CVV CVD Equipment Corp

Item 9.01     Financial Statements and Exhibits

Item 9.01     Financial Statements and Exhibits

Mesoscribe Technologies, Inc.

CONTENTS

Mesoscribe Technologies, Inc.

Notes to Financial Statements

September 30, 2016

1.      Description of Business

Mesoscribe Technologies (Company) is a Delaware Corporation engaged in manufacturing products used in harsh environments for the commercial, aerospace and defense markets. Antennas, heaters, sensors and wiring are applied directly to customer’s parts. The company is in New York and is registered to do business in New York and California.

2.      Summary of Significant Accounting Policies

a.     Basis of Accounting

The Company uses the accrual method of accounting for financial statement and income tax purposes. The accompanying statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

b.     Use of Estimates

Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenue and expenses. Actual results could differ from these estimates.

c.     Accounts Receivable

Accounts receivable are recorded at the amount the company expects to collect on balances outstanding at year-end. Management closely monitors outstanding balances and writes off, as of year-end, all balances that are uncollectible by the time the financial statements are issued. Bad debt expense and allowance for doubtful accounts for the years ended September 30, 2016 and September 30, 2015 are $0 respectively.

d.     Revenue Recognition

Sales are recorded when products are shipped to the customers. In instances where products are configured to customer requirements, revenue is recorded upon the successful completion of the Company’s final test procedures and the customer’s acceptance. Customer deposits not earned are included in deferred revenue.

e.     Taxes Collected from Customers and Remitted to Government Authorities – Net Basis

The Company’s policy is to present taxes collected from customers and remitted to government authorities on a net basis. The Company records the amounts collected as a current liability and relieves such liability upon remittance to the taxing authority without impacting revenues or expenses.

Mesoscribe Technologies, Inc.

Notes to Financial Statements

September 30, 2016

f.     Property, equipment and Intellectual Assets

Property and equipment are stated at cost. Depreciation is provided using the straight-line method and accelerated methods over the useful lives, which are as follows:

Depreciation for the years ended September 30, 2016 and 2015 were $37,494 and $50,311 respectively.

g.     Inventory

Inventory, consisting of products and parts, is stated at cost. The inventory at September 30, 2016 and September 30, 2015 was $93,435 and $102,356 respectively.

h.     The Company has a line of credit with Chase Bank with a limit of $250,000. The line of credit is unsecured and bears interest of 4.500 percentage points. No balance on this line of credit was outstanding as of September 30, 2016 and 2015.

i.     Advertising

The company expenses advertising costs as they are incurred. Advertising expenses for the year ended September 30, 2016 and 2015 was $0.

j.     The Company has a SIMPLE IRA plan is a Savings Incentive Match Plan for Employees. Participating employees may elect to contribute, on a tax-deferred basis, a portion of their compensation, in accordance of 401(k) of the internal Revenue Code. The Company’s matching contribution rate is 100% of the employee contribution up to 3% of employee’s compensation. The Company’s matching contribution expense for the year ended September 30, 2016 was $14,433. The Company matching contribution expense for the year ended September 30, 2015 was $12,357.

k.     Income Tax

The Company accounts for income taxes in accordance with generally accepted accounting principles, whereby deferred taxes are provided on temporary differences arising from assets and liabilities whose bases are different for financial reporting and income tax purposes. Deferred taxes relate to the effects of the following items:

Differences in calculating depreciation on fixed assets

Tax loss carryforwards

Charitable contributions carryforwards

Mesoscribe Technologies, Inc.

Notes to Financial Statements

September 30, 2016

As of September 30, 2016 and 2015. The Company accounts for income taxes in accordance with the reporting used in filing its income tax returns, which is based on interpretations or prevailing tax laws that the Company believes are accurate and justified.

Deferred tax assets at September 30, 2016 and 2015 were $138,517 and $4,398 respectively.

A valuation allowance has not been established to eliminate the net deferred tax benefit due to uncertainty as to whether the tax benefits would ever be realized. Management is confident that deferred tax assets will be used in the next 20 years before its expiration.

As of September 30, 2016 and September 30, 2015, the Company had federal net operating loss carry forwards of $401,798 and $65,103 respectively that can be deducted against future taxable income. The tax carry forward amount of $65,103 expires on September 30, 2030 and $336,692 expires on September 30, 2031.

l.      Accrued Vacation Payable

Employees of the Company are entitled to paid vacation, paid sick days and personal days off, depending on job classification, length of service, and other factors. Accrued but unused vacation, sick and personal leave in the amount of $63,836 and $66,288 is included in accrued expenses on the balance sheet as of September 30, 2015 and 2016, respectively.

3.     Shareholder Loan

As of September 30, 2016 and 2015, the Company owed $20,743 to officers of the Company. Management does not expect to repay $20,743 during the year ended September 30, 2017 and the officers have agreed not to demand payment in 2017; therefore it is classified as long-term on the balance sheets.

4.     Significant Concentrations

a.     Credit Risk

The Company maintains its domestic checking and savings account with a financial institution that insures cash balances up to $250,000 through the Federal Deposit Insurance Corporation. At times, these accounts may exceed the insured limit.

b.     Major Suppliers

The company is dependent on a few major suppliers for all its product and parts available for sale.

Mesoscribe Technologies, Inc.

Notes to Financial Statements

September 30, 2016

c.    Major Customers

The Company provides service primarily to the air space manufacturing industry. In 2016 65% of revenue was received from commercial customers and 35% from grants and government R&D contracts. Any major changes in this industry which lead to reduced staffing and spending could have a material adverse effect on the company. Listing of the major customers is as follows:

5.     Operating Lease                       

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:

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

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”). Pursuant 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.

Pursuant 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.