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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.08pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.04pp
Flat
Net-tone change vs last year's 10-K.
MD&A
-0.13pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
volatile+1
decline+1
Positive rising
No words rose this year.
Risk Factors (Item 1A)
6,590 words
Item 1A.
Risk Factors
In addition to the other information set forth in this Annual Report on Form 10-K, our shareholders should carefully consider the risk factors described below. The risks set forth below may not be the only risk factors relating to the Company. Any of these factors, many of which are beyond our control, could materially adversely affect our business, financial condition, operating results, cash flow and stock price.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
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.
During 2025, two customers represented 27.6% and 13.7% of our total revenues, respectively. The loss of a major customer would have to be replaced by others, and our inability to do so may have a material adverse effect on our business and financial condition. We expect that contracts or orders from a relatively limited number of customers will, at times, continue to account for a substantial portion of our business. The mix and type of customers, and sales to any single customer, may vary significantly from quarter to quarter and from year to year. If any major customer did not place orders, or if they substantially reduced, delayed, or cancelled orders, we may not be able to replace the business in a timely manner or at all, which can and has had a material adverse effect on our results of operations and financial condition.
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. The lengthy sales cycle makes forecasting the volume and timing of sales difficult and raises additional risks that customers may cancel or decide not to enter into contracts. The length of the sales cycle depends on the size and complexity of the project, the customer’s in-depth evaluation of our products, and, in some cases, the protracted nature of a bidding process.
Because a significant portion of our operating expenses are fixed, we have and may continue to incur substantial expense before we earn associated revenue. If customer cancellations occur, they could result in the loss of anticipated sales without allowing us sufficient time to reduce our operating expenses.
If any of our customers cancel or fail to accept a large system order, our financial position and results of operations could be materially and adversely affected.
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. Because our orders are subject to cancellation or delay by the customer, our backlog at any point in time is not necessarily representative of actual sales for succeeding periods, nor does our backlog provide any assurance of achievement of revenues or that we will realize a profit from completing these orders. Our financial position and results of operations could be materially and adversely affected should any large system order be cancelled prior to shipment or not be accepted by the customer due to alleged non-conformity with product specifications or otherwise. Likewise, a significant change in the liquidity or financial position of any of our customers that purchase large systems, could have a material impact on the collectability of our accounts receivable and our future operating results. 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.
Our products are utilized to develop and manufacture materials and coatings for industrial and research applications that are used in numerous markets including but not limited to power electronics, battery materials, aerospace, nano and advanced electronic components. A significant part of our growth strategy involves continued expansion of the sales of our products for industrial as well as research and development purposes by companies, universities, and government-funded research laboratories. The availability of funds for these purposes may be subject to budgetary and political restrictions, as well as cost-cutting measures by manufacturers in the markets in which we operate.
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.
The industries in which we operate are characterized by ongoing factors, including:
global and regional economic and geopolitical developments and conditions including in Europe, Asia, and Middle East;
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.
For these and other reasons, demand for our products may fluctuate significantly and, consequently, our results of operations for past periods may not necessarily be indicative of future operating results.
Our business might be adversely affected by our dependence on foreign business.
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. Periodic local or international economic downturns, trade balance issues and political instability including trade disruptions and the imposition of tariffs, as well as fluctuations in interest and currency exchange rates. Any significant increases in tariffs on a broad array of goods, could negatively affect our business and results of operations.
The majority of our sales to date have been primarily priced in U.S. dollars. 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.
United States trade policies that restrict imports or increase import tariffs may have a material adverse effect on our business.
There have been significant changes and proposed changes in recent years to U.S. trade policies, tariffs, and treaties affecting imports. Any significant increases in tariffs on a broad array of important goods, could negatively affect our business and results of operations.
In response to the tariffs announced by the U.S., China and other countries have imposed or proposed additional tariffs on certain exports from the United States. There is current uncertainty about the future relationship between the United States and other countries with respect to trade policies, taxes, government regulations, and tariffs and we cannot predict whether, and to what extent, U.S. trade policies will change in the future. A significant proportion of our materials and components are manufactured in China and other regions outside of the United States. Accordingly, such U.S. policy changes have made it and may continue to make it difficult or more expensive for us to obtain certain products manufactured outside the United States, which could affect our revenue and profitability. Any of these factors could depress economic activity and restrict our access to suppliers or customers and could have a material adverse effect on our business, financial condition, and results of operations.
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. The time required to design, order parts and materials and to manufacture, assemble and install our products may in turn lead to delays or shortages in the availability of some products. If a product is delayed or is the subject of shortage because of problems with our ability to design, manufacture or assemble the product on a timely basis, obtain necessary materials and components, or if a product or software otherwise fails to meet performance criteria, we may lose revenue opportunities entirely, or experience delays in revenue recognition associated with a product or service. In addition, we may incur higher operating expenses during the period required to correct the problem.
We may not be able to keep pace with the rapid change in the technology we use in our products.
We believe that our continued success in the markets in which we operate depends, in part, on our ability to continually improve existing technologies and to develop and manufacture new products and product enhancements on a timely and cost-effective basis. We must be able to introduce these products and product enhancements into the market in a timely manner, in response to customers’ demands for higher-performance research and assembly equipment, customized to address rapid technological advances in capital equipment designs.
Technological innovations are inherently complex and require long development cycles and appropriate professional staffing. Our future business success depends on our ability to develop and introduce new products, or new uses for existing products that successfully address changing customer needs. Our success also depends on our ability to achieve market acceptance of our new products. To maintain our success in the marketplace, we may have to substantially increase our expenditure on research and development. If we do not develop and introduce new products, technologies or uses for existing products in a timely manner and continually find ways to reduce the cost of developing and producing them in response to changing market conditions or customer requirements, our business could be seriouslyharmed.
We face significant competition, and we are relatively small in size and have fewer resources in comparison with many of our competitors.
We face significant competition throughout the world, which may increase as certain markets in which we operate continue to evolve. Our future performance depends, in part, upon our ability to continue to compete successfully worldwide. Some of our competitors are diversified companies that have substantially greater financial resources and more extensive research, engineering, manufacturing, marketing and customer service and support capabilities than we can provide. We face competition from companies whose strategy is to provide a broad array of products, some of which compete with the products and services that we offer, as well as companies, universities and research laboratories that have the capacity to design and build their own equipment internally. These competitors may bundle their products and services in a manner that may discourage customers from purchasing our products. In addition, we face competition from smaller emerging processing equipment companies, whose strategy is to provide a portion of the products and services that we offer at often lower prices than ours, using innovative technology to sell products into specialized markets. Loss of competitive position could impair our prices, customer orders, revenue, gross margin, and market share, any of which would negatively affect our financial position and results of operations. Our failure to compete successfully with these other companies would seriouslyharm our business. 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.
Risks Related to Manufacturing and Supply Chain
Manufacturing interruptions or delays could affect our ability to meet customer demand and lead to higher costs, while the failure to accurately estimate customer demand could result in excess or obsolete inventory.
Our business depends on timely supply of equipment, services and related products that meet the rapidly changing technical and volume requirements of our customers. Some key parts to our products are subject to long lead-times and/or obtainable only from a single supplier or limited group of suppliers. Cyclical industry conditions and the volatility of demand for manufacturing equipment increase capital, technical, operational and other risks for us and for companies throughout our supply chain. Further, these conditions may cause some suppliers to scale back operations, exit businesses, merge with other companies, or file for bankruptcy protection and possibly cease operations. We have also experienced and continue to experience significant disruptions in our supply chain, resulting in delays and higher costs to procure certain components and materials that we utilize in our business.
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).
If a supplier fails to meet our requirements concerning quality, cost, or other performance factors, we may transfer our business to alternative sources, which could entail manufacturing delays, additional costs, or other difficulties. 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.
Supply chain delays and cost increases that may adversely affect our business, including potential cost increases from the imposition of tariffs.
Geopolitical developments across Europe, Asia and Middle East have and may continue to restrict our ability to procure raw materials and components such as nickel and integrated circuits. We have experienced increased costs on certain components as well as delays in supply chain delivery, which may also impact on our ability to recognize revenue and reduce our gross profit margins, as well as extend our manufacturing lead times and reduce our manufacturing efficiencies. In addition, political and trade tensions have resulted in the imposition of tariffs which may affect our supply chain and the costs of components and materials. Any significant increases in tariffs on components and materials that we purchase could negatively affect our business and results of operations. We have begun placing orders with more lead time to help mitigate the manufacturing delays, as well as assessing other suppliers or components to attempt to mitigate the potential cost impacts. In addition, we are utilizing our in-house flexible manufacturing to attempt to further mitigate both potential schedule delivery delays and material cost increase, as well as increasing sales prices. 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, including tariffs, may impact our revenues and profitability.
Inflation has and may continue to adversely affect our business, financial condition, and results of operations.
Recent global inflation has adversely affected our costs, including the cost of materials, production, and labor. As such, we have had to implement measures to mitigate the negative impacts of inflation on our costs. As the selling prices in our customer contracts are fixed, any increase in the cost of materials, labor and other costs as we manufacture any system would negatively impact our gross margins and results of operations. Longstanding or increased periods of inflation could perpetuate these material adverse effects on our business, financial condition and results of operations.
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. In turn, any reduction in the availability of these materials and components may reduce our ability to obtain sufficient amounts in a cost-effective manner. We generally do not have guaranteed supply arrangements with our suppliers. Because of the variability and uniqueness of our customers’ orders, we try to avoid maintaining an extensive inventory of materials and components for manufacturing. While we are not dependent on any principal or major supplier for most of our material and component needs, switching to an alternative supplier may take significant amounts of time and added expense, which could result in a disruption of our operations and adversely affect our business. It is not always practical or even possible to ensure that component parts are available from multiple suppliers; accordingly, we procure some key parts from a single supplier or a limited group of suppliers. At certain times, increases in demand for capital equipment can result in longer lead-times for many important system components, which may cause delays in meeting shipments to our customers. The delay in the shipment of even a few systems could cause significant variations in our quarterly revenue, operating results and the market value of our common stock.
Our manufacturing facilities 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.
Our manufacturing facilities are in Central Islip, New York and Saugerties, New York and could be affected by multiple weather risks, most notably hurricanes for our Central Islip facility which is located on Long Island, New York. Although we carry property and casualty insurance and business interruption insurance, future possible disruptions of operations or damage to property, plant and equipment due to hurricanes or other weather risks could result in impaired production and affect our ability to meet our commitments to our customers and impair important business relationships, the loss of which could adversely affect our operations and profitability. We do, however, maintain a backup power source at our Central Islip facility.
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. We may be subject to breaches of the information technology systems we use for these purposes. Experienced computer programmers and hackers may be able to penetrate our network security and misappropriate and/or compromise our confidential information (and/or third-party confidential information), create system disruptions, or cause shutdowns. Computer programmers and hackers also may be able to develop and deploy viruses, worms, and other malicious software programs that attack our systems or our products, or that otherwise exploit any security vulnerabilities.
While we have an active security training program for all employees during the year, utilize intrusionprevention and detection systems, as well as hardware firewall and virus security, the costs to address the foregoing security problems and security vulnerabilities before or after a cyber-incident could be significant. Our remediation efforts may not be successful and could result in interruptions, delays, or cessation of service, and loss of existing or potential customers, impeding our sales, manufacturing, distribution, or other critical functions. In addition, breaches of our security measures and the unapproved dissemination of proprietary information or sensitive data about us, our customer, or other third parties, could expose us, our customers, or other third parties to a risk of loss or misuse of this information, resulting in litigation and potential liability for us, damage our reputation, or otherwise harm our business.
Our financial position and results of operations may be materially harmed if we are unable to recover our investment in research and development.
The rapid change in technology in our industry requires that we continue to make substantial investments in research and development and selective acquisitions of technologies and products, to enhance the performance and functionality of our product line, to keep pace with competitive products and to satisfy customer demands for improved performance, features and functionality. There can be no assurance that revenue from future products or enhancements will be sufficient to recover the development costs associated with such products, enhancements, or acquisitions, or that we will be able to secure the financial resources necessary to fund future research and development or acquisitions. Research and development costs are typically incurred before we confirm the technical feasibility and commercial viability of a product, and not all development activities result in commercially viable products. In addition, we cannot ensure that products or enhancements will receive market acceptance, or that we will be able to sell these products at prices that are favorable to us. Our business could be seriouslyharmed 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. If third parties violate our proprietary rights, or accuse us of infringing upon their proprietary rights, such events could result in a loss of value of some of our intellectual property or costlylitigation.
We attempt to protect certain of our intellectual property rights by obtaining patent and trademark protection where we believe it is appropriate to do so. While patent, copyright and trademark protection for our intellectual property may be important, we believe our future success in highly dynamic markets is most dependent upon the technical competence and creative skills of our personnel. We may also attempt to protect our trade secrets and other proprietary information through confidentiality agreements with our customers, suppliers, employees, and consultants, and through other internal security measures. However, these employees, consultants and third parties may breach these agreements, and we may not have adequate remedies for wrongdoing. In addition, the laws of certain territories in which we sell our products may not protect our intellectual property rights to the same extent as do the laws of the United States.
Occasionally, we may receive communications from other parties asserting the existence of patent rights or other intellectual property rights that they believe cover certain of our products, processes, technologies, or information. In addition, it is possible we could have a dispute with a customer concerning the use of intellectual property utilized in their equipment. If such cases arise, we will evaluate our position and consider the available alternatives, which may include seeking licenses to use the technology in question on commercially reasonable terms, developing new alternative technology or defending our position. Nevertheless, we cannot ensure that we will be able to obtain licenses, or, if we are able to obtain licenses, which related terms will be acceptable, or that litigation or other administrative proceedings will not occur. Defending our intellectual property rights through litigation could be very costly. If we cannot negotiate the necessary licenses on commercially reasonable terms or successfullydefend 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.
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. Export Administration Regulations (“EAR”) when exported to and re-exported from international jurisdictions, in addition to the local jurisdiction’s export regulations applicable to individual shipments. Licenses or proper license exceptions may be required for the shipment of our products to certain customers or countries. Obtaining an export license or determining whether an export license exception exists often requires considerable effort by us and cooperation from the customer, which can add time to the order fulfillment process. We may be unable to obtain required export licenses or qualify for export license exceptions and, as a result, we may be unable to export products to our customers and/or meet their servicing needs. Non-compliance with the EAR or other applicable export regulations could result in a wide range of penalties including the denial of export privileges, fines, criminalpenalties, and the seizure of commodities. 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.
We are subject to the United States Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. We have agreements with third parties and make sales in countries known to experience corruption, extortion, bribery, pay-offs, theft, and other fraudulent practices. If our employees or other agents are found to have engaged in such practices, we could sufferseverepenalties and other consequences that may have a material adverse effect on our business, financial condition, and results of operations.
We are subject to environmental regulations, and our inability or failure to comply with these regulations could adversely affect our business.
We are subject to environmental regulations in connection with our business operations, including regulations related to the development and manufacture of our products and our customers’ use of our products. 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.
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.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, the SEC adopted requirements for companies that manufacture products that contain certain minerals and metals known as “conflict minerals”. These rules require public companies to perform diligence and to report annually to the SEC whether such minerals originate from the Democratic Republic of Congo and adjoining countries. The implementation of these requirements could adversely affect the sourcing, availability, and pricing of minerals we use in the manufacture of our products. In addition, we have incurred and will continue to incur additional costs to comply with the disclosure requirements, including costs related to determining the source of any of the relevant minerals used in our products. Given the complexity of our supply chain, we may not be able to ascertain the origins of these minerals used in our products through the due diligence procedures that we implement, which may harm our reputation. We may also face difficulties in satisfying customers who may require that our products be certified as conflict mineral free, which could harm our relationships with these customers and lead to a loss of revenue. 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
Volatile demand for our products may make it difficult for us to accurately budget our expense levels, which are based in part on our projections of future revenues.
Historically, demand for our equipment and related consumable products have been volatile because of changes in supply and demand, our ability to market and sell our products and other factors in the manufacturing process. Our orders levels tend to be more volatile than our revenue, as any change in demand is reflected immediately in orders booked, which are net of cancellations, while revenue, tends to be recognized over multiple quarters because of procurement and production lead times, and the deferral of certain revenue under our revenue recognition policies. The fiscal period in which we can recognize revenue is also at times subject to the length of time that our customers require to evaluate the performance of our equipment. This could cause our quarterly operating results to fluctuate.
When fluctuations in our order levels and backlog 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. During a down cycle, we must be able to make timely adjustments to our cost and expense structure to correspond to the prevailing market conditions. In addition, during periods of rapid growth, we must be able to increase manufacturing capacity and the number of our personnel to meet customer demand, which may require additional liquidity. We can provide no assurance that these objectives can be met in a timely manner in response to changes within the industry cycles in which we operate. If we fail to respond to these cyclical changes, our business could be seriouslyharmed.
We do not have long-term volume production contracts with our customers, and we do not control the timing or volume of orders placed by our customers. Whether and to what extent our customers place orders for any specific products, and the mix and quantities of products included in those orders are factors beyond our control. 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. 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.
We may, in the future, identify deficiencies in controls over financial reporting.
While we have concluded that, as of December 31, 2025, 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. 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.
We have and may continue to be required to take impairment charges on assets.
We are required to assess our long-lived assets, consisting of our property, plant and equipment, for recoverability and impairment whenever there are indicators or impairment, such as an adverse change in business climate.
As part of our long-term strategy, we have pursued acquisitions of other companies or assets, and may pursue future acquisitions of other companies or assets which could potentially increase our assets. Adverse changes in business conditions could materially impact our estimates of future operations and result in impairment charges to these assets.
If our assets were impaired, our financial condition and results of operations could be materially and adversely affected.
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.
We evaluate potential acquisitions of businesses and technologies, and we consider targeted acquisitions that expand our core competencies to be an important part of our future growth strategy. In the past, we have made acquisitions of other businesses with synergistic products, services and technologies, and plan to continue to do so in the future.
Acquisitions involve numerous risks, which include but are not limited to:
difficulties and increased costs in connection with the integration of the personnel, operations, technologies, services and products of the acquired companies into our existing facilities and operations;
diversion of management’s attention from other operational matters;
failure to commercialize the acquired technology;
the potential loss of key employees of the acquired companies;
lack of synergy, or inability to realize expected synergies, resulting from the acquisitions;
the risk that the issuance of our common stock, if any, in an acquisition or merger could be dilutive to our shareholders;
the inability to obtain and protect intellectual property rights in key technologies; and
the acquired assets becoming impaired as a result of technological advancements or worse-than-expected performance of the acquired assets.
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. 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. 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 successfulclaimsagainst us.
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. 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 science of nanotechnology is based on arranging atoms in such a way as to modify or build materials not made in nature; therefore, the effects are unknown. Future research into the effects of nanomaterials in general, and carbon nanotubes, on health and environmental issues, may have an adverse effect on products incorporating nanotechnology. 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.
Risks Related to our Stock
The price of our common shares is volatile and could decline significantly.
The stock market in general and the market for technology stocks have experienced volatility. If those industry-based market fluctuations continue, the trading price of our common shares could decline significantly independent of the overall market, and shareholders could lose all or a substantial part of their investment. The market price of our common shares could fluctuate significantly in response to several factors, including, among others:
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.
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. If similar litigation were pursued against us, it could result in substantial costs and a diversion of management’s attention and resources, which could materially and adversely affect our financial condition, results of operations, and liquidity.
General Risks
Our success is highly dependent on the technical, sales, marketing and managerial contributions of key individuals, including our Chief Executive Officer and President, and we may be unable to retain these individuals or recruit others.
We depend on our senior executives including our Chief Executive Officer and President, and certain key managers as well as, engineering, research and development, sales, marketing and manufacturing personnel, who are critical to our business. Except for our Chief Executive Officer and President, we do not have employment agreements with our key employees. Furthermore, the current labor market remains very competitive and challenging for the acquisition and retention of key employees. Larger competitors may be able to offer more generous compensation packages to our executives and key employees, and therefore we risk losing key personnel to those competitors. 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.
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.
Competition in our industry for senior management, technical, sales, marketing and other key personnel is intense and has been made even more challenging in the current labor market. If we are unable to retain our existing personnel, or attract and train additional qualified personnel, our growth may be limited due to a lack of capacity to develop and market our products.
We have, from time to time, had trouble in hiring and retaining skilled engineers with appropriate qualifications to support our growth strategy. 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.
In response to the continued fluctuations in our order rates and the recent decline in the bookings of our CVD Equipment division, we have reduced our workforce during 2025. These actions could result in an increase in future employee turnover or otherwise impact our ability to hire and retain qualified personnel.
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MD&A (Item 7)
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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 actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors discussed in this report and those discussed in other documents we file with the SEC. In light of these risks, uncertainties and assumptions, readers are cautioned not to place undue reliance on such forward-looking statements. These forward-looking statements represent beliefs and assumptions as of the date of this report. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change. Past performance does not guarantee future results.
Executive Summary
We have served the advanced materials markets with chemical vapor and thermal process equipment for over 40 years. CVD designs, develops, and manufactures a broad range of chemical vapor deposition, gas control, and other state-of-the-art equipment and process solutions used to develop and manufacture materials and coatings for industrial applications and research.
During 2025:
Revenue decreased by $1.1 million or 4.1% as compared to the prior year due to decreases in revenues from aerospace and industrial contracts in progress in our CVD segment, lower revenues in our SDC segment and the lower revenues related to the ceasing of MesoScribe’s operations.
Gross profit increased by $1.2 million or 20.4% as compared to the prior year due principally to a $1.6 million non-cash charge in 2024 to reduce certain inventory to net realizable value.
Total bookings for 2025 were approximately $13.0 million as compared to $28.1 million in 2024. The decrease in bookings of $15.1 million was related to a decrease in orders for systems in our CVD Equipment segment due in part to macroeconomic issues associated with tariffs, reduction in university funding and the U.S. government shutdown during 2025.
Our backlog declined from $19.4 million to $6.6 million due to the reduction in bookings, a decrease of $12.8 million or 66.0%.
Cash balance at December 31, 2025 was $8.7 million as compared to $12.6 million at December 31, 2024
Business Update
On March 23, 2026, we entered into a definitive agreement under which our SDC business division will be sold to a subsidiary of the Atlas Copco Group. The purchase price amounts to approximately $16.9 million in cash, subject to certain purchase price adjustments. The transaction is expected to close during the second quarter of 2026, subject to customary closing conditions.
We expect to use the proceeds from the transaction to enhance financial flexibility and support initiatives aimed at creating shareholder value. The expected net cash proceeds after payment of transaction expenses and taxes are approximately $15.0 million, of which $900,000 will be held in escrow to cover post-closing adjustments and indemnification obligations under the agreement.
CVD will retain ownership of its Saugerties, New York facility, which will be leased to the acquiring company for an initial term of two years following the closing of the transaction.
On November 6, 2025, our Board of Directors approved a comprehensive strategy to transform our Company in response to the continued fluctuations in our order rates and the recent decline in the bookings of our CVD Equipment division. As part of this strategy, we transitioned our operating model for our CVD Equipment business from vertically integrated fabrication to outsourced fabrication of certain components to reduce our fixed operating costs.
The transformation strategy also includes the exploration of strategic alternatives for businesses and product lines, including the potential sale or divestiture of assets or business lines.
We completed the workforce reduction plan during the fourth quarter of 2025 and incurred approximately $0.1 million in severance and other charges. As of December 31, 2025, the Company classified certain manufacturing equipment as held for sale with a fair value of $0.5 million based on an agreement the Company entered into in January 2026 with a third-party to sell the equipment for this amount. The Company recorded an impairment charge of $0.2 million related to this equipment and related capitalized software during the year ended December 31, 2025.
Our core strategy remains focused on serving key markets related to aerospace, microelectronics/power electronics and industrial applications.
With respect to aerospace, our systems are being used by our customers to produce ceramic matrix composite materials (“CMCs”) that will be used in next generation gas turbine jet engines with the objective of reducing jet fuel consumption and to produce specialty coatings for advanced high temperature environments.
In October 2025, we received an order for two PVT150™ units from Stony Brook University (SBU) for their new semiconductor research center - onsemi Silicon Carbide Crystal Growth Center. The recently launched research center will enable SBU faculty, scientists, and students to conduct research on silicon carbide crystal growth and other wide band gap (WBG) materials and device-enabling technologies critical to improving energy efficiency in power semiconductors and foster the next generation of skilled professionals in this field.
Our PVT reactor design and control system architecture allows for precise process and temperature control enabling run-to-run repeatability and system-to-system matching. The PVT system platform is also being considered to process other WBG materials such as aluminum nitride (AlN) to support the development of emerging, high performance semiconductor materials.
Our PVT systems may provide us with standard product offerings to continue to support the EV focused market as well as energy storage, power conversion and power transmission. In addition, SiC semiconductors specifically help address the need for high energy efficiency and power density in the AC-DC stage in power supply units for AI data centers. We plan to evaluate the market conditions and opportunities to expand our product offerings in the power electronics market.
We have generally gained new customers through our industry reputation, as well as print advertising and trade show attendance. We have increased the number of trade shows and industry conferences we attend.
The global economy continues to confront the impacts of recent executive orders by the U.S. federal administration regarding tariffs on imports from various countries including the European Union, Canada, Mexico, and China and the potential impact of actions taken by other countries in response to the announced tariffs. Tariffs may make our products less cost competitive and reduce gross margins. The impact on our business related to these or any other tariffs that may be imposed, is uncertain and depends on multiple factors, including the duration and expansion of current tariffs, future changes to tariff rates, scope or enforcement, retaliatory measures by impacted trade partners, and related inflationary effects.
Results of Operations
Years Ended December 31, 2025, and 2024
The following table presents revenue and expense line items reported in our Consolidated Statements of Operations for the years ended December 31, 2025, and 2024 and the period-over-period dollar and percentage changes for those line items (in thousands, except percentages).
December 31, 2025
December 31, 2024
Change
Percent
Revenue
Cost of revenue
Gross profit
Operating expenses
Research and development
Selling
General and administrative
Impairment charges
Gain on sales of equipment
Total operating expenses
Operating loss
Other income (expense):
Interest income
Interest expense
Other income
Total other income, net
Loss before income tax
Income tax expense
Net loss
* Not meaningful
Revenue
December
December 31, 2024
Change
Percent
CVD Equipment
SDC
MesoScribe
Intersegment sales elimination
Total
Our revenue for the year ended December 31, 2025 was $25.8 million as compared to $26.9 million for the year ended December 31, 2024, a decrease of $1.1 million or 4.1%.
The decrease in revenue versus the prior year period was primarily attributable to lower revenue of $0.2 million from our CVD Equipment segment, a $0.5 million decrease in revenue from our SDC segment and $0.7 million lower MesoScribe revenues which ceased operations in 2024. Revenue from two customers for the year ended December 31, 2025 represented 27.6% and 13.7% of our consolidated revenues and 39.5% and 19.6% of CVD Equipment segment revenues, respectively.
The revenue contributed by our CVD Equipment segment for the year ended December 31, 2025 of $18.1 million (net of intersegment revenue of $23,000) represented 70.0% of overall revenue as compared to $18.3 million (net of intersegment revenue of $8,000) or 68.0% of overall revenue for the year ended December 31, 2024. The decrease in external revenues of $0.2 million or 1.2% resulted principally from lower system revenues due to lower orders during 2025 offset by higher non-system revenues, principally spare parts.
The revenue contributed by our SDC segment for the year ended December 31, 2025 of $7.6 million (net of intersegment sales of $0.3 million) represented 29.5% of overall revenue as compared to $7.8 million (net of intersegment sales of $0.6 million) or 29.1% of overall revenue for the year ended December 31, 2024. External revenue for our SDC segment decreased by $0.2 million or 2.6%.
The revenue contributed by our MesoScribe segment for the year ended December 31, 2025 of $0.1 represented 0.4% of our overall revenue as compared to $0.8 million or 2.9% of overall revenue for the year ended December 31, 2024. MesoScribe fulfilled its final orders during 2024 and ceased operations. Revenue in 2025 was principally a license fee.
Our order backlog at December 31, 2025 was approximately $6.6 million as compared to December 31, 2024 of $19.4 million. Our order backlog at December 31, 2025 consists of approximately $4.9 million related to remaining performance obligations of contracts in progress and not yet started and the balance of approximately $1.7 million represents other orders received from customers. As of December 31, 2025, one aerospace customer represented 29.4% of our backlog and one industrial customer represented 15.4% of our backlog. Historically, our revenues and orders have fluctuated based on changes in order rate and demand as well as factors in our manufacturing process that impacts the timing of revenue recognition. Accordingly, orders received from customers and revenue recognized may fluctuate from quarter to quarter.
Gross Profit
Gross profit for the year ended December 31, 2025 amounted to $7.3 million, with a gross profit margin of 28.3%, compared to a gross profit of $6.1 million and a gross profit margin of 22.5% for the year ended December 31, 2024. The increase in gross profit of $1.2 million was primarily due to higher gross margin for CVD Equipment due principally to a $1.6 million non-cash charge in 2024 to reduce certain inventory to net realizable value. This was offset by lower gross margins at our SDC and MesoScribe segments due principally to lower revenues.
Research and Development
For the year ended December 31, 2025, research and development expenses were $2.8 million, or 10.8% of revenue as compared to $2.6 million, or 9.8% for the year ended December 31, 2024. The increase was due to less time charged to contracts in progress partially offset by lower personnel costs.
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.
Selling
Selling expenses were $1.4 million or 5.6% of the revenue for the year ended December 31, 2025 as compared to $1.7 million or 6.2% for the year ended December 31, 2024. The decrease was primarily due to lower personnel costs.
General and Administrative
General and administrative expenses for the year ended December 31, 2025 were $4.8 million or 18.6% of revenue compared to $4.9 million or 18.2% of revenue for the year ended December 31, 2024, a decrease of $0.1 million. The decrease in 2025 was due to lower employee compensation and lower professional fees.
Impairment Charge
At December 31, 2025, we classified certain excess manufacturing equipment as held for sale with a fair value of $0.5 million based on an agreement with a third-party to sell the equipment for this amount. The Company recorded an impairment charge of $0.2 million related to this equipment and related capitalized software during the year ended December 31, 2025.
Gain on Sales of Equipment
During 2024, we recognized a gain of $0.6 million on the sale of equipment related to MesoScribe representing the sale price of $0.8 million less the costs of the equipment sold of $0.2 million. We also recognized a gain of $42,000 on the sale of equipment by our CVD Equipment segment.
Other Income, Net
Other income (expense) consists principally of interest income on U.S. treasury securities and was lower than the prior year quarter due to less funds available for investment and lower interest rates.
Income Taxes
Income tax expense for the years ended December 31, 2025 and 2024, was $3,000 and $24,000 respectively. We continue to evaluate for potential utilization of our deferred tax asset, which has been fully reserved for, on a quarterly basis, by reviewing our economic models, including projections of future operating results.
Inflation and Supply Chain Matters
We experienced increased costs on certain materials and components as well as delays in supply chain delivery, which may also impact our ability to recognize revenue and reduce our gross profit margins, as well as extend our manufacturing lead times and reduce our manufacturing efficiencies. We have commenced placing orders with more lead time to help mitigate the manufacturing delays, as well as assessing other suppliers or components to attempt to mitigate the potential cost impacts. 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 also had an impact on salaries and compensation. 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.
Any significant increases in tariffs on goods that we purchase could negatively affect our business and results of operations by increasing the cost to manufacture our products.
Liquidity and Capital Resources
As of December 31, 2025, we had aggregate working capital of $14.1 million compared to aggregate working capital of $13.8 million at December 31, 2024. Our cash and cash equivalents at December 31, 2025 and 2024 were $8.7 million and $12.6 million, respectively.
Net cash used in operating activities during 2025 was $3.7 million and was principally due to the net loss of $1.6 million and net increase in contract assets and liabilities of $3.5 million, offset by a reduction in inventory of $0.5 million, and non-cash items of $1.6 million.
Net cash used in investing activities for the year ended December 31, 2025 of $0.1 million consisted of purchases of equipment and investment in captive insurance company.
Net cash used in financing activities for the year ended December 31, 2025 consisted of repayments of $0.1 million for an equipment loan.
We believe that our cash and cash equivalent positions and our projected cash flow from operations will be sufficient to meet our working capital and capital expenditure requirements for the next twelve months from the filing of this Form 10-K. We will continue to assess our operations and take actions anticipated to maintain our operating cash to support the working capital needs.
Critical Accounting Estimates
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. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods.
In accordance with U.S. GAAP, the Company bases its estimates on historical experience and on various other assumptions the Company believes are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
We consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.
Revenue Recognition
We design, manufacture, and sell custom chemical vapor deposition equipment through contractual agreements. These system sales require us to deliver functioning equipment that is generally completed within two to eighteen months from commencement of order acceptance. We recognize revenue over time by using an input method based on costs incurred as it depicts our progress toward satisfaction of the performance obligation. Under this method, revenue arising from fixed price contracts is recognized as work is performed based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations.
Incurred costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. Contract material costs are included in incurred costs when the project materials have been purchased or moved to work-in-process as required by the project’s engineering design. Cost based input methods of revenue recognition require us to make estimates of costs to complete the projects. In making such estimates, significant judgment is required to evaluate assumptions related to the costs to complete the projects, including materials, labor, and other system costs. If the estimated total costs on any contract are greater than the net contract revenues, we recognize the entire estimated loss in the period the loss becomes known and can be reasonably estimated.
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. 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. 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. 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 impairmentloss is measured on the excess of it carrying value over its fair value. Assets to be disposed of are reported at the lower of their carrying value or net realizable value. 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.
