies.
Manufacturing these standardized systems in higher volumes may provide us the flexibility to reduce both the cost and delivery time of our systems. These systems, which we market and sell under the CVD, FirstNano and EasyTube® product names, are sold to commercial companies, universities and research laboratories in the United States and throughout the world.
We received two system orders in 2021 to deposit coatings onto powders used in silicon-graphite anodes, including a production system and a second for research and material development. Both systems were completed in 2022. 6 Aerospace & Defense CVD is a leading manufacturer of CVI and tow-coating systems to manufacture CMCs for aerospace gas turbine jet engine applications.
We received two system orders in 2021 to deposit coatings onto powders used in silicon-graphite anodes, including a production system and a second for research and material development. We received additional system orders from this customer in 2023 that were completed during 2023.
Our CVD team, like the technologies we enable, is a rich combination of diverse individuals coming together to make a material difference for our people, our customers, and the world. As a company that enables tomorrow’s technologies, we recognize that a diverse employee population makes CVD a stronger, more innovative, and a more engaging place to work.
Equal Opportunity We are committed to building and sustaining a culture of equal opportunity that encourages all of our employees to reach their full potential. Our CVD team, like the technologies we enable, is a rich combination of diverse individuals coming together to make a material difference for our people, our customers, and the world.
Historically, we manufactured products for research and development on an application-specific basis to meet an individual customer’s specific research and production requirements. Our proprietary systems leverage the technological expertise that we have developed through designing these custom systems into a broader standardized product line.
Our proprietary systems leverage the technological expertise that we have developed through designing these custom systems into a broader standardized product line. The standard product line can be configured from a wide range of available options to meet diverse product and budgetary requirements.
The performance and success of our products has historically driven repeat orders from existing customers as well as generated business from new customers. Furthermore, with our proprietary solutions and expanded focus on “ enabling tomorrow ’ s technologies ” TM we have been developing a new customer base in addition to growing with our existing customers.
Furthermore, with our proprietary solutions and expanded focus on “ enabling tomorrow’s technologies ” TM we have been developing a new customer base in addition to growing with our existing customers. Key Growth Strategies Our core strategy is to focus on growth market applications in end markets related to the “electrification of everything,” aerospace and industrial applications.
Our chemical vapor deposition systems are complete and include all necessary heating techniques, precise control instrumentation, gas delivery and abatement subsystems and components and include state-of-the-art proprietary process control software. We provide both standard and emerging applications specified products. Some of the standard systems we offer are for SiC, GaN, Aluminum Nitride (AlN), CMCs, silicon (Si), CNT, graphene, silicon nanowires.
We provide both standard and emerging applications specified products. Some of the standard systems we offer are for SiC, GaN, Aluminum Nitride (AlN), CMCs, silicon (Si), CNT, graphene, silicon nanowires. The systems are sold under the CVD and FirstNano product brands.
There can be no assurance that our backlog will result in actual revenue in any particular period, or at all, or that any contract included in backlog will be profitable. The actual amount and timing of any revenue is subject to various contingencies, many of which are beyond our control, such as cancellations and delays.
The timing for completion of backlog varies depending on the product mix and can be as long as two years or as short as 30-60 days. 12 There can be no assurance that our backlog will result in actual revenue in any particular period, or at all, or that any contract included in backlog will be profitable.
The technique involves powder material that is injected into a thermal plasma where it is rapidly heated and deposited onto the substrate or component. The versatility of the process enables a wide range of materials to be deposited including ceramic dielectrics, nickel-based sensor alloys, metallic conductors, precious metals, and protective coatings.
The versatility of the process enables a wide range of materials to be deposited including ceramic dielectrics, nickel-based sensor alloys, metallic conductors, precious metals, and protective coatings. Products include temperature sensors, heaters, antennas and patterns per customer specifications.
These systems should provide us with standard product to continue to support the EV focused market as well as energy storage, power conversion and power transmission.
We have also received orders from OneD Battery Materials in 2023, a company that is engaged in providing battery nanomaterials. 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 believe this results in a higher level of employee satisfaction and hence improved performance and employment longevity. On December 31, 2022, we had 136 employees.
Human Capital We consider our employees a vital asset to our business and strive to ensure we foster a work environment of respect, communication, objective orientation, and personal life balance. We believe this results in a higher level of employee satisfaction and hence improved performance and employment longevity. On December 31, 2023, we had 128 employees.
Production Applications: - PowderCoat-1100 production system launched in 2021 grows Si nanowires on carbon nanoparticles. - Carbon-150: Single substrate system for CNT growth. Versatile substrate format, on wafer or foil. - Carbon-300 : Multiple substrate batch tube system for CNT growth. Versatile substrate format, on wafer or foil.
Versatile substrate format, on wafer or foil. - Carbon-300: Multiple substrate batch tube system for CNT growth. Versatile substrate format, on wafer or foil. R&D Applications: - ET-3000: Versatile CNT growth system for research and development.
We continue to monitor the results of our growth and profitability initiatives, and we have taken actions as required to improve our results in line with anticipated revenue levels. Key Company Strengths Based on more than 40 years of equipment experience, we use our capabilities in process development, engineering, and vertical manufacturing to transform emerging applications into mainstream manufacturing solutions.
The decisions to sell our Tantaline subsidiary and wind down the operations of MesoScribe were based on our ongoing strategy to focus on the equipment business consisting of the CVD Equipment and SDC segments. 3 Key Company Strengths Based on more than 40 years of equipment experience, we use our capabilities in process development, engineering, and vertical manufacturing to transform emerging applications into mainstream manufacturing solutions.
Our Application Laboratory allows customers the option to bring their process tools to our laboratory and to work collaboratively with our scientists and engineers to optimize process performance. To expand our presence into our major target markets, we are developing a line of proprietary standard use products to complement our customized legacy systems.
To expand our presence into our major target markets, we are developing a line of proprietary standard use products to complement our customized legacy systems. Historically, we manufactured products for research and development on an application-specific basis to meet an individual customer’s specific research and production requirements.
The PVT150 system was specifically designed to address the SiC crystal growth market for 150mm substrates or wafers. It is at present our flagship product for the SiC market. Designed to provide enhanced process parameter control it allows existing and future customers the ability to tightly control and monitor the crystal growth process for 150mm substrates.
Designed to provide enhanced process parameter control it allows existing and future customers the ability to tightly control and monitor the crystal growth process for 150mm substrates. A 200 mm version called the PVT200 was developed during 2023 and the first order was received in February 2024.
Mass production system for multi-layer coating for CMCs. - Silicon bond coat environmental barrier depositing system. Deposits Si on machined gas turbine jet engine CMC components. - Chemical Vapor Deposition/ Chemical Vapor Infiltration production coating system for multi-layer CMC coatings on SiC fiber preforms.
Mass production system for multi-layer coating for CMCs. - Silicon bond coat environmental barrier depositing system.
Additionally, there are large, established companies who compete with us and pose a competitive risk in the market. Due to budgetary and funding constraints, many customers are price sensitive.
CVD Equipment competes with companies located in Asia, Europe, and the US in both the production and research market. In the production and research markets, some of our potential customers built their own equipment. Additionally, there are large established companies who compete with us and pose a competitive risk in the market.
Production Applications: - PVT150 SiC crystal growth system launched in 2022. - 150mm SiC boule anneal furnace under development - HVPE400 : polycrystalline GaN (legacy product) R&D Application: - SiC Epitaxy single wafer system (legacy product) EV Battery Materials / Energy Storage The shift to electrification also requires improvements in energy storage, specifically with the use of novel anode materials.
EV Battery Materials / Energy Storage The shift to electrification also requires improvements in energy storage, specifically with the use of novel anode materials. Production Applications: - PowderCoat-1100 production system launched in 2021 grows Si nanowires on carbon nanoparticles. - Carbon-150: Single substrate system for CNT growth.
Our primary marketing activities include direct sales engagement, participation in trade associations and trade shows (that were impacted by the COVID-19 pandemic in 2020 and 2021) and our internet websites. The Company plans to expand its market activities in 2023 including attendance at key tradeshows and online marketing.
Our primary marketing activities include direct sales engagement, participation in trade associations and trade shows and our internet websites. We expanded our marketing activities in 2023 through attendance at key tradeshows and online marketing. 10 Customers Our systems and products are used in both production applications and advanced materials research.
We plan to expand our product offerings in the power electronics market to build off the success of recently introduced PVT150 system that is used to produce silicon carbide crystals for 150mm silicon carbide wafers. This planned expansion includes the development of the PVT200 system that would be used to produce silicon carbide crystals for the manufacture of 200mm wafers.
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.
The Tantaline® treatment improves the corrosion resistance of these base stainless-steel parts extending the service life and increasing value in a wide range of applications. MesoPlasma ™ Direct Write Printing - A materials deposition process that provides robust direct write high-definition instrumentation, fine feature patterns, and coatings onto conformal components.
MesoPlasma™ Direct Write Printing – A materials deposition process that provides robust direct write high-definition instrumentation, fine feature patterns, and coatings onto conformal components. The technique involves powder material that is injected into a thermal plasma where it is rapidly heated and deposited onto the substrate or component.
Bookings During 2022, bookings of new orders from customers was approximately $33.1 million, representing an increase of approximately 56.6% compared to 2021 bookings of $21.1 million. We have achieved order growth in all segments, including a 100% growth in the CVD Equipment segment of our business, with 33 system orders in 2022 of which 24 orders were for PVT150 systems.
Bookings During 2023, bookings of new orders from customers was approximately $25.8 million, representing a decrease of approximately 22.1% compared to 2022 bookings of $33.1 million. The decline in bookings was related to $8.8 million of orders of PVT150 systems that were received in 2022 as compared to no such orders in 2023.
Historically, subject to lead times, the components and raw materials we used in manufacturing our products were readily obtainable. Presently, many of our suppliers have been adversely impacted by the ongoing supply chain disruptions due to the remaining effects of the COVID-19 pandemic and geopolitical developments across Europe and Asia.
We are not dependent on a principal or major supplier and alternate suppliers are available. Historically, subject to lead times, the components and raw materials we used in manufacturing our products were readily obtainable.
Our MesoScribe product line supports the aerospace and defense markets with novel robust direct write instrumentation. Our CVD Tantaline product line consists of chemical-resistant coating services to many industrial applications. Neither product line is considered as a core business.
Our wholly owned subsidiary, CVD Materials Corporation, includes our MesoScribe product lines. Our MesoScribe product line supports the aerospace and defense markets with novel robust direct write instrumentation. We plan to wind down the operations of MesoScribe in 2024 after satisfaction of customer purchase orders.
Removed
In January 2021, our Board of Directors appointed Emmanuel Lakios as President and Chief Executive Officer and directed him to evaluate our overall business strategy and operations to improve sales growth and return the Company to profitability.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeDue to the impact of the COVID-19 pandemic and geopolitical developments across Europe and Asia, we are experiencing reduced availability of raw materials and components. In turn, any reduction in the availability of these materials and components may reduce our ability to obtain sufficient amounts in a cost-effective manner. We generally do not have guaranteed supply arrangements with our suppliers.
Biggest changeIn turn, any reduction in the availability of these materials and components may reduce our ability to obtain sufficient amounts in a cost-effective manner. We generally do not have guaranteed supply arrangements with our suppliers. Because of the variability and uniqueness of our customer’s orders, we try to avoid maintaining an extensive inventory of materials and components for manufacturing.
Risk categories: ● Risks related to sales and product development ● Risks related to manufacturing and supply chain ● Risks related to cybersecurity, intellectual property and regulatory compliance ● Risks related to financial and accounting matters ● Risks related to product liability ● Risks related to our stock ● General risk factors 17 Risks related to sales and product development Historically, we have maintained a highly concentrated customer base so that changes in ordering patterns, delays or order cancellations could have a material adverse effect on our business and results of operations.
Risk categories: ● Risks related to sales and product development ● Risks related to manufacturing and supply chain ● Risks related to cybersecurity, intellectual property and regulatory compliance ● Risks related to financial and accounting matters ● Risks related to product liability ● Risks related to our stock ● General risk factors Risks related to sales and product development Historically, we have maintained a highly concentrated customer base so that changes in ordering patterns, delays or order cancellations could have a material adverse effect on our business and results of operations.
If an export regulatory body determines that any of our shipments violate applicable export regulations, we could be fined significant sums and our export capabilities could be restricted, which could have a material adverse impact on our business. Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.
If an export regulatory body determines that any of our shipments violate applicable export regulations, we could be fined significant sums and our export capabilities could be restricted, which could have a material adverse impact on our business. 22 Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.
The length of the sales cycle depends on the size and complexity of the project, the customer’s in-depth evaluation of our products, and, in some cases, the protracted nature of a bidding process. Because a significant portion of our operating expenses are fixed, we have and may continue to incur substantial expense before we earn associated revenue.
The length of the sales cycle depends on the size and complexity of the project, the customer’s in-depth evaluation of our products, and, in some cases, the protracted nature of a bidding process. 15 Because a significant portion of our operating expenses are fixed, we have and may continue to incur substantial expense before we earn associated revenue.
In addition, if we need to rapidly increase our business and manufacturing capacity to meet increases in demand or expedited shipment schedules, this may exacerbate any interruptions in our manufacturing operations and supply chain and the associated effect on our working capital. 21 We are presently experiencing supply chain delays and cost increases that may adversely affect our business.
In addition, if we need to rapidly increase our business and manufacturing capacity to meet increases in demand or expedited shipment schedules, this may exacerbate any interruptions in our manufacturing operations and supply chain and the associated effect on our working capital. We are presently experiencing supply chain delays and cost increases that may adversely affect our business.
Our success depends on our ability to identify, hire, train and retain qualified engineering personnel with experience in equipment design. Specifically, we need to continue to attract and retain mechanical, electrical, software and field service engineers to work with our direct sales force to technically qualify and perform on new sales opportunities and orders, and to demonstrate our products.
Our success depends on our ability to identify, hire, train and retain qualified engineering personnel with experience in equipment design. Specifically, we need to continue to attract and retain mechanical, electrical, software and field service engineers to work with our direct sales force to technically qualify and perform on new sales opportunities and orders, and to demonstrate our products. 27
Since part of our growth strategy is based on sales of research equipment to produce carbon nanotubes and the sale of such materials, the determination that these materials are harmful could adversely affect the expansion of our business. 28 Risk related to our stock The price of our common shares is volatile and could decline significantly.
Since part of our growth strategy is based on sales of research equipment to produce carbon nanotubes and the sale of such materials, the determination that these materials are harmful could adversely affect the expansion of our business. Risk related to our stock The price of our common shares is volatile and could decline significantly.
If the availability of funds or the demand for capital equipment in the markets in which we operate declines, the demand for our products would also decline and our financial position and results of operations could be harmed. The demand for our products and the profitability of our products can change significantly from period to period because of numerous factors.
If the availability of funds or the demand for capital equipment in the markets in which we operate declines, the demand for our products would also decline and our financial position and results of operations could be harmed. 16 The demand for our products and the profitability of our products can change significantly from period to period because of numerous factors.
There is a risk that larger, better financed competitors will develop and market more advanced products than those we currently offer, or that competitors with greater financial resources may decrease prices, thereby putting us under financial pressure. 20 Risks related to manufacturing and our supply chain Manufacturing interruptions or delays could affect our ability to meet customer demand and lead to higher costs, while the failure to estimate customer demand accurately could result in excess or obsolete inventory.
There is a risk that larger, better financed competitors will develop and market more advanced products than those we currently offer, or that competitors with greater financial resources may decrease prices, thereby putting us under financial pressure. 18 Risks related to manufacturing and our supply chain Manufacturing interruptions or delays could affect our ability to meet customer demand and lead to higher costs, while the failure to estimate customer demand accurately could result in excess or obsolete inventory.
Our business could be seriously harmed if we are unable to sell our products at favorable prices, or if our products are not accepted by the markets in which we operate. We have made investments in our proprietary technologies.
Our business could be seriously harmed if we are unable to sell our products at favorable prices, or if our products are not accepted by the markets in which we operate. 21 We have made investments in our proprietary technologies.
In addition, we may incur higher operating expenses during the period required to correct the problem. We may not be able to keep pace with the rapid change in the technology we use in our products.
In addition, we may incur higher operating expenses during the period required to correct the problem. 17 We may not be able to keep pace with the rapid change in the technology we use in our products.
Our backlog does not provide any assurance that we will realize a profit from those orders or indicate in which period revenue will be recognized. 18 If demand declines for chemical vapor deposition, physical vapor transport, gas control and related equipment, or for carbon nanotube and nanowire deposition systems, our financial position and results of operations could be materially adversely affected.
Our backlog does not provide any assurance that we will realize a profit from those orders or indicate in which period revenue will be recognized. If demand declines for chemical vapor deposition/infiltration, physical vapor transport, gas control and related equipment, or for carbon nanotube and nanowire deposition systems, our financial position and results of operations could be materially adversely affected.
If we do identify material weaknesses in our internal controls over financial reporting in the future, our ability to analyze, record and report financial information free of material misstatements, and to prepare our financial statements within the time periods specified by the rules and forms of the SEC, may likely be adversely affected. 26 We have and may continue to be required to take impairment charges on assets.
If we do identify material weaknesses in our internal controls over financial reporting in the future, our ability to analyze, record and report financial information free of material misstatements, and to prepare our financial statements within the time periods specified by the rules and forms of the SEC, may likely be adversely affected. 24 We have and may continue to be required to take impairment charges on assets.
Because a portion of our revenues are derived from international customers, our operating results could be negatively affected by a decline in the economies of any of the countries or regions in which we do business. Each region can exhibit unique characteristics, which can cause capital equipment investment patterns to vary significantly from period to period.
Because a material portion of our revenues are traditionally derived from international customers, our operating results could be negatively affected by a decline in the economies of any of the countries or regions in which we do business. Each region can exhibit unique characteristics, which can cause capital equipment investment patterns to vary significantly from period to period.
The industries in which we operate are characterized by ongoing factors, including: ● global and regional economic developments and conditions including in Europe and Asia; ● governmental budgetary and political constraints; ● changes in the capacity utilization and production volume for research and industrial applications in the markets in which we operate; ● the profitability and capital resources of manufacturers in the markets in which we operate; changes in technology; ● the availability of funds for research and development; ● the effects of the COVID-19 pandemic; and ● the effects of supply chain disruptions.
The industries in which we operate are characterized by ongoing factors, including: ● global and regional economic developments and conditions including in Europe and Asia; ● governmental budgetary and political constraints; ● changes in the capacity utilization and production volume for research and industrial applications in the markets in which we operate; ● the profitability and capital resources of manufacturers in the markets in which we operate; ● changes in technology; ● the availability of funds for research and development; and ● the effects of supply chain disruptions.
While we have initiated actions to mitigate the potential negative impacts to our revenue and profitability, there can be no assurance of the ultimate impact and the length of time that the supply chain factors may impact our revenues and profitability. Inflation has and may continue to adversely affect our business, financial condition, and results of operations.
While we have taken actions to mitigate the potential negative impacts to our revenue and profitability, there can be no assurance of the ultimate impact and the length of time that the supply chain factors may impact our revenues and profitability. 19 Inflation has and may continue to adversely affect our business, financial condition, and results of operations.
Our backlog includes of orders customized systems including our chemical vapor deposition equipment and annealing and diffusion furnaces which are built to client specifications. These customized systems can have prices up to several million dollars, depending on the configuration, specific options included and any specific requirements of the customer.
Our backlog includes orders for customized systems including our chemical vapor deposition equipment and furnaces which are built to client specifications. These customized systems can have prices up to several million dollars, depending on the configuration, specific options included and any specific requirements of the customer.
Our manufacturing facilities are located in Central Islip, New York, Saugerties, New York and Nordborg, Denmark and could be affected by multiple weather risks, most notably hurricanes for our Central Islip facility which located on Long Island, New York.
Our manufacturing facilities are located in Central Islip, New York and Saugerties, New York could be affected by multiple weather risks, most notably hurricanes for our Central Islip facility which is located on Long Island, New York.
If our assets were impaired, our financial condition and results of operations could be materially and adversely affected. Acquisitions can result in an increase in our operating costs, divert management ’ s attention away from other operational matters and expose us to other associated risks.
If our assets were impaired, our financial condition and results of operations could be materially and adversely affected. Acquisitions can result in an increase in our operating costs, divert management’s attention away from other operational matters and expose us to other associated risks.
In 2022, we experienced increased costs on certain components as well as delays in supply chain delivery, which may also impact our ability to recognize revenue and reduce our gross profit margins, as well as extend our manufacturing lead times and reduce our manufacturing efficiencies.
Since 2021, we have experienced increased costs on certain components as well as delays in supply chain delivery, which may also impact our ability to recognize revenue and reduce our gross profit margins, as well as extend our manufacturing lead times and reduce our manufacturing efficiencies.
We may also experience significant interruptions of our manufacturing operations, delays in our ability to deliver products or services, increased costs or customer order cancellations as a result of: ● The failure or inability of suppliers to timely deliver sufficient quantities of quality parts on a cost-effective basis; ● Volatility in the availability and cost of materials, including rare earth elements; ● Difficulties or delays in obtaining required import or export approvals; ● Information technology or infrastructure failures; ● Natural disasters or other events beyond our control (such as earthquakes, floods or storms, regional economic downturns, pandemics, social unrest, political instability, terrorism, or acts of war); and ● The effects of the COVID-19 pandemic on our employees, suppliers and other third-parties upon which we rely.
We may also experience significant interruptions of our manufacturing operations, delays in our ability to deliver products or services, increased costs or customer order cancellations as a result of: ● The failure or inability of suppliers to timely deliver sufficient quantities of quality parts on a cost-effective basis; ● Volatility in the availability and cost of materials, including rare earth elements; ● Difficulties or delays in obtaining required import or export approvals; ● Information technology or infrastructure failures; and ● Natural disasters or other events beyond our control (such as earthquakes, floods or storms, regional economic downturns, pandemics, social unrest, political instability, terrorism, or acts of war).
There is no scientific agreement on the health effects of nanomaterials in general and carbon nanotubes but some scientists believe that in some cases, nanomaterials may be hazardous to an individual’s health or to the environment.
The health and environmental effects of nanotechnology are unknown. There is no scientific agreement on the health effects of nanomaterials in general and carbon nanotubes but some scientists believe that in some cases, nanomaterials may be hazardous to an individual’s health or to the environment.
If we were to lose the services of any of our key personnel, our engineering, product development, manufacturing and sales efforts could be slowed. We may also incur increased operating expenses and be required to divert the attention of our senior executives to search for their replacements.
If we were to lose the services of any of our key personnel, our engineering, product development, manufacturing and sales efforts could be slowed. We may also incur increased operating expenses and be required to divert the attention of our senior executives to search for their replacements. The integration of any new personnel could disrupt our ongoing operations.
The market price of our common shares could fluctuate significantly in response to several factors, including, among others: ● difficult macroeconomic conditions, unfavorable geopolitical events, and general stock market uncertainties, such as those occasioned by a global liquidity crisis and a failure of large financial institutions; ● an offering of our common shares to raise capital; ● receipt of large orders or cancellations of orders for our products; ● issues associated with the performance and reliability of our products; ● actual or anticipated variations in our results of operations; ● announcements of financial developments or technological innovations; ● changes in recommendations and/or financial estimates by investment research analysis; ● strategic transactions, such as acquisitions, divestitures, or spin-offs; ● offerings of our securities; ● the occurrence of major catastrophic events; and ● volatile trading volumes.
The market price of our common shares could fluctuate significantly in response to several factors, including, among others: ● difficult macroeconomic conditions, unfavorable geopolitical events, and general stock market uncertainties, such as those occasioned by a global liquidity crisis and a failure of large financial institutions; ● an offering of our common shares to raise capital; ● receipt of large orders or cancellations of orders for our products; ● issues associated with the performance and reliability of our products; ● actual or anticipated variations in our results of operations; ● announcements of financial developments or technological innovations; ● changes in recommendations and/or financial estimates by investment research analysis; ● strategic transactions, such as acquisitions, divestitures, or spin-offs; ● offerings of our securities; ● the occurrence of major catastrophic events; and ● volatile trading volumes. 26 Significant price and value fluctuations have occurred with respect to our publicly traded securities and those of technology companies generally.
While we have concluded that, as of December 31, 2022, our disclosure and reporting controls were effective as included in Part II, Item 9A, there can be no assurance that material weaknesses will not be identified in the future.
We may, in the future, identify deficiencies in controls over financial reporting. While we have concluded that, as of December 31, 2023, our disclosure and reporting controls were effective as included in Part II, Item 9A, there can be no assurance that material weaknesses will not be identified in the future.
This could cause our quarterly operating results to fluctuate. 27 When cyclical fluctuations result in lower-than-expected revenue levels, operating results have been and may continue to be materially adversely affected and cost reduction measures have been and may continue to be necessary for us to remain competitive and financially sound.
When cyclical fluctuations result in lower-than-expected revenue levels, operating results have been and may continue to be materially adversely affected and cost reduction measures have been and may continue to be necessary for us to remain competitive and financially sound.
If we are not able to negotiate the necessary licenses on commercially reasonable terms or successfully defend our position, our ability to utilize such intellectual property could substantially inhibit our access to certain markets and our ability to compete in these markets which could have a material adverse effect on our financial position and results of operations. 24 We may be unable to obtain required export licenses for the sale of our products.
If we are not able to negotiate the necessary licenses on commercially reasonable terms or successfully defend our position, our ability to utilize such intellectual property could substantially inhibit our access to certain markets and our ability to compete in these markets which could have a material adverse effect on our financial position and results of operations.
The integration of any new personnel could disrupt our ongoing operations. 29 We may not be able to hire or retain the number of qualified personnel, particularly engineering personnel, required for our business, which would harm the development and sales of our products and limit our ability to grow.
We may not be able to hire or retain the number of qualified personnel, particularly engineering personnel, required for our business, which would harm the development and sales of our products and limit our ability to grow.
The fiscal period in which we can recognize revenue is also at times subject to the length of time that our customers require to evaluate the performance of our equipment.
The fiscal period in which we can recognize revenue is also at times subject to the length of time that our customers require to evaluate the performance of our equipment. This could cause our quarterly operating results to fluctuate.
While we regularly evaluate the nature and limits of our insurance coverages, there can be no assurance that our existing policies of insurance will be adequate to protect us from all liabilities that we might incur in connection with the manufacture and sale of our products in the event of a successful product liability claim or series of successful claims against us.
While we regularly evaluate the nature and limits of our insurance coverages, there can be no assurance that our existing policies of insurance will be adequate to protect us from all liabilities that we might incur in connection with the manufacture and sale of our products in the event of a successful product liability claim or series of successful claims against us. 25 The health and environmental effects of nanotechnology are unknown, and this uncertainty could adversely affect the expansion of our business.
Whether with respect to sales to customers located in China or otherwise, products which (i) are manufactured in the United States, (ii) incorporate controlled U.S. origin parts, technology, or software, or (iii) are based on U.S. technology, are subject to the U.S.
We may be unable to obtain required export licenses for the sale of our products. Whether with respect to sales to customers located in China or otherwise, products which (i) are manufactured in the United States, (ii) incorporate controlled U.S. origin parts, technology, or software, or (iii) are based on U.S. technology, are subject to the U.S.
In addition, breaches of our security measures and the unapproved dissemination of proprietary information or sensitive data about us, our customer, or other third parties, could expose us, our customers, or other third parties to a risk of loss or misuse of this information, result in litigation and potential liability for us, damage our reputation, or otherwise harm our business. 23 Our financial position and results of operations may be materially harmed if we are unable to recoup our investment in research and development.
In addition, breaches of our security measures and the unapproved dissemination of proprietary information or sensitive data about us, our customer, or other third parties, could expose us, our customers, or other third parties to a risk of loss or misuse of this information, result in litigation and potential liability for us, damage our reputation, or otherwise harm our business.
Our failure or inability to comply with existing or future environmental regulations could result in significant remediation liabilities, the imposition of fines or the suspension or termination of development, manufacturing, or use of certain of our products, or affect the operation of our facilities, use or value of our real property, each of which could damage our financial position and results of operations. 25 Regulations related to conflict minerals will force us to incur additional expenses, may make our supply chains more complex, and may result in damage to our relationships with customers.
Our failure or inability to comply with existing or future environmental regulations could result in significant remediation liabilities, the imposition of fines or the suspension or termination of development, manufacturing, or use of certain of our products, or affect the operation of our facilities, use or value of our real property, each of which could damage our financial position and results of operations.
We may be subject to breaches of the information technology systems we use for these purposes. Experienced computer programmers and hackers may be able to penetrate our network security and misappropriate and/or compromise our confidential information (and or third-party confidential information), create system disruptions, or cause shutdowns.
Experienced computer programmers and hackers may be able to penetrate our network security and misappropriate and/or compromise our confidential information (and or third-party confidential information), create system disruptions, or cause shutdowns.
Significant price and value fluctuations have occurred with respect to our publicly traded securities and those of technology companies generally. The price of our common shares is likely to be volatile in the future. In the past, securities class action litigation often has been brought against a company following periods of volatility in the market price of its securities.
The price of our common shares is likely to be volatile in the future. In the past, securities class action litigation often has been brought against a company following periods of volatility in the market price of its securities.
Such risks include possible losses due to both currency exchange rate fluctuations and from possible social and political instability. 19 Our reputation and operating performance may be negatively affected if our products are not timely delivered. We provide complex products that often require substantial lead-time for design, ordering parts and materials, and for assembly and installation.
Our reputation and operating performance may be negatively affected if our products are not timely delivered. We provide complex products that often require substantial lead-time for design, ordering parts and materials, and for assembly and installation.
During 2022, one customer accounted for 29.2% of our total revenues. The loss of a major customer would have to be replaced by others, and our inability to do so may have a material adverse effect on our business and financial condition.
During 2023, three customers represented 14.3%, 13.5% and 10.9% of our total revenues. The loss of a major customer would have to be replaced by others, and our inability to do so may have a material adverse effect on our business and financial condition.
The COVID-19 pandemic adversely impacted worldwide supply chains and our ability to obtain component parts. Subsequent geopolitical developments across Europe and Asia have and may continue to restrict our ability to procure raw materials and components such as nickel and integrated circuits.
Geopolitical developments across Europe and Asia have and may continue to restrict our ability to procure raw materials and components such as nickel and integrated circuits.
While our business has not been materially affected in the past by currency fluctuations, there is a risk that it may be materially adversely affected in the future.
While our business has not been materially affected in the past by currency fluctuations, there is a risk that it may be materially adversely affected in the future. Such risks include possible losses due to both currency exchange rate fluctuations and from possible social and political instability.
These requirements could limit the pool of suppliers that can provide conflict-free minerals, and we may be unable to obtain conflict-free minerals at competitive prices, which could increase our costs and adversely affect our manufacturing operations and our profitability. Risks related to financial and accounting matters We might require additional financing.
These requirements could limit the pool of suppliers that can provide conflict-free minerals, and we may be unable to obtain conflict-free minerals at competitive prices, which could increase our costs and adversely affect our manufacturing operations and our profitability. 23 Risks related to financial and accounting matters Cyclical demand for our products may make it difficult for us to accurately budget our expense levels, which are based in part on our projections of future revenues.
The marketing, sale and manufacture of our products, often requires a lengthy sales cycle ranging from several months to over one year before we can complete production and delivery. The lengthy sales cycle makes forecasting the volume and timing of sales difficult and raises additional risks that customers may cancel or decide not to enter into contracts.
Our lengthy and variable sales cycle makes it difficult to predict our financial results. The marketing, sale and manufacture of our products, often requires a lengthy sales cycle ranging from several months to over one year before we can complete production and delivery.
If our critical suppliers fail to deliver enough quality materials and components in a timely and cost-effective manner, it could negatively affect our business. We do not manufacture many components used in the production of our products, and consequently, we use numerous unrelated suppliers of materials and components.
If our critical suppliers fail to deliver enough quality materials and components in a timely and cost-effective manner, it could negatively affect our business. We use numerous unrelated suppliers of materials and components. Due to geopolitical developments across Europe and Asia, we are experiencing reduced availability of raw materials and components.
At certain times, increases in demand for capital equipment can result in longer lead-times for many important system components, which may cause delays in meeting shipments to our customers.
At certain times, increases in demand for capital equipment can result in longer lead-times for many important system components, which may cause delays in meeting shipments to our customers. The delay in the shipment of even a few systems could cause significant variations in our quarterly revenue, operating results and the market value of our common stock.
The manufacture and sale of our products, which in operation sometimes involve the use of toxic materials and extreme temperatures and could result in product liability claims. For example, our rapid thermal processing systems used to heat semiconductor materials to temperatures more than 1000º Celsius have certain inherent risks.
Risks related to product liability We face the risk of product liability claims. The manufacture and sale of our products, which in operation sometimes involve the use of toxic materials and extreme temperatures and could result in product liability claims.
Cyclical demand for our products may make it difficult for us to accurately budget our expense levels, which are based in part on our projections of future revenues. Historically, demand for our equipment and related consumable products have been volatile because of changes in supply and demand, and other factors in the manufacturing process.
Historically, demand for our equipment and related consumable products have been volatile because of changes in supply and demand, and other factors in the manufacturing process.
The delay in the shipment of even a few systems could cause significant variations in our quarterly revenue, operating results and the market value of our common stock. 22 Our manufacturing facilities are in Central Islip, New York, Saugerties, New York and Nordborg, Denmark and could be affected due to multiple weather risks, including risks to our Central Islip facility from hurricanes and similar phenomena.
Our manufacturing facilities are in Central Islip, New York and Saugerties, New York could be affected due to multiple weather risks, including risks to our Central Islip facility from hurricanes and similar phenomena.
We do, however, maintain a backup power source at our Central Islip facility, are working to establish deeper redundancies between our New York facilities to help mitigate this risk.
We do, however, maintain a backup power source at our Central Islip facility, are working to establish deeper redundancies between our New York facilities to help mitigate this risk. 20 Risks related to cybersecurity, intellectual property and regulatory compliance If we are subject to cyberattacks, we could incur substantial costs and, if such attacks are successful, we could incur significant liabilities, reputational harm, and disruption to our operations.
In addition, we could issue additional common stock, to fund our growth initiatives and operations which could materially dilute the ownership interests of the then existing shareholders. We may, in the future, identify deficiencies in controls over financial reporting.
If adequate financing is not available when required on commercially reasonable terms, if at all, our business and operations may be materially and adversely affected. In addition, we could issue additional common stock, to fund our growth initiatives and operations which could materially dilute the ownership interests of the then existing shareholders.
A failure of our products at a customer site could also result in losses due to interruption of the business operations of our customer.
For example, our rapid thermal processing systems used to heat semiconductor materials to temperatures more than 1000º Celsius have certain inherent risks. A failure of our products at a customer site could also result in losses due to interruption of the business operations of our customer.
Insufficient orders would result in under-utilization of our manufacturing facilities and infrastructure and will negatively affect our financial position and results of operations. Risks related to product liability We face the risk of product liability claims.
Insufficient orders would result in under-utilization of our manufacturing facilities and infrastructure and will negatively affect our financial position and results of operations. We might require additional financing. Our continuing operating losses may make it difficult for us to obtain financing on commercially reasonable terms, if at all.
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Major customers may also seek, and on occasion receive, pricing, payment, intellectual property-related, or other commercial terms that are less favorable to us and can hurt our competitive position. Our lengthy and variable sales cycle makes it difficult to predict our financial results.
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The lengthy sales cycle makes forecasting the volume and timing of sales difficult and raises additional risks that customers may cancel or decide not to enter into contracts.
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Furthermore, disruptions and delays in the ability of our third-party freight carriers to transport these items to our manufacturing facility also continues to be a challenge.
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We manage, store, and transmit proprietary information and sensitive data relating to our operations. We may be subject to breaches of the information technology systems we use for these purposes.
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Because of the variability and uniqueness of our customer’s orders, we try to avoid maintaining an extensive inventory of materials and components for manufacturing.
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Our financial position and results of operations may be materially harmed if we are unable to recoup our investment in research and development.
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Risks related to cybersecurity, intellectual property and regulatory compliance If we are subject to cyberattacks, we could incur substantial costs and, if such attacks are successful, we could incur significant liabilities, reputational harm, and disruption to our operations. We manage, store, and transmit proprietary information and sensitive data relating to our operations.
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Regulations related to conflict minerals will force us to incur additional expenses, may make our supply chains more complex, and may result in damage to our relationships with customers.
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Our continuing operating losses may make it difficult for us to obtain financing on commercially reasonable terms, if at all. If adequate financing is not available when required on commercially reasonable terms, if at all, our business and operations may be materially and adversely affected.
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The health and environmental effects of nanotechnology are unknown, and this uncertainty could adversely affect the expansion of our business. The health and environmental effects of nanotechnology are unknown.
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A pandemic, epidemic or outbreak of an infectious disease such as COVID-19 in the United States or worldwide has adversely affected our business.
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Although we expect conditions relating to COVID-19 will continue to improve, the COVID-19 pandemic has had and if conditions deteriorate again, could continue to have an adverse effect on the United States and global economies, as well as on aspects of our business, operations, and financial condition and those of third parties on whom we rely.
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We previously experienced some decreases in product demand in certain of our other businesses. If conditions related to the pandemic were to deteriorate, we expect that parts of our business could again suffer negative impacts from the pandemic.
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On the supply side, we are experiencing continued but moderating challenges with the supply of raw materials and components used in the production of our products. There are currently industry wide supply shortages of certain raw materials and electronic components. We have experienced raw material cost increases because of the COVID-19 pandemic, which will likely continue.
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In addition, while logistics capacity constraints are improving, we continue to experience freight surcharges and expect these to continue at least for the near term.
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With respect to our personnel, although we adhere to government mandated and Environmental, Health and Safety protocols, an outbreak of COVID-19 at one or more of our facilities could cause shutdowns of facilities and a reduction in our workforce, which could dramatically affect our ability to operate our business and our financial results.
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The duration of the COVID-19 pandemic is unknown, and it is difficult to predict the full extent of potential impacts the pandemic could have in the future on our business, operations, and financial results, or on our customers, suppliers, logistics providers, or on the global economy. 30

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur corporate headquarters, research and development, manufacturing and process coating facilities as of December 31, 2022 are as follows: Owned Locations Size (sf) Segment Mortgage/Loan Principal use Central Islip, NY 130,000 CVD Equipment No Corporate headquarters; R&D; Manufacturing Saugerties, NY 22,000 SDC No Manufacturing; Administration; Leased Locations Size (sf) Segment Lease term Principal use Nordborg, Denmark 7,793 CVD Materials 9/30/22 (1) Process coatings; (1) The lease term expires the later of 9/30/22 or upon four months written notice by CVD or landlord.
Biggest changeItem 2. Properties Our corporate headquarters, research and development, manufacturing and process coating facilities as of December 31, 2023 are as follows: Owned Locations Size (sf) Segment Mortgage/Loan Principal use Central Islip, NY 128,000 CVD Equipment / CVD Materials No Corporate headquarters; R&D; Manufacturing Saugerties, NY 22,000 SDC No Manufacturing; Administration

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur dividend policy with respect to our common stock is within the discretion of the Board of Directors and its policy with respect to dividends in the future will depend on numerous factors, including earnings, financial requirements, and general business conditions.
Biggest changeOur dividend policy with respect to our common stock is within the discretion of the Board of Directors and its policy with respect to dividends in the future will depend on numerous factors, including earnings, financial requirements, and general business conditions. Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None.
Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities As of March 15, 2023, there were approximately 54 holders of record and approximately 3,300 beneficial owners of our common stock, and the closing sales price of our common stock as reported on the NASDAQ Capital Market was $10.94.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities As of March 25, 2024, there were approximately 55 holders of record and approximately 3,544 beneficial owners of our common stock, and the closing sales price of our common stock as reported on the NASDAQ Capital Market was $4.93.
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Equity Compensation Plan Information Table The following table provides information about shares of our common stock that may be issued upon the exercise of options under all of our existing compensation plans as of December 31, 2022.
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Number of securities to be issued upon exercise of outstanding options, warrants and rights(1) Weighted-average exercise price of outstanding options, warrants and rights(2) Number of securities remaining available for future issuance Plan Category Equity compensation plans approved by security holders 673,000 $ 5.70 466,698 Equity compensation plans not approved by security holders -- N/A -- Total 673,000 $ 5.70 466,698 (1) Reflects aggregate options outstanding under our 2007 Share Incentive Plan, 2016 Equity Incentive Plan and 2022 Equity Incentive Plan.
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(2) Calculation is exclusive of the value of any unvested restricted stock awards. Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeDecember 31, 2022 December 31, 2021 Change Percent Revenue $ 25,813 $ 16,447 9,366 57 % Cost of revenue 19,186 13,370 5,816 44 % Gross profit 6,627 3,077 3,550 115 % Operating expenses Research and development 1,906 1,785 121 7 % Selling and shipping 1,216 864 352 41 % General and administrative 5,328 5,092 236 5 % Total operating expenses 8,450 7,741 709 9 % Operating loss (1,823 ) (4,664 ) 2,841 (61 %) Other income (expense): Interest income 162 6 156 * Interest expense (8 ) (261 ) 253 * Employee retention credits 1,529 - 1,529 * Foreign exchange loss (95 ) (143 ) 48 * Gain on sale of building - 6,894 (6,894 ) * Gain on debt extinguishment - 2,443 (2,443 ) * Other income 15 500 (485 ) * Total other income, net 1,603 9,439 (7,836 ) * (Loss) income before income tax (220 ) 4,775 (4,995 ) * Income tax expense 4 28 (24 ) * Net (loss) income $ (224 ) $ 4,747 (4,971 ) * * Not meaningful Revenue December 31, 2022 December 31, 2021 Change Percent CVD Equipment $ 16,674 $ 8,589 $ 8,085 94 % SDC 6,541 4,849 1,692 35 % CVD Materials 3,171 3,355 (184 ) (5 %) Intersegment sales elimination (573 ) (346 ) (227 ) * Total $ 25,813 $ 16,447 $ 9,366 57 % * Not meaningful 35 Our revenue for the year ended December 31, 2022 was $25.8 million compared to $16.4 million for the year ended December 31, 2021, an increase of 57%.
Biggest changeDecember 31, 2023 December 31, 2022 Change Percent Revenue $ 24,109 $ 25,813 $ (1,704 ) (7 %) Cost of revenue 19,038 19,186 (148 ) (1 %) Gross profit 5,071 6,627 (1,556 ) (24 %) Operating expenses Research and development 2,596 1,906 690 36 % Selling 1,632 1,216 416 34 % General and administrative 5,451 5,328 123 2 % Loss on disposition of Tantaline 162 - 162 * Impairment charge 111 - 111 * Total operating expenses 9,952 8,450 1,502 18 % Operating loss (4,881 ) (1,823 ) (3,058 ) (168 %) Other income (expense): Interest income 577 162 415 256 % Interest expense (23 ) (8 ) (15 ) 188 % Employee retention credits - 1,529 (1,529 ) (100 %) Foreign exchange loss 42 (95 ) 137 * Other income 91 15 76 * Total other income, net 687 1,603 (916 ) (57 %) Loss before income tax (4,194 ) (220 ) (3,974 ) * Income tax (benefit) expense (14 ) 4 (18 ) * Net loss $ (4,180 ) $ (224 ) $ (3,956 ) * * Not meaningful 32 Revenue December 31, 2023 December 31, 2022 Change Percent CVD Equipment $ 16,334 $ 16,674 $ (340 ) (2 %) SDC 7,139 6,541 598 9 % CVD Materials 1,184 3,171 (1,987 ) (63 %) Intersegment sales elimination (548 ) (573 ) 25 * Total $ 24,109 $ 25,813 $ (1,704 ) (7 %) * Not meaningful Our revenue for the year ended December 31, 2023 was $24.1 million compared to $25.8 million for the year ended December 31, 2022, a decrease of $1.7 million or 7%.
During 2022, we conducted an analysis to determine if we were entitled to employee retention credit (“ERC”) under the Coronavirus Aid, Relief, and Economic Security Act as amended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Plan Act of 2021.
During 2022, we conducted an analysis to determine if we were entitled to an employee retention credit (“ERC”) under the Coronavirus Aid, Relief, and Economic Security Act as amended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Plan Act of 2021.
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 its carrying value over its fair value.
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.
Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis in conjunction with our consolidated financial statements and related notes contained elsewhere in this report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis in conjunction with our consolidated financial statements and related notes contained elsewhere in this report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions.
Our order backlog at December 31, 2022 was approximately $17.8 million as compared to December 31, 2021 of $10.4 million. Our backlog at December 31, 2022 consists of approximately $16.2 million related to remaining performance obligations of contracts in progress and the balance of approximately $1.6 million represents orders received from customers.
Our order backlog at December 31, 2023 was approximately $18.4 million as compared to December 31, 2022 of $17.8 million. Our order backlog at December 31, 2023 consists of approximately $16.3 million related to remaining performance obligations of contracts in progress and the balance of approximately $2.1 million represents other orders received from customers.
General and Administrative General and administrative expenses for the year ended December 31, 2022 were $5.3 million or 21% of revenue compared to $5.1 million or 31% of revenue for the year ended December 31, 2021, an increase of $0.2 million.
General and Administrative General and administrative expenses for the year ended December 31, 2023 were $5.5 million or 22.6% of revenue compared to $5.3 million or 20.6% of revenue for the year ended December 31, 2022, an increase of $0.1 million.
During 2022, we completed the production of a system for a customer that deposits coatings onto powders used in silicon-graphite anodes that has the objective of increasing EV battery performance while lowering cost.
During 2022, we completed the production of a system for a customer that deposits coatings onto powders used in silicon-graphite anodes that has the objective of increasing EV battery performance while lowering cost. We received two additional orders from this customer in 2023 that were completed during the year.
Based in our analysis, we determined that we are entitled to an ERC of approximately $1.5 million related to payroll paid in the first and third quarters of 2021 under the applicable Internal Revenue Service regulations related to ERCs. Accordingly, the Company has recognized other income of $1.5 million for the year ended December 31, 2022.
Based on our analysis, we determined that we were entitled to an ERC of approximately $1.5 million related to payroll paid in the first and third quarters of 2021 under the applicable Internal Revenue Service regulations and . we recognized other income of this amount during the year ended December 31, 2022. This amount was collected in July 2023.
During 2021, we received the first six (6) orders for our PVT150 system that is used by our customer to grow silicon carbide crystals. These crystals are than further processed into silicon carbide wafters by our customer and later processed into integrated circuits and other devices.
During 2021, we received the first six (6) orders for our PVT150 system that is used by our customer to grow silicon carbide crystals and received an additional 24 orders from the same customer in 2022. The crystals would be further processed into 150 mm silicon carbide wafers and later processed into integrated circuits and other devices.
The revenue contributed by the CVD Equipment segment for the year ended December 31, 2022 represented 65% of overall revenue as compared to 52% of overall revenue for the year ended December 31, 2021.
The revenue contributed by the SDC segment for the year ended December 31, 2023 represented 28% of overall revenue as compared to 25% of overall revenue for the year ended December 31, 2022.
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. 39 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.
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.
The increase in revenue versus the prior year period was primarily attributable to increased revenue of $8.1 million from the CVD Equipment segment related to equipment sales and spare parts, a $1.7 million increase in revenue from our SDC segment, offset, in part by, decreased revenue of $0.2 million from the CVD Materials segment.
The decrease in revenue versus the prior year period was primarily attributable to decreased revenue of $0.3 million from the CVD Equipment segment related to lower equipment sales and spare parts, $2.0 million decrease from our CVD Materials segment due to the disposition of Tantaline and wind down of MesoScribe’s operations, offset by a $0.6 million increase in revenue from our SDC segment due to higher demand.
We continue to evaluate for potential utilization of our deferred tax asset, which has been fully reserved for, on a quarterly basis, by reviewing our economic models, including projections of future operating results.
Income Taxes Income tax (benefit) expense for the years ended December 31, 2023 and 2022, was ($14,000) and $4,000, respectively. We continue to evaluate for potential utilization of our deferred tax asset, which has been fully reserved for, on a quarterly basis, by reviewing our economic models, including projections of future operating results.
Any such resulting changes in margins or contract losses 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.
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.
The revenue contributed by the CVD Materials segment for the year ended December 31, 2022 represented 12% of our overall revenue as compared to 20% of overall revenue for the year ended December 31, 2021 The decrease of $0.2 million was principally due to lower demand for coating services by our Tantaline subsidiary during 2022 as compared to 2021.
The revenue contributed by the CVD Materials segment for the year ended December 31, 2023 represented 5% of our overall revenue as compared to 12% of overall revenue for the year ended December 31, 2022 The decrease of $2.0 million was principally due to the disposition of Tantaline in May 2023 and the wind down of MesoScribe’s operations.
Historically, our revenues and orders have fluctuated based on changes in order rate as well as other factors in our manufacturing process that impacts the timing of revenue recognition. Accordingly, orders received from customers and revenue recognized may fluctuate from quarter to quarter.
One aerospace customer represented 49.2% of our backlog as of December 31, 2023. Historically, our revenues and orders have fluctuated based on changes in order rate as well as other factors in our manufacturing process that impacts the timing of revenue recognition.
To remain competitive in the acquisition and retention of our employees, we have reviewed and adjusted salaries and implemented bonus incentives to mitigate the potential negative impacts of inflation on our employees.
To remain competitive in the acquisition and retention of our employees, we have reviewed and adjusted salaries and implemented bonus incentives to mitigate the potential negative impacts of inflation on our employees. 35 Liquidity and Capital Resources As of December 31, 2023, we had aggregate working capital of $14.3 million compared to aggregate working capital of $15.5 million at December 31, 2022.
Gross Profit Gross profit for the year ended December 31, 2022 amounted to $6.6 million, with a gross profit margin of 26%, compared to a gross profit of $3.1 million and a gross profit margin of 19% for the year ended December 31, 2021.
Accordingly, orders received from customers and revenue recognized may fluctuate from quarter to quarter. 33 Gross Profit Gross profit for the year ended December 31, 2023 amounted to $5.1 million, with a gross profit margin of 21%, compared to a gross profit of $6.6 million and a gross profit margin of 26% for the year ended December 31, 2022.
However, 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.
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.
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.
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.
The revenue contributed by the SDC segment for the year ended December 31, 2022 represented 25% of overall revenue as compared to 29% of overall revenue for the year ended December 31, 2021 Revenue for our SDC segment increased $1.7 million or 35% due to increased orders and demand for the SDC’s products during 2022 as compared to the prior year.
Revenue for our SDC segment increased $0.6 million or 9% due to increased orders and demand for the SDC’s products during 2023 as compared to the prior year.
Critical Accounting Policies and Estimates Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
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.
Other Income, Net Other income, net was $1.6 million for the year ended December 31, 2022 as compared to other income, net of $9.4 million for the year ended December 31, 2021.
Other Income, Net Other income, net was $0.7 million for the year ended December 31, 2023 as compared to other income, net of $1.6 million for the year ended December 31, 2022. The increase in interest income of $0.4 million was due to higher interest rates and increased amounts invested in U.S. treasury bills.
The increase in 2022 was primarily the result of increased personnel and employee-related costs during to support increased marketing efforts.
Selling Selling expenses were $1.6 million or 6.8% of the revenue for the year ended December 31, 2023 as compared to $1.2 million or 4.7% for the year ended December 31, 2022. The increase in 2023 was primarily the result of increased personnel and employee-related costs during to support increased marketing efforts.
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.
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.
The increase in revenue in the period was principally the result of the recognition of revenue associated with our PVT150 systems. Sales of PVT150 systems were made to one customer in 2022 and represented 29.2% of our total revenues and 46% of CVD Equipment segment revenues.
Revenue from one aerospace customer in 2023 represented 13.5% of our total revenues and 20.1% of CVD Equipment segment revenues. Sales of PVT150 systems made to one customer in 2023 and 2022 represented 14.3% and 29.2%, respectively, of our total revenues and 21.2% and 45.2%, respectively, of CVD Equipment segment revenues.
Devices based on silicon carbide have been shown to reduce energy consumption in EVs and reduce the need for additional cooling elements. During 2022, we received an additional 24 orders from the same customer. We also launched our marketing campaign for the PVT150 in the latter part of 2022 as we seek orders from other potential customers.
Devices based on silicon carbide have been shown to reduce energy consumption in EVs and reduce the need for additional cooling elements. While we did not receive any additional orders from this customer, we remain in continuing discussions regarding potential additional orders.
Assets to be disposed of are reported at the lower of their carrying value or net realizable value.
Assets to be disposed of are reported at the lower of their carrying value or net realizable value. It is not possible for us to predict the likelihood of any possible future impairments or, if such an impairment were to occur, the magnitude of any impairment.
The increase in 2022 was the result of increased personnel and employee-related costs to develop new products for key growth markets. General engineering support and expenses related to the development of more standard products and value-added development of existing products are reflected as part of research and development expense.
General engineering support and expenses related to the development of more standard 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.
The increase in gross profit of $3.6 million was primarily the result of leveraging fixed costs on higher sales levels and improved product mix, which offset certain component cost increases and higher compensation costs. 36 Research and Development For the year ended December 31, 2022, research and development expenses were $1.9 million, or 7.4% of revenue as compared to $1.8 million, or 11% for the year ended December 31, 2021.
Research and Development For the year ended December 31, 2023, research and development expenses were $2.6 million, or 10.8% of revenue as compared to $1.9 million, or 7.4% for the year ended December 31, 2022. The increase in 2023 was the result of increased personnel and employee-related costs to develop new products for key growth markets.
We have achieved order growth in all segments, including a 100% growth in the CVD equipment portion of the business, with 33 system orders in 2022, that included the 24 PVT150 systems, as compared to a total of 23 systems booked in 2021. 34 Results of Operations Years Ended December 31, 2022 and 2021 The following table presents revenue and expense line items reported in our Consolidated Statements of Operations for the years ended December 31, 2022 and 2021 and the period-over-period dollar and percentage changes for those line items (in thousands, except percentages).
In February 2024, we received a multisystem order for approximately $10 million that will be used for depositing a silicon carbide protective coating on OEM components. 31 Results of Operations Years Ended December 31, 2023 and 2022 The following table presents revenue and expense line items reported in our Consolidated Statements of Operations for the years ended December 31, 2023 and 2022 and the period-over-period dollar and percentage changes for those line items (in thousands, except percentages).
We have been engaged in the production and delivery of goods on a continual basis under contractual arrangements for many years. Historically, we have demonstrated an ability to accurately estimate total revenues and total expenses relating to our long-term contracts.
Historically, we have demonstrated an ability to accurately estimate total revenues and total expenses relating to our long-term contracts. However, there exist many inherent risks and uncertainties in estimating revenues, expenses and progress toward completion, particularly on larger or longer-term contracts.
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.
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. 37 We have been engaged in the production and delivery of goods on a continual basis under contractual arrangements for many years.
We commenced marketing of our PVT150 system to other potential customers during the latter part of 2022. ● Received a $3.7 million order from a major aerospace company for the production of a CVI system.
Bookings for 2022 included orders for PVT equipment as compared to none in 2023. ● Received $8.7 million in orders from a major aerospace company for the production of CVI systems.
We will continue to assess our operations and take actions anticipated to maintain our operating cash to support the working capital needs.
We will continue to assess our operations and take actions anticipated to maintain our operating cash to support the working capital needs. 36 Critical Accounting Policies and Estimates Use of 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.
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During 2022, the CVD team accomplished a number of milestones, including: ● Overall 57% revenue growth, led by sales of our PVT150 system that is used to grow silicon carbide crystals; ● Received orders for 24 of our PVT150 systems in 2022 and a cumulative total orders of 30 PVT150 systems in 2021 and 2022.
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During 2023: ● Revenue declined by $1.7 million or 6.6% as the prior year benefited from a large number of PVT150 orders. ● Gross margin declined by $1.6 million or 23.5% due to cost overruns experienced on one large contract. ● Total bookings for 2023 were approximately $25.8 million, a decrease of $7.3 million or 22.1% as compared to 2022.
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The system will be used by our customer to manufacture CMCs) for their gas turbine jet engines. ● Total bookings for 2022 were approximately $33.1 million, an increase of $11.9 million or 56.6% as compared to 2021. ● Increased our backlog by $7.4 million to $17.8 million. ● Expanded our facilities to enhance our manufacturing capabilities. 33 Business Update Since early 2021, we have focused on bolstering our core business of equipment manufacturing.
Added
The systems will be used by our customer to manufacture CMCs for their gas turbine jet engines. ● Increased our backlog from $17.8 million to $18.4 million. ● Cash balance at December 31, 2023 was $14.0 million. 30 Business Update Our core strategy is to focus on growth market applications in end-user markets related to the “electrification of everything,” aerospace and industrial applications.
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This has resulted in the rationalization of our CVD Materials business, including the consolidation of our Tantaline business into our Nordborg, Denmark facility. Our core strategy is to focus on growth market applications end-user markets related to the “electrification of everything” and aerospace.
Added
We launched our marketing campaign for the PVT150 in the latter part of 2022 as we seek orders from other potential customers. We also developed and launched our new PVT200 system used to grow silicon carbide crystals for the manufacture of 200 mm wafers in 2023. In February 2024, we received our first order for a PVT200.
Removed
We believe that the receipt of a $3.7 million order from a major aerospace company in 2022 for the production of chemical vapor infiltration system reflects the beginnings of a revival in aircraft manufacturing.
Added
This is our second customer for PVT equipment. This customer plans to evaluate our equipment with the objective to select a vendor for potential additional purchases of PVT equipment.
Removed
In prior years, we had sold Tow-Coating Systems to manufacture CMCs to another major jet engine manufacturer and have an installed base of such systems at that customer. During 2022, new order bookings approximated $33.1 million, representing an increase of approximately 56.6% compared to bookings of $21.1 million in 2021.
Added
During 2023, we also received a total $10.6 million of aerospace orders from multiple customers, reflecting continuing strong interest in the application of CMCs in gas turbine jet engines.
Removed
The increase in revenues of $8.1 million or 94% resulted from an increase in orders in 2022 over 2021 due to increased demand for our products, principally for our PVT150 systems.
Added
The revenue contributed by the CVD Equipment segment for the year ended December 31, 2023 represented 67% of overall revenue as compared to 65% of overall revenue for the year ended December 31, 2022. The decrease in revenues of $0.3 million or 2% resulted from lower PVT150 revenues offset by an increase in aerospace revenue.
Removed
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 $1.2 million or 4.7% of the revenue for the year ended December 31, 2022 as compared to $0.9 million or 5.3% for the year ended December 31, 2021.
Added
The decrease in gross profit of $1.6 million was primarily due to significant cost overruns on one contract and lower PVT150 and CVD Materials revenues as compared to 2022.
Removed
The increase in expenses was principally due to increases in personnel and employee-related costs of approximately $0,6 million to support the growth of our business, a severance charge of $0.1 million, a bad debt recovery in the prior year of $0.1 million and other increases of $0.3 million.
Added
The increase in expenses was principally due to increases in stock-based compensation of $0.2 million, higher professional fees of $0.3 million, and increase in 401(k) match of $0.2 million, offset by lower bonus expense of $0.4 million and lower expenses for CVD Materials of $0.1 million due to the disposition of Tantaline.
Removed
Offsetting these increases were lower professional fees of approximately $0.3 million, decreased building-related costs of associated with the 555 Building that was sold in July 2021 of approximately $0.6 million.
Added
Loss on Disposition of Tantaline This expense represents the net loss on the sale of our Tantaline subsidiary including professional fees. 34 Impairment Charge This expense represents the loss on the impairment of certain assets of MesoScribe based on the decision to wind down its operations.
Removed
The gain on debt extinguishment in 2021 was the result of the forgiveness of the Company’s PPP loan in the amount of $2.4 million. The gain on the sale of the building of $6.9 million in 2021 was the result of the sale of our 555 Building.
Added
Our cash and cash equivalents at December 31, 2023 and 2022 were $14.0 million and $14.4 million, respectively.
Removed
Other income from subleasing a portion of our 555 Building (which was sold on July 26, 2021) was $500,000 for the year ended December 31, 2021.
Added
Net cash used in operating activities during 2023 was $0.2 million and was principally due to the net loss of $4.2 million, decrease in contract assets of $0.6 million, increase in inventories of $1.9 million, decrease in accrued expenses of $0.7 million (primarily due to payment of 2022 bonus) offset by a decrease in accounts receivable of $1.8 million, collection of employee retention credit receivable of $1.5 million, an increase in contract liabilities of $0.9 million and non-cash items of $2.0 million.
Removed
The foreign exchange losses in both 2022 and 2021 are related to an intercompany loan between CVD and its Tantaline subsidiary in Denmark. 37 As a result of our increased cash position from the sale of the 555 Building in July 2021 and higher interest rates, interest income increased from $6,000 in 2021 to $162,000 in 2022.
Added
The increase in inventory was related to the production of PVT150 systems in anticipation of potential future orders and increases related to new system orders. Net cash used in investing activities during 2023 was $0.1 million. Capital expenditures of $0.4 million related to purchases of manufacturing equipment and building improvements.
Removed
In addition, interest expense decreased principally due to the satisfaction of the mortgage loans on our 555 Building on July 26, 2021 and on our 355 Building on March 1, 2022. Income Taxes Income tax expense for the years ended December 31, 2022 and 2021, was $4,000 and $28,000, respectively, related to minimum state taxes.
Added
The disposition of Tantaline resulted in a cash outflow of $0.3 million based on the terms of the agreement. We received $0.6 million of deposits from the purchaser of certain MesoScribe equipment as described below.
Removed
Liquidity and Capital Resources As of December 31, 2022, we had aggregate working capital of $15.5 million compared to aggregate working capital of $16.7 million at December 31, 2021. Our cash and cash equivalents at December 31, 2022 and 2021 were $14.4 million and $16.7 million, respectively. Net cash provided by operating activities during 2022 was $194,000.
Added
Cash flows from financing activities during 2023 was not significant and included $0.1 million of proceeds from the exercise of employee stock options and $0.1 million of repayment of an equipment loan. On August 4, 2023, we entered into a Purchase and License Agreement with a third-party.
Removed
This is the result of the net loss of $224,000 as adjusted for non-cash expenses of depreciation and amortization and stock-based compensation of $1.3 million.
Added
Pursuant to the Purchase and License Agreement, we 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 our related intellectual property as more fully described in the Purchase and License Agreement, for an aggregate purchase price of $0.9 million.
Removed
Cash from operations decreased due to increases in a) accounts receivables of $2.3 million due to increases in our revenues, b) inventories of $1.3 million due to longer lead times and additional orders, and c) other receivables as we recorded a receivable of $1.5 million for ERC credits offset by an increase in contract liabilities of $2.4 million related to advance payments from customers in excess of costs incurred and from an increase of $1.0 million in accounts payable and accrued expenses. 38 Capital expenditures in the year ended December 31, 2022 were $0.7 million related to purchases of manufacturing equipment to allow for more efficient manufacturing and improved control of our supply chain.
Added
The purchase price is payable in several installments and contingent upon certain performance metrics and other milestones. During the year ended December 31, 2023, we received payments under the Purchase and License Agreement in the amount of $0.6 million which is reflected as deposits from purchaser in the accompanying consolidated balance sheet as of December 31, 2023.
Removed
In September 2022, we entered into a loan agreement to acquire equipment in the amount of $0.4 million. This loan is secured by the equipment and is payable in 60 equal monthly installments of $8,352 with an interest rate of 6%.
Added
We expect the transaction to be completed during 2024. We expect to continue to fulfill remaining customer 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.
Removed
We had a loan agreement with a bank that was secured by a mortgage on our Central Islip headquarters at 355 South Technology Drive. On March 1, 2022, according to the terms of the agreement, the loan amount outstanding of approximately $1.8 million was satisfied.
Added
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.
Removed
Actual results could differ from those estimates. Our critical estimates include accounting for certain items such as revenues on long-term contracts recognized on the input method; and the recoverable value of our long-lived assets. We consider the following significant accounting policies to be critical because of their complexity and the high degree of judgment involved in maintaining them.
Added
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.
Removed
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 three to eighteen months from commencement of order acceptance.
Added
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. Accordingly, these are the policies that we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations.
Added
For information on the Company’s significant accounting policies and estimates refer to Note 2 “Summary of Significant Accounting Policies” including the “Use of Estimates” section, in the consolidated financial statements. Revenue Recognition We design, manufacture, and sell custom chemical vapor deposition equipment through contractual agreements.
Added
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.

Other CVV 10-K year-over-year comparisons