Good afternoon and welcome to the CBD Equipment Corporation second quarter 2026 earnings conference call. As a reminder, today's call is being recorded. We'll begin with prepared remarks followed by a question and answer session. Presenting on today's call are Emmanuel Lakios, President and Chief Executive Officer, and Richard Catalano, Executive Vice President and Chief Financial Officer. Our earnings press release and information about today's call are available in the investor relations section of our website. Before I begin, please note that the comments made during this call may include forward-looking statements, including statements regarding future financial performance, marketing conditions, customer demand, strategic initiatives, potential asset monetization opportunities, and the execution of our transformation strategy. These statements are based on current expectations and are subject to risks and uncertainties, that could cause actual results to differ materially. For discussion for these risks, please refer to our filings with the Securities and Exchange Commission, including the risk factor section of our annual report on Form 10-K for the year ended December 31st, 2025. We undertake no obligation to update any forward-looking statements except as required by law. With that, I'll turn the floor over to Emmanuel Lakios, President and Chief Executive Officer. Please go ahead.

Thank you, operator, and good afternoon, everyone. We appreciate you joining us today to review our second quarter 2026 financial results and to provide an update on our business and strategic initiatives. Second quarter marked a transformational period for CBD equipment. Most notably, we completed the sale of our SDC business on April 1st, 2026. This transaction significantly strengthened our balance sheet, increased our financial flexibility, and allowed us to focus on our future strategy, including our core advanced material process equipment group. As a result of the investiture, we ended the quarter with approximately $23,500,000 in cash and cash equivalents and no long-term debt. providing us with a strong financial foundation as we navigate a challenging market environment. In addition to completing the divestiture, we substantially completed the operational restructuring initiative that we began last year. These efforts were designed to align our cost structure with our current business activity levels, improve operating efficiency, and positioned the company to respond more effectively when market conditions improve. We expect these actions to materially reduce our fixed operating costs going forward. While customer orders level continue to be adversely affected by broader economic and geopolitical uncertainty, we remain actively engaged with our customers and are continuing to pursue opportunities developing across our targeted markets. We are also focused on maintaining a disciplined approach to capital allocation and expense control with the goal of creating long-term shareholder value. Returning to operating performance, second quarter revenue from continuing operations was approximately $2 million, compared with $3.4 million in the prior year quarter. Orders during the quarter totaled approximately $1.2 million in backlog at the end of June 30th, 2026 was 3.9 million. With that, I'll turn the call over to our CFO, Rich Catalano, to review the financial results in more detail.

Thank you, Manny, and good afternoon. As Manny noted, the sale of the SDC business closed on April 1st, 2026. Accordingly, the results of SDC continue to be reported as discontinued operations for all periods presented. following the divestiture, CBD Equipment operates as a single reportable segment focusing on advanced material processing equipment and related technologies. Second quarter of 2026 revenue from continuing operations was $2 million, as Manny mentioned, compared to 3.4 million in the second quarter of 2025, a decline of approximately 43%. This reduction primarily reflects lower system revenue resulting from weaker bookings experienced during 2025 and the first half of 2026. Gross profit for the quarter was approximately $329,000 resulting in a gross margin of 16.8% compared to a gross profit of approximately $481,000 and a gross margin of 14.1% in the prior year quarter. The increase in gross margin percentage was primarily attributable to a higher proportion of non-system revenues during the current quarter. Our operating loss from continuing operations was approximately $1.6 million for the quarter. After interest, income, and other items, the net loss from continuing operations was approximately $1.4 million, or $0.20 per share, basic and diluted, compared to a net loss from continuing operations of $1.3 million, or $0.19 per basic and diluted share in the prior year quarter. Net income from discontinued operations was approximately $13.9 million. This is the regain on the divestiture of SDC, net of transaction expenses, and income tax expense. Including transaction costs we recorded in the first quarter, the total gain on the divestiture was approximately $13.5 million. As a result, the total income for the second quarter was approximately $12.6 million, or $1.81 per basic and diluted share, compared to a net loss of 1.1 million in the prior year quarter. Turning to our balance sheet, we ended the quarter with approximately 23.5 million in cash and cash equivalents compared with 8.7 million at December 31st, 2025. We also have $900,000 that is being held in escrow related to the SDC transaction and no long-term debt. Our stockholders' equity increased to approximately $36 million as of June 30th, 2026 as compared to $24.7 million at year end. Following our quarter end, the customer associated with the $0.8 million system order that we received in Q2 filed a prepackaged Chapter 11 bankruptcy proceeding. Although the unsecured trade creditors are expected to be unimpaired according to the proposed plan, we will be evaluating the potential impact on the order we just received as well as the impact on our backlog, our financial results, financial positions, and cash flows. With that, I'll turn it back to Manny.

Thank you, Rich. The successful completion of the STC divestiture represents a significant milestone for CBD Equipment. We have transformed the company into a well-capitalized, debt-free organization with a focus on business strategy and a substantially improved financial position. Although market conditions remain challenging, we continue to pursue orders across our targeted markets and remain committed to disciplined execution, operational efficiency, and long-term shareholder value creation. We believe the actions we have taken over the last year provide a solid platform from where we should move forward. Operator, we are now ready to open the line for questions.

Thank you, and I'll be conducting a question and answer session. If you'd like to be placed into question queue, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star one. One moment, please, while we poll for questions. and once again that's star one to be placed into question Q. Our first question today is coming from Neil Cataldi from Blueprint Capital Management. Your line is now live.

Hey guys, thanks for taking a couple questions. My first one is on the aerospace side. We've seen continued pretty heavy CapEx from the major engine OEMs targeting CMC component capacity. GE Aerospace has disclosed multiple billion dollar plus investment programs for the LEAP and the GE 9X engines. So the question is, given your order history with customers like them, how are you guys thinking about the timing and the sizing of potential follow-on orders in that business as the production ramps sort of continue going forward here?

Do you want to ask all your questions, Neil, or do you want me to take it one by one?

Yeah, let's go one by one, if you don't mind. Okay, fair.

Thanks. So on aerospace in general, aerospace, yes, has had a take-up in the production of gas turbine engines that utilize ceramic matrix composite materials, which we have both an installed base and we have a number of tools which we have spoken before about that are in the installation and commissioning phase. So we are in the middle of adding to our customers capacity that they ordered previously and we shipped and now as I said earlier are in the process of installing and commissioning. We have seen an uptake in our consumables and spare parts from the aerospace segment and as Rich indicated earlier those are typically proprietary parts that are very reasonable gross margins and we'll continue, we believe, to see that as our customers continue to utilize our equipment.

Okay, great. And then my second question is following up on the PVT discussion from our last call where the On Sammy Stony Brook collaboration is generated, published research results. You guys had a press release on that. I'm just wondering if that visibility has translated into any sort of broader commercial engagement, pipeline conversations, or really just, you know, anything with PBT.

Sure. On the PBT side of the business, we have a quality system, produces quality bulls to a marketplace that is saturated by Silicon Carbide Wafers. So we have a solution with a serving an ill market and so we have, as you've seen, we have played down any advancements. We continue to do characterization of our equipment and that there could be a potential future but at this point in time we have nothing really to report on the commercial side.

Okay. All right, thanks so much. Looking forward to following up with you guys offline.

Bye-bye. Thank you. As a reminder, that's star one to be placed in the question queue. Our next question is coming from Paul Jacob from MS&E Resources. Your line is now live.

Hello, everybody. Thanks for taking calls. Again, on the Stony Brook system, I was just wondering if you have any progress reports on bull quality or wafer quality to share beyond your last press release on that.

We will typically, thank you, Paul. I don't think we've actually spoken before. So we have an arrangement, an agreement with Stony Brook University that we will co-release or allow them to release characterization information first. to the extent that they have not released anything since our last release. I would say there's nothing more I can say on that other than they continue to run bulls on our equipment.

Sure, very fair. Yeah, I'll look forward to hearing more about that. I had a long association with the infancy of that process. and the powder coat system, you may have already said this, I'm sorry, was that intended for battery applications? I assume it was.

It's in the energy space. We can assume that it's in the, somebody can assume that it's in battery applications.

Okay. Well, I'm looking forward to seeing how the leadership strategizes with new investments. The company has invested in some very innovative intriguing, interesting new material technologies like process technologies in the past and they come, they go and I'll be interested to see what kind of focus the company puts on the big market applications that you have. You have great technology and always finding ways to improve it and I don't honestly think There's not a lot of competition in this small niche that you're in. So I just want to commend you on the technology and the decisions that you've been making. Thanks.

Thank you. Thank you. Next question is coming from Brett Reese from Jamie Montgomery Scott. Your line is now live.

Manny, can you hear me?

Brett, I can hear you well. I'm surprised that you weren't the first person to ask the question.

Well, Neil is quicker on the trigger than I am. Manny, what macroeconomic headwinds have to change and shift so that orders can start to flow to our company? Okay.

Okay, so if that's the question that's... probably need a cup of coffee on it, but let's start off with university funding. There needs to be a shift in the federal government funding of universities such that research is put at a higher priority. That has always driven our first nanoproduct lines. The first nanoproduct lines are lower ASP, but they're the seeding material for production systems of the future. The second is we are still impacted by the, and it's just going to take time, by the inefficiencies that were caused by the government shutdown. Some of our prospects, their funding was delayed substantially. I typically tell my team the longer you leave an order or an opportunity on the table, the more it can potentially grow mold. So some of these opportunities have to be rebirthed, re-quoted, funding resubmitted. That's going to take some period of time. We are seeing some interesting demand for opportunities in the defense area. and I can't comment because I don't have enough information yet to quantify if that'll be a pickup and in what period of time we could see that as a pickup. So those are the major ones. As far as PVT, a lot of questions today about PVT and silicon carbide. Yes, there's a big demand in the world and a lot of buzz around data centers. Silicon Carbide plays a role in data centers, but we don't serve the device side. We serve the blue growth side. And as I said in the first question with Neil, is that market today is saturated, saturated by the Chinese suppliers. And then of course, on semi will speed and coherent. So there, I think that's going to take a longer period of time. and I don't know what the saving grace will be for that, but the PVT could potentially have, can be incubated into other growth technologies. Again, that's suspect and a lot of if statements, so there's nothing really to speak about there. In the area of aerospace, we always want to mention that we launched several new products in the aerospace market. Many of those products, have not been installed and commissioned to date yet. Those need to be installed, commissioned, and be adopted so that we could potentially, and again, potentially enjoy orders in the future. So those are the major, I would say, macro and I would say mid-range being the aerospace that we have to overcome.

Right. Now, Manny, the business that we used to get from universities, if the Democrats take the House in November, will that loosen up the spigots, or do we have to wait for a change in the executive branch? Yeah, I agree.

Yeah, I would offend probably half the people in the room if I started talking about politics one way or another, so I probably will stay away from that one. I think whichever party is more favorable to university funding will be a positive to the universities and then therefore to all the equipment suppliers, including CBD.

Okay, fair enough. Now, the strategic... initiatives that you're exploring. Have you retained an outside investment bank to help you with that, or are you doing it all internally?

In the past, when we had something to speak about on the strategic alternatives, we did just that. We spoke about it. At this point in time, We do not have anything that I would be able to have a substantive conversation on or disclose. As we do develop that, we will inform all of you of that.

Okay. And because it's a kind of difficult product mix, there's no way that Rich could tell us what the – You know, revenue amount, you know, to break even, you know, what that number would be?

Hi, Brett. Nice to hear from you. You know, at this point, you know, historically, we have not given any type of guidance given the nature of our business and, you know, the size of our business. So, unfortunately, we're not able to go out and make those type of forecasts. Okay.

Okay. Thank you for taking my questions. and enjoy the rest of the summer. Thank you as well.

Thank you. We reach the end of our question and answer session. I'd like to turn the floor back over for any further closing comments.

Thank you, operator, and I appreciate everyone's questions and look forward to hearing from you personally. Thank you all for joining us today. We appreciate your continued support and interest in CBD Equipment Corporation. If you have any other questions or follow-up questions, feel free to contact Investor Relations or myself or Rich, who is also Investor Relations. And we'd love to chat. Thank you very much.

Thank you. That does conclude today's teleconference webcast. We'll disconnect your line at this time and have a wonderful day. We thank you for your participation today.