<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-KSB
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________.
Commission File No. 0-14720-NY
CVD EQUIPMENT CORPORATION
(Exact name of registrant as specified in charter)
New York 11-2621692
(State of incorporation) (IRS Employer Identification No.)
1881 Lakeland Avenue, Ronkonkoma, New York 11779
(Address of principal executive offices)
516-981-7081
(Registrant's telephone number)
Securities Registered Pursuant to Section 12 (b) of the Act: NONE
Securities Registered Pursuant to Section 12 (g) of the Act:
Common Stock
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days. YES [ X ] NO [ ]
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-B is not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment
to this Form 10-KSB. [X]
The registrant's revenues for 1999 were $5,295,859
The aggregate market value of the voting stock held by non-affiliates on
March 30, 2000 based on a closing price of $2.625 on that date was $3,645,994.
As of March 30, 2000 there were 2,918,750 shares of Common Stock, Par Value
$.01 Per Share, Outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
<PAGE> 2
PART I
ITEM 1. BUSINESS
INTRODUCTION
Statements contained in this Report on Form 10-KSB that are not historical
facts are forward-looking statements within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended, including without
limitation, statements regarding industry trends, strategic business
development, pursuit of new markets, competition, results from operations,
and are subject to the safe harbor provisions created by that statute. A
forward-looking statement may contain words such as "intends", "plans",
"anticipates", "believes", "expect to", or words of similar import.
Management cautions that forward-looking statements are subject to risks and
uncertainties that could cause the Company's actual results to differ
materially from those projected. These risks and uncertainties include, but
are not limited to, marketing success, product development, production,
technological difficulties, manufacturing costs, and changes in economic
conditions in the markets the Company serves. The Company undertakes no
obligation to release revisions to forward-looking statements to reflect
subsequent events, changed circumstances, or the occurrence of unanticipated
events.
GENERAL DEVELOPMENT OF BUSINESS
CVD Equipment Corporation (the "Company") was incorporated under the laws of
New York State in October 1982. On September 11, 1985 the Company made an
initial public offering of 700,000 units underwritten by D. H. Blair & Co.,
44 Wall Street, New York, New York 10005, pursuant to which it received net
proceeds of $2,683,640.
Between December 11 and December 15, 1998, the Company purchased at public
auction the former inventory, tangible assets, intangible assets and
intellectual property of Stainless Design Corporation, Saugerties, NY, for
$672,095.
On December 14, 1998, the Company entered into a contract with Kidco Realty
Corp. to purchase, for $1,400,000, the facility owned by Kidco Realty Corp.
located at 1117 Old Kings Highway, Saugerties, NY 12477 and formerly occupied
by Stainless Design Corporation. The contract provided for leasing the
22,000 square foot facility, situated on 5 acres of land, until contract
closing which occurred on April 29, 1999. The purchase price was paid by cash
funds from the Company in the amount of $500,000 and Kidco Realty Corp.
issuing a 30 year amortization, 7% interest, 10 year balloon, non-recourse
purchase money note and mortgage to the Company in the amount of $900,000.
On December 23, 1998 the Company formed a 100% owned subsidiary called
Stainless Design Concepts, Ltd. The subsidiary is located at 1117 Old Kings
Highway, Saugerties, NY 12477 manufactures ultra high purity gas and chemical
delivery control systems for the semiconductor industry. On April 23, 1999,
the subsidiary was merged into a division of the Company.
On November 5, 1999 the Company formed a second division called Equipment
Consulting Services (ECS). This division also located at 1117 Old Kings
Highway, Saugerties, NY 12477 will focus on equipment consulting and the
refurbished semiconductor equipment market, a 1.5 billion-dollar industry.
Our existing facilities and capabilities should enable ECS to become an
important player in this market. ECS has become an Associate Member of the
Surplus Equipment Consortium / Network (SEC/N).
<PAGE> 3
THE ORGANIZATION
This year major organizational changes were implemented to better position
the Company for future growth. The organizational re-alignment eliminates a
single source of management. Each division, CVD, SDC and ECS has their own
operating manager with sales and administration being handled by individual
corporate mangers. The impact of these changes creates a much stronger
management team.
INFORMATION ABOUT INDUSTRY SEGMENTS
The Company designs, develops, manufactures, markets, installs and services
equipment primarily for the semiconductor industry. The Company's products
include (1) both batch and single substrate systems used for depositing,
rapid thermal processing, annealing, diffusion and etching of semiconductor
films, (2) gas and liquid flow control systems, (3) ultra high purity gas
and chemical piping delivery systems, (4) fabricates standard and custom
quartzware and (5) equipment consulting and refurbishing of semiconductor
processing equipment. The Company's products are generally manufactured to
the particular specifications of each of its customers.
GENERAL NARRATIVE DESCRIPTION OF BUSINESS
Semiconductor components are the fundamental electronic building blocks used
in modern electronic equipment and systems. These components are classified
as either discrete devices (such as transistors) or integrated circuits (in
which a number of transistors and other elements are combined to form a more
complicated electronic circuit). In an integrated circuit, these elements
are formed on a small "chip" of silicon, gallium arsenide, or other
materials, which is then encapsulated in an epoxy, ceramic, or metal package
having lead wires for connection to a circuit board. The Company's products
are used in the manufacture of these components.
CVD DIVISION
Designs and manufactures both standard and custom equipment for the
semiconductor industry. CVD has developed a fine reputation for producing
high quality, state-of-the-art products.
SDC DIVISION
Designs and manufactures in their Class 100 cleanroom, ultra high purity Gas
and Chemical Delivery systems. Their field service group provides for
contract maintenance, high purity fab and equipment installations and
equipment removal.
ECS DIVISION
Provides semiconductor equipment consulting and refurbishing services. Their
expertise crosses over many product lines as well as manufacturers and
positions the division to meet the changing requirements of the industry.
PRODUCTS
Chemical Vapor Deposition (CVD) - is a process which passes a gaseous
compound over a target material surface that is heated to a temperature that
causes the compound to decompose and deposit a desired layer onto substrate
material. The process is accomplished by combining appropriate gases in a
reaction chamber, of the kind produced by the Company, at elevated
temperatures (typically 300 - 1300 degrees Celsius). The Company's Chemical
Vapor Deposition Systems are complete and include all necessary
<PAGE> 4
instrumentation, subsystems and components. The systems include mass flow
controllers, gas valves, stainless steel lines and fittings. The Company
provides both standard systems and specifically engineered products for
particular customer applications. Some of the standard systems offered by
the Company are for Silicon, Silicon-Germanium, Silicon Dioxide, Silicon
Nitride, Polysilicon, Liquid Phase Epitaxial, and Metalorganic Chemical
Vapor Deposition.
The Company's CVD systems are available in a variety of models that can be
used in production and laboratory research. All models can be offered with
total system automation, a microprocessor control system, by which the user
can measure, predict and regulate gas flow, temperature, pressure and
chemical reaction rates, thus controlling the process in order to enhance
the quality of the materials produced. The Company's standard
microprocessor control system is extremely versatile and capable of
supporting the Company's complete product line and most custom system
requirements. The Company's CVD systems generally range in price from
$100,000 to $2,000,000.
Rapid Thermal Processing (RTP) - are used to heat semiconductor materials to
elevated temperatures at rapid rates of up to 200 degrees Celsius per second.
The Company's RTP systems are offered for implant activation, oxidation,
silicide formation and many other processes. The Company offers system that
can operate both at atmospheric or reduced pressures. A specific model of
the Company's RTP system is used for Thermal Desorption Spectroscopy which
allows the semiconductor process engineer the ability to analyze the
deposited films between the many process steps used in the complex
fabrication process. The Company's RTP systems generally range in price from
$50,000 to $200,000.
Annealing and Diffusion Furnaces - are used for diffusion, oxidation,
implant anneal, solder reflow and other processes. The systems are normally
operated at atmospheric pressure with gaseous atmospheres related to the
process. An optional feature of the system allows for the heating element
to be moved away from the process chamber allowing the wafers to rapidly cool
or be heated in a controlled environment. Our process based, cascade
temperature control system enables more precise control of wafer temperature.
The systems are equipped with an automatic controller for process sequencing
and monitoring. The Company's Annealing and Diffusion Furnace systems
generally range in price from $50,000 to $400,000.
Ultra High Purity Gas and Chemical Delivery Systems - standard and
custom-designed gas and liquid control systems encompassing (1) gas cylinder
storage cabinets, (2) custom gas and chemical delivery systems, (3) gas and
liquid valve manifold boxes (VMB's) and (4) gas isolation boxes (GIB's) to
provide safe storage and handling of pressurized gases and chemicals.
System design allows for automatic or manual control from both a local and
remote location. The Company's Gas and Liquid Control Systems generally
range in price from $10,000 to $150,000.
Ultra High Purity Gas and Chemical Piping - we offer field installation of
ultra high purity piping systems within a semiconductor plant for the
distribution of gases and chemicals to the assorted process tools. As part
of the field service group we also offer repair service work on customer
equipment.
Quartzware - standard and custom fabricated quartzware used in the Company's
equipment and other customer tools. The Company also provides repair and
replacement of existing customer quartzware.
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RESEARCH AND DEVELOPMENT
The Company continues its efforts on several research and development
projects. Our joint venture with Dow Corning continues and has been extended
through the year 2000. In addition, we continue to develop and customize
equipment for numerous government, university and industry research
laboratories around the world.
MARKETING
The Company's products are used in production and research applications by
the semiconductor industry. The Company sells its products primarily to
semiconductor manufacturers and to institutions involved in electronic
research such as universities, government and industrial laboratories.
During 1999, the Company generated sales from its sales offices located in
Ronkonkoma and Saugerites, New York. During 1999, sales of the Company's
products were made by a staff of four employees and five sales
representatives, whose activities were supported, by a staff of seven
application engineers. During 1999 the Company continue to work on
expanding our product offerings.
In September 1997, the Company opened a Web Site; www.cvdequipment.com to
support the Company's expanded marketing program. In May, 1999 a second
Company web site was initiated; www.stainlessdesign.com. In November, 1999
the Company launched a third web site; www.equipmentconsulting.com.
During 1999, the Company expanded it's sales efforts considerably by
utilizing sales representatives having offices in Santa Clara, CA,
Oceanside, CA, Portland, OR, Chandler, AZ, Albuquerque, NM, Austin, TX,
Dallas, TX, Taiwan and Korea. Additional representatives are expected to
be added during the year 2000. We expect this expansion to create a wider
exposure to CVD and it's product line.
On December 31, 1999, the Company had a backlog of orders of approximately
$1,317,521 as compared to $900,000 on December 31, 1998. The backlog at
December 31, 1999 is current and is expected to ship during year 2000.
The Company warrants its equipment for a period of six months after
shipment and passes along any warranties from original manufacturers of
components used in its products. The Company provides for its own
equipment servicing with in-house field service personnel.
PATENTS, COPYRIGHTS AND LICENSE AGREEMENTS
The Company has developed technology related to the automatic valve
shut-off system manufactured by the Company, which has been granted
Patent No. 4,527,715 that expires on August 27, 2002. Although the Company
believes that the patent with respect to the automatic valve shut-off
system provides it with some competitive advantage, the Company does not
believe the patent protection is significant to any of its current business
operations. Patent protection was not significant to previous business
because the unique products offered are custom built for a particular
customer. As such, when reviewing the cost and time required for patent
protection, management determined that future benefits were minimal. The
Company believes that while patents are useful, and will be used at times
in the future, they are not critical or valuable in many cases on an
individual basis. We believe the collective value of the intangible
property of the Company is comprised of blueprints, specifications,
technical processes, cumulative employee knowledge, experience, copyrights
and patents.
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In August 1997, the Company signed a 5-year license agreement with IBM to
sell equipment using IBM's patented method for low temperature, low-pressure
chemical vapor deposition of Silicon and Silicon-Germanium epitaxial layers
(UHV/CVD).
During November 1999 the Company applied for several copyrights associated
with the intellectual properties of the former Stainless Design Corporation.
Thus far, three copyrights have been approved and additional copyrights are
pending approval.
COMPETITION
The Company's business is subject to intense competition. The Company is
aware of other competitors that offer a substantial number of products
comparable to the Company's. Many of the Company's competitors (including
customers who may elect to manufacture systems for internal use) have
financial, marketing and other resources greater than the Company's. To
date, the Company has been able to compete in markets that include these
competitors, primarily on the basis of price, technical performance,
quality and delivery.
CUSTOMERS
The Company sells to a wide range of customers. Sales to a single customer
in a given year however can exceed 10%. In 1999, two customers represented
approximately 13% and 14% of sales whereas in 1998, two customers
represented approximately 10% and 42% of sales. CVD's customers include
many of the largest semiconductor, telecommunications, and computer
companies in the world.
FOREIGN OPERATIONS
The Company derived 12% of total revenues in 1999 as compared to 4% in 1998
from foreign exports.
MANUFACTURING MATERIALS AND SUPPLIES
The Company does not manufacture many components used in producing the
Company's products. They are purchased from unrelated third-party
manufacturers of such equipment. The Company has no supply contracts
covering these components. The Company is not dependent on a principal or
major supplier and alternate suppliers are available. The Company does not
use a large amount of raw or difficult to obtain materials that could cause
a problem in production of our equipment.
EMPLOYEES
As of December 31, 1999, the Company employed 47 full time personnel and 4
part time personnel of which 21 were in manufacturing, 9 in engineering
(including research and development and efforts related to product
improvement), 3 in field service, 4 in marketing and 10 in general
management and administration.
The Company is not party to any collective bargaining agreement and has no
work stoppages. The Company believes that its employee relations are good.
INSURANCE
Because the Company's products are used in connection with explosive,
flammable, corrosive and toxic gases, there are potential exposures to
personnel injury as well as property damage, particularly if operated
without regard to the design limits of the systems and components.
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The Company endeavors to minimize its product liability exposure by
engineering safety devices for its products, carefully monitoring
incidents involving its products to determine areas where safety
improvements may be made, and training programs in connection with its
products.
The Company believes that their insurance coverage is adequate. The
following types of insurance coverage is carried by the Company:
* Product liability
* Property Contents
* General Liability
* Workers Compensation
* Transportation
* Directors and Officers
* Employee Benefits Liability
* Business Auto
* Umbrella
GOVERNMENT REGULATIONS
The Company knows of no necessary government approval for the sale of
their products or services except in some export cases. At that time we
apply for the appropriate export license. As of December 31, 1999, there
were no pending government approvals.
The Company knows of no existing or probable governmental regulations that
would have a serious effect on our business.
Cost associated with compliance to environmental laws has not been
significant to the Company's business.
FORWARD LOOKING STATEMENTS
Certain statements in this Management's Discussion and Analysis of Financial
Condition and Results of Operations constitute "forward looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Such forward looking 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.
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YEAR 2000
All Company systems are operating and no Year 2000 issues have surfaced.
There were no exceptional costs beyond what had previously been expected and
planned. All systems are Year 2000 compliant.
ITEM 2. DESCRIPTION OF PROPERTIES
On June 1, 1991, the Company relocated its operations to its present
location in Ronkonkoma, New York. The 20,000 square foot facility offers
significant financial and operational benefits over the Company's previous
location. The Company signed a new 5-year lease in 1996 that is scheduled
to expire on July 31, 2001. The Company is in the process of negotiating a
5-year extension to the existing lease. Management feels that the property
is adequately covered by insurance and is in good condition.
On December 14, 1998, the Company entered into a contract to lease and to
subsequently purchase for $1,400,000, a 22,000 square foot facility, situated
on 5 acres of land located at 1117 Old Kings Highway, Saugerties, NY 12477.
The purchase was completed on April 29,1999. Management feels the property
is adequately covered by insurance and is in good condition.
ITEM 3. LEGAL PROCEEDINGS
On September 24,1999 the Company was named in a lawsuit. The nature of this
legal proceeding focused around certain intellectual properties obtained
during the purchase of the assets of Stainless Design Corporation. On
November 10, 1999, the Company responded with a counterclaim. It is our
belief that the lawsuit is without merit.
On October 27, 1999, the Company initiated a lawsuit against a customer
having an outstanding debt. The Company was awarded a judgement that covers
the amount owed. However, the customer filed for chapter 11 protection.
We continue to pursue the recovery of money owed.
On January 26 , 2000, the Company initiated a lawsuit against a customer
who refused to pay the balance on their account. We are in the process of
pursuing a judgement.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A shareholder's meeting was held in the third quarter of 1999 for the
primary purpose of re-electing directors and approving the selection of
our outside auditing firm.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED SECURITY HOLDER MATTERS
PRINCIPAL MARKET
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The stock continues to be traded on the OTC Bulletin Board and reported in
the OTC "Pink Sheets".
STOCK PRICE AND DIVIDEND INFORMATION
The Company's common stock first began to be publicly traded on
September 11, 1985 and prior to that date the Company was privately held.
The following chart sets forth the high and low closing bid price of the
Common Stock for the indicated periods.
<TABLE>
<CAPTION>
Period High Low
<C> <C> <C>
January 1, 1998 through March 31, 1998 1.875 1.375
April 1, 1998 through June 30, 1998 1.750 1.375
July 1, 1998 through September 30, 1998 1.563 0.750
October 1, 1998 through December 31, 1998 1.063 0.625
January 1, 1999 through March 31, 1999 1.125 0.875
April 1, 1999 through June 30, 1999 1.0625 0.8125
July 1, 1999 through September 30, 1999 0.875 0.6875
October 1, 1999 through December 31, 1999 1.000 0.6875
<FN>
The chart reflects inter-dealer prices, without retail mark-up, markdown, or
commission and does not represent actual transactions. The Company paid no
cash dividends during the period.
</TABLE>
APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK
The number of holders of record of the Company's Common Stock as of March 30,
2000 was approximately 350.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
1999 COMPARED TO 1998
There is a material difference in the financial data from 1999 when compared
to 1998. The significant differences are attributed to the start-up of
Stainless Design Concepts and the purchase of the facility in Saugerties, NY.
New orders in 1999 totaled $2.7 million for CVD and $3.3 million for SDC for
a total of $6.0 million, which was 185.7% higher than the 1998 level of $2.1
million. In 1999 gross profit was $1,842,552 or 112% higher than the gross
profit of $865,463 in 1998. Diluted net earnings per share were $.05 in
1999 compared to $.03 in 1998.
In the past the Company has generally manufactured customized equipment. In
1999 the Company continued work on developing a line of standard products as
a supplement to our custom systems. Three of the four products were
introduced during 1999. In September 1997, the Company opened a Web site,
www.cvdequipment.com to support the Company's marketing program. In May
1999 the Company opened it's second web site, www.stainlessdesign.com and in
November of 1999 a third wed site was added, www.equipmentconsulting.com.
<PAGE> 10
REVENUE
An increase in volume resulted in revenue for the year being $5,295,859,
which was a 74.4% increase from 1998 revenues of $3,037,259.
The type of sales in 1999 was similar to those of 1998. The Company shipped
approximately 4% to government associated entities, 15% to major colleges
and universities, 4% to research laboratories and 77% to significant Fortune
500 industrial companies.
COSTS AND EXPENSES
In 1999, cost of revenues as a percentage of revenues decreased to 65% from
72% in 1998. The main reason for the 7% decrease in cost of revenues as a
percentage of revenues was a decrease in the cost of materials. The Company
averaged 51 employees in 1999 compared to 35 employees in 1998. The actual
cost of revenues increased from $2,171,796 in 1998 to $3,453,307 in 1999 for
an increase of $1,281,511. Of this increase, $706,357 is attributable to
increased purchases of material, $90,959 to an increase in utilities,
$45,540 to an increase in rent expense, $238,714 to an increase in salaries
and $58,859 to an increase in depreciation.
Selling and shipping expense was higher by $407,730 in 1999 compared to 1998.
This mainly resulted from a $363,584 increase in salaries, a $25,840
increase in travel and a $11,629 increase in freight expense.
General and Administrative expenses rose by $507,291 in 1999 compared to 1998.
This resulted mainly from a $20,937 increase in insurance, a $342,425
increase in salaries and employee benefits, an increase in consulting fees of
$53,609, an increase in depreciation of $26,175, an increase in professional
fees of $34,223, an increase in real estate taxes of $14,392, and a reserve
for bad debt of $22,410.
Interest expense increased by $51,287 from 1998 to 1999 because the
Company's average outstanding debt increased in 1999 as a result of it's
mortgage on the Saugerties, NY facility.
LIQUIDITY AND CAPITAL RESOURCES
By year-end 1999, the Company's cash position decreased to $91,714 from
$127,489 at the beginning of the year, even though cash provided by
operating activities increased to $218,888 in 1999 from $31,160 in 1998.
In 1999, accounts receivable increased to $1,019,771 from $347,126 in 1998
while inventory increased to $713,762 from $422,280. The increase in
receivables from 1999 to 1998 is associated with an increase in revenues.
The increase in inventory in 1999 was mainly due to the purchase of
inventory and the work in process of $286,000.
The net cash used in investing activities decreased by $34,432 in 1999.
Proceeds from disposition of land in 1998 increased cash by $720,000
whereas in 1999 capital expenditures increased by $890,693 mainly due to
the purchase of the Saugerties, NY facility. In 1999, the Company sold
$650,000 of the $1,000,000 of securities purchased in 1998.
Cash flows from financing activities decreased by $145,948 in 1999. The
change is mainly due to re-payment of short term borrowings. Cash was
provided mostly by a $900,000 mortgage on the Saugerties, NY facility. In
1998 cash was provided by short term borrowings of $300,000 and re-payment
of an officer loan.
<PAGE> 11
In 2000, we expect to have sufficient cash flow from operations and do not
anticipate the need to raise additional funds.
1998 COMPARED TO 1997
New orders in 1998 totaled $2.1 million, which was 32% lower than 1997's
level of $3.1 million. The revenues produced a net profit of $84,205. Net
earnings per share were $.03 in 1998 compared to $.21 in 1997. In the past
the Company has generally manufactured customized equipment. In September
1997, the Company opened a Web site; www.cvdequipment.com to support the
Company's expanded marketing program.
REVENUE
A reduction in volume resulted in revenue for the year being $3.0 million,
which was a 20% decrease from 1997 of $3.8 million.
The type of sales in 1998 was similar to those of 1997. The Company shipped
approximately 8% to government associated entities, 15% to major colleges
and universities, 1% to research laboratories and another 76% was shipped to
two significant Fortune 500 companies.
COSTS AND EXPENSES
In 1998 cost of revenues increased to 72% from 64% in 1997. The main reason
for the 8% increase in cost of revenues was a 4% increase in payroll
expenses. The Company averaged 35 employees in 1998 compared to 34 employees
in 1997.
Selling and shipping expense increased by $44,406 in 1998 compared to 1997.
This mainly resulted from an increase in salaries of $34,000, an increase in
sales commissions of $18,000, and reductions in advertising and freight
expenses.
General and Administrative expenses were higher by $91,462 in 1998 compared
to 1997. This resulted mainly from a $17,000 increase in insurance, a
$36,000 increase in salaries and employee benefits and increases in
consulting fees of $21,000.
Interest expense Decreased by $2,477 from 1997 to 1998 since the Company's
average outstanding debit decreased in 1998.
LIQUIDITY AND CAPITAL RESOURCES
By year-end 1998, the Company's cash position decreased to $127,489 from
$239,476 at the beginning of the year. However, the Company purchased
$1,000,000 in securities available for sale in 1998.
In 1998, accounts receivable decreased to $347,126 from $394,065 in 1997
while inventory increased to $422,280 from $135,807. The decrease in
receivables from 1998 to 1997 is associated with a decrease in revenues. The
increase in inventory in 1998 was mainly due to the $114,000 purchase of
inventory of the former Stainless Design Corporation and the completion of
finished goods totaling $235,348.
<PAGE> 12
The net cash used in investing activities increased $833,853 in 1998 mainly
due to the capital expenditures of $683,823. This increase included the
purchase of fixed assets of the former Stainless Design Corporation for
$517,695.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by ITEM 7 is incorporated by reference in ITEM 13.
<PAGE> 13
CVD EQUIPMENT CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FORM 10-KSB ITEM 7
Years ended December 31, 1999 and 1998
<PAGE> 14
<TABLE>
<CAPTION>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page No.
<S> <S>
INDEPENDENT AUDITORS' REPORT F-3
FINANCIAL STATEMENTS:
Consolidated balance sheets as of December 31, 1999 and 1998 F-4
Consolidated statements of income and comprehensive income
for the years ended December 31, 1999 and 1998 F-5
Consolidated statements of stockholders' equity for the years ended
December 31, 1999 and 1998 F-6
Consolidated statements of cash flows for the years ended
December 31, 1999 and 1998 F-7
Notes to consolidated financial statements F-8
</TABLE>
<PAGE> 15
F-3
A L B R E C H T , V I G G I A N O , Z U R E C K
& C O M P A N Y , P . C .
CERTIFIED PUBLIC ACCOUNTANTS
25 SUFFOLK COURT
HAUPPAUGE, NY 11788
(631) 434-9500
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
CVD Equipment Corporation
Ronkonkoma, New York
We have audited the accompanying consolidated balance sheets of CVD Equipment
Corporation and Subsidiaries (the Company) as of December 31, 1999 and 1998,
and the related consolidated statements of income and comprehensive income,
stockholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CVD
Equipment Corporation and Subsidiaries as of December 31, 1999 and 1998 and
the results of its operations and its cash flows for the years then ended,
in conformity with generally accepted accounting principles.
/s/ Albrecht, Viggiano, Zureck & Co.
Hauppauge, New York
March 3, 2000
<PAGE> 16
F-4
<TABLE>
<CAPTION>
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 91,714 $ 127,489
Accounts receivable 1,019,771 347,126
Costs and estimated earnings in excess of billings
on uncompleted contracts 490,214 1,180,253
Securities available-for-sale 297,000 1,018,340
Inventories 713,762 422,280
Deferred tax asset 17,490 -0-
Prepaid income taxes 12,812 60,540
Other current assets 39,387 33,212
------------ ------------
Total Current Assets 2,682,150 3,189,240
Property, Plant and Equipment 2,204,644 832,171
Deferred Tax Asset 348,768 140,082
Other Assets 177,267 151,713
------------ ------------
Total Assets $ 5,412,829 $ 4,313,206
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ -0- $ 300,000
Accounts payable 171,138 67,156
Accrued expenses 284,134 144,972
Billings in excess of costs on uncompleted contracts 67,504 46,993
Deferred tax liability -0- 5,905
Current maturities of long-term debt 16,936 4,004
------------ ------------
Total Current Liabilities 539,712 569,030
Long-Term Debt 978,552 17,137
------------ ------------
1,518,264 586,167
------------ ------------
Commitments and Contingencies
Stockholders' Equity
Common stock - $0.01 par value - 10,000,000 shares
authorized; 2,918,750 shares issued and outstanding 29,188 29,188
Additional paid-in capital 2,838,990 2,784,060
Retained earnings 1,061,897 901,356
Accumulated other comprehensive income (35,510) 12,435
------------ ------------
Total Stockholders' Equity 3,894,565 3,727,039
------------ ------------
Total Liabilities and Stockholders' Equity $ 5,412,829 $ 4,313,206
============ ============
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE> 17
F-5
<TABLE>
<CAPTION>
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Years ended December 31, 1999 and 1998
1999 1998
------------ ------------
<S> <C> <C>
Revenues
Revenue on completed contracts $ 4,069,873 $ 1,773,389
Revenue on uncompleted contracts 1,225,986 1,263,870
------------ ------------
Total Revenues 5,295,859 3,037,259
------------ ------------
Costs of Revenues
Costs on completed contracts 2,824,775 1,378,823
Costs on uncompleted contracts 628,532 792,973
------------ ------------
Total Costs of Revenues 3,453,307 2,171,796
------------ ------------
Gross Profit 1,842,552 865,463
------------ ------------
Operating Expenses
Selling and shipping 566,197 158,467
General and administrative 1,307,967 800,676
------------ ------------
Total Operating Expenses 1,874,164 959,143
------------ ------------
(31,612) (93,680)
------------ ------------
Other Income (Expense)
Interest income 46,231 86,374
Interest expense (53,676) (2,389)
Gain on sale of land -0- 164,442
Other income (expense) (2,745) 1,871
------------ ------------
Total Other Income (Expense) (10,190) 250,298
------------ ------------
Income (Loss) Before Taxes (41,802) 156,618
Income Tax Benefit (Provision) 202,343 (72,413)
------------ ------------
Net Income 160,541 84,205
Other Comprehensive Income, Net of Tax
Unrealized gain (loss) on securities (47,945) 12,435
------------ ------------
Comprehensive Income $ 112,596 $ 96,640
============ ============
Earnings Per Share
Basic $ 0.06 $ 0.03
Diluted $ 0.05 $ 0.03
Weighted Average Shares
Basic 2,918,750 2,918,750
Diluted 2,991,083 2,994,610
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE> 18
F-6
<TABLE>
<CAPTION>
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1999 and 1998
Accumulated
Additional Other Total
Common Paid-In Comprehensive Retained Stockholders'
Stock Capital Income Earnings Equity
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance as of
December 31, 1997 $ 29,188 $ 2,784,060 $ -0- $ 817,151 $ 3,630,399
Net income 84,205 84,205
Other comprehensive
income, net of tax:
Unrealized gains on
securities 12,435 12,435
------------
Total comprehensive
income 96,640
------------ ------------ ------------ ------------ ------------
Balance as of
December 31, 1998 29,188 2,784,060 12,435 901,356 3,727,039
Net income 160,541 160,541
Other comprehensive
income, net of tax:
Unrealized loss on
securities:
Unrealized
holding loss
arising during
the year (51,211) (51,211)
Less:
reclassification
adjustment for
loss realized
in net income 3,266 3,266
------------ ------------
Net unrealized loss (47,945) (47,945)
------------
Total comprehensive
income 112,596
Compensatory stock
Options 54,930 54,930
------------ ------------
Balance as of
December 31, 1999 $ 29,188 $ 2,838,990 $ (35,510) $ 1,061,897 $ 3,894,565
============ ============ ============ ============ ============
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE> 19
F-7
<TABLE>
<CAPTION>
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1999 and 1998
1999 1998
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 160,541 $ 84,205
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred tax provision (benefit) (208,686) 57,252
Depreciation and amortization 232,748 148,732
Compensatory stock options 54,930 -0-
Bad debt provision 22,410 -0-
Gain on disposition of land -0- (164,442)
Loss on sale of securities 4,875 -0-
(Increase) decrease in:
Accounts receivable (695,055) 46,939
Costs and estimated earnings
in excess of billings on uncompleted contracts 690,039 210,768
Inventory (291,482) (286,473)
Prepaid income taxes 47,728 6,189
Other current assets (6,175) 11,150
Other assets (56,640) (86,751)
Increase (decrease) in:
Accounts payable 103,982 (29,156)
Accrued expenses 139,162 27,967
Deposit on a contract for the sale of land -0- (40,000)
Income and other taxes payable -0- (2,213)
Billings in excess of costs
on uncompleted contracts 20,511 46,993
------------ ------------
Net Cash Provided By Operating Activities 218,888 31,160
------------ ------------
Cash Flows from Investing Activities
Proceeds from disposition of land -0- 720,000
Capital expenditures (1,574,135) (683,442)
Proceeds from sale (purchase) of securities 645,125 (1,000,000)
------------ ------------
Net Cash Used In Investing Activities (929,010) (963,442)
------------ ------------
Cash Flows from Financing Activities
Proceeds from (payments of) short-term borrowings (300,000) 300,000
Proceeds from long-term debt 986,400 25,693
Payments of long-term debt (12,053) (4,552)
Proceeds from officer loan receivable -0- 499,154
------------ ------------
Net Cash Provided By Financing Activities 674,347 820,295
------------ ------------
Net Decrease in Cash and Cash Equivalents (35,775) (111,987)
Cash and Cash Equivalents at Beginning of Year 127,489 239,476
------------ ------------
Cash and Cash Equivalents at End of Year $ 91,714 $ 127,489
============ ============
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE> 20
F-8
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 1 - Summary of Significant Accounting Policies
Description of Business
CVD Equipment Corporation and Subsidiaries (the Company), a New York
corporation, was organized and commenced operations in October 1982.
Principal business activities include the manufacturing of chemical vapor
deposition equipment, customized gas control systems, and hydrogen
annealing and brazing furnaces, all of which are used primarily to produce
semiconductors and other electronic components. The Company engages in
business throughout the United States and Asia.
Basis of Consolidation
The consolidated financial statements include the accounts of CVD Equipment
Corporation and its wholly-owned subsidiaries. In December 1998, a new
subsidiary, Stainless Design Concepts, Ltd., was formed as a New York
corporation. In April 1999, this subsidiary was merged into CVD Equipment
Corporation. The Company had one subsidiary, CVD Materials Corporation as
of December 31, 1999. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Estimates are used when accounting for certain items such as long-term
contracts, allowance for doubtful accounts, depreciation and amortization,
taxes and warranties.
Comprehensive Income
In 1998, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 130, Reporting Comprehensive Income. Comprehensive income
consists of net income and other comprehensive income; the latter includes
unrealized gains and losses on available-for-sale securities and is
presented in the Consolidated Statements of Stockholders' Equity. The
adoption of SFAS No. 130 had no effect on stockholders' equity.
Inventories
Inventories are valued at the lower of cost or market. The Company uses a
cost system which approximates the first-in, first-out method.
<PAGE> 21
F-9
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 1 - Summary of Significant Accounting Policies (continued)
Securities Available-For-Sale
The Company evaluates its investment policies consistent with Financial
Accounting Standards Board Statement (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities. Accordingly, investment
securities are classified as available-for-sale securities and carried at
fair value, with temporary unrealized gains and losses reported in
accumulated other comprehensive income as a separate component of
stockholders' equity. Realized gains and losses on sales of securities
classified as available-for-sale are determined using the specific
identification method.
Income Taxes
The Company uses the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts and the tax
basis of existing assets and liabilities. A valuation allowance is not
considered necessary by management, since it is more likely than not that
the deferred tax asset will be realized. An allowance may be necessary in
the future based on changes in economic conditions.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated
depreciation and amortization. The cost of certain labor and overhead
which is expected to benefit future periods, has been capitalized and
amortized. Depreciation and amortization are computed by the straight-line
method for financial purposes over the estimated useful lives of the assets.
Software Capitalization
In 1998, the Company adopted Statement of Position 98-1, Accounting for
Costs of Computer Software Developed or Obtained for Internal Use. This
standard requires certain direct development costs associated with
internal-use software to be capitalized including external direct costs
of material and services and payroll costs for employees devoting time to
the software projects. These costs totaled $11,957 and $33,023 for the
years ended December 31, 1999 and 1998, respectively, and are included in
Other Assets. All software is amortized straight-line over three years.
Amortization expense related to software totaled $16,320 and $25,795 for
the years ended December 31, 1999 and 1998, respectively.
Intangible Assets
In December 1998, the Company paid $15,000 for the right to use the trade
name, "Stainless Design". This amount is included in Other Assets and
amortized straight-line over ten years. Also in December 1998, the Company
purchased engineering drawings for $25,000, which is included in Other
Assets and amortized straight-line over 15 years. As of December 31, 1999
and 1998, the Company recorded in Other Assets a license agreement costing
$10,000. The license agreement is being amortized over its life of 5 years.
Amortization expense recorded by the Company in 1999 and 1998 for these
intangibles totaled $5,212 and $2,000, respectively.
<PAGE> 22
F-10
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 1 - Summary of Significant Accounting Policies (continued)
Revenue and Income 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 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.
Bad Debts
Accounts receivable are presented net of an allowance for doubtful accounts
of $22,410 and zero as of December 31, 1999 and 1998, respectively. The
allowance is based on prior experience and management's evaluation of the
collectibility of accounts receivable. Management believes the allowance
is adequate. However, further additions may be necessary based on changes
in economic conditions.
Product Warranty
The Company records warranty costs as incurred and does not provide for
possible future costs. Management estimates such costs to be insignificant
based on prior experience. However, it is reasonably possible that this
estimate may change in the future.
Advertising Costs
The Company expenses advertising costs which are not expected to benefit
future periods. Advertising expenses included in selling and shipping
expenses were $3,796 and $12,845 in 1999 and 1998, respectively. As of
December 31, 1999 and 1998, the Company's capitalized advertising costs
included in Other Assets totaled $59,566 and $28,661, respectively, to
develop a web site and to print brochures expected to be used in the future.
Capitalized advertising costs are amortized straight-line over three years.
Amortization expense related to advertising costs totaled $9,554 and $4,308
in 1999 and 1998, respectively.
<PAGE> 23
F-11
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 1 - Summary of Significant Accounting Policies (continued)
Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, Earnings per Share. This pronouncement requires the reporting of
two net income per share figures: basic net income per share and diluted net
income per share. Basic net income is calculated by dividing net income by
the weighted-average number of common shares outstanding during the period.
Diluted net income per share is computed by dividing net income by the sum of
the weighted-average number of common shares outstanding during the period
plus the dilutive effect of shares issuable through stock options.
A reconciliation of the weighted-average number of common shares outstanding
used in the calculations of basic and diluted earnings per share follows.
<TABLE>
<CAPTION>
1999 1998
Basic Dilutive Basic Dilutive
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Weighted-average number of
common shares outstanding 2,918,750 2,918,750 2,918,750 2,918,750
============ ============
Dilutive options to purchase
common shares outstanding 72,333 75,860
------------ ------------
2,991,083 2,994,610
============ ============
</TABLE>
The effects of 140,000 options granted in 1998 at an exercise price of $1.51
and 52,500 options granted in 1999 at an exercise price $1.00 were not
included in the computation of diluted earnings per share for the years
ended December 31, 1998 and 1999 because they are anti-dilutive.
Cash and Cash Equivalents
The Company considers all highly liquid financial instruments purchased with
a maturity of three months or less to be cash equivalents.
The Company places its most of temporary cash investments with one financial
institution and normally exceeds the FDIC limit. The Company has not
experienced any losses to date resulting from this policy.
Fair Value of Financial Instruments
The carrying amounts of financial instruments including cash and cash
equivalents, accounts receivable, other assets, accounts payable and accrued
expenses, approximate fair value due to the relatively short maturity of
these instruments. The fair value of securities available-for-sale is
estimated based on quoted market prices. The carrying value of long-term
debt approximates fair value based on borrowing rates currently available
for loans with similar terms and maturities.
<PAGE> 24
F-12
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 1 - Summary of Significant Accounting Policies (continued)
Stock-Based Compensation
The Company accounts for stock options as prescribed by Accounting
Principles Board Opinion No. 25 and includes pro forma information in the
stock-based compensation footnote, as permitted by Financial Accounting
Standards Board Statement No. 123, Accounting for Stock-Based Compensation
("SFAS 123"). Accordingly, no compensation cost is recognized for stock
options granted in 1999 and 1998 since the option exercise price is not less
than the market price of the underlying stock on the date of grant.
Compensation cost is recognized for stock options granted to Directors
before December 15, 1998 based upon the fair market value of the options
granted. Compensation cost is also recognized for stock options granted to
the President at an exercise price less than the market price of the
underlying stock on the date of the grant.
Note 2- Supplemental Cash Flow Information
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Cash paid (received) during the year for:
Income taxes, net of refunds $ (41,384) $ 11,185
Interest 9,682 1,394
Noncash investing activities:
Unrealized gains (losses) on securities, net of tax $ (47,945) $ 12,435
</TABLE>
Note 3 - Uncompleted Contracts
<TABLE>
<CAPTION>
Costs, estimated earnings, and billings on uncompleted contracts are summarized as follows:
1999 1998
------------ ------------
<S> <C> <C>
Costs incurred on uncompleted contracts $ 628,532 $ 792,973
Estimated earnings 606,011 470,897
------------ ------------
1,234,543 1,263,870
Billings to date (811,833) (130,610)
------------ ------------
$ 422,710 $ 1,133,260
============ ============
Included in accompanying balance sheets
under the following captions:
Costs and estimated earnings in excess
of billings on uncompleted contracts $ 490,214 $ 1,180,253
Billings in excess of costs and estimated
earnings on uncompleted contracts (67,504) (46,993)
------------ ------------
$ 422,710 $ 1,133,260
============ ============
</TABLE>
<PAGE> 25
F-13
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 4 - Securities Available-For-Sale
<TABLE>
<CAPTION>
Securities available-for-sale consist of the following:
1999 1998
------------ ------------
<S> <C> <C>
Corporate preferred bonds:
Maturing in 2038 $ 350,000 $ 750,000
Maturing in 2098 -0- 250,000
------------ ------------
Cost $ 350,000 $ 1,000,000
Fair value $ 297,000 $ 1,018,340
</TABLE>
At December 31, 1999 and 1998, corporate preferred bonds have been
categorized as available-for-sale and stated at fair value. The Company
recorded an unrealized holding (loss) gain of ($53,000) and $18,340 for the
years ended December 31, 1999 and 1998, respectively, which is shown net of
a deferred tax asset (liability) of $17,490 and ($5,905), respectively, in
accumulated other comprehensive income.
Note 5 - Inventory
<TABLE>
<CAPTION>
Inventories consist of the following:
1999 1998
------------ ------------
<S> <C> <C>
Raw materials $ 119,074 $ 186,932
Work-in-process 286,292 -0-
Finished goods 308,396 235,348
------------ ------------
$ 713,762 $ 422,280
============ ============
</TABLE>
Note 6 - Property, Plant and Equipment
<TABLE>
<CAPTION>
Major classes of property, plant and equipment consist of the following:
1999 1998
------------ ------------
<S> <C> <C>
Land $ 61,620 $ -0-
Buildings 1,463,551 -0-
Machinery and equipment 633,744 636,880
Capitalized labor and overhead 753,239 1,032,772
Furniture and fixtures 156,283 152,216
Computer equipment 108,136 90,655
Transportation equipment 50,750 50,750
Leasehold improvements 46,285 15,733
------------ ------------
3,273,608 1,979,006
Accumulated depreciation and amortization (1,068,964) (1,146,835)
------------ ------------
$ 2,204,644 $ 832,171
============ ============
Depreciation and amortization expense $ 201,662 $ 116,629
============ ============
</TABLE>
<PAGE> 26
F-14
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 7 - Short-Term Borrowings
The Company has a line of credit facility with a bank which allows the
Company to borrow up to $500,000 until June 1, 2000. Interest is payable
on any unpaid principal balance at the bank's prime rate plus 0.75%.
Borrowings are collateralized by the Company's assets.
Note 8 - Long-Term Debt
<TABLE>
<CAPTION>
Long-term debt consists of the following:
1999 1998
------------ ------------
<S> <C> <C>
KIDCO REALTY CORP.
$900,00 purchase money mortgage secured by
real property, building and improvements in
Saugerties, New York; payable in equal
monthly installments of $5,988, including
interest at 7% per annum; entire principal
comes due on May 1, 2009. $ 893,977 $ -0-
THE DIME SAVINGS BANK
$86,400 note payable secured by real
property and condominium unit in Saugerties,
New York; payable in equal monthly
installments of $846, including interest at
8.29% per annum until August 2004, when
interest converts to a fixed rate equal to
the 5-year United States Treasury Bill rate
plus 2.86%; final payment due August 1, 2014. 85,198 -0-
NISSAN MOTOR ACCEPTANCE CORP.
Collateralized by a lien on the Company's
automobile; payable in 60 monthly installments
of $495 including interest of 5.9% per annum;
final payment due February 5, 2003. 16,313 21,141
------------ ------------
995,488 21,141
Less: Current maturities 16,936 4,004
------------ ------------
$ 978,552 $ 17,137
============ ============
</TABLE>
<TABLE>
<CAPTION>
Future maturities of long-term debt are as follows:
<S> <C>
2000 $ 16,936
2001 19,030
2002 20,395
2003 16,794
2004 15,170
2005 to maturity 907,163
----------
$ 995,488
==========
</TABLE>
<PAGE> 27
F-15
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 9 - Income Taxes
<TABLE>
<CAPTION>
The provision (benefit) for income taxes include the following:
1999 1998
------------ ------------
<S> <C> <C>
Current:
Federal $ 5,265 $ 11,161
State 1,078 4,000
------------ ------------
Total current provision 6,343 15,161
------------ ------------
Deferred:
Federal (17,176) 50,359
State (191,510) 6,893
------------ ------------
Total deferred provision (benefit) (208,686) 57,252
------------ ------------
$ (202,343) $ 72,413
============ ============
</TABLE>
The Company has a state investment tax credit carryforward of $140,586 that
may be offset against future state tax liabilities through the year 2014 and
other state tax credits totaling $179,789 which may be carried forward
indefinitely. The Company also has a capital loss carryforward of $4,875
that may be offset against capital gains through the year 2004.
<TABLE>
<CAPTION>
The difference between the provision for income taxes at the Company's
effective income tax rate and the federal statutory rate of 34% is as
follows:
1999 1998
------------ ------------
<S> <C> <C>
Income taxes at statutory rate $ (14,213) $ 47,170
State taxes 1,635 9,712
Nondeductible expenses 5,503 4,807
Investment tax credits (195,268) 10,724
------------ ------------
Provision (Benefit) for Income Taxes $ (202,343) $ 72,413
============ ============
</TABLE>
<TABLE>
<CAPTION>
The tax effects of temporary differences giving rise to significant
portions of deferred taxes are as follows:
1999 1998
------------ ------------
<S> <C> <C>
Allowance for doubtful accounts $ 4,482 $ -0-
Inventory capitalization 13,743 (8,660)
Capital loss carryforward 1,306 -0-
Compensatory stock options 10,986 -0-
Depreciation and amortization (2,124) 13,644
Investment tax credit 320,375 135,098
------------ ------------
Deferred Tax Asset $ 348,768 $ 140,082
============ ============
</TABLE>
A deferred tax liability of $5,905 was recorded in current liabilities as
of December 31, 1998 to reflect the tax effects of temporary differences
arising from unrealized gains on securities available-for-sale.
<PAGE> 28
F-16
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 10 - Stock-Based Compensation
On June 15, 1989, the Company instituted a non-qualified stock option plan
(the "Plan"). In connection therewith, 700,000 shares of the Company's
common stock are reserved for issuance pursuant to options that may be
granted under the Plan through June 3, 2004. On June 3, 1996, the Company
issued 84,000 options which expire ten years from the date of grant. None
of these options were exercisable until June 3, 1999. The option price was
less than the fair market value per share on the date the 1996 options were
granted. On April 15, 1998, 140,000 options were granted to employees under
this Plan. Options granted in 1998 vest straight-line over a four-year
period following the date of grant and expire five years after the date of
grant. On July 16, 1999, 52,500 options were granted to employees under
this Plan. Options granted in 1999 vest incrementally over a four-year
period following the date of grant and expire seven years after the date of
grant. The option price for options granted in 1998 and 1999 is an amount
per share of not less than the fair market value per share on the date the
option is granted.
<TABLE>
<CAPTION>
A summary of stock option activity related to the Company's Plan is as follows:
Beginning Granted Exercised Canceled Ending
Balance During During During Balance
Outstanding Period Period Period Outstanding Exercisable
------------ ------------ ------------ ------------ ------------ ------------
<S> <C>
Year ended December 31, 1998
Number of shares 84,000 140,000 -0- -0- 224,000 -0-
Weighted average exercise price
per share $ 0.125 $ 1.51 $ -0- $ -0- $ 0.99 $ -0-
Year ended December 31, 1999
Number of shares 224,000 52,500 -0- 10,000 266,500 116,500
Weighted average exercise price
per share $ 0.99 $ 1.00 $ -0- $ 1.51 $ 0.97 $ 0.51
</TABLE>
<TABLE>
<CAPTION>
The weighted-average per share fair value of the options granted during 1999
and 1998 was estimated as $0.23 and $1.50, respectively, on the date of grant
using the Black-Scholes option-pricing model with the following weighted-
average assumptions:
1999 1998
------------ ------------
<S> <C> <C>
Risk-free interest rate 5.5% 4.5%
Expected option life 7 years 5 years
Expected volatility 30% 267%
Expected dividend yield 0% 0%
</TABLE>
<TABLE>
<CAPTION>
The following table summarizes information about the options at
December 31, 1999:
Options Outstanding = Options Exercisable
-------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Exercise Number Remaining Exercisable Number Exercisable
Price Outstanding Life Price Exercisable Price
------------ ------------ ------------ ------------ ------------ ------------
<C> <C> <C> <C> <C> <C>
0.125 84,000 6.5 years 0.125 84,000 0.125
1.00 52,500 6.5 years 1.00 -0- 1.00
1.51 130,000 3.25 years 1.51 32,500 1.51
</TABLE>
<PAGE> 29
F-17
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 10 - Stock-Based Compensation (continued)
<TABLE>
<CAPTION>
Had compensation expense for the Company's stock-based compensation plan
been determined consistent with SFAS 123, net income and earnings per share
would be decreased to the pro forma amounts indicated below:
1999
------------
<S> <C>
Net income
As reported $ 160,541
Pro forma 128,366
Earnings per share - basic
As reported $ 0.06
Pro forma 0.04
Earnings per share - diluted
As reported $ 0.05
Pro forma 0.04
</TABLE>
Note 11 - 401(k) Plan
On August 1, 1998, the Company adopted a 401(k) Plan for the benefit of all
eligible employees. All employees as of the effective date of the 401(k)
Plan became eligible. An employee who became employed after August 1, 1998,
would become a participant after three months of continuous service.
Participants may elect to contribute from their compensation any amount up
to the maximum deferral allowed by the Internal Revenue Code. Employer
contributions are optional. During the year ended December 31, 1999 and
1998, the Company incurred 401(k) costs totaling $1,944 and $1,038,
respectively.
Note 12 - Concentration of Credit Risk
Significant Customers
The Company's sales encompass markets wherein the demands of any one
customer may vary greatly due to changes in technology. In 1999 and 1998,
the Company had one significant customer, which represented approximately
13% and 42%, respectively, of sales and 71% of the total accounts receivable
and costs and estimated earnings in excess of billings on uncompleted
contracts at December 31, 1998. The Company had a second significant
customer, which represented approximately 14% of sales in 1999, and a
different major customer which represented approximately 10% of sales in
1998. No one customer was considered significant to accounts receivable
and costs and estimated earnings in excess of billings on uncompleted
contracts at December 31, 1999.
Export Sales
Export sales to unaffiliated customers represented approximately 12% and 4%
of sales for the years ended December 31, 1999 and 1998, respectively.
Export sales in 1999 and 1998 were primarily to customers in Asia. All
contracts are denominated in U.S. dollars. The Company does not enter into
any foreign exchange contracts.
<PAGE> 30
F-18
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 13 - Related Party Transactions
The general counsel for the Company is also a director. The Company
incurred legal fees for his professional services of approximately $20,000
for each of the years ended December 31, 1999 and 1998. As of December 31,
1999 and 1998, the Company owed the general counsel $20,000 and $40,000,
respectively.
Note 14 - Segment Reporting
In 1999, the Company adopted SFAS 131, Disclosures about Segments of an
Enterprise and Related Information. As a result, Stainless Design Concepts
("SDC"), which was a subsidiary of the Company as of December 31, 1998,
operated as a segment of the Company as of December 31, 1999. SDC is the
Company's ultra-high purity manufacturing division in Saugerties, New York.
The accounting policies of SDC are the same as those described in the
summary of significant accounting policies (see Note 1). The Company
evaluates performance based on several factors, of which the primary
financial measure is earnings before taxes. The following table presents
certain information regarding the Company's segments at December 31, 1999
and for the year then ended.
<TABLE>
<CAPTION>
CVD SDC Eliminations Consolidated
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Assets $ 4,884,892 $ 4,105,512 $(3,577,575) $ 5,412,829
============ ============ ============ ============
Revenues $ 2,997,261 $ 2,617,986 $ (319,388) $ 5,295,859
Interest income 45,356 875 46,231
Interest expense 4,904 48,772 53,676
Depreciation and amortization 141,605 91,143 232,748
Capital expenditures 1,641 1,572,494 1,574,135
Pretax earnings (loss) 40,655 (82,457) (41,802)
============ ============ ============ ============
</TABLE>
Note 15 - Commitments and Contingencies
Leases
The Company rents its headquarters and operations in Ronkonkoma, New York
under a lease expiring on July 31, 2001. Minimum future rental commitments
are as follows:
2000 $ 130,751
2001 77,589
Rental expense under the above operating lease totaled $126,942 and $123,245
for 1999 and 1998, respectively.
<PAGE> 31
INDEX TO SUPPLEMENTARY FINANCIAL SCHEDULES
Page No.
Independent Auditors' Report on Supplementary Information ............ S-2
Supplementary Financial Schedules:
II. Valuation and qualifying accounts ............................ S-3
III. Amounts receivable from related parties and
underwriters, promoters, and employees other
than related parties ....................................... S-4
IV. Property, plant and equipment ................................ S-5
V. Accumulated depreciation and amortization
of property, plant and equipment ........................... S-6
VI. Supplementary income statement information ................... S-7
<PAGE> 32
S-2
A L B R E C H T , V I G G I A N O , Z U R E C K
& C O M P A N Y , P . C .
CERTIFIED PUBLIC ACCOUNTANTS
25 SUFFOLK COURT
HAUPPAUGE, NY 11788
(631) 434-9500
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY INFORMATION
To the Board of Directors and Stockholders
CVD Equipment Corporation
Ronkonkoma, New York
We have audited and reported separately herein on the consolidated financial
statements of CVD Equipment Corporation and subsidiaries (the Company) as of
and for the years ended December 31, 1999 and 1998.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements of the Company taken as a whole. The
supplementary information included in Form 10-KSB, Schedules II, III, IV, V
and VI is presented for purposes of additional analysis and is not a required
part of the basic consolidated financial statements. Such information has
been subjected to the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, is fairly stated in
all material respects in relation to the basic consolidated financial
statements taken as a whole.
/s/ Albrecht, Viggiano, Zureck & Co.
Hauppauge, New York
March 3, 2000
<PAGE> 33
S-3
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
FORM 10-KSB, SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Additions
--------------------
Balance at (1) Charged (2) Charged Balance
Beginning to Costs and to Other at End
Deducted from Assets of Period Expenses Accounts Deductions of Period
- ----------------------------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Allowance for net unrealized gains
(losses) on securities:
Year ended December 31, 1999 $ 18,340 $ -0- $ -0- $ (71,340) $ (53,000)
Year ended December 31, 1998 -0- -0- 18,340(a) -0- 18,340
Allowance for doubtful accounts:
Year ended December 31, 1999 $ -0- $ 22,410 $ -0- $ -0- $ 22,410
Year ended December 31, 1998 -0- -0- -0- -0- -0-
<FN>
(a) Net unrealized gains on securities recorded in stockholders' equity.
</TABLE>
<PAGE> 34
S-4
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
FORM 10-KSB, SCHEDULE III
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
- ------------------------------------ ------------ ------------ ---------------------------- ------------
Deductions
------------
Balance at (1) (2) Balance at
Beginning Amounts Amounts End of
Name of Debtor of Period Additions Collected Written off Period
- ------------------------------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1999:
$ -0- $ -0- $ -0- $ -0- $ -0-
Year ended December 31, 1998:
Leonard A. Rosenbaum, President
Maturity: January 1, 2007
Interest: 7% per annum $ 499,154 $ -0- $ 499,154 $ -0- $ -0-
</TABLE>
<PAGE> 35
S-5
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
FORM 10-KSB, SCHEDULE IV
PROPERTY, PLANT AND EQUIPMENT
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
- ----------------------------------------- ------------ ------------ ------------ ------------
Balance at Other Balance at
Beginning Additions Changes - End of
Description of Period at Cost Add (Deduct) Period
- ----------------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
1999:
Land $ -0- $ 61,620 $ 61,620
Building -0- 1,463,551 1,463,551
Machinery and equipment 636,880 1,164 $ (4,300) $ 633,744
Capitalized labor and overhead 1,032,772 (279,533) 753,239
Furniture and fixtures 152,216 4,067 156,283
Computer equipment 90,655 17,481 108,136
Transportation equipment 50,750 50,750
Leasehold improvements 15,733 30,552 46,285
------------ ------------ ------------ ------------
$ 1,979,006 $ 1,578,435 $ (283,833) $ 3,273,608
============ ============ ============ ============
1998:
Machinery and equipment $ 87,712 $ 549,168 $ 636,880
Capitalized labor and overhead 1,213,577 69,101 $ (249,906) 1,032,772
Furniture and fixtures 133,182 19,034 152,216
Computer equipment 77,266 13,389 90,655
Transportation equipment 24,557 26,193 50,750
Leasehold improvements 13,795 1,938 15,733
------------ ------------ ------------ ------------
$ 1,550,089 $ 678,823 $ (249,906) $ 1,979,006
============ ============ ============ ============
</TABLE>
<PAGE> 36
S-6
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
FORM 10-KSB, SCHEDULE V
ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
- ------------------------------------------ ------------ ------------ ------------ ------------
Balance at Other Balance at
Beginning Additions Changes - End of
Description of Period at Cost Add (Deduct) Period
- ------------------------------------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
1999:
Building $ -0- $ 18,764 $ 18,764
Machinery, equipment and capitalized
labor and overhead 927,577 $ 150,178 $ (279,533) $ 798,222
Furniture and fixtures 128,913 3,724 132,637
Computer equipment 48,415 16,078 64,493
Transportation equipment 28,923 8,731 37,654
Leasehold improvements 13,007 4,187 17,194
------------ ------------ ------------ ------------
$ 1,146,835 $ 201,662 $ (279,533) $ 1,068,964
============ ============ ============ ============
1998:
Machinery, equipment and capitalized
labor and overhead $ 1,082,756 $ 94,727 $ (249,906) $ 927,577
Furniture and fixtures 126,987 1,926 128,913
Computer equipment 33,584 14,831 48,415
Transportation equipment 24,557 4,366 28,923
Leasehold improvements 12,228 779 13,007
------------ ------------ ------------ ------------
$ 1,280,112 $ 116,629 $ (249,906) $ 1,146,835
============ ============ ============ ============
</TABLE>
<PAGE> 37
S-7
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
FORM 10-KSB, SCHEDULE VI
SUPPLEMENTARY INCOME STATEMENT INFORMATION
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Col. A Col. B
- ------------------------------------------ -----------------------------
Charges to Costs and Expenses
Item 1999 1998
- ------------------------------------------ ------------ ------------
<S> <C> <C>
1. Amortization of software, advertising
costs and other intangible assets $ 31,086 $ 32,103
</TABLE>
<PAGE> 38
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There are no changes or disagreements.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth, with respect to each officer and/or director,
his/her age, present position with the Company, principal occupation during
the past five years, other directorships, if any, and the year he/she first
became an officer and/or a director of the Company.
<TABLE>
<CAPTION>
Position with Officer/Director
Name of Officer/Director Age the Company Since
- ------------------------- --- ---------------- ----------------
<S> <S> <S> <S>
Leonard A. Rosenbaum 54 President and 1982
Chief Executive Officer
Alan H. Temple, Jr. 66 None 1986
Mitchell Drucker 51 Chief Financial Officer 1999
Sharon Canese 39 Secretary 1998
Martin J. Teitelbaum 50 Assistant Secretary 1985
Albert G. Metzler 52 None 1993
</TABLE>
Leonard A. Rosenbaum founded the Company in October 1982 and has been its
President, Chief Executive Officer and a director since that date.
Alan H. Temple, Jr. has, since 1977, been President of Harrison Homes, Inc.
Pittsford, New York, a building and consulting firm.
Mitchell Drucker joined the Company on April 19,1999. Prior to joining CVD,
Mr. Drucker was General Manager of Infoserve Corporation for a period of 11
years. Mr. Drucker also held the position of Vice President of Bankers Trust
Company from 1976-1984. In addition, Mr. Drucker has had a variety of
engagements in the manufacturing and consulting arena. Mr. Drucker was
appointed Chief Financial Officer of CVD on August 27, 1999.
Sharon Canese joined the Company on September 11, 1991. From 1998 to August
27, 1999 Ms. Canese served as Chief Financial Officer of CVD. Prior to
joining CVD, Ms. Canese was Assistant Controller of Transcontrol Corporation
for a period of four years. Ms. Canese has also held the position of
Financial Analyst of the Financial Planning Department at Eaton
Corporation/AIL Division from 1983 to 1987.
Martin J. Teitelbaum from January 1988 to date has been principal attorney
for the Law Offices of Martin J. Teitelbaum. Mr. Teitelbaum became a
director of the Company in 1985. From September 23, 1986 to December 31,
1986 he served as Corporate Secretary and served again as Corporate
Secretary from August 1997 to February 1998. Since January 1, 1987 he has
served as the Assistant Secretary. Mr. Teitelbaum serves as General Counsel
to the Company.
<PAGE> 39
Albert G. Metzler has, since 1972, been Sales Manager of R. S. Crum & Co.,
a distributor of valves and valve fittings. Mr. Metzler was formerly a
director of CVD from 9/28/83 to 5/29/86. R. S. Crum is a supplier to the
Company. On January 4, 1999, Mr. Metzler resigned as Sales Manager of R.S.
Crum & Co. and was employed full time by Stainless Design Concepts, the
Company's 100% owned subsidiary. On September 15,1999, Mr. Metzler resigned
his full time position at Stainless Design Concepts.
All directors hold office until the next annual meeting of stockholders of
the Company or until their successors are elected and qualify.
The Board of Directors met three times during 1999. Mr.Rosenbaum, Mr.Temple,
Mrs. Canese, Mr. Teitelbaum and Mr. Metzler attended all meetings.
ITEM 10. EXECUTIVE COMPENSATION
REMUNERATION
The following table sets forth certain information as to each of the
Company's most highly compensated executive officers whose cash compensation
exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- ---------------------------
Name and Principal Annual Stock Options
Position Year Compensation Granted
- --------------------------- ----- ------------ ------------
<S> <C> <C> <C>
Leonard A. Rosenbaum 1999 $ 163,742 -0-
1998 $ 163,742 -0-
President and Chief 1997 $ 211,342 -0-
Executive Officer 1996 $ 139,126 30,000 *
<FN>
* The stock options granted in 1996: vested 100% in 1999, have an exercise
price of $.125, expire 10 years from date of grant and represent 36% of the
number of options granted that year.
</TABLE>
The Company owns life insurance on the life of Leonard A. Rosenbaum in the
amount of $2,000,000. The Company is the sole beneficiary of said policy.
In June 1989, the shareholders approved a non-qualified stock option plan
covering key employees, officers and directors. Options will be awarded by
the Board of Directors or by a committee appointed by the board.
Under the plan an aggregate of 700,000 shares of common stock, $.01 par value
of the Company are reserved for issuance or transfer upon the exercise of
options which are granted. Unless otherwise provided in the Option
Agreement, an option granted under the plan shall become exercisable in 25%
installments commencing one year from the anniversary date of the grant. The
stock options generally expire five years after the date of grant. The Board
of Directors has extended this plan and it will terminate on June 30, 2004.
In 1996 a total of 84,000 options were granted which did not vest until 1999
at which time they vested 100%. In 1998, 140,000 options were granted to
employees other than executive officers or directors. The options vest at
25% per year starting in 1999. In 1999 a total of 52,500 options were
granted to employees other than executive officers or directors. The
<PAGE> 40
options vest at varying rates starting in 2000. As of December 31, 1999, no
options have been exercised under this plan.
Other than the one non-qualified stock option plan, the Company has no
pension or profit sharing plan or other contingent forms of remuneration.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS & MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
<TABLE>
Set forth below is certain information concerning persons who are known by
the Company to own beneficially more than 5% of any class of the Company's
voting shares on March 30, 2000:
Amount & Nature
Title Of Name and Address of Of Beneficial Percentage
Class Beneficial Owner Ownership (1) of Class
- ------- -------------------- --------------- ----------
<S> <S> <C> <C>
Common Leonard A. Rosenbaum 1,270,450 43.5%
Stock 1881 Lakeland Avenue
Ronkonkoma, NY 11779
Common Alan H. Temple Jr. 186,000 6.4%
Stock 10 Harrison Circle
Pittsford, NY 14534
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
<TABLE>
<CAPTION>
The following table sets forth as of March 30, 2000, information concerning
the beneficial ownership of each class of equity security by each director
and all directors and officers of the Company as a group:
Amount & Nature
Title Of Name and Address of Of Beneficial Percentage
Class Beneficial Owner Ownership (1) of Class
- ------- ------------------------- --------------- ----------
<S> <S> <C> <C>
Common Leonard A. Rosenbaum 1,270,450 43.5%
Stock 1881 Lakeland Avenue
Ronkonkoma, NY 11779
Common Martin J. Teitelbaum 2,000 (2) *
Stock 329 Middle Country Road
Smithtown, NY 11787
Common Alan H. Temple, Jr. 186,000 (3) 6.4%
Stock 10 Harrison Circle
Pittsford, NY 14534
Common Albert Metzler 57,400 (4) 2.0%
Stock 85 Shellbank Place
Rockville Centre, NY 11570
Common Mitchell Drucker 13,950 (1) *
Stock 42 Blackmore Lane
East Islip, NY 11730
Common All Directors and Officers 1,529,800 52.4%
Stock as a group (four persons)
<FN>
* Less than 1%
<PAGE> 41
(1) Except as noted, all shares are beneficially owned, and the sole voting
and investment power is held by the persons named.
(2) Shares are held by Mr. Teitelbaum's wife and beneficial ownership thereof
is disclaimed by Mr. Teitelbaum.
(3) Includes and aggregate of 13,000 shares held by Mr. Temple's wife, as to
which he disclaims beneficial interest.
(4) Includes an aggregate of 9,900 shares held by Mr. Metzler in custody for
his minor children as to which he disclaims beneficial interest.
</TABLE>
CHANGES IN CONTROL
The Company knows of no contractual arrangements which may at a subsequent
date result in a change of Company control.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1999, the Company incurred approximately $20,000 in legal fees to
Martin J. Teitelbaum. Mr. Teitelbaum, a director of the Company, is the
principal attorney for the law offices of Martin J. Teitelbaum.
<PAGE> 42
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES & REPORTS ON FORM 8-K
1. Exhibits - The following Exhibits are filed as part of, or incorporated
by reference into, this report on Form 10-KSB
(3) Articles of incorporation and by-laws
(4) Instruments defining the rights of holders, including indentures
(9) Voting trust agreement
(10) Material Contracts
(11) Statement re: Computation of per share earnings
(13) Annual or quarterly reports, Form 10-QSB
(18) Letter on change in accounting principles
(19) Previously unfiled documents
(21) Subsidiaries of registrant
(22) Published report regarding matters submitted to vote
(23) Consent of experts and counsel
(24) Power of Attorney
(28) Information from reports furnished to state insurance authorities
(99) Additional exhibits
All items included by reference.
2. Financial Statements - The following consolidated financial statement of
CVD Equipment Corporation and report of Independent Accountants are
filed as part of this Report on Form 10-KSB and should be read in
conjunction with the related notes thereto, included herein.
The following financial statements of CVD Equipment Corporation are
included in Part II, Item 7:
Report of Independent Certified Public Accountants............. F-3
Balance Sheets - December 31, 1999 and 1998.................... F-4
Statements of Income and Comprehensive Income
Years Ended December 31, 1999 and 1998..................... F-5
Statements of Stockholders Equity.............................. F-6
Statements of Cash Flows
Years Ended December 31, 1999 and 1998..................... F-7
Notes to the Financial Statements.............................. F-8-F-18
<PAGE> 43
3. Financial Statement Schedules
Report of Independent Certified Public Accountants............. S-2
Schedules:
II. Valuation and Qualifying Accounts........................ S-3
III. Amounts receivable from Related Parties and Underwriters,
Promoters, and Employees other than Related Parties,..... S-4
IV. Property, Plant and Equipment............................ S-5
V. Accumulated depreciation and amortization of Property,
Plant and Equipment...................................... S-6
VI. Supplementary Income Statement Information............... S-7
All other schedules are omitted because they are not
applicable, or not required, or because information is
included in the consolidated financial statements or notes
thereto.
<PAGE> 44
A L B R E C H T , V I G G I A N O , Z U R E C K
& C O M P A N Y , P . C .
CERTIFIED PUBLIC ACCOUNTANTS
25 SUFFOLK COURT
HAUPPAUGE, NY 11788
(631) 434-9500
To the Board of Directors and Stockholders
CVD Equipment Corporation
We consent to the use of our reports included herein and to the
reference to our firm under the heading "experts" in the Form 10-KSB.
/s/ Albrecht, Viggiano, Zureck & Co.
Hauppauge, New York
March 29, 2000
<PAGE> 45
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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
31st day of March 2000.
CVD EQUIPMENT CORPORATION
By: /s/ Leonard A. Rosenbaum
Leonard A. Rosenbaum
President and Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Leonard A. Rosenbaum President, Chief Executive Officer and Director
Leonard A. Rosenbaum
/s/ Alan H. Temple, Jr. Director
Alan H. Temple, Jr.
/s/ Martin J. Teitelbaum Director
Martin J. Teitelbaum
/s/ Mitchell Drucker Chief Financial Officer
Mitchell Drucker
/s/ Sharon Canese Secretary
Sharon Canese
/s/ Albert G. Metzler Director
Albert G. Metzler
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 91,714
<SECURITIES> 297,000
<RECEIVABLES> 1,532,395
<ALLOWANCES> 22,410
<INVENTORY> 713,762
<CURRENT-ASSETS> 2,682,150
<PP&E> 3,273,608
<DEPRECIATION> 1,068,964
<TOTAL-ASSETS> 5,412,829
<CURRENT-LIABILITIES> 539,712
<BONDS> 0
0
0
<COMMON> 29,188
<OTHER-SE> 3,865,377
<TOTAL-LIABILITY-AND-EQUITY> 5,412,829
<SALES> 5,295,859
<TOTAL-REVENUES> 5,295,859
<CGS> 3,453,307
<TOTAL-COSTS> 3,453,307
<OTHER-EXPENSES> 1,874,164
<LOSS-PROVISION> 22,410
<INTEREST-EXPENSE> 53,676
<INCOME-PRETAX> (41,802)
<INCOME-TAX> (202,343)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 160,541
<EPS-BASIC> .06
<EPS-DILUTED> .05
</TABLE>
