CVD EQUIPMENT CORPORATION (NASDAQ:CVV) Files An 8-K Financial Statements and Exhibits

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CVD EQUIPMENT CORPORATION (NASDAQ:CVV) Files An 8-K Financial Statements and Exhibits
Item 9.01 of Form 8-K. The pro forma financial information contained in Amendment No. 1 was derived from the Company’s Statements of Operations and Statements of Cash Flows, for the three and six months ended June 30, 2017 and those of Mesoscribe for the three and nine months ended June 30, 2017.

a.On May 20, 2014, the Company signed a lease for corporate office space from Mr. Wei-Chen Chang in the city of Huntington Beach located at 7441 Vincent Circle, CA. The lease commenced on June 1, 2014 and expires on May 31, 2019. Future minimum lease payments at September 30, 2016, are as follows:

2015-2016 $172,415
2016-2017 $177,597
2017-2018 $182,911
2018-2019 $188,411

b.On August 1, 2014, the Company signed a lease for corporate office space from Adriatic Holdings, L.L.C., in the city of Setauket located at 100 North Country Road, NY. The lease commenced on September 1, 2014 and expires on August 31, 2017 with an option to renew the lease for further 3 years. Future minimum lease payments at September 30, 2016, are as follows:

Rental expense totaled $176,461 for the year ended September 30, 2016 and is recorded in the following expense line item: rent expense.

6. Intangible Assets

a. Patents

The Company owns certain patents under agreements that are classified as assets. The cost of the patents is included in the balance sheet as fixed asset and was $102,067 at September 30, 2016. Accumulated amortization for patents is approximately $ 62,807 and amortization expense for the year is $ 6,801.

Mesoscribe Technologies, Inc.

Notes to Financial Statements

September 30, 2016

b. Goodwill

In May 2013, Mesoscribe Technologies, Inc. acquired assets from Robert Greenlaw through an asset purchase agreement. The cost of the investments was in excess of the underlying fair value of net assets acquired at the date of the purchase and accordingly such additional costs are recorded as goodwill. At September 30, 2016 goodwill was $100,000. Goodwill is assessed annually for impairment. If impaired, goodwill is written down to fair value and a corresponding impairment loss recognized.

During 2016, Mesoscribe Technologies Inc., determined, based on future expected cash flows, that the carrying amount of the goodwill associated with its acquisition of the assets did not exceed the current fair value. Therefore, an impairment loss of $0 was recognized during 2016.

7. Subsequent Events

The Company has evaluated events from September 30, 2016 through the date the financial statements were issued.

a. In 2017 Mesoscribe Technologies, Inc. was in discussions to sell the assets of the company.

b.Operating lease for corporate office space from Adriatic Holdings, LLC, in the city of Setauket located at 100 N. Country Rd., NY will expire on August 31, 2017 and was not renewed.

Mesoscribe Technologies, Inc.

Balance Sheet

As of June 30, 2017

June 30

ASSETS

Current Assets

Cash and cash equivalents

$ 303,684

Accounts receivable, net

70,689

Inventory

95,579

Accrued revenue

94,000

Deferred tax asset

231,660

Prepaid corporate taxes

82,836

Prepaid expenses

30,169

Total Current Assets

908,617

Property and equipment, net

92,367

Goodwill

100,000

Patents, net

28,117

Security deposit

36,072

Total Assets

$ 1,165,173

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities

Accounts payable

$ 3,010

Accrued expenses

109,438

Deferred income taxes

4,126

Total Current Liabilities

116,574

Shareholder loan

20,743

Total Liabilities

137,317

Stockholders’ Equity:

Common stock – $0.01 par value – 20,000,000 shares authorized at June 30, 2017 and September 30, 2016: issued and outstanding 10,500,000 at

June 30, 2017 and at September 30, 2016

10,500

Additional paid-in capital

16,109

Retained earnings

1,001,247

Total Stockholders’ Equity

1,027,856

Total Liabilities and Stockholders’ Equity

$ 1,165,173

Mesoscribe Technologies, Inc.

Statement of Operations and Retained Earnings

For the Three and Six Months Ended June 30, 2017

Three months

Six months

Ended June 30

Ended June 30

Revenue

$ 181,061 $ 388,236

Cost of revenue

73,324 210,440

Gross profit

107,737 177,796

General and Administrative expenses

213,184 422,148

Total General and Administrative Expenses

213,184 422,148

Operating (loss)

(105,447 ) (244,352 )

Other income (expense):

Interest income

Deferred tax income

42,015 95,795

Penalties

(70 ) (147 )

Total other (expense)/income net

41,989 97,742

(Loss) before income tax expense

(63,459 ) (146,610 )

Income tax expense

1,100

Net (loss)

$ (63,459 ) $ (147,710 )

Retained Earnings, Beginning of period

1,064,706 1,148,957

Retained Earnings, End of period

1,001,247 1,001,247

Mesoscribe Technologies, Inc.

Statements of Cash Flows

For the Three and Six Months ended June 30, 2017

Three Months

Six Months

Ended June 30,

Ended June 30,

Cash flows from operating activities:

Net (loss)

$ (63,459 ) $ (147,710 )

Adjustments to reconcile net (loss) to net cash used in operating activities

Depreciation and amortization

7,784 15,569

Deferred income tax benefit

(39,437 ) (92,649 )

Increase/(decrease) in operating assets

Accounts receivable

37,984 165,847

Inventory, net

(512 ) 1,252

Accrued revenue

(94,000 ) (94,000 )

Other current assets

(10,367 ) (24,881 )

Increase/(decrease) in operating liabilities

Accounts payable

Accrued expenses

5,050 3,512

Deferred revenue

(96,759 )

Total adjustments

(93,426 ) (121,782 )

Net cash used in operating activities

(156,885 ) (269,492 )

Cash flows from investing activities:

Net cash provided by/(used in) investing activities

—-

Cash flows from financing activities

Net cash provided by/(used in) financing activities

Net (decrease) in cash and cash equivalents

(156,885 ) (269,492 )

Cash and cash equivalents – Beginning of year

460,570 573,176

Cash and cash equivalents – End of year

$ 303,684 $ 303,684

Supplemental disclosure of cash flow information

Interest expenses

Income taxes

1,100

CVD EQUIPMENT CORPORATION

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma combined financial statements are provided for informational purposes only and do not purport to represent what the actual combined results of operations or the combined financial position of the combined company would be had the Acquisition (as previously defined) occurred on the dates assumed, nor are they necessarily indicative of future combined results of operations or combined financial position. The unaudited combined financial statements do not reflect any cost savings or synergies which may be realized following the Acquisition.

On October 31, 2017 (the “Closing Date”), CVD Mesoscribe Technologies Corporation, a New York corporation (“Buyer”) and newly formed and wholly-owned indirect subsidiary of the Company and Mesoscribe entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”). to the Asset Purchase Agreement, among other things, the Company acquired (the “Acquisition”) substantially all of the operating assets and business of Mesoscribe (excluding cash, accounts receivable and other specified excluded assets), as more particularly described in the Asset Purchase Agreement.

to the Asset Purchase Agreement, the purchase price for the assets acquired in the Acquisition was $800,000, of which $500,000 was paid on the Closing Date and $300,000 may be paid to Mesoscribe as additional contingent consideration based upon the achievement of certain revenue thresholds and other criteria set forth in the Asset Purchase Agreement with respect to each of the two (2) consecutive twelve (12) month measurement periods following the Closing Date.

The Asset Purchase Agreement contains usual and customary representations, warranties and covenants of the parties, as well as indemnification provisions.

For the year ended December 31, 2016, the unaudited pro forma combined statement of income gives effect to the twelve months ended December 31, 2016 for CVD Equipment Corporation with the twelve months ended September 30, 2016 for Mesoscribe Technologies, Inc.

For the year ended December 31, 2016, the unaudited pro forma combined statement of income gives effect to the Acquisition as if it had been consummated at the start of the December 31, 2016 year end.

For the period ended June 30, 2017, the unaudited pro forma combined statement of income gives effect to the six month period ended June 30, 2017 for CVD Equipment Corporation and the six month period ended June 30, 2017 for Mesoscribe Technologies, Inc. and gives effect to the Acquisition as if it had been consummated at the start of the period ended June 30, 2017.

The unaudited pro forma balance sheet as of June 30, 2017 gives effect to the Acquisition as if it had been consummated on that date.

CVD EQUIPMENT CORPORATION

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

JUNE 30, 2017

CVD

Mesoscribe

Pro Forma

Historical

Historical

Adjustments

Notes

Pro Forma

(Unaudited)

(Unaudited)

(Unaudited)

ASSETS

Current Assets:

Cash and cash equivalents

$ 21,477,068 $ 303,684 $ (803,684 )

(a)

$ 20,977,068

Accounts receivable, net

1,852,047 70,689 (70,689 )

(a)

1,852,047

Costs and estimated earnings in excess of billings on contracts in progress

3,027,086 3,027,086

Inventories, net

3,101,557 95,579 (70,579 )

(d)

3,126,557

Other current assets

344,025 207,005 (207,005 )

(a)

344,025

Total Current Assets

29,801,783 676,957 (1,151,957 ) 29,326,783

Property, plant and equipment

14,122,984 92,367 257,633

(b)

14,472,984

Construction in progress

156,518 156,518

Deferred income taxes

1,952,296 231,660 (231,660 )

(a)

1,952,296

Other assets

271,665 36,072 (36,072 )

(a)

271,665

Intangible assets, net

240,304 128,117 296,883

(c)

665,304

Total Assets

$ 46,545,550 $ 1,165,173 $ (865,173 ) $ 46,845,550

LIABILITIES AND

STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$ 1,173,384 $ 3,010 $ (3,010 )

(a)

$ 1,173,384

Accrued expenses

2,121,702 113,564 (113,564 )

(a)

2,121,702

Current maturities of long-term debt

300,000 300,000

Billings in excess of costs and

Estimated earnings on contracts

In progress

2,984,621 2,984,621

Deferred revenue

98,509 98,509

Total Current Liabilities

6,678,216 116,574 (116,574 ) 6,678,216

Long-term debt, net of current portion

2,815,508 2,815,508

Acquisition related contingent payments

300,000

(a)

300,000

Loans from shareholders

20,743 (20,743 )

(a)

Total Liabilities

9,493,724 137,317 162,683 9,793,724

Commitments and contingencies

Stockholders’ Equity

Common stock

63,812 10,500 (10,500 )

(a)

63,812

Additional paid-in capital

24,588,783 16,109 (16,109 )

(a)

24,588,783

Retained earnings

12,399,231 1,001,247 (1,001,247 )

(a)

12,399,231

Total stockholders’ equity

37,051,826 1,027,173 (1,027,856 ) 37,051,826

Total Liabilities and Stockholders’

Equity

$ 46,545,550 $ 1,165,173 $ (865,173 ) $ 46,845,550

CVD EQUIPMENT CORPORATION

UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2017

CVD

Mesoscribe

Pro forma

Historical

Historical

Adjustments

Notes

Pro Forma

(Unaudited)

(Unaudited)

(Unaudited)

Revenue

$ 20,480,326 $ 388,236 $ 20,868,562

Cost of revenue

11,898,737 210,440 14,583

(e)

12,123,760

Gross profit

8,581,589 177,796 (14,583 ) 8,744,802

Operating expenses:

Research and development

181,300 181,300

Selling and shipping

638,325 638,325

General and administrative

4,214,388 422,148 7,083

(f)

4,643,619

Total operating expenses

5,034,013 422,148 7,083 5,463,244

Operating income.(loss)

3,547,576 (244,352 ) (21,666 ) 3,281,558

Other income/(expense):

Interest income

26,053 26,148

Interest expense

(35,244 ) (35,244 )

Other income/(expense)

97,647 (97,647 )

(g)

Total other (expense)

(8,752 ) 97,742 (97,647 ) (8,657 )

Income/(loss) before income taxes

3,538,824 (146,610 ) (119,313 ) 3,272,901

Income tax

1,257,915 (1,100 ) 1,100

(g)

1,257,915

Net income/(loss)

$ 2,280,909 $ (147,710 ) $ (118,213 ) $ 2,014,986

Weighted average common shares

Outstanding

Basic

6,370,244 6,370,244

Diluted

6,404,761 6,404,761

Net income per common share

Basic

0.36 0.32

Diluted

0.36 0.31

CVD EQUIPMENT CORPORATION

UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2016 AND THE STATEMENT OF

INCOME FOR MESOSCRIBE TECHNOLOGIES, INC. FOR THE TWELVE MONTHS

ENDED SEPTEMBER 30, 2016

CVD

Mesoscribe

Pro Forma

Pro

Historical

Historical

Adjustments

Notes

Forma

(Unaudited)

(Unaudited)

(Unaudited)

Revenue

$ 20,955,347 $ 856,922 $ 21,812,269

Cost of revenue

13,850,824 212,991 43,750

(e)

14,107,565

Gross profit

7,104,523 643,931 (43,750 ) 7,704,704

Operating expenses:

Research and development

433,844 433,844

Selling and shipping

1,097,661 1,097,661

General and administrative

6,926,487 1,002,036 21,250

(f)

7,949,773

Litigation settlement

(628,905 ) (628,905 )

Total operating expenses

7,829,087 1,002,036 21,250 8,852,373

Operating (loss)

(724,564 ) (358,105 ) (65,000 ) (1,147,669 )

Other income/(expense):

Interest income

28,233 28,435

Interest expense

(79,861 ) (79,861 )

Other income/(expense)

123,006 123,006

Total other (expense)

71,378 71,580

Income/(loss) before income taxes

(653,186 ) (357,903 ) (65,000 ) (1,076,089 )

Income tax (benefit)

(504,061 ) (142,073 ) (646,134 )

Net (loss)

$ (149,124 ) $ (215,830 ) $ (65,000 ) $ (429,955 )

Weighted average common shares

Outstanding

Basic

6,285,815 6,285,815

Diluted

6,281,815 6,285,815

Net income per common share

Basic

(0.02 ) (0.07 )

Diluted

(0.02 ) (0.07 )

Notes to Unaudited Pro forma Combined Financial Statements

1.Purchase Price

The unaudited pro forma combined financial statements reflect the acquisition of certain assets by the Company effective October 31, 2017.

Cash paid at closing $428,713
Net asset adjustment 71,287
Contingent consideration 300,000
Total purchase price $800,000

The Company agreed to make additional payments (“Contingent Consideration”) to Mesoscribe as additional contingent consideration based upon the achievement of certain revenue thresholds and other criteria set forth in the Asset Purchase Agreement with respect to each of the two (2) consecutive twelve (12) month measurement periods following the Closing Date.

The Company allocated the purchase price to the acquired assets based on their estimated fair values at the acquisition date as summarized in the following table.

Inventory $ 25,000
Machinery and equipment 350,000
Intellectual property 425,000
Net assets acquired $ 800,000

2.The following pro forma adjustments are based upon management’s preliminary estimates. These are subject to finalization.

(a)To eliminate historical Mesoscribe amounts not acquired or assumed.

(b)To record the preliminary estimate of the increase to property and equipment acquired to estimated fair value.

(c)The fair values of the identifiable intangible assets are based on current information and are subject to change.

(d)To adjust inventory to its estimated fair value.

(e)To reflect additional depreciation resulting from the increase in the fair value of the fixed assets at the date of acquisition over the historical value. Fixed assets are depreciated over periods ranging from 5 to 39.5 years.

(f)To reflect amortization of estimated identifiable intangible assets, arising from the acquisition.

(g)To adjust the provision for income taxes to reflect the estimate provision for taxes on a pro forma combined basis.


About CVD EQUIPMENT CORPORATION (NASDAQ:CVV)

CVD Equipment Corporation designs and manufactures equipment and process solutions used to develop and manufacture materials and coatings for research and industrial applications. The Company operates through two divisions: CVD/First Nano and Stainless Design Concepts (SDC). The Company’s CVD/First Nano division supplies chemical vapor deposition systems for use in the research, development and manufacturing of aerospace and medical components, semiconductors, light emitting diodes (LEDs), carbon nanotubes, nanowires, solar cells and a number of other industrial applications. The Company’s SDC division designs and manufactures purity gas and chemical delivery control systems for semiconductor fabrication processes, solar cells, LEDs, carbon nanotubes, nanowires, and other industrial applications. Its products include chemical vapor deposition, rapid thermal processing (RTP), annealing and diffusion furnaces, purity gas and liquid control systems, and quartz-ware.

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