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

The accompanying unaudited condensed consolidated financial statements for CVD Equipment Corporation and Subsidiaries (collectively “the Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. They do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary in order to make the interim financials not misleading have been included and all such adjustments are of a normal recurring nature. The operating results for the three and ninemonths ended ~~March 31,~~September 30, 2022 are not necessarily indicative of the results that can be expected for the year ending December 31, 2022.

The condensed consolidated balance sheet as of December 31, 2021 has been derived from the audited consolidated financial statements at such date, as filed on Form 10-K with the SEC on March 31, 2022, but does not contain all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with that report.

All material intercompany balances and transactions have been eliminated in consolidation. In addition, certain reclassifications have been made to the prior period condensed consolidated financial statements to conform to the current period presentation. These reclassifications had no effect on net ~~income.~~income (loss).

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

~~NOTE~~ 2: ~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~

NOTE 2:

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

~~Revenue Recognition~~Over time

The Company designs, manufactures and sells ~~custom~~specialized chemical vapor deposition equipment through contractual agreements. These system sales require the Company to deliver functioning equipment that is generally completed within three to eighteen months from commencement of order acceptance. The Company recognizes revenue from system sales over time by using an input method based on costs incurred as it depicts the Company’s 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 supplies, tools, repairs and depreciation costs. Contract material costs are included in incurred costs when the project materials have been purchased or moved to work in process, and installed, as required by the project’s engineering design. ~~Cost based~~Cost-based input methods of revenue recognition require the Company to make estimates of costs to complete the projects. In making such estimates, significant judgment is required to evaluate assumptions related to the costs to complete the projects, including materials, labor and other system costs. If the estimated total costs on any contract are greater than the net contract revenues, the Company recognizes the entire estimated loss in the period the loss becomes known and can be reasonably estimated.

“Contract assets,” include unbilled amounts typically resulting from system sales under contracts and represents revenue recognized that exceeds the amount billed to the customer. ~~The amount~~ ~~may~~ ~~not~~ ~~exceed their estimated net realizable value. Contract assets are classified as current based on our contract operating cycle.~~

“Contract liabilities,” include advance payments and billings in excess of revenue recognized. The Company typically receives down payments upon receipt of order and progress payments ~~during~~as the ~~manufacturing cycle.~~ system is manufactured.

Contract assets and contract liabilities are classified as current ~~based on our contract operating cycle and reported on a contract-by-contract basis, net of revenue recognized, at~~as these contracts in progress are expected to be substantially completed within the ~~end of each reporting period.~~next twelve months.

Point in time

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

NOTE 2:

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Recent Accounting Standards

In June 2016, the FASB issued Accounting Standard Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326), which require that financial assets measured at amortized cost be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected. The income statement reflects the measurement of credit losses for newly recognized financial assets, as well as the increase or decreases of expected credit losses that have taken place during the period. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. On November 15, 2019, the FASB delayed the effective date for smaller reporting companies. The amendments in this update are now effective for fiscal years beginning after December 15, 2022 and interim periods within those annual periods. Management is currently evaluating the effect of this update on the Company’s consolidated financial statements and currently believes it should not have a material impact.

~~NOTE~~ 2: ~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)~~

~~Recent Accounting Standards (continued)~~

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

NOTE 3:

~~NOTE~~ 3:CONCENTRATION OF CREDIT RISK

Cash and cash equivalents

The Company had cash and cash equivalents of ~~$13.3~~$11.9 million and $16.7 million at ~~March 31,~~September 30, 2022 and December 31, 2021, respectively. The Company invests excess cash in U.S. treasury bills, certificates of deposit or deposit accounts, all with maturities of less than three months. Cash equivalents were $7.1 million and $7.0 million at ~~March 31,~~September 30, 2022 and December 31, 2021, respectively.

The Company places most of its temporary cash investments with financial institutions, which from time to time may exceed the Federal Deposit Insurance Corporation limit. The amount at risk at ~~March 31,~~September 30, 2022 and December 31, 2021 was ~~$5,411,000~~$3.7 million and ~~$8,613,000,~~$8.6 million, respectively.

NOTE 3:

CONCENTRATION OF CREDIT RISK (continued)

Sales concentration

Revenue from a single customer in any one period can exceed 10% of our total revenues. During the three months ended ~~March 31,~~September 30, 2022, one customer exceeded 10% of revenues, representing 44.6% of revenues, and during the nine months ended September 30, 2022, one customer exceeded 10%, representing 28.6% of revenues. During the three months ended September 30, 2021, two customers exceeded 10% of revenues, representing ~~14.3%, 13.3%~~15.6% and ~~11.6%~~11.8% of revenues, and during the ~~three~~nine months ended ~~March 31,~~September 30, 2021, ~~one~~ ~~customer~~two customers exceeded 10%, representing ~~30.7%~~12.0% and 11.7% of revenues.

Accounts receivable

The Company sells products and services to various companies across several industries in the ordinary course of business. The Company performs ongoing credit evaluations to assess the probability of accounts receivable collection based on a number of factors, including past transaction experience, evaluation of their credit history and review of the invoicing terms of the contract to determine the financial strength of its customers. For certain contracts, the Company receives advanced payments for a portion of the contract price. The Company also maintains allowances for anticipated losses. At ~~March 31,~~September 30, 2022, ~~four~~ ~~customers~~one customer exceeded 10% of the accounts receivable balance representing ~~58.1%~~in the aggregate 34.4%, and at December 31, 2021 two customers exceeded 10% of the accounts receivable balance, representing in the aggregate 50.0% of the accounts receivable balance.

NOTE 4:         ~~REVENUE DISAGGREGATION~~
REVENUE RECOGNITION

The following table represents a disaggregation of revenue for the three and ninemonths ended ~~March 31,~~September 30, 2022 and 2021 (in thousands):

Three Month's Ending March 31, 2022

Three months ended September 30, 2022

Over time

Point in time

Total

Over time

Point in time

Total

Aerospace
$ 0 $ 705 $ 705 $ - $ 154 $ 154
Energy, storage and transmission
$ 899 $ 7 $ 906 3,791 25 3,816
Industrial
$ 997 $ 872 $ 1,869 1,653 1,153 2,806
Research
$ 706 $ 470 $ 1,176 827 516 1,343
Total
$ 2,602 $ 2,054 $ 4,656 $ 6,271 $ 1,848 $ 8,119

Three Month's Ending March 31, 2021

Over time

Point in time

Total

Aerospace
$ 189 $ 526 $ 715
Energy, storage and transmission
$ 0 $ 0 $ 0
Industrial
$ 1,369 $ 675 $ 2,044
Research
$ 187 $ 420 $ 607
Total
$ 1,745 $ 1,621 $ 3,366
10
NOTE 4:
REVENUE RECOGNITION (continued)

Three months ended September 30, 2021

Over time

Point in time

Total

Aerospace
$ - $ 574 $ 574
Energy, storage and transmission
- - -
Industrial
1,551 1,205 2,756
Research
612 388 1,000
Total
$ 2,163 $ 2,167 $ 4,330

Nine months ended September 30, 2022

Over time

Point in time

Total

Aerospace
$ - $ 1,375 $ 1,375
Energy, storage and transmission
6,714 49 6,763
Industrial
4,099 3,197 7,296
Research
1,832 1,313 3,145
Total
$ 12,645 $ 5,934 $ 18,579

Nine months ended September 30, 2021

Over time

Point in time

Total

Aerospace
$ 386 $ 1,677 $ 2,063
Energy, storage and transmission
- - -
Industrial
4,147 3,173 7,320
Research
1,164 1,183 2,347
Total
$ 5,697 $ 6,033 $ 11,730

The Company has unrecognized contract revenue of approximately ~~$6.2~~$9.8 million at ~~March 31,~~September 30, 2022, which it expects to substantially recognize as revenue within the next twelve months.

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

11
NOTE 4:
REVENUE RECOGNITION (continued)
Changes in estimates for sales of systems may occur for a variety of reasons, including but not limited to (i) build accelerations or delays, (ii) product cost forecast changes, (iii) cost related change orders or add-ons, or (iv) changes in other information used to estimate costs. Changes in estimates may have a material effect on the Company’s consolidated statements of operations.
10

~~NOTE~~ 4:         ~~REVENUE DISAGGREGATION (continued)~~

Contract ~~Assets~~assets and ~~Liabilities~~liabilities
Contract assets consist of (i) retainage which represents the earned, but unbilled, portion for which payment is deferred by the customer until certain contractual milestones are met; and (ii) unbilled receivables which represent revenue that has been recognized in advance of billing the customer, which is common for long-term contracts. Contract liabilities consist of customer advances and billings in excess of revenue recognized.

During the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021, the increase in contract assets of approximately $.2.6 million and ~~$.5~~$1.1 million, respectively, was the result of work performed in excess of billings which are based upon ~~project~~contract milestones.

Contract assets and contract liabilities on input method type contracts in progress are summarized as follows:

2022

2022

Costs incurred on contracts in progress
$ 6,878,958 $ 11,921,048
Estimated earnings
4,792,589 8,530,639
11,671,547 20,451,687
Billings to date
(9,510,318 ) (18,548,776 )
$ 2,161,229 1,902,911
Deferred revenue related to non-systems contracts
(163,791 )
Deferred revenue related to non-system contracts
(228,336 )
1,997,438 $ 1,674,575
Included in accompanying balance sheets

Under the following captions:

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

Contract assets
$ 2,717,823 $ 3,152,469
Contract liabilities
$ (720,385 ) $ (1,477,894 )

NOTE 5:
~~NOTE~~ 5:INVENTORIES, NET

Inventories consist of:

March 31,
2022

December 31,
2021

September 30, 2022

December 31, 2021

Raw materials
$ 1,368,955 $ 1,030,955 $ 1,804,675 $ 1,030,955
Work-in-process
368,946 194,060 329,092 194,060
Inventories
$ 1,737,901 $ 1,225,015 $ 2,133,767 $ 1,225,015

11
12

NOTE 6:
~~NOTE~~ 6:ACCOUNTS RECEIVABLE, NET

Accounts receivable are presented net of an allowance for doubtful accounts of approximately $36,000 and $59,000 as of ~~March 31,~~September 30, 2022 and December 31, 2021, respectively. The allowance is based on prior experience and management’s evaluation of the collectability of accounts receivable. Management believes the allowance is adequate. However, future estimates may change based on changes in future economic conditions.

NOTE 7:
LONG-TERM DEBT

~~NOTE~~In 7:September 2022,          ~~LONG-TERM DEBT~~the Company entered into a loan agreement to fund the acquisition of machinery. The loan amount is $432,000, is payable in 60 equal monthly installments of $8,352 and secured by equipment. The interest rate is 6%.

The Company had a loan agreement with HSBC Bank USA (“HSBC”) which was secured by a mortgage against its Central Islip, ~~NY Headquarters.~~New York facility. The loan was payable in 120 consecutive equal monthly installments of $25,000 in principal plus interest and a final balloon payment upon maturity on March 1, 2022. The balance as of December 31, 2021 was approximately $1.8 million. ~~Interest accrued on the Loan, at the Company’s option, at the variable rate of LIBOR plus 1.75% or Prime less 0.5% (1.86% at~~ ~~December 31, 2021).~~ According to the terms of the agreement, the loan was satisfied on March 1, 2022.

NOTE 8:
GAIN ON DEBT EXTINGUISMENT
On April 21, 2020, the Company entered into a loan agreement (the “Loan Agreement”) with HSBC pursuant to which the Company was granted a loan in the principal amount of $2.4 million, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted by the United States Congress on March 27, 2020.
The PPP loan, the obligation of which was represented by a note issued by the Company, was to mature on April 21, 2022 and bore interest at a rate of 1% per annum. The note could be prepaid by the Company at any time prior to maturity with no prepayment penalties. Under the terms of the PPP, all or a portion of the loan could be forgiven, based upon payments made in the firsttwenty-four weeks following receipt of the proceeds, related to payroll costs, continue group health care benefits, utilities and mortgage interest on other debt obligations incurred before February 15, 2020. The Company filed an application for forgiveness in April 2021 and the Company received a notification from its lender that on June 10, 2021 the U.S. Small Business Administration approved the Company’s PPP Loan forgiveness application and remitted payment to the lender for the entire principal amount of the PPP Loan and accrued interest. As a result, the Company recognized a gain on debt extinguishment in the amount of $2.4 million during the nine months ended September 30, 2021.
13

NOTE 9:
~~NOTE~~ 8:STOCK-BASED COMPENSATION EXPENSE

The Company recorded ~~$97,110~~$118,548 and ~~$50,373~~$307,379 during the three and ninemonths ended ~~March 31,~~September 30, 2022, respectively, and recorded $105,491 and $217,942 during the threeand ~~2021,~~nine months ended September 30, 2021, respectively, for the cost of employee and director services received in exchange for equity instruments based on the grant-date fair value of those instruments. The following table summarizes the compensation expense recorded for the three and ninemonths ended ~~March 31,~~September 30, 2022 and 2021 related to stock-based compensation.

Three months ended March 31,

2022

2021

Cost of revenue
$ 16,029 $ 0
Engineering, research and development
$ 3,941 $ 0
Selling and shipping
$ 5,246 $ 0
General and administrative
$ 71,894 $ 50,373

Total
$ 97,110 $ 50,373
12

~~NOTE~~ 8:         ~~STOCK-BASED COMPENSATION EXPENSE (continued)~~

Three months ended
September 30,

Nine months ended
September 30,

2022

2021

2022

2021

Cost of revenue
$ 9,221 $ 7,715 $ 26,100 $ 7,715
Research and development
16,367 3,972 42,684 3,972
Selling and shipping
7,508 4,371 18,305 4,371
General and administrative
85,452 89,433 220,290 201,884

Total
$ 118,548 $ 105,491 $ 307,379 $ 217,942

A summary of the stock option activity related to the 2007 Share Incentive Plan, ~~and~~ the 2016 ~~Share~~Equity Incentive Plan and the 2022 Equity Incentive Plan for the period from January 1, 2022 through ~~March 31,~~September 30, 2022 are as follows:

2007 Share Incentive Plan

Beginning

Granted

Exercised

Canceled

Ending

Beginning

Granted

Exercised

Canceled

Ending

Balance

During

During

During

Balance

Balance

During

During

During

Balance

Outstanding

Period

Period

Period

Outstanding

Exercisable

Outstanding

Period

Period

Period

Outstanding

Exercisable

Number of shares
220,000 0 0 0 220,000 220,000 220,000 - - (75,000 ) 145,000 145,000
Weighted average exercise price per share
$ 12.56 0 0 0 $ 12.56 $ 12.56 $ 12.56 - - $ 15.00 $ 11.29 $ 11.29

2016 Share Incentive Plan

Beginning

Granted

Exercised

Canceled

Ending

Balance

During

During

During

Balance

Outstanding

Period

Period

Period

Outstanding

Exercisable

Number of shares
398,500 12,500 0 (2,500 ) 408,500 65,000
Weighted average exercise price per share
$ 4.43 $ 4.60 0 $ 4.01 $ 4.43 $ 5.94
14

2016 Equity Incentive Plan

Beginning

Granted

Exercised

Canceled

Ending

Balance

During

During

During

Balance

Outstanding

Period

Period

Period

Outstanding

Exercisable

Number of shares
398,500 102,500 - (44,000 ) 457,000 145,500
Weighted average exercise price per share
$ 4.43 $ 4.97 - $ 4.25 $ 4.56 $ 4.94
2022 Equity Incentive Plan

Beginning

Granted

Exercised

Canceled

Ending

Balance

During

During

During

Balance

Outstanding

Period

Period

Period

Outstanding

Exercisable

Number of shares
- 76,000 - - 76,000 -
Weighted average exercise price per share
- $ 5.13 - - $ 5.13 -
In August 2022, the shareholders of the Company approved the 2022 Equity Incentive Plan that provides for the issuance of stock options and restricted stock for up to 515,000 shares. As of September 30, 2022, there were 47,698 shares available for grant under the 2016 Equity Incentive Plan and 439,000 shares available for grant under the 2022 Equity Incentive Plan.

For the ~~three~~nine months ended ~~March 31,~~September 30, 2022, the Company granted ~~12,500~~178,500 stock options, vesting 25% per year over four years, with a ten-year life. The Company determined the weighted average fair value of stock options granted during the ~~three~~nine months ended ~~March 31,~~September 30, 2022 was $3.17 and is based upon weighted average assumptions ~~as provided~~ below.

Stock Price
$ 4.60 $ 5.04
Exercise Price
$ 4.60 $ 5.04
Dividend yield
0 % 0 %
Expected volatility
68 % 68 %
Risk-Free interest rate
1.79 % 2.96 %
Expected life (in years)
6.00 6.00

The Company has a total of ~~628,500~~678,000 outstanding stock options, of which ~~285,000~~290,500 were exercisable, under the ~~two~~three plans at ~~March 31,~~September 30, 2022.

1315

NOTE 9:
~~NOTE~~ 8:STOCK-BASED COMPENSATION EXPENSE (continued)

The following table summarizes information about the outstanding and exercisable options at ~~March 31, 2022.~~September 30, 2022 by ranges of exercise prices:

Options Outstanding

Options Exercisable

Weighted

Weighted

Weighted

Average

Average

Average

Exercise

Number

Remaining

Exercise

Intrinsic

Number

Exercise

Intrinsic

Price Range

Outstanding

Contractual

Price

Value

Exercisable

Price

Value

$ 4.00 - 7.00 388,500 9.1 $ 4.25 $ 116,000 45,000 $ 5.00 $ 0
$ 7.01 - 10.00 20,000 6.1 $ 8.07 $ 0 20,000 $ 8.07 $ 0
$ 10.01 - 12.00 120,000 3.3 $ 10.52 $ 0 120,000 $ 10.52 $ 0
$ 12.01 - 15.00 100,000 .4 $ 15.00 $ 0 100,000 $ 15.00 $ 0

Options Outstanding

Options Exercisable

Weighted

Weighted

Weighted

Average

Average

Average

Exercise

Number

Remaining

Exercise

Intrinsic

Number

Exercise

Intrinsic

Price Range

Outstanding

Contractual

Price

Value

Exercisable

Price

Value

$4.00 - 7.00 513,000 8.8 $ 4.51 $ 249,645 125,500 $ 4.94 $ 67,905
$7.01 - 10.00 20,000 5.6 $ 8.07 $ 0 20,000 $ 8.07 $ 0
$10.01 - 12.00 120,000 4.5 $ 10.52 $ 0 120,000 $ 10.52 $ 0
$12.01 - 15.00 25,000 .1 $ 15.00 $ 0 25,000 $ 15.00 $ 0

~~NaN options were exercised during~~For the ~~three~~nine months ended ~~March 31, 2022.~~September 30, 2022, no options were exercised. As of ~~March 31,~~September 30, 2022, there was ~~$693,000~~$1.0 million of unrecognized compensation costs related to stock options expected to be recognized over a weighted average period of 3.3 years.

Restricted Stock Awards
~~There were 0 unvested shares of restricted stock at~~ ~~March 31, 2022~~ ~~and~~ ~~December 31, 2021.~~ ~~During the~~ ~~three~~ ~~months ended~~ ~~March 31, 2022~~ ~~there were 0 grants of restricted stock.~~
Pursuant to the ~~director compensation~~Director Compensation plan approved on October 11, 2021, each director is entitled to Director Compensation for an Annual Equity Retainer in the amount of $40,000, to be automatically granted on the date of the Company’s annual meeting of ~~shareholders (directors~~shareholders. The directors may elect to receive payment in restricted stock, stock options or a combination ~~thereof).~~thereof.
During the three and nine months ended September 30, 2022, the Company’s directors received 32,000 shares of restricted stock with an estimated fair value of $160,000 of which 16,000 shares vested upon the date of grant on August 17, 2022 and the remaining 16,000 shares will vest on December 31, 2022. At September 30, 2022, there was $40,000 of unrecognized stock compensation expense associated with the restricted stock awards.

Restricted Stock Units
The following table summarizes activity related to outstanding restricted stock units for the ~~three~~nine months ended ~~March 31,~~September 30, 2022:

Weighted

Weighted

Shares of

Average Grant

Shares of

Average Grant

Restricted

Date Fair

Restricted

Date Fair

Stock Units

Value

Stock Units

Value

Unvested outstanding at December 31, 2021
5,500 $ 4.82 5,500 $ 4.82
Granted
0 $ 0 - $ -
Vested
(5,500 ) $ 4.82 (5,500 ) $ 4.82
Forfeited/Cancelled
0 $ 0
Forfeited or cancelled
- $ -

Unvested outstanding at March 31, 2022
0 $ 0
Unvested outstanding at September 30, 2022
- $ -
16
NOTE 9:
STOCK-BASED COMPENSATION EXPENSE (continued)

The total fair value of vested restricted stock units was $3,458 for the ~~three~~nine months ended ~~March 31,~~September 30, 2022. As of ~~March 31,~~September 30, 2022, there was 0no unrecognized compensation costs related to restricted stock units.

14

NOTE 10:
~~NOTE~~ 9:         ~~INCOME TAXES~~
~~As of~~ ~~March 31, 2022~~ ~~and~~ ~~December 31, 2021,~~ ~~the Company has provided a full valuation allowance against all of the net deferred tax assets. This was based on management’s assessment, including the last~~ ~~two~~ ~~years of operating losses, that it is more likely than~~ ~~not~~ ~~that the net deferred tax assets~~ ~~may~~ ~~not~~ ~~be realized in the future.~~
On ~~March 27, 2020,~~ the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted by the United States Congress. As a result of the enactment of the CARES Act, net operating losses (“NOL’s”) generated in ~~2018~~-~~2020~~ ~~can now be carried back for~~ ~~five~~ ~~years and resulted in the Company recognizing approximately $1.5 million of a tax benefit, of which $.7 million was a receivable at~~ ~~December 31, 2021.~~ ~~This tax receivable was collected in the~~ ~~three~~ ~~months ended~~ ~~March 31, 2022.~~ Management continues to evaluate for potential utilization of the Company’s deferred tax asset, which has been fully reserved for, on a quarterly basis, reviewing our economic models, including projections and timing of orders, and cost containment measures.
~~NOTE~~ ~~10:~~EARNINGS PER SHARE

Basic earnings per share is computed by dividing net earnings available to common shareholders (the numerator) by the weighted average number of common shares outstanding (the denominator) for the period presented. The computation of diluted earnings per share is similar to basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued.

A reconciliation of basic to diluted shares used in the earnings per share calculation is as follows:

Three months ended
March 31,

2022

2021

Basic weighted average common shares outstanding
6,725,042 6,680,130
Dilutive effect of options and unvested restricted shares
0 0
Diluted weighted average shares outstanding
6,725,042 6,680,130
15

~~NOTE~~ ~~10:~~         ~~EARNINGS PER SHARE (continued)~~

Three months ended
September 30,

Nine months ended
September 30,

2022

2021

2022

2021

Basic weighted average common shares outstanding
6,736,764 6,685,599 6,730,263 6,683,407
Dilutive effect of options and unvested restricted shares
3,928 22,284 - 8,406
Diluted weighted average shares outstanding
6,740,692 6,707,883 6,730,263 6,691,813

The following table represents ~~common~~weighted average stock ~~equivalents~~options that were excluded from the computation of diluted earnings per share for the three and ninemonths ended ~~March 31,~~September 30, 2022 and 2021, because the effect of their inclusion would be anti-dilutive.

Three months ended
September 30,

Nine months ended
September 30,

2022

2021

2022

2021

Stock options
652,109 716,216 615, 999 730,094
Restricted stock
- - 2,637 -
652,109 716,216 618,636 730,094

Three months ended
March 31,

2022

2021

Stock Options
628,500 410,000
628,500 410,000
17

~~Stock options to purchase 628,500 shares of common stock were outstanding and 285,000 were exercisable during the~~ ~~three~~ ~~months ended~~ ~~March 31, 2022.~~
NOTE 10:
EARNINGS PER SHARE (continued)

The dilutive potential common shares on options is calculated in accordance with the treasury stock method, which assumes that proceeds from the exercise of all options are used to repurchase common stock at market ~~value.~~value and the amount of stock-based compensation cost attributed to future services and not yet recognized. The number of shares remaining after the proceeds and unrecognized compensation cost are exhausted represents the potential dilutive effect of the securities.

NOTE 11:
INCOME TAXES
As of September 30, 2022 and December 31, 2021, the Company has provided a full valuation allowance against its net deferred tax assets. This was based on management’s assessment, including the last four years of operating losses, that it is more likely than not that the net deferred tax assets may not be realized in the future. Management continues to evaluate for potential utilization of the Company’s net deferred tax asset, which has been fully reserved for, on a quarterly basis, reviewing our economic models, including projections of future operating results.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted by the United States Congress. As a result of the enactment of the CARES Act, net operating losses (“NOL’s”) generated in during the years 2018 through 2020 could be carried back for five years and resulted in the Company recognizing approximately $1.5 million of a tax benefit, of which $.7 million was a receivable at December 31, 2021. This tax receivable was collected in March 2022.

NOTE 12:
~~NOTE~~ ~~11:~~SEGMENT REPORTING

The Company operates through three (3) segments: CVD Equipment (“CVD”), Stainless Design Concepts (“SDC”) and CVD Materials (“Materials”). The CVD segment ~~is utilized for~~manufactures and sells chemical vapor deposition ~~equipment manufacturing.~~equipment. SDC is the Company’s ultra-high purity manufacturing division ~~in Saugerties, New York~~ for gas control systems. The Materials segment ~~was established to provide~~provides material coatings for aerospace, medical, electronic and other applications. The Company evaluates performance based on several factors, of which the primary financial measure is income or (loss) before taxes.
16

~~NOTE~~ ~~11:~~          ~~SEGMENT REPORTING (continued)~~

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

18

NOTE 12:
SEGMENT REPORTING (continued)
Elimination entries included in the “Eliminations and Unallocated” column represent intersegment revenues and cost of revenues that are eliminated in consolidation. Intersegment sales for the three months ended September 30, 2022 and 2021 by the SDC segment to the CVD Equipment segment were 72,409 and $6,882, respectively. Intersegment sales for the nine months ended September 30, 2022 and 2021 by the SDC segment to the CVD Equipment segment were $497,306 and $121,920, respectively.
Three ~~Months Ended~~months ended ~~March 31,~~September 30,
(In thousands)

Eliminations* and

Eliminations

2022

CVD

SDC

Materials

Unallocated

Consolidated

CVD

SDC

Materials

and Unallocated

Consolidated

Assets
$ 22,575 $ 7,756 $ 1,661 $ 15 $ 32,007 $ 22,415 $ 8,800 $ 2,345 $ 42 $ 33,602

Revenue
2,827 1,415 458 (44 ) 4,656 5,718 1,663 809 (71 ) 8,119
Operating (loss) income
(736 ) 442 (6 ) (706 ) (1,006 ) (32 ) 448 365 (659 ) 122
Pretax (loss) income
(726 ) 442 (7 ) (706 ) (997 ) (27 ) 448 258 (615 ) 64

2021

Assets
$ 29,659 $ 6,116 $ 3,407 $ 24 $ 39,206 $ 27,248 $ 7,053 $ 1,655 $ 2 $ 35,958

Revenue
2,006 827 629 (96 ) 3,366 2,074 1,326 937 (7 ) 4,330
Operating loss
(575 ) (5 ) (110 ) (929 ) (1,619 )
Operating (loss) income
(911 ) 275 441 (727 ) (922 )
Pretax (loss) income
(590 ) (5 ) 18 (929 ) (1,506 ) (920 ) 275 7,373 (1) (727 ) 6,001

*All elimination entries represent intersegment revenues eliminated in consolidation for external financial reporting.Nine months ended September 30,
(In thousands)

Eliminations

2022

CVD

SDC

Materials

and Unallocated

Consolidated

Revenue
12,324 4,669 2,083 (497 ) 18,579
Operating (loss) income
(1,391 ) 1,117 642 (1,970 ) (1,602 )
Pretax (loss) income
(1,380 ) 1,117 392 (1,903 ) (1,772 )

2021

Revenue
5,884 3,314 2,654 (122 ) 11,730
Operating (loss) income
(2,664 ) 637 828 (2,425 ) (3,624 )
Pretax (loss) income
(259 )(2) 637 8,014 (1) (2,425 ) 5,967

~~NOTE~~ ~~12:~~          ~~SIGNIFICANT EVENTS- CORONAVIRUS (COVID-~~19
(1)
Materials segment includes a gain on the sale of building in the amount of $6,894,109 for the nine months ended September 30, 2021.

~~The Company has been actively monitoring the coronavirus (COVID-~~19
(2) outbreak and resulting pandemic and its impact on both the global economic and operating environment and specifically on its impact to the Company, its employees, its operations and its financial condition. In ~~March 2020,~~ ~~the World Health Organization recognized the COVID-~~19 ~~outbreak as a pandemic based on the global spread of the disease, the severity of illnesses it causes and its effects on society. In response to the COVID-~~19 outbreak, the governments of many countries, states, cities and other geographic regions have taken preventative or protective actions, such as imposing restrictions on travel and business operations, including complete or partial government shutdowns of many schools and businesses, including the Company, and advising or requiring individuals to limit or forego their time outside of their homes. Accordingly, the COVID-19 outbreak (including the impact of the COVID Omicron variant) has severely restricted the level of economic activity in many countries, including the United States, and continues to materially and adversely impact global economic activity. In particular, the aerospace sector, for which the Company relies on a significant part of its business, has been faced with significant reductions to its business due to reduced air travel which has negatively affected new order bookings and has materially and adversely affected the Company’s revenues to date.
CVD segment includes a gain on the forgiveness of the PPP loan for the nine months ended September 30, 2021.

1719

NOTE 13:
SALE-LEASEBACK TRANSACTION
~~NOTE~~
On ~~12:~~September 22, 2022, the Company entered into an Agreement of Purchase and Sale (the “Purchase Agreement”) with 355 ~~SIGNIFICANT EVENTS- CORONAVIRUS (COVID-~~S Technology Drive Owner LLC (the “Potential Purchaser”), to sell and leaseback its facility in Central Islip, New York that houses it corporate headquarters and the administrative offices and manufacturing operations of its CVD Equipment and MesoScribe subsidiaries. The lease agreement was to have an initial term of 19ten~~) (continued)~~ years and two renewal terms of five year each. The terms of the agreement provided for a purchase price of $28.5 million and annual fixed rent of $1.5 million in the first year of the initial term and increasing by 3% each year. The Potential Purchaser had thirty (30) business days from date of the Purchase Agreement to complete its due diligence (until November 3, 2022), during which time the Potential Purchaser retained the right to cancel the Purchase Agreement. On November 3, 2022 and November 4, 2022, the Company and the Potential Purchaser entered into two extension agreements whereas the due diligence period was ultimately extended to November 11, 2022. On November 11, 2022, the Potential Purchaser notified the Company that it was terminating the Purchase Agreement in its entirety and the transactions contemplated thereby, prior to the expiration of the due diligence period. Each party will bear its own costs and expenses in connection with the forgoing, and neither party will pay a termination fee with respect to the termination of the Purchase Agreement.
20

NOTE 14:
SALE OF 555 BUILDING
On March 29, 2021, the Company entered into an agreement with Steel K, LLC for the sale of its facility located at 555 S. Technology Drive in Central Islip, New York (the “555 Building”), and on July 26, 2021, the Company closed on the sale. The sale price was $24.4 million, subject to adjustment for apportionments, adjustments and credits. A portion of the sale proceeds was used to satisfy the existing mortgage debt on the 555 Building, including interest and fees, in the amount of $9.4 million, as well as various costs related to the closing of the transaction. The Company recognized a gain on the sale of the building in the amount of $6.9 million and received approximately $14.0 million in net proceeds.

Management ~~is unable to predict~~had determined the ~~extent~~555 Building was not needed for business operations, and the remaining elements of the ~~impact~~CVD Materials business located in the ~~pandemic will have on~~555 Building were consolidated into the ~~Company’s financial position and operating results for the remainder of~~ ~~2022~~355 due to numerous uncertainties, but the impact could be material during any future period affected either directly or indirectly by this pandemic. The Company intends to continue to evaluate the various government-sponsored plans and programs put in place in response to the COVID-19 pandemic and further plans to take advantage of any such government benefits reasonably available to it. Moreover, the Company will continue to monitor developments in that area as new government initiatives are passed.Building.
NOTE 15:
RISKS AND UNCERTAINTIES

The ~~COVID-~~19Company currently operates in a challenging economic environment as the global economy continues to confront the impacts from the pandemic, ~~has adversely impacted worldwide~~geopolitical conflicts, inflationary pressures and adverse supply ~~chains and~~chain disruptions. The specific impacts on the ~~ability to obtain sufficient amounts of raw materials and component parts such as nickel and integrated circuits. Further,~~Company have included:
Significant geopolitical developments across Europe and Asia (including the war in Ukraine) have and may continue to restrict ~~our~~the Company’s ability to procure raw materials and components such as nickel and integrated circuits, as well as impact ~~our~~the Company’s ability to sell ~~our~~its products into China, Russia and other Eastern European and Asian regions. ~~In addition,~~
Supply chain disruptions have led to much longer lead times to acquire raw materials for production and ~~delays~~has led to inflationary pressures in ~~the ability of the Company’s~~ ~~third~~ ~~party freight carriers to transport these items to the Company’s manufacturing facility also continues to be a challenge. During the~~ ~~third~~both materials and ~~fourth~~ ~~quarters of~~ ~~2021,~~ ~~and into~~ ~~2022,~~ ~~the Company experienced increased costs on certain components as well as delays in~~labor. These supply chain ~~delivery, which has and~~ ~~may~~ ~~continue to impact its~~disruptions have impacted the Company’s ability to recognize revenue ~~and reduce~~more timely as it delays the Company’s ~~gross profit margins, as well as extend our~~ manufacturing ~~lead times and reduce its manufacturing efficiencies.~~ processes.
The ~~Company is now placing~~pandemic’s impact on long distance air travel resulted in a reduction in orders ~~with more lead time to help mitigate~~for the ~~manufacturing delays, as well as assessing other suppliers or components to attempt to mitigate~~Company’s aerospace equipment products that adversely affected the ~~potential cost impacts. In addition,~~Company’s revenues since the ~~Company is utilizing its in-house flexible manufacturing to attempt to further mitigate both potential schedule delivery delays and material cost increase.~~ start of the pandemic.
While management has initiated actions to mitigate the potential negative impacts to ~~our~~its revenue and profitability, ~~there can be~~ no ~~assurance of~~ the ~~ultimate~~Company is unable to predict the impact ~~and the length of time period~~ that the ~~supply chain factors~~above uncertainties may ~~impact~~have on its ~~revenues~~future results of operations and ~~profitability.~~cash flows.

18

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

Except for historical information contained herein, this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, as amended. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements. Important assumptions and other factors that could cause actual results to differ materially from those in the forward-looking statements, include but are not limited to: competition in the Company’s existing and potential future product lines of business; the Company’s ability to attract and retain key personnel and employees; the Company’s ability to obtain financing on acceptable terms if and when needed; uncertainty as to the Company’s future profitability, uncertainty as to the future profitability of acquired businesses or product lines, uncertainty as to any future expansion of the Company, uncertainty as to the Company’s ability to adequately obtain raw materials and components from foreign markets in light of geopolitical developments and the effect of the novel coronavirus (COVID-19) on our business and operations (including with respect to supply chain disruptions), and those of our customers, suppliers and other third parties . Other factors and assumptions not identified above were also involved in the derivation of these forward-looking statements and the failure of such assumptions to be realized as well as other factors may also cause actual results to differ materially from those projected. The Company assumes no obligation to update these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements. Past results are no guaranty of future performance. You should not place undue reliance on any forward-looking statements, which speak only as of the dates they are made. When used with this Report, the words “believes”, “anticipates”, “expects”, “estimates”, “plans”, “intends”, “will” and similar expressions are intended to identify forward-looking statements.

Known Trends and Uncertainties
We are confronting a very difficult operating environment as the global economy continues to experience the challenges from the pandemic, geopolitical conflicts, surging inflationary pressures and adverse supply chain disruptions. The specific impacts on our Company have included:
●
Significant geopolitical developments across Europe and Asia (including the war in Ukraine) have and may continue to restrict our ability to procure raw materials and components such as nickel and integrated circuits, as well as impact our ability to sell its products into China, Russia and other Eastern European and Asian regions.
●
Supply chain disruptions have led to much longer lead times to acquire raw materials for production and has led to inflationary pressures in both materials and labor. These supply chain disruptions have impacted our ability to recognize revenue more timely as it delays our manufacturing processes.
1922

~~Coronavirus (COVID-19)~~
●
The pandemic’s impact on long distance air travel resulted in a reduction in orders for the Company’s aerospace equipment products that adversely affected our revenues since the start of the pandemic.

We have been actively monitoring the coronavirus ("COVID-19") outbreak and its impact globally. Our primary focus to this point has been to ensure the health and safety of our employees. To that end, we have adopted social distancing practices where appropriate, implemented travel restrictions, and have taken actions to ensure that our facilities are cleaned and sanitized regularly. These are novel and challenging times and the magnitude of this crisis is requiring us to consider all options to promote the safety of employees, including, where appropriate, or where required to comply with foreign, national, state or local governmental authority recommendations, guidelines, and/or mandates, the temporary reduction or suspension of work at certain of our locations and production facilities to protect employees and curb the spread of the coronavirus. All of these factors have adversely impacted our operating results. In particular, the aerospace sector, for which we rely on for a significant part of our business, has been faced with significant reductions to its business due to reduced air travel which has negatively affected new order bookings and has materially and adversely affected the Company’s revenues to date. Due to the timing of the COVID-19 outbreak, our new order levels during the first quarter of 2021 have seen continued substantial reductions, while new orders in the second, third, and fourth quarters of 2021 were substantially higher at approximately $6.0 million, $6.1 million and $5.2 million, respectively, and new orders in the first quarter of 2022 were approximately $4.1 million. Significant 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, as well as impact our ability to sell our products into China, Russia and other Eastern European and Asian regions. We continue to be unable to predict the extent of the impact the pandemic and geopolitical uncertainties will have on our financial position and operating results for the remainder of 2022 and in future periods due to numerous uncertainties, ~~(including the impact of the COVID Omicron variant),~~ supply chain disruptions, rapidly rising costs and the impact on the aerospace sector, but the impact could be material during any future period affected either directly or indirectly by ~~this pandemic.~~the pandemic and the geopolitical uncertainties. The longer-term impacts from ~~the pandemic~~these matters are highly uncertain and cannot be predicted.
Critical Accounting Policies and Significant Judgments and Estimates
This discussion and analysis of the Company’s financial condition and results of operations is based on the Company’s condensed 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.
For information on the Company’s significant accounting policies and estimates refer to Note 2 to the Company’s consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021 and to Note 2 “Summary of Significant Accounting Policies” in the unaudited condensed consolidated financial statements.

Executive Level Summary

CVD has continued to serve the advanced materials markets with chemical vapor and thermal process equipment for over 3840 years. ~~Our products are used in research and development centers as well as in production environments.~~ We develop, design, manufacture and service a broad range of chemical vapor deposition, gas control and other state-of-the-art process equipment and solutions used in advanced materials and coatings. ~~We serve markets ranging from academic/~~Our products are used in production environments as well as research ~~initiatives to industrial applications. With the adoption of our technology in these markets we see increased usage of our systems across production environments.~~and development centers, both academic and corporate. Major target markets for our business include advanced nanomaterials, batteries and ~~Silicon Carbide~~silicon carbide for high power electronics; aerospace (such as gas turbine engines and structural ~~components;~~components); medical devices (such as implants); advanced semiconductor devices and ~~Silicon~~silicon for solar cells; and carbon nanotubes and nanowires. Our Application Laboratory supports the development of new material systems and processes. Our CVD Materials group (consisting of our MesoScribe and Tantaline subsidiaries) provides material coating services, process development support and process startup ~~assistance with the focus on~~ ~~enabling tomorrow~~’~~s technologies~~^TM~~. Our Mesoscribe product line~~assistance. MesoScribe continues to support the aerospace and defense markets with robust direct write instrumentation. ~~Our CVD~~ Tantaline ~~subsidiary~~ which underwent a restructuring and consolidation in 2021 provides chemical-resistant coating services to many industrial applications.

~~Based on more than 38 years of experience, we~~We use our capabilities in process development, engineering and vertical manufacturing to transform new applications into mainstream manufacturing solutions. We have built a significant 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.

20

To expand our presence into various growth markets, we are developing a line of proprietary standard use products to complement our ~~customized~~specialized 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. Our proprietary systems leverage the technological expertise that we have developed through designing these ~~custom~~specialized systems into a broader standardized product line. The standard product line is easily configured from a wide range of available options to meet diverse product and budgetary requirements. Manufacturing these standardized systems in higher volumes provides us the flexibility to reduce both the cost and delivery time of our systems. These systems, which we market and sell under the EasyTube® and CVD product lines, are sold to corporations, universities, research laboratories, ~~and production companies~~ in the United States and throughout the world.

23
Sales of our proprietary standard systems, ~~custom~~specialized systems and process solutions have been driven by our installed customer base, which includes Fortune 500 companies. 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 “accelerating the commercialization of tomorrow’s technologies”^TM we have been developing a new customer base in addition to growing with our existing customers. We have generally gained new customers through our industry reputation, as well as limited print advertising and trade show attendance (which has been negatively impacted by COVID-19 in 2020, 2021 and into 2022).

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. These factors significantly 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 up their process tools in our Application Laboratory and to work collaboratively with our scientists and engineers to optimize process performance.

In 2021 and into 2022 our focus has been on our growth markets, the development of standard product solutions and being able to provide solutions from gas/liquid storage through process and process by-product treatment. This has allowed us to provide increased value to our customers.
Our return to profitability is dependent upon, among other things, the receipt of new equipment orders, our ability to mitigate the impact of supply chain disruptions and inflationary pressures, as well as managing planned capital expenditures and operating expenses.

2022 Developments

In 2021, we launched our strategy to transition the focus of the Company to standardized products serving global growth application markets. Our growth opportunities in 2022 are consistent with our strategic plan to address and serve growth production markets.

In the first nine months of 2022, total orders were $24.0 million as compared to $15.9 million in the first nine months of 2021, an increase of $8.1 million or 51.2%. The first nine months of 2022 orders included 14 system orders for PVT-150 systems that grow silicon carbide (“SiC”) material which is subsequently processed into wafers to support high power electronics applications. All PVT-150 systems are planned to be shipped to our customer in 2022. For the first, second and third quarters of 2022, new customer orders were $4.1 million, $12.6 million, and $7.3 million, respectively. For the first, second and third quarters of 2022 revenue was $4.7 million, $5.8 million, and $8.1 million, respectively.
2124

In the first three months of 2022, and in the month of April 2022, total Company orders were approximately $4.1 million and $7.2 million, respectively. This $11.3 million year to date total for April 2022 included 14 system orders for Silicon Carbide (“SiC”) growth. There have been twenty (20) systems ordered for our PVT-150 system which has been developed for SiC growth over the last 6 months and planned to ship in 2022. In total there were eighteen (18) CVD systems booked in the first four months of 2022.
~~Statement of Operations~~

Three Months Ended

MARCH 31,

2022

2021

Revenue
$ 4,655,727 $ 3,365,860

Cost of revenue
3,886,176 2,921,554

Gross profit
769,551 444,306

Operating expenses

Engineering, research and development
310,207 310,954
Selling and shipping
272,679 135,755
General and administrative
1,192,653 1,616,384

Total operating expenses
1,775,539 2,063,093

Operating loss
(1,005,988 ) (1,618,787 )

Other income (expense):

Interest income
18,282 1,223
Interest expense
(9,634 ) (107,221 )
Other Income
- 219,235
Total other income, net
8,648 113,237

Loss before income tax
(997,340 ) (1,505,550 )

Income tax expense
- -

Net loss
$ (997,340 ) $ (1,505,550 )
22

~~Three Months Ended March 31, 2022 vs. March 31, 2021~~
~~Revenue~~
Our revenue for the three months ended March 31, 2022 was $4.7 million compared to $3.4 million for the three months ended March 31, 2021, an increase of $1.3 million or 38.3%. The increase in revenue for the three months ended March 31, 2022 versus the prior year period was primarily attributable to increased revenue of $.8 million from the CVD Equipment segment related to spare parts and equipment sales, $.6 million from our SDC segment, offset, in part by, decreased revenue of $.1 million from the CVD Materials segment. Despite achieving a sales increase of $1.3 million or 38.3% this quarter, as compared to the prior year quarter, overall sales levels continue to be negatively affected, primarily attributable to the impacts of COVID-19 including delays in our supply chain delivery of components which impacts our ability to recognize revenue more timely. However, as a result of increased new orders, primarily in the last three quarters of 2021, the result of a recovery in the marketplace, exclusive of aerospace, as well as the execution of our operating plan, we have achieved four sequential quarters of revenue increases during 2021. Quarterly revenue in 2021 was $3.4 million, $4.0 million, $4.3 million and $4.7 million, during Q1 to Q4, respectively, and revenue in Q1 2022 was essentially unchanged at $4.7 million. Our backlog at March 31, 2022 was approximately $9.9 million, a decrease of $.5 million as compared to December 31, 2021 of $10.4 million. This decrease is due to the timing of new orders in Q1 2022 of $4.1 million, as compared to revenue of $4.7 million. While aerospace sales had represented as much as 60% of our total revenue, during the three months ended March 31, 2022 and 2021 it represented approximately 15.1% and 21.2%, respectively. This is due to the negative effect the COVID-19 crisis has had initially in 2020 and continuing to date on the aerospace sector, which resulted from reduced travel and reduction of industry gas turbine engine sales.
The revenue contributed by the CVD Equipment segment for the three months ended March 31, 2022 was $2.8 million, which totaled 60.7% of our overall revenue, and was 40.8% or $.8 million higher than the segment’s $2.0 million contribution made in the three months ended March 31, 2021, which totaled 59.6% of our overall revenue. This revenue increase is the result of increases of $.4 million in spare parts sales, which continue to be impacted by the slow down in aerospace demand due to COVID-19, and an increase of $.4 million from equipment sales.
Revenue for our SDC segment was $1.4 million for the three months ended March 31, 2022 as compared to $.8 million for the three months ended March 31, 2021, an increase of $.6 million resulting from the receipt of one large order in 2022, compared to 2021.
~~Revenues for our CVD Materials segment were $.5 million for the three months ended March 31, 2022, as compared to $.6 million in the three months ended March 31, 2021.~~
23

~~Gross Profit~~
Gross profit for the three months ended March 31, 2022 was to $.8 million, with a gross profit margin of 16.5%, as compared to a gross profit of $.4 million and a gross profit margin of 13.2% for the three months ended March 31, 2021. The increase in gross profit and gross profit margin was primarily the result of leveraging fixed costs on higher sales levels, and product mix, which more than offset certain component cost increases and compensation costs. During the quarter ended September 30, 2021, we started to experience increased costs on certain components as well as delays in supply chain delivery, which also impacts revenue as well as manufacturing lead times and efficiencies. We are also seeing the effects of the macroeconomic inflationary cost environment that has resulted in increased costs for labor and materials. We have been 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 increases. In late 2021, we initiated price increases on new quotations in line with inflationary pressures which we ~~anticipate will~~believe could mitigate our cost increases and ~~we anticipate will~~ benefit margins during 2022 and 2023.
Statement of Operations

Three months ended
September 30,

Nine months ended
September 30,

2022

2021

2022

2021

Revenue
$ 8,118,627 $ 4,329,459 $ 18,579,447 $ 11,729,727

Cost of revenue
5,698,766 3,466,159 13,952,413 9,424,994

Gross profit
2,419,861 863,300 4,627,034 2,304,733
Gross profit percentage
29.8 % 19.9 % 24.9 % 19.6 %

Operating expenses:

Research and development
518,007 445,807 1,397,408 1,187,516
Selling
289,800 237,934 894,740 602,836
General and administrative
1.489,779 1,101,883 3,936,734 4,138,417

Total operating expenses
2,297,586 1,785,624 6,228,882 5,928,769

Operating income (loss)
122,275 (922,324 ) (1,601,848 ) (3,624,035 )

Other income (expense):

Interest income
43,050 1,776 73,979 3,402
Interest expense
(159 ) (35,973 ) (5,502 ) (250,194 )
Gain on sale of building
- 6.894,109 - 6,894,109
Gain on debt extinguishment
- - - 2,443,418
Foreign exchange loss (107,000 ) - (250,000 ) -
Other income
5,437 63,143 11,057 499,970
Total other income, net
(58,672 ) 6,923,055 (170,466 ) 9,590,705

Income (loss) before income taxes
63,603 6,000,731 (1,772,314 ) 5.966,670

Income tax expense
65 27,327 890 28,391

Net income (loss)
$ 63,538 $ 5,973,404 $ (1,773,204 ) $ 5,938,279
25
Three Months Ended September 30, 2022 versus September 30, 2021
Revenue
Our revenue for the three months ended September 30, 2022 was $8.1 million compared to $4.3 million for the three months ended September 30, 2021, an increase of $3.8 million or 88.4%. The increase in revenue for the three months ended September 30, 2022 versus the prior year period was primarily attributable to increased revenue of $3.6 million from the CVD Equipment segment related to equipment sales and spare parts, $.3 million from our SDC segment, offset, in part by, decreased revenue of $.1 million from the CVD Materials segment. The large increase in revenue in the quarter was principally the result of the recognition of revenue associated with our PVT-150 systems. Our order backlog at September 30, 2022 was $15.7 million as compared to $10.4 million at December 31, 2021. 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.
The revenue contributed by the CVD Equipment segment for the three months ended September 30, 2022 was $5.7 million, which totaled 70.4% of our overall revenue, and was $3.6 million or 275.6% higher than the segment’s $2.1 million contribution made in the three months ended September 30, 2021, which totaled 47.9% of our overall revenue. The increase in revenues resulted from an increase in orders in 2022 over 2021 due to increased demand for the Company’s products including for its PVT-150 systems.
Revenue for our SDC segment was $1.6 million for the three months ended September 30, 2022 as compared to $1.3 million for the three months ended September 30, 2021, an increase of $.3 million or 23.1% as compared to 2021 as a result of increased orders and demand for the Company’s products during 2022.

Revenues for our CVD Materials segment were $.8 million for the three months ended September 30, 2022, as compared to $.9 million in the three months ended September 30, 2021. The decrease of $.1 million was the result of reduced revenue in the amount of $.2 million related to our Tantaline products, offset, in part by, increased MesoScribe revenue of $.1 million.

~~Engineering,~~ Gross Profit
Gross profit for the three months ended September 30, 2022 was $2.4 million, with a gross profit margin of 29.8%, as compared to a gross profit of $.9 million and a gross profit margin of 19.9% for the three months ended September 30, 2021. The increase in gross profit of $1.5 million was primarily the result of leveraging fixed costs on higher sales levels and product mix, which offset certain component cost increases and higher compensation costs.

Research and Development

For the three months ended ~~March 31~~September 30, 2022, ~~and 2021, engineering,~~ research and development expenses were ~~$310,207~~$518,007, or 6.4% of revenue as compared to $445,807, or 10.3% for the three months ended September 30, 2021. The increase in 2022 was the result of increased personnel and ~~$310,954, respectively, essentially unchanged.~~ employee-related costs.
General engineering support and expenses related to ~~focusing~~the development onof more standard products and ~~value added~~value-added development of existing products are reflected as ~~engineering,~~part of research and development ~~while due to the technical development required on custom orders, our~~expense. General engineering ~~team~~support and ~~their~~ expenses are charged to costs of goods sold when ~~they are working~~work is performed directly on a customer ~~project.~~order.

Selling

Selling expenses were ~~$272,679~~$289,800 or ~~5.9%~~3.6% of the revenue for the three months ended ~~March 31,~~September 30, 2022 as compared to ~~$135,755~~$237,934 or ~~4.0%~~5.5% of the revenue for the three months ended ~~March 31,~~September 30, 2021. The increase in 2022 was primarily the result of increased ~~employee compensation, which includes the transfer of one employee from administration to focus on all sales~~personnel and ~~marketing initiatives, and benefit~~employee-related costs during the three months ended ~~March 31,~~September 30, 2022, to support increased marketing efforts, as compared to ~~March 31,~~September 30, 2021.

General and Administrative

General and administrative expenses for the three months ended ~~March 31,~~September 30, 2022 were ~~$1,192,653~~$1.5 million or ~~25.6%~~18.4% of revenue as compared to ~~$1,616,384~~$1.1 million or ~~48.0%~~25.4% of revenue for the three months ended ~~March 31,~~September 30, 2021, ~~a decrease~~an increase of ~~$423,731~~$.4 million or ~~26.2%~~35.2%. The ~~decrease~~increase in ~~these~~ expenses ~~is primarily~~was principally due to ~~reduced legal expenses of $206,000 due~~increases in personnel and employee-related costs to ~~higher costs in~~support the three months ended March 31, 2021 related to governance and strategic planning activities, including $75,000 related to the preparation of the sale of the 555 building which closed in July 2021. In addition, other operating costs decreased due to lower building operating costs as a result of the sale of the 555 Building in July 2021, and consolidationgrowth of our ~~facilities into our 355 facility.~~business of approximately $186,000, and a severance charge of $134,000.
24

Operating ~~loss~~Income (Loss)

As a result of increased sales of $3.8 million and the increased gross profit ~~margins~~ of ~~$.3~~$1.9 million, ~~and reduced~~offset by increased operating expenses of ~~$.3~~$.6 million, our operating ~~loss~~income was ~~1.0 million in~~$122,275 for the three months ended ~~March 31~~September 30, 2022 compared with an operating loss of ~~$1.6~~$.9 million infor the three months ended ~~March 31,~~September 30, 2021.

Other ~~income~~Income (Expense)

Other income (expense), net was ~~$8,648 and $113,237~~an expense of $.1 million for the three months ended ~~March 31,~~September 30, 2022 and ~~2021, respectively. Other~~ income ~~from subleasing a portion~~ of ~~our then 555 Building (which was sold on July 26, 2021) was $219,235~~$6.9 million for the three months ended ~~March 31, 2021 as compared to none in the three months ended March 31, 2022. As a result of our increased cash position from the sale of the 555 Building in July 2021, interest~~September 30, 2021. Other income ~~increased $17,059, to $18,282~~ for the three months ended ~~March 31,~~September 30, 2021 included a gain on the sale of our 555 building of $6.9 million. Interest income increased in 2022 as ~~compared to $1,223 in 2021. In addition,~~the result of higher interest rates and investable balances from the sale of our 555 Building. Other expense ~~related to the Company’s mortgages decreased $97,587 to $9,634 in~~for the three months ended ~~March 31,~~September 30, 2022 ~~as compared to $107,221 in 2021, the result~~was principally a foreign exchange loss of ~~our 555 Building mortgage satisfied~~$107,000 on ~~July 26, 2021, as well as the satisfaction of our remaining mortgage on the 355 building on March 1, 2022.~~an intercompany loan.

Income Taxes

Income tax expense for the three months ended ~~March 31,~~September 30, 2022 and 2021, ~~were $0, respectively.~~was $65 and $27,327, respectively, related to minimum state taxes. 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 ~~and timing~~ of ~~orders, cost containment measures and other factors.~~future operating results.

Net Income (Loss)
As a result of the foregoing factors, we reported a net income of $63,603 or $0.01 for both basic and diluted per share, for the three months ended September30, 2022, as compared to net income of $6.0 million (which includes a $6.9 million gain on sale of building), or $0.89 for both basic and diluted share for the three months ended September 30, 2021.
Nine Months Ended September 30, 2022 versus September 30, 2021
Revenue
Our revenue for the nine months ended September 30, 2022 was $18.6 million compared to $11.7 million for the nine months ended September 30, 2021, an increase of $6.9 million or 58.4%. The increase in revenue for the nine months ended September 30, 2022 versus the prior year period was primarily attributable to increased revenue of $6.4 million from the CVD Equipment segment related to equipment sales and spare parts, a $1.0 million increase in revenue from our SDC segment, offset, in part by, decreased revenue of $.6 million from the CVD Materials segment. The large increase in revenue in the period was principally the result of the recognition of revenue associated with our PVT-150 systems. Our order backlog at September 30, 2022 was approximately $15.7 million as compared to December 31, 2021 of $10.4 million. 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
The revenue contributed by the CVD Equipment segment for the nine months ended September 30, 2022 was $12.3 million, which totaled 66.3% of our overall revenue, and was 109.4% or $6.4 million higher than the segment’s $5.9 million contribution made in the nine months ended September 30, 2021, which totaled 50.2% of our overall revenue. The increase in revenues resulted from an increase in orders in 2022 over 2021 due to increased demand for the Company’s products including for its PVT-150 systems.
Revenue for our SDC segment was $4.2 million for the nine months ended September 30, 2022 (22.4% of our overall revenue) as compared to $3.2 million for the nine months ended September 30, 2021, an increase of $1.0 million or 30.7% resulting from increased orders and demand for the SDC’s products during 2022.
28
Revenues for our CVD Materials segment were $2.1 million for the nine months ended September 30, 2022 (11.2% of our overall revenue), as compared to $2.7 million in the nine months ended September 30, 2021. The decrease of $.6 million was the result of reduced revenue in the amount of $.8 million related to our Tantaline products which was impact by supply chain issues that impacted its ability to obtain components to coat for its customers, offset, in part by, increased MesoScribe revenue of $.2 million.
Gross Profit
Gross profit for the nine months ended September 30, 2022 was $4.6 million, with a gross profit margin of 24.9%, as compared to a gross profit of $2.3 million and a gross profit margin of 19.6% for the nine months ended September 30, 2021. The increase in gross profit of $2.4 million was primarily the result of leveraging fixed costs on higher sales levels and higher margin product mix, which more than offset certain component cost increases and higher compensation costs.
Research and Development
For the nine months ended September 30, 2022, research and development expenses were $1.4 million, or 7.5% of revenue as compared to $1.2 million, or 10.1% for the nine months ended September 30, 2021. The increase in 2022 was the result of increased personnel and employee-related 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 $.9 million or 4.8% of revenue for the nine months ended September 30, 2022 as compared to $.6 million or 5.1% of revenue for the nine months ended September 30, 2021. The increase in 2022 was primarily the result of increased personnel and employee-related costs during the nine months ended September 30, 2022, to support increased marketing efforts, as compared to September 30, 2021.
General and Administrative
General and administrative expenses for the nine months ended September 30, 2022 were $3.9 million or 21.2% of revenue as compared to $4.1 million or 35.2% of revenue for the nine months ended September 30, 2021, a decrease of $.2 million or 4.8%. The decrease in expenses was principally due to lower professional fees of approximately $160,000 and decreased operating costs of associated with the 555 building that was sold in July 2021 of approximately $.5 million. Offsetting these decreases were increases in personnel and employee-related costs to support the growth of our business of approximately $277,000 and a severance charge of $134,000.
29
Operating Loss
As a result of increased sales of $6.9 million and the increased gross profit margins of $2.4 million, and offset by increased operating expenses of $.6 million, our operating loss was $1.9 million in the nine months ended September 30, 2022, as compared with an operating loss of $3.6 million in the nine months ended September 30, 2021.
Other Income (Expense)
Other income (expense), net was an expense of $.2 million for the nine months ended September 30, 2022 an income of $9.6 million for the nine months ended September 30, 2021. The gain on debt extinguishment for the nine months ended September 30, 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 was the result of the sale of our 555 Building. There were no such gains during the nine months ended September 30, 2022. Other income from subleasing a portion of our 555 Building (which was sold on July 26, 2021) was $500,000 for the nine months ended September 30, 2021 as compared to none in the nine months ended September 30, 2022. Other expense for the nine months ended September 30, 2022 was principally a foreign exchange loss of $250,000 on an intercompany loan.
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 to $43,050 for the nine months ended September 30, 2022 as compared to $3,402 in 2021. In addition, interest expense decreased principally due to the satisfactions 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 nine months ended September 30, 2022 and 2021, was $890 and $28,391, respectively, related to minimum state taxes. 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.
Net Income (Loss)

As a result of the foregoing factors, we reported a net loss of ~~$997,340~~$1.8 million or ~~$0.15 per~~$0.26 for both basic and diluted per share, for the ~~three~~nine months ended ~~March 31,~~September 30, 2022, as compared to a net ~~loss~~income of ~~$1,505,550,~~$5.9 million (which includes a $2.4 million gain on debt extinguishment and a $6.9 million gain on the sale of building), or ~~$0.23 per~~$0.89 for both basic and diluted per share for the ~~three~~nine months ended ~~March 31,~~September 30, 2021.

Liquidity and Capital Resources

As of ~~March 31,~~September 30, 2022, we had aggregate working capital of ~~$15.9~~$15.0 million compared to aggregate working capital of $16.7 million at December 31, 2021. Our cash and cash equivalents at ~~March 31,~~September 30, 2022 and December 31, 2021 were ~~$13.3~~$11.9 million and $16.7 million, respectively.

Net cash used in operating activities was ~~$1.4~~$2.3 million. This is primarily the result of aour net loss, adjusted for non-cash ~~items,~~expenses of ~~$.6~~$.8 million, ~~decreased~~and increases in accounts receivable and contract ~~liabilities of $.9 million,~~assets due to our increase in revenue, as well as increased inventory ~~of $.5 million~~ to support increased orders and ~~attempt~~ to mitigate ~~further~~the impact of delays in our supply ~~chain impacts, increased contract assets of $.2 million, offset, in part by, decreased tax receivables $.7 million and increased accrued expenses of $.1 million.~~chain.
25

Capital expenditures ~~for equipment~~ were ~~$.2~~$.6 million in the ~~three~~nine months ended ~~March 31, 2022.~~September 30, 2022 related to purchases of manufacturing equipment to allow for more efficient manufacturing and improved control of our supply chain. We also entered into a loan agreement to acquire equipment in the amount of $.4 million.

We had a loan agreement with HSBC USA, N.A. (the “HSBC”) which was secured by a mortgage on our Central Islip headquarters at 355 South Technology Drive. ~~The loan was payable in 120 consecutive equal monthly installments of $25,000 in principal plus interest and a final balloon payment upon maturity on March 1, 2022.~~ According to the terms of the agreement the loan was satisfied on March 1, 2022 resulting in total debt repayments of $1.8 million during the ~~three~~nine months ended ~~March 31,~~September 30, 2022.

~~The COVID-19 outbreak has resulted~~Sale-Leaseback of 355 South Technology Drive, Central Islip, New York
On September 22, 2022, the Company entered into an Agreement of Purchase and Sale (the “Purchase Agreement”) with 355 S Technology Drive Owner LLC (the “Potential Purchaser”), to sell and leaseback its facility in extended shutdowns of certain businesses in United States and around the world. We have been actively monitoring the COVID-19 outbreak and its impact globally. Our primary focus to this point has been to ensure the health and safety of our employees. ToCentral Islip, New York that end, we have adopted social distancing where appropriate, implemented travel restrictions, and we have taken actions to ensure that locations and facilities are cleaned and sanitized regularly. These are novel and challenging timeshouses it corporate headquarters and the ~~magnitude~~administrative offices and manufacturing operations of ~~this crisis is requiring us~~its CVD Equipment and MesoScribe subsidiaries. The lease agreement was to ~~consider all options to promote the safety~~have an initial term of employees, including, where appropriate, or where required to comply with foreign, national, state or local governmental authority recommendations, guidelines, and/or mandates, the temporary reduction or suspensionten years and two renewal terms of ~~work at certain~~five year each. The terms of the ~~Company’s locations~~agreement provided for a purchase price of $28.5 million and ~~production facilities to protect employees and curb~~annual fixed rent of $1.5 million in the ~~spread~~first year of the ~~coronavirus. All~~initial term and increasing by 3% each year. The Potential Purchaser had thirty (30) business days from date of ~~these actions~~the Purchase Agreement to complete its due diligence (until November 3, 2022), during which time the Potential Purchaser retained the right to cancel the Purchase Agreement. On November 3, 2022 and November 4, 2022, the Company and the Potential Purchaser entered into two extension agreements whereas the due diligence period was ultimately extended to November 11, 2022. On November 11, 2022, the Potential Purchaser notified the Company that it was terminating the Purchase Agreement in its entirety and the transactions contemplated thereby, prior to the expiration of the due diligence period. Each party will bear its own costs and expenses in connection with the forgoing, and neither party will pay a termination fee with respect to the termination of the Purchase Agreement.
31
Geopolitical Uncertainties and COVID-19
We are confronting a very difficult operating environment as the global economy continues to confront the challenges from the pandemic, geopolitical conflicts, surging inflationary pressures and adverse supply chain disruptions.
Significant geopolitical developments across Europe and Asia (including the war in Ukraine) have ~~adversely impacted~~and may continue to restrict our ~~operating results. In particular,~~ability to procure raw materials and components such as nickel and integrated circuits, as well as impact our ability to sell our products into China, Russia and other Eastern European and Asian regions. Supply chain disruptions resulting from both the pandemic and geopolitical matters have led to much longer lead times to acquire materials for production and has led to surging inflationary pressures. Since 2020, our aerospace sector ~~for which we rely on a significant part of our business,~~ has been faced with significant reductions to its business due to reduced long distance air travel which has negatively affected new order bookings and has materially and adversely affected the Company’s revenues to date.
32
We continue to be unable to predict the extent of the impact the pandemic and geopolitical uncertainties will have on our financial position and operating results for the remainder of 2022 and beyond due to numerous uncertainties, ~~(including the impact of the COVID Omicron variant),~~ supply chain disruptions, rising costs and the impact on the aerospace sector, but the impact could be material during any future period affected either directly or indirectly by this pandemic. The longer-term impacts from the pandemic and geopolitical uncertainties are highly uncertain and cannot be predicted.
Our return to profitability is dependent upon, among other things, the receipt of new equipment orders, our ability to mitigate the ~~lessening~~impact of ~~the ongoing effects of COVID-19 on our business~~supply chain disruptions and ~~the Aerospace market, improvement in the operations of the materials business,~~inflationary pressures, as well as managing planned capital expenditures and operating expenses.

Based upon all of these factors, 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 to eighteen months of the filing of this Form 10-Q. Should the current environment continue longer or worsen, we will continue to assess our operations and take actions anticipated to maintain our operating cash to support the working capital needs.
26

~~Off-Balance Sheet Arrangements.~~
~~We have no off-balance sheet arrangements at this time.~~

Item 3.                           Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4.                           Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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

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

Changes in Internal Controls

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

Limitations on the Effectiveness of Controls

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

2734

CVD EQUIPMENT CORPORATION

PART II

OTHER INFORMATION

Item 1.
Legal Proceedings.

None.

Item 1A.
Risk Factors.

There have been no other material changes to the risk factors disclosed in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 31, 2022.

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

None.

Item 3.
Defaults Upon Senior Securities.

None.

Item 4.
Mine Safety Disclosures.

Not applicable.

Item 5.
Other Information.
None.

Item 6.
Exhibits
10.1
Agreement of Purchase and Sale dated September 21, 2022*
10.2
Form of Lease Agreement*
10.3
Second Amendment dated November 3, 2022 to Agreement of Purchase and Sale dated September 21, 2022*
10.4
Third Amendment dated November 4, 2022 to Agreement of Purchase and Sale dated September 21, 2022*
35

31.1*
Certification of Emmanuel Lakios, Chief Executive Officer, dated ~~May 16,~~August 15, 2022

31.2*
Certification of ~~Thomas McNeill,~~Richard Catalano, Chief Financial Officer, dated ~~May 16,~~November 14, 2022

32.1*
Certification of Emmanuel Lakios, Chief Executive Officer, dated ~~May 16,~~November 14, 2022, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

28

32.2*
Certification of ~~Thomas McNeill,~~Richard Catalano, Chief Financial Officer, dated ~~May 16,~~November 14, 2022, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.1**
Inline XBRL Instance.

101.SCH**
Inline XBRL Taxonomy Extension Schema.

101.CAL**
Inline XBRL Taxonomy Extension Calculation.

101.DEF**
Inline XBRL Taxonomy Extension Definition.

101.LAB**
Inline XBRL Taxonomy Extension Labels.

101.PRE**
Inline XBRL Taxonomy Extension Presentation.

104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
________________

* Filed herewith.

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

2936

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 1614^th day of ~~May~~November 2022.

CVD EQUIPMENT CORPORATION

ByBy:
/s/ Emmanuel Lakios

Emmanuel Lakios

President and Chief Executive Officer

(Principal Executive Officer)

By:
/s/ ~~Thomas McNeill~~Richard Catalano
~~Thomas McNeill~~

~~Executive~~ Richard Catalano
Vice President and

Chief Financial Officer

(Principal Financial and

Accounting Officer)

~~EXHIBIT INDEX~~
31.1*
~~Certification of Emmanuel Lakios, Chief Executive Officer, dated May 16, 2022~~
31.2*
~~Certification of Thomas McNeill, Chief Financial Officer, dated May 16, 2022~~
32.1*
~~Certification of Emmanuel Lakios, Chief Executive Officer, dated May 16, 2022, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~
32.2*
~~Certification of Thomas McNeill, Chief Financial Officer, dated May 16, 2022, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~
101.1**
~~Inline XBRL Instance.~~
101.SCH**
~~Inline XBRL Taxonomy Extension Schema.~~
101.CAL**
~~Inline XBRL Taxonomy Extension Calculation.~~
101.DEF**
~~Inline XBRL Taxonomy Extension Definition.~~
101.LAB**
~~Inline XBRL Taxonomy Extension Labels.~~
101.PRE**
~~Inline XBRL Taxonomy Extension Presentation.~~
~~104~~
~~Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).~~
~~________________~~
* Filed herewith.
** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not to be filed or part of a registration statement of prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under these sections.
3137

New York	11-2621692

*State or Other Jurisdiction of* *Incorporation or Organization)*	*(I.R.S. Employer Identification No.)*
355 South Technology Drive Central Islip, New York 11722

*(Address of principal executive offices)*

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

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

Part I - Financial Information

Item 1 – Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets at ~~March 31,~~September 30, 2022 and December 31, 2021	3

Condensed Consolidated Statements of Operations for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021	4

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021	5

Condensed Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021	6

Notes to Condensed Consolidated Financial Statements	7

Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations	1922
Item 3 – Quantitative and Qualitative Disclosures About Market Risk	2733
Item 4 – Controls and Procedures	2733

Part II - Other Information

Item 1 – Legal Proceedings	2835
Item 1A-Risk Factors	2835
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	2835
Item 3 – Defaults Upon Senior Securities	2835
Item 4 – Mine Safety Disclosures	2835
Item 5 – Other Information	2835
Item 6 – Exhibits	2835

Signatures	30

~~Exhibit Index~~	3137

	(Unaudited)				(Unaudited)
	March 31, 2022		December 31, 2021		September 30, 2022		December 31, 2021
ASSETS
Current Assets
Current assets
Cash and cash equivalents	$	13,270,853	$	16,651,371	$	11,875,921	$	16,651,371
Accounts receivable, net		1,498,183		1,446,354		2,850,861		1,446,354
Contract assets		2,717,823		2,538,373		3,152,469		2,538,373
Inventories, net		1,737,901		1,225,015		2,133,767		1,225,015
Taxes Receivable		0		715,599
Taxes receivable						-		715,599
Other current assets		384,286		493,788		560,019		493,788


Total Current Assets		19,609,046		23,070,500
Total current assets						20,573,037		23,070,500

Property, plant and equipment, net		12,196,745		12,261,321		12,813,611		12,261,321
Intangible assets, net		191,316		182,838		205,510		182,838
Other assets		9,570		9,570		9,570		9,570
Total Assets	$	32,006,677	$	35,524,229
Total assets					$	33,601,728	$	35,524,229


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Current liabilities
Accounts payable	$	1,178,206	$	1,161,381	$	1,523,893	$	1,161,381
Accrued expenses		1,820,341		1,758,939		2,445,791		1,758,939
Current maturities of long-term debt		0		1,765,508		76,379		1,765,508
Contract Liabilities		720,385		1,650,426
Total Current Liabilities		3,718,932		6,336,254
Contract liabilities						1,477,894		1,650,426
Total current liabilities						5,523,957		6,336,254

Total Liabilities		3,718,932		6,336,254
Long-term debt, net of current portion						355,621		-
Total liabilities						5,879,578		6,336,254



Stockholders’ Equity:
Common stock - $0.01 par value – 20,000,000 shares authorized; issued and outstanding 6,728,938 at March 31, 2022 and 6,723,438 at December 31, 2021		67,289		67,234
Stockholders’ equity:
Common stock - $0.01 par value – 20,000,000 shares authorized; issued and outstanding 6,760,938 at September 30, 2022 and 6,723,438 at December 31, 2021						67,609		67,234
Additional paid-in capital		27,374,209		27,277,154		27,584,158		27,277,154
Retained earnings		846,247		1,843,587		70,383		1,843,587
Total Stockholders’ Equity		28,287,745		29,187,975
Total stockholders’ equity						27,722,150		29,187,975

Total Liabilities and Stockholders’ Equity	$	32,006,677	$	35,524,229
Total liabilities and stockholders’ equity					$	33,601,728	$	35,524,229


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

	Three Months Ended
	MARCH 31,
	2022			2021

Revenue	$	4,655,727		$	3,365,860

Cost of revenue		3,886,176			2,921,554

Gross profit		769,551			444,306

Operating expenses
Engineering, research and development		310,207			310,954
Selling and shipping		272,679			135,755
General and administrative		1,192,653			1,616,384

Total operating expenses		1,775,539			2,063,093

Operating loss		(1,005,988	)		(1,618,787	)

Other income (expense):
Interest income		18,282			1,223
Interest expense		(9,634	)		(107,221	)
Other Income		0			219,235
Total other income, net		8,648			113,237

Loss before income tax		(997,340	)		(1,505,550	)

Income tax expense		0			0

Net loss	$	(997,340	)	$	(1,505,550	)

Basic loss per common share	$	(0.15	)	$	(0.23	)
Diluted loss per common share	$	(0.15	)	$	(0.23	)

Weighted average common shares Outstanding-basic		6,725,042			6,680,130

Weighted average common shares Outstanding-diluted		6,725,042			6,680,130

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
Revenue	$	8,118,627		$	4,329,459		$	18,579,447		$	11,729,727
Cost of revenue		5,698,766			3,466,159			13,952,413			9,424,994

Gross profit		2,419,861			863,300			4,627,034			2,304,733

Operating expenses:
Research and development		518,007			445,807			1,397,408			1,187,516
Selling		289,800			237,934			894,740			602,836
General and administrative		1,489,779			1,101,883			3,936,734			4,138,416

Total operating expenses		2,297,586			1,785,624			6,228,882			5,928,768

Operating income (loss)		122,275			(922,324	)		(1,601,848	)		(3,624,035	)

Other income (expense):
Interest income		43,050			1,776			73,979			3,402
Interest expense		(159	)		(35,973	)		(5,502	)		(250,194	)
Gain on sale of building		-			6,894,109			-			6,894,109
Gain on debt extinguishment		-			-			-			2,443,418
Foreign exchange loss		(107,000	)		-			(250,000	)		-
Other income		5,437			63,143			11,057			499,970

Total other income, net		(58,672	)		6,923,055			(170,466	)		9,590,705

Income (loss) before income taxes		63,603			6,000,731			(1,772,314	)		5,966,670

Income tax expense		65			27,327			890			28,391

Net income (loss)	$	63,538		$	5,973,404		$	(1,773,204	)	$	5,938,279

Income (loss) per common share - basic	$	0.01		$	0.89		$	(0.26	)	$	0.89
Income (loss) per common share - diluted	$	0.01		$	0.89		$	(0.26	)	$	0.89

Weighted average common shares outstanding:
Basic		6,736,764			6,685,599			6,730,263			6,683,407
Diluted		6,740,692			6,707,883			6,730,263			6,691,813

Three months ended March 31, 2022 and 2021
	Common stock
							Retained
	Shares		Par Value		Additional paid-in Capital		Earnings/ (Accumulated deficit)			Total

Balance at January 1, 2022		6,723,438	$	67,234	$	27,277,154	$	1,843,587		$	29,187,975
Net loss		-		-		-		(997,340	)		(997,340	)
Stock-Based Compensation		5,500		55		97,055		-			97,110
Balance at March 31, 2022		6,728,938	$	67,289	$	27,374,209	$	846,247		$	28,287,745

Balance at January 1, 2021		6,678,698	$	66,786	$	26,961,684	$	(2,902,898	)		24,125,572
Net loss		-		0		0		(1,505,550	)		(1,505,550	)
Stock-Based Compensation		5,583		56		50,317		-			50,373
Balance at March 31, 2021		6,684,281	$	66,842	$	27,012,001	$	(4,408,448	)	$	22,670,395

Three months ended September 30, 2022 and 2021
	Common stock
	Shares		Par Value		Additional paid-in Capital		Retained Earnings/ (Accumulated Deficit)			Total


Balance at July 1, 2022		6,728,938	$	67,289	$	27,465,930	$	6,845		$	27,540,064
Net income		-		-		-		63,538			63,538
Stock-based compensation		32,000		320		118,228		-			118,548
Balance at September 30, 2022		6,760,938	$	67,609	$	27,584,158	$	70,383		$	27,722,150

Balance at July 1, 2021		6,684,281	$	66,842	$	27,074,079	$	(2,938,023	)	$	24,202,898
Net income		-		-		-		5,973,404			5,973,404
Stock-based compensation		3,157		32		105,459		-			105,491
Balance at September 30, 2021		6,687,438	$	66,874	$	27,179,538	$	3,035,381		$	30,281,793

Nine months ended September 30, 2022 and 2021
	Common stock
	Shares		Par Value		Additional paid-in Capital		Retained Earnings / (Accumulated Deficit)			Total


Balance at January 1, 2022		6,723,438	$	67,234	$	27,277,154	$	1,843,587		$	29,187,975
Net loss		-		-		-		(1,773,204	)		(1,773,204	)
Stock-based compensation		37,500		375		307,004		-			307,379
Balance at September 30, 2022		6,760,938	$	67,609	$	27,584,158	$	70,383		$	27,722,150

Balance at January 1, 2021		6,678,698	$	66,786	$	26,961,684	$	(2,902,898	)	$	24,125,572
Net income		-		-		-		5,938,279			5,938,279
Stock-based compensation		8,740		88		217,854		-			217,942
Balance at September 30, 2021		6,687,438	$	66,874	$	27,179,538	$	3,035,381		$	30,281,793

	Three Month's Ending March 31, 2022						Three months ended September 30, 2022

	Over time		Point in time		Total		Over time		Point in time		Total
Aerospace	$	0	$	705	$	705	$	-	$	154	$	154
Energy, storage and transmission	$	899	$	7	$	906		3,791		25		3,816
Industrial	$	997	$	872	$	1,869		1,653		1,153		2,806
Research	$	706	$	470	$	1,176		827		516		1,343
Total	$	2,602	$	2,054	$	4,656	$	6,271	$	1,848	$	8,119

	Three Month's Ending March 31, 2021

	Over time		Point in time		Total
Aerospace	$	189	$	526	$	715
Energy, storage and transmission	$	0	$	0	$	0
Industrial	$	1,369	$	675	$	2,044
Research	$	187	$	420	$	607
Total	$	1,745	$	1,621	$	3,366

	Three months ended September 30, 2021

	Over time		Point in time		Total
Aerospace	$	-	$	574	$	574
Energy, storage and transmission		-		-		-
Industrial		1,551		1,205		2,756
Research		612		388		1,000
Total	$	2,163	$	2,167	$	4,330

	Nine months ended September 30, 2022

	Over time		Point in time		Total
Aerospace	$	-	$	1,375	$	1,375
Energy, storage and transmission		6,714		49		6,763
Industrial		4,099		3,197		7,296
Research		1,832		1,313		3,145
Total	$	12,645	$	5,934	$	18,579

	Nine months ended September 30, 2021

	Over time		Point in time		Total
Aerospace	$	386	$	1,677	$	2,063
Energy, storage and transmission		-		-		-
Industrial		4,147		3,173		7,320
Research		1,164		1,183		2,347
Total	$	5,697	$	6,033	$	11,730

	2022			2022
Costs incurred on contracts in progress	$	6,878,958		$	11,921,048
Estimated earnings		4,792,589			8,530,639
		11,671,547			20,451,687
Billings to date		(9,510,318	)		(18,548,776	)
	$	2,161,229			1,902,911
Deferred revenue related to non-systems contracts		(163,791	)
Deferred revenue related to non-system contracts					(228,336	)
		1,997,438		$	1,674,575
Included in accompanying balance sheets
Under the following captions:
Included in accompanying condensed consolidated balance sheets under the following captions:
Contract assets	$	2,717,823		$	3,152,469
Contract liabilities	$	(720,385	)	$	(1,477,894	)

	March 31, 2022		December 31, 2021		September 30, 2022		December 31, 2021

Raw materials	$	1,368,955	$	1,030,955	$	1,804,675	$	1,030,955
Work-in-process		368,946		194,060		329,092		194,060
Inventories	$	1,737,901	$	1,225,015	$	2,133,767	$	1,225,015

	Three months ended March 31,
	2022		2021

Cost of revenue	$	16,029	$	0
Engineering, research and development	$	3,941	$	0
Selling and shipping	$	5,246	$	0
General and administrative	$	71,894	$	50,373

Total	$	97,110	$	50,373

	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021

Cost of revenue	$	9,221	$	7,715	$	26,100	$	7,715
Research and development		16,367		3,972		42,684		3,972
Selling and shipping		7,508		4,371		18,305		4,371
General and administrative		85,452		89,433		220,290		201,884

Total	$	118,548	$	105,491	$	307,379	$	217,942

2007 Share Incentive Plan
	Beginning		Granted		Exercised		Canceled		Ending				Beginning		Granted		Exercised		Canceled			Ending
	Balance		During		During		During		Balance				Balance		During		During		During			Balance
	Outstanding		Period		Period		Period		Outstanding		Exercisable		Outstanding		Period		Period		Period			Outstanding		Exercisable

Number of shares		220,000		0		0		0		220,000		220,000		220,000		-		-		(75,000	)		145,000		145,000
Weighted average exercise price per share	$	12.56		0		0		0	$	12.56	$	12.56	$	12.56		-		-	$	15.00		$	11.29	$	11.29

2016 Share Incentive Plan
	Beginning		Granted		Exercised		Canceled			Ending
	Balance		During		During		During			Balance
	Outstanding		Period		Period		Period			Outstanding		Exercisable

Number of shares		398,500		12,500		0		(2,500	)		408,500		65,000
Weighted average exercise price per share	$	4.43	$	4.60		0	$	4.01		$	4.43	$	5.94

2016 Equity Incentive Plan
	Beginning		Granted		Exercised		Canceled			Ending
	Balance		During		During		During			Balance
	Outstanding		Period		Period		Period			Outstanding		Exercisable

Number of shares		398,500		102,500		-		(44,000	)		457,000		145,500
Weighted average exercise price per share	$	4.43	$	4.97		-	$	4.25		$	4.56	$	4.94

2022 Equity Incentive Plan
	Beginning		Granted		Exercised		Canceled		Ending
	Balance		During		During		During		Balance
	Outstanding		Period		Period		Period		Outstanding		Exercisable

Number of shares		-		76,000		-		-		76,000		-
Weighted average exercise price per share		-	$	5.13		-		-	$	5.13		-

Stock Price	$	4.60		$	5.04
Exercise Price	$	4.60		$	5.04
Dividend yield		0	%		0	%
Expected volatility		68	%		68	%
Risk-Free interest rate		1.79	%		2.96	%
Expected life (in years)		6.00			6.00

				Options Outstanding								Options Exercisable
						Weighted		Weighted						Weighted
						Average		Average						Average
*Exercise*				*Number*		*Remaining*		*Exercise*		*Intrinsic*		*Number*		*Exercise*		*Intrinsic*
*Price Range*				*Outstanding*		*Contractual*		*Price*		*Value*		*Exercisable*		*Price*		*Value*
$	4.00	-	7.00		388,500		9.1	$	4.25	$	116,000		45,000	$	5.00	$	0
$	7.01	-	10.00		20,000		6.1	$	8.07	$	0		20,000	$	8.07	$	0
$	10.01	-	12.00		120,000		3.3	$	10.52	$	0		120,000	$	10.52	$	0
$	12.01	-	15.00		100,000		.4	$	15.00	$	0		100,000	$	15.00	$	0

				Weighted					Weighted
	Shares of			Average Grant		Shares of			Average Grant
	Restricted			Date Fair		Restricted			Date Fair
	Stock Units			Value		Stock Units			Value
Unvested outstanding at December 31, 2021		5,500		$	4.82		5,500		$	4.82
Granted		0		$	0		-		$	-
Vested		(5,500	)	$	4.82		(5,500	)	$	4.82
Forfeited/Cancelled		0		$	0
Forfeited or cancelled							-		$	-

Unvested outstanding at March 31, 2022		0		$	0
Unvested outstanding at September 30, 2022							-		$	-

	Three months ended March 31,
	2022		2021

Basic weighted average common shares outstanding		6,725,042		6,680,130
Dilutive effect of options and unvested restricted shares		0		0
Diluted weighted average shares outstanding		6,725,042		6,680,130

	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021

Basic weighted average common shares outstanding		6,736,764		6,685,599		6,730,263		6,683,407
Dilutive effect of options and unvested restricted shares		3,928		22,284		-		8,406
Diluted weighted average shares outstanding		6,740,692		6,707,883		6,730,263		6,691,813

										Eliminations* and														Eliminations
2022	CVD			SDC			Materials			Unallocated			Consolidated			CVD			SDC		Materials			and Unallocated			Consolidated
Assets	$	22,575		$	7,756		$	1,661		$	15		$	32,007		$	22,415		$	8,800	$	2,345		$	42		$	33,602

Revenue		2,827			1,415			458			(44	)		4,656			5,718			1,663		809			(71	)		8,119
Operating (loss) income		(736	)		442			(6	)		(706	)		(1,006	)		(32	)		448		365			(659	)		122
Pretax (loss) income		(726	)		442			(7	)		(706	)		(997	)		(27	)		448		258			(615	)		64

2021
Assets	$	29,659		$	6,116		$	3,407		$	24		$	39,206		$	27,248		$	7,053	$	1,655		$	2		$	35,958

Revenue		2,006			827			629			(96	)		3,366			2,074			1,326		937			(7	)		4,330
Operating loss		(575	)		(5	)		(110	)		(929	)		(1,619	)
Operating (loss) income																	(911	)		275		441			(727	)		(922	)
Pretax (loss) income		(590	)		(5	)		18			(929	)		(1,506	)		(920	)		275		7,373	(1)		(727	)		6,001

31.1*	Certification of Emmanuel Lakios, Chief Executive Officer, dated ~~May 16,~~August 15, 2022

31.2*	Certification of ~~Thomas McNeill,~~Richard Catalano, Chief Financial Officer, dated ~~May 16,~~November 14, 2022

32.2*	Certification of ~~Thomas McNeill,~~Richard Catalano, Chief Financial Officer, dated ~~May 16,~~November 14, 2022, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

	CVD EQUIPMENT CORPORATION

	ByBy:	/s/ Emmanuel Lakios
		Emmanuel Lakios
		President and Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ ~~Thomas McNeill~~Richard Catalano
		~~Thomas McNeill~~
		~~Executive~~ Richard Catalano
		Vice President and
		Chief Financial Officer
		(Principal Financial and
		Accounting Officer)