UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended Commission File Number 1-16525 September 30, 2004 CVD EQUIPMENT CORPORATION (Exact name of registrant as specified in its charter) New York 11-2621692 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 1860 Smithtown Avenue Ronkonkoma, New York 11779 (Address of principal executive office) Registrant's telephone number, including area code (631) 981-7081 Indicated by check mark whether the Registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark whether registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes No X As of November 12, 2004 3,039,100 shares of the issuer's common stock, par value $.01, were outstanding. 1 CVD EQUIPMENT CORPORATION AND SUBSIDIARY Index Part I - Financial Information Item 1 - Financial Statements Condensed Consolidated Balance Sheets at September 30, 2004 (Unaudited) and December 31, 2003 2 Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, 2004 and 2003 3 Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2004 and 2003 4 Notes to Condensed Consolidated Financial Statements 5 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3 - Controls and Procedures 14 Part II - Other Information 15 Item 1 - Legal Proceedings 15 Item 2 - Changes in Securities and Use of Proceeds 15 Item 3 - Defaults Upon Senior Securities 15 Item 4 - Submission of Matters to a Vote of Security Holders 15 Item 5 - Other Information 16 Item 6 - Exhibits and Reports Filed on Form 8-K 16 Signatures 17 Exhibit Index 18 Certification of Chief Executive Officer 19 Certification of Chief Financial Officer 20 Certification of Chief Executive Officer pursuant to U.S.C. Section 1350 21 Certification of Chief Financial Officer pursuant to U.S.C. Section 1350 22 2 PART 1 - FINANCIAL INFORMATION Item 1 - Financial Statements CVD EQUIPMENT CORPORATION AND SUBSIDIARY Condensed Consolidated Balance Sheets September 30,2004 (Unaudited) December 31, 2003 ----------------- ----------------- ASSETS Current Assets: Cash and cash equivalents $ 396,945 $ 321,490 Accounts receivable, net 1,096,843 1,819,744 Cost in excess of billings on uncompleted contracts --- 575,734 Inventories 2,391,691 1,425,851 Other current assets 111,446 74,247 ----------------- ----------------- Total current assets 3,996,925 4,217,066 Property, plant and equipment, net 5,215,742 5,400,032 Deferred income taxes 440,362 440,362 Other assets 300,051 144,458 Intangible assets, net 112,913 122,977 ----------------- ----------------- $ 10,065,993 $ 10,324,895 ================= ================= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt $ 210,900 $ 177,381 Short-term notes payable 300,000 --- Accounts payable 513,366 520,525 Accrued expenses 895,202 488,011 Billings in excess of costs on uncompleted contracts --- 174,068 ----------------- ----------------- Total current liabilities 1,919,468 1,359,985 Long-term debt, net of current portion 3,183,539 3,336,400 ----------------- ----------------- Total liabilities 5,103,007 4,696,385 ----------------- ----------------- Commitments and contingencies --- --- Stockholders' Equity Common stock, par value $.01 per share, authorized 10,000,000 shares; issued and outstanding, 3,039,100 shares 30,391 30,391 Additional paid-in capital 2,902,149 2,902,149 Retained earnings 2,030,446 2,695,970 ----------------- ----------------- 4,962,986 5,628,510 ----------------- ----------------- $ 10,065,993 $ 10,324,895 ================= =================See notes to the consolidated financial statements. 2 3 CVD EQUIPMENT CORPORATION AND SUBSIDIARY Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended Nine Months Ended September 30 September 30 2004 2003 2004 2003 --------------- --------------- --------------- ---------------- Revenue: Revenue on completed contracts $ 2,016,591 $ 1,818,249 $ 5,547,848 $ 5,789,773 Revenue on uncompleted contracts (387,276) 274,554 --- 1,954,621 --------------- --------------- --------------- ---------------- 1,629,315 2,092,803 5,547,848 7,744,394 --------------- --------------- --------------- ---------------- Costs of Revenue Cost on completed contracts 1,421,722 1,187,164 3,930,543 4,669,633 Cost on uncompleted contracts (264,310) 187,522 --- 1,229,617 --------------- --------------- --------------- ---------------- 1,157,412 1,374,686 3,930,543 5,899,250 --------------- --------------- --------------- ---------------- Gross profit 471,903 718,117 1,617,305 1,845,144 --------------- --------------- --------------- ---------------- Operating expenses Selling and shipping 179,425 163,339 489,118 589,254 General and administrative 578,733 620,529 1,647,420 1,746,942 --------------- --------------- --------------- ---------------- Total operating expenses 758,158 783,868 2,136,538 2,336,196 Operating loss (286,255) (65,751) (519,233) (491,052) --------------- --------------- --------------- ---------------- Other income (expense) Interest income 173 661 518 895 Interest expense (53,768) (59,889) (164,634) (183,651) Other income 11,181 14,655 21,081 278,585 --------------- --------------- --------------- ---------------- Total other (expense) income (42,414) (44,573) (143,035) 95,829 Loss before income taxes (328,669) (110,324) (662,268) (395,223) Income tax (provision) benefit (2,136) 1,853 (3,256) 1,853 --------------- --------------- --------------- ---------------- Net loss $ (330,805) $ (108,471) $ (665,524) $ (393,370) ================ ================ ================ ================= Basic loss per common share $ (0.11) $ (0.04) (0.22) (0.13) ================ ================ ================ ================= Diluted loss per common share $ (0.11) $ (0.04) (0.22) (0.13) ================ ================ ================ ================= Weighted average common shares outstanding basic loss per share 3,039,100 3,039,100 3,039,100 3,039,100 Effect of potential common share issuance: Stock options --- --- --- --- --------------- --------------- --------------- ---------------- Weighted average common shares outstanding diluted loss per share 3,039,100 3,039,100 3,039,100 3,039,100 ================ ================ ================ ================= See notes to the condensed consolidated financial statements 3 4 CVD EQUIPMENT CORPORATION AND SUBSIDIARY Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30 2004 2003 ----------------- ----------------- Cash flows from operating activities Net loss $ (665,524) $ (393,370) Adjustments to reconcile net loss to net cash used in operating activities: Deferred tax provision - 63,908 Depreciation and amortization 267,425 270,696 Bad debt provision (5,427) 9,282 Changes in operating assets and liabilities: Accounts receivable 728,329 (181,804) Cost in excess of billings on uncompleted contracts 575,734 (408,988) Inventory (965,840) 456,538 Other current assets (37,199) 104,846 Other assets (192,013) (49,700) Accounts payable (7,159) (181,692) Accrued expenses 407,191 246,468 Billing in excess of costs on uncompleted contracts (174,068) (13,066) ----------------- ----------------- Net cash used in operating activities (68,551) (76,882) ----------------- ----------------- Cash flows from investing activities: Capital expenditures (36,651) (56,205) ----------------- ----------------- Net cash used in investing activities (36,651) (56,205) ----------------- ----------------- Cash flows from financing activities: Proceeds from short-term borrowings 875,000 876,000 Payments of short-term borrowings (575,000) (690,000) Proceeds from long-term debt 26,460 - Payments of long-term debt (145,803) (131,802) ----------------- ----------------- Net cash provided by financing activities 180,657 54,198 ----------------- ----------------- Net increase (decrease) in cash and cash equivalents 75,455 (78,889) Cash and cash equivalents at beginning of period 321,490 323,537 ----------------- ----------------- Cash and cash equivalents at end of period $ 396,945 $ 244,648 ================= ================= See notes to condensed consolidated financial statements 4 5 CVD EQUIPMENT CORPORATION AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: BASIS OF PRESENTATION The accompanying condensed consolidated financial statements include the accounts of CVD Equipment Corporation and its subsidiary ("the Company"). All intercompany balances and transactions have been eliminated in consolidation. These unaudited, condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB. Accordingly, 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 for a fair presentation have been included. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the fiscal the year. For further information, refer to the consolidated financial statements and accompanying footnotes included in the Company's annual report on Form 10-KSB for the year ended December 31, 2003. NOTE 2: The accounting policies followed by the Company are set forth in Note 2 to the Company's financial statements in the December 31, 2003 Form 10-KSB. Revenue Recognition: The Company recognizes revenues and income using the percentage-of-completion method for complex major products while revenues from other products are recorded when such products are accepted and shipped. Profits on contracts for complex major products are recorded on the basis of the Company's estimates of the percentage-of-completion of individual contracts, commencing when progress reaches a point where experience is sufficient to estimate final results with reasonable accuracy. Under this method, revenues are recognized based on costs incurred to date compared with total estimated costs. The asset, "Costs and estimated earnings in excess of billings on uncompleted contracts," represents revenues recognized in excess of amounts billed. The liability, "Billings in excess of costs on uncompleted contracts" represents amounts billed in excess of revenues earned. 5 6 CVD EQUIPMENT CORPORATION AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 3: UNCOMPLETED CONTRACTS Costs, estimated earnings and billings on uncompleted contracts are summarized as follows: September 30, 2004 December 31, 2003 -------------------- -------------------- Costs incurred on uncompleted contracts $ 0 $ 303,772 Estimated earnings 0 951,894 -------------------- -------------------- 0 1,255,666 Billings to date 0 (854,000) -------------------- -------------------- $ 0 $ 401,666 -------------------- -------------------- Included in accompanying balance sheets Under the following captions: Costs and estimated earnings in excess of billings on uncompleted contracts $ 0 $ 575,734 Billings in excess of costs and estimate earnings on uncompleted contracts 0 (174,068) -------------------- -------------------- $ 0 $ 401,666 -------------------- -------------------- At September 30, 2004 there were no jobs uncompleted under the percentage of completion method of accounting. NOTE 4: INVENTORY Inventories consist of the following: September 30, 2004 December 31, 2003 -------------------- -------------------- Raw materials $ 1,016,256 $ 777,893 Work-in-process 995,123 108,350 Finished goods 380,312 539,608 -------------------- -------------------- $ 2,391,691 $ 1,425,851 -------------------- -------------------- The Company has increased its inventory in anticipation of the production requirements needed to complete the Company's backlog as of September 30, 2004. 6 7 CVD EQUIPMENT CORPORATION AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 5: BAD DEBTS The Company records an allowance for uncollectible amounts based on a review of the collectibility of its accounts receivable. Management determines the adequacy of this allowance by analyzing historical bad debts, continually evaluating individual customer's receivables and considering the customer's financial condition and current economic conditions. If the financial condition of the customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances could be required. NOTE 6: SHORT TERM BORROWINGS September 30, 2004 December 31, 2003 -------------------- -------------------- $300,000 $0 The Company has a line of credit with a bank permitting the Company to borrow up to $1,000,000 which will be subject to renewal on June 1, 2005. Interest is payable on any unpaid principal balance at the bank's prime rate plus 3/4 of 1%. Borrowings are collateralized by the Company's assets NOTE 7: OTHER INCOME Other income for the three and nine months ended September 30, 2003 consists primarily of cash received on the collection of accounts receivable exceeding the amount booked as part of the purchase of assets of Conceptronic's Inc. Surface Mount Technology (SMT) business. NOTE 8: STOCK OPTION PLANS The Company accounts for the stock option plans under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, accounting for Stock-based Compensation, to stock-based employee compensation. 7 8 CVD EQUIPMENT CORPORATION AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 8: STOCK OPTION PLANS (continued) Nine months ended September 30, 2004 2003 -------------------- -------------------- Net loss as reported $ (665,524) $ (393,370) Add: Stock-based employee compensation expense included in reported net income, net of related tax effects --- --- Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (72,532) (14,839) -------------------- -------------------- Pro forma net loss $ (738,056) $ (408,209) -------------------- -------------------- Loss per share: Basic-as reported $ (0.22) $ (0.13) -------------------- -------------------- Basic-pro forma $ (0.24) $ (0.13) -------------------- -------------------- Diluted-as reported $ (0.22) $ (0.13) -------------------- -------------------- Diluted-pro forma $ (0.24) $ (0.13) -------------------- -------------------- 8 9 CVD EQUIPMENT CORPORATION AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 9: New Authoritative Pronouncements In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities ("FIN 46"). FIN 46 clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The Company is required to adopt the provision of FIN 46 for variable interest entities created after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after December 15, 2003. In December 2003, the FASB issued Interpretation No. 46(R) ("FIN 46R") which revised certain provisions of FIN 46. Publicly reporting entities that are small business issuers must apply FIN 46R to all entities subject to FIN 46R no later than the end of the first reporting period that ends after December 15, 2004 (as of December 31, 2004, for a calendar year enterprise). The effective date includes those entities to which FIN 46 had previously been applied. However, prior to the application of FIN 46R, a public entity that is a small business issuer shall apply FIN 46 or FIN 46R to those entities that are considered special-purpose entities no later than as of the end of the first reporting period that ends after December 15, 2003 (as of December 31, 2003 for a calendar year enterprise). The Company does not expect the adoption of FIN 46 or FIN 46R to have a material effect on its consolidated financial position or results of operations. 9 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes filed as part of this report. 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 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. 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. Results of Operations Revenue for the three month period ended September 30, 2004 was $1,629,315 compared to $2,092,803 for the three month period ended September 30, 2003, a decrease of approximately $463,000 or 22.1%. The Company is still experiencing the effects of an overall softness in the economy which has caused some existing and potential customers to either reduce or delay their capital expenditures which has negatively impacted the revenue generated from the manufacture of CVD and SDC equipment gas and chemical delivery systems. However, as reflected in the Company's backlog of $4,423,000 at September 30, 2004 which consists of all outstanding accepted purchase orders, and represents an increase of approximately $2,300,000 or 108.5% over the backlog at September 30, 2003, we have experienced an increase in orders during the current three month period. Although some re-engineering continues on the Conceptronic and Research International product lines, the Conceptronic division has experienced an increase in revenues during the current three month period. 10 11 Revenue for the nine months ended September 30, 2004 was $5,547,848, a decrease of $2,196,546 or 28.4% compared to the $7,744,394 of revenue achieved in the nine month period ended September 30, 2003. This decrease can be attributed to higher revenues for the nine month period ending September 30, 2003 as a result of the Company's relocation of its corporate headquarters during the quarter ended December 31, 2002 which resulted in a slowdown in productivity. Products that would have been completed and shipped prior to December 31, 2002 were completed and shipped during the first three months of 2003 resulting in higher revenues for that nine month period. Additionally, revenues for the current nine month period ended September 30, 2004 have been adversely affected as a result of an overall softness in the economy which has caused some existing and potential customers to either reduce or delay their capital expenditures which has negatively impacted the revenue generated from the manufacture of CVD and SDC equipment gas and chemical delivery systems. The Company has also utilized this "slow" time to redesign and re-engineer some Conceptronic and Research International product lines into more cost effective and efficient systems enabling us to implement our marketing strategy to sell these products. The Company's gross profit decreased by approximately $246,000 to $471,903 during the three months ended September 30, 2004 compared to the three months ended September 30, 2003.The gross profit margin decreased from 34.3% for the three month period ended September 30, 2003 to 29.0% for the current three month period. This decrease in the gross profit margin is attributable to a certain minimum level of fixed costs that the Company needs to maintain. The Company's gross profit decreased by $227,839 during the nine month period ended September 30, 2004 compared to the nine month period ended September 30, 2003, however the gross profit margin for the current nine month period was 29.2% compared to a gross profit margin of 23.8% for the same period one year ago. This increase in the gross profit margin is a result of the engineering and design modifications the Company has been able to make to the product line as well as cost reductions achieved by assimilating the Conceptronic division into the Company's mainstream. For the nine months ended September 30, 2004, the Company's selling and shipping expenses were approximately $489,000 which represents a decrease of approximately $100,000 or 17.0% compared to the approximately $589,000 incurred during the nine months ended September 30, 2003. This is primarily a result of the reduction in the Company's sales force and the increased reliability placed on distributors in addition to the lower sales volume. The Company incurred approximately $579,000 of general and administrative expenses during the quarter ended September 30, 2004, a decrease of 6.7% or approximately $42,000 compared to the approximately $621,000 of general and administrative expenses incurred in the quarter ended September 30, 2003. This decrease is primarily the result of the elimination of building rent expense of approximately $42,000 associated with the Company's former headquarters. 11 12 General and administrative expenses for the nine months ended September 30, 2004 were $1,647,420, representing a 5.7% decrease compared to approximately $1,747,000 for the nine months ended September 30, 2003. This decrease is primarily attributable to the higher than normal costs incurred during the nine months ended September 30, 2003 prior to the assimilation of Conceptronic into the Company mainstream. Interest expense for the three and nine months ended September 30, 2004 decreased to approximately $54,000 and $165,000 respectively compared to approximately $60,000 and $184,000 for the three and nine months ended September 30, 2003, a reduction of 10.2% and 10.4% respectively, as a result of reduced borrowing by the Company on its short-term revolving credit line. Other income decreased by approximately $10,000 and $258,000 for the three and nine months ended September 30, 2004 compared to the same respective periods one year earlier. During the nine month period ended September 30, 2003 the Company collected approximately $150,000 as an insurance reimbursement for legal fees, $42,000 in collections of accounts receivable in excess of the $369,000 recorded as part of the purchase of the assets of Conceptronic's Inc. Surface Mount Technology (SMT) business and $106,000 of accounts receivable in excess of the amount recorded as part of the purchase of the assets of Conceptronic's Inc. Surface Mount Technology (SMT) business. The Company did not receive any income from those sources during the current three and nine month period. Liquidity and Capital Resources As of September 30, 2004, the Company had an aggregate working capital of approximately $2,077,000 compared to an aggregate working capital of $2,857,000 at December 31, 2003 and had available cash and cash equivalents of $396,945 compared to $321,490 at December 31, 2003. The increase in cash is attributable to the utilization of the Company's line of credit with its bank. Accounts receivable as of September 30, 2004 was $1,096,843 compared to $1,819,744 as of December 31, 2003. This decrease is attributable to timing of customer payments and reduced billings. Anticipating the additional requirements necessitated by the Company's increased backlog as of September 30, 2004, the Company has increased its inventory by $965,840 or 67.7%, with the majority of the increase being in work-in process. As of September 30, 2004 the Company's backlog, which is comprised of all outstanding accepted purchase orders, increased to approximately $4,423,000 from approximately $1,738,000 at December 31, 2003 and approximately $2,683,000 at June 30, 2004. During the 12 13 period ended September 30, 2004, the Company had received several orders in all three divisions, CVD, Conceptronic and SDC for which production had begun. The timing for completion of the backlog varies depending on the product mix, however, there is generally a one to six month lag in the completion and shipping of backlogged product. The Company has a line of credit facility with a bank permitting it to borrow up to $1,000,000 which will be subject to renewal on June 1, 2005. Interest is payable on any unpaid principal balance at the bank's prime rate plus 3/4 of 1%. As of September 30, 2004, $300,000 was outstanding on this facility. Borrowings are collateralized by the Company's assets. The Company believes that its cash, cash equivalents and available credit facilities will be sufficient to meet its working capital and investment requirements for the next twelve months. However, future growth, including potential acquisitions, may require additional funding, and from time to time the Company may need to raise capital through additional equity or debt financing. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the periods presented. Among other things, estimates are used in accounting for allowances for bad debts, uncompleted contracts, deferred income taxes and revenue recognition. To the extent there are material differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. The significant accounting policies that we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following: Revenue Recognition: Revenue associated with complex major products is recognized utilizing the estimated percentage-of-completion method which measures progress towards completion of the project. Revisions in cost estimates and recognition of losses on these contracts are reflected in the accounting period in which the facts become known. The complexity of the estimation process and issues related to the assumptions, risks and uncertainties inherent with the application of the percentage of completion method of accounting affect the amounts of revenue and related expenses reported in our Consolidated Financial Statements. A number of internal and external factors can affect our estimates, including labor rates, parts costs and utilization and efficiency variances. We also derive revenue from other products which are recorded when such products are accepted and shipped. 13 14 Item 3. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Based on their evaluation as of the end of the period covered by this Form 10-QSB, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as required by Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective to insure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms. Changes in Internal Controls There were no significant changes in the Company's internal controls over financial reporting that occurred during the quarter ended September 30, 2004 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. 14 15 CVD EQUIPMENT CORPORATION PART II OTHER INFORMATION Item 1. Legal Proceedings. None. Item 2. Changes in Securities and Use of Proceeds. None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders. At our annual meeting of stockholders, which was held on September 8, 2004, our stockholders: (1) Elected five nominees for directors to serve for a term ending in 2005; (2) Ratified the appointment of Albrecht, Viggiano, Zureck & Co. as our independent auditors and public accountants for the fiscal year ended 2004; The following tables show the common stock votes cast with respect to the proposals identified above: Election of Directors: For Withheld Authority ------------- ------------------ Leonard A. Rosenbaum 2,657,435 75,291 Conrad J. Gunther 2,661,726 71,000 Martin J. Teitelbaum 2,660,726 72,000 Bruce T. Swan 2,661,726 71,000 Alan H. Temple Jr. 2,660,726 72,000 Proposal 2: For Against Abstentions ------------- --------- ----------- 2,730,726 2,000 0 15 16 Item 5. Other Information. None. Item 6. Exhibits and Reports Filed on Form 8-K (a) Exhibits filed with this report: 31.1 Certification of Chief Executive Officer 31.2 Certification of Chief Financial Officer 32.1 Certification of Chief Executive Officer pursuant to U.S.C. Section 1350 32.2 Certification of Chief Financial Officer pursuant to U.S.C. Section 1350 (b) Reports on Form 8-K None 16 17 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 12h day of November 2004. CVD EQUIPMENT CORPORATION By: /s/ Leonard A. Rosenbaum Leonard A. Rosenbaum Chief Executive Officer (Principal Executive Officer) By: /s/ Glen R. Charles Glen R. Charles Chief Financial Officer (Principal Financial and Accounting Officer) 17 18 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION 31.1 Certification of Chief Executive Officer * 31.2 Certification of Chief Financial Officer * 32.1 Certification of Chief Executive Officer pursuant to U.S.C. Section 1350 * 32.2 Certification of Chief Financial Officer pursuant to U.S.C. Section 1350 * * Filed herewith 18 19 Exhibit 31.1 Certifications Pursuant to Rule 13A-14 or 15D-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Leonard A. Rosenbaum, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of CVD Equipment Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrants' board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: November 12, 2004 /s/ Leonard A. Rosenbaum ---------------------------------------- President, Chief Executive Officer and Director 19 20 Exhibit 31.2 Certifications Pursuant to Rule 13A-14 or 15D-14 of the Securities exchange act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Glen R. Charles, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of CVD Equipment Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrants' board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Dated: November 12, 2004 /s/ Glen R. Charles ---------------------------------------- Chief Financial Officer 20 21 Exhibit 32.1 Certification of Principal Executive Officer Pursuant to U.S.C. Section 1350 As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 I, Leonard A. Rosenbaum, President and Chief Executive Officer of CVD Equipment Corporation, hereby certify, to my knowledge, that the quarterly report on Form 10-QSB for the period ending September 30, 2004 of CVD Equipment Corporation (the "Form 10-QSB") fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934 and the information contained in the Form 10-QSB fairly presents, in all material respects, the financial condition and results of operations of CVD Equipment Corporation as of and for the periods covered in this report. Dated: November 12, 2004 /s/ Leonard A. Rosenbaum Leonard A. Rosenbaum Chief Executive Officer (Principal Executive Officer) 21 22 Exhibit 32.2 Certification of Principal Financial Officer Pursuant to U.S.C. Section 1350 As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 I, Glen R. Charles, Chief Financial Officer of CVD Equipment Corporation, hereby certify, to my knowledge, that the quarterly report on Form 10-QSB for the period ending September 30, 2004 of CVD Equipment Corporation (the "Form 10-QSB") fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934 and the information contained in the Form 10-QSB fairly presents, in all material respects, the financial condition and results of operations of CVD Equipment Corporation as of and for the periods covered in this report. Dated: November 12, 2004 /s/ Glen R. Charles Glen R. Charles Chief Financial Officer (Principal Financial Officer) 22