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.
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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
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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
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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.
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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.
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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.
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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.
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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.
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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
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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
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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)
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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
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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
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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
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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)
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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)
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