Good day ladies and gentlemen, and welcome to the CVD Equipment First Quarter 2016 Earnings Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder this conference is being recorded. I would now like to turn the call over to your host Glen Charles, Chief Financial Officer. Thank you. You may begin.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us today for our first quarter 2016 earnings conference call. We will begin with some prepared remarks followed by a question-and-answer session. Presenting on the call today will be Len Rosenbaum, President and CEO and myself Glen Charles, CFO. As a reminder, today's call is being recorded. Additionally, we have posted our earnings release and call replay information to the Investor Relations event section of our website at www.cvdequipment.com. Before we begin, I would like to remind you that many of the comments made on today's call are forward-looking statements including those related to future financial performance, market growth, total available market, demand for our products and general business conditions and outlook. These are forward-looking statements based on certain assumptions, expectations and projections and are subject to a number of risks and uncertainties described in our press release and in our filings with the SEC including, but not limited to the risk factor section of our 10-K for the year ended December 31, 2015 and our other reports filed with the SEC. Actual results may differ materially from those described during this call. In addition, all forward-looking statements are made as of today and we undertake no obligation to update any forward-looking statements based on new circumstances or revised expectations. Now I would like to turn the call over to Len. Len?

Good afternoon, everyone, and thank you for joining us for our first quarter 2016 earnings conference call. As you know, last quarter was our first earnings conference call and I spent some time outlining CVD's position in our target markets and summarizing our growth strategy. Today I will briefly update you on the progress we are making towards achieving our strategic goals and then Glen you walk you through a summary of our 2016 first quarter financial results. After, we will be pleased to answer some questions. Our primary mission is to develop and enable commercialization of next generation technologies by incorporating our technology into equipment build for customers, manufacturing processes. Over the last 33 years we have nurtured new technologies in various lab environments and followed those developments through production by building the equipment needed each step in the process. Wanted to grow our business over the long term, we plan to continue to expand our capabilities in equipment design, process development, materials applications, IT and manufacturing as we work with new and existing customers. Last quarter we updated you on our potentially large opportunity with the long time customer who is a large U.S. aerospace manufacturer. Over the last few years we have been engaged with them on different aspects of their manufacturing process to develop critical technology needed for the development of jet engines. As we previously mentioned, systems have already been delivered in the factory and depending on the specific equipment are either in production being qualified for production and the initial start-up are soon to be started. The negotiations for additional orders from this customer have been prolonged and have required substantial attention and resources. I am happy to saying negotiations have been ongoing and we are making progress. We anticipate the favor of our…

Thank you, Len. During the first quarter of 2016 we experienced a decline in revenue, operating income and net income as a result of the Company's focus on securing a significant contract with our largest aerospace customer. Our revenue decreased 49% to $5.0 million for the current quarter from $9.7 million in 2015. We experienced an operating loss of $500,000 and incurred a net loss of $300,000. That same customer represents a 58.8% and 54.6% of our revenue for the three months ended March 31, 2016 and 2015 respectively. Orders declined to $2.3 million compared to $5.2 million in orders in 2015 resulting in a backlog of $3.4 million as of March 31, 2016 compared to $16.6 million as of March 31, 2015. In addition to the distractions in a substantial amount of time spent on the contract negotiations, the Company standard for traffic process of selling equipment lend itself to uneven orders and backlog levels from period to period. Approximately $400,000 or 11.8% of the first quarter 2016 backlog is from our largest customer as compared to $9.7 million or 58.4% from that same customer in 2015. Although timing for completion of the backlog varies depending on the product mix and can be as long as two years, we believe a significant portion of our current backlog will be completed within the next 12 months. We generated a gross profit of $1.5 million resulting in a gross margin of 30.7% for the three months ended March 31, 2016 as compared to a gross profit of $3.8 million with a gross margin of 38.8% for the three months ended March 31, 2015. The decrease gross margin is primarily attributable to the lower revenues with comparable fixed costs. Operating expenses decreased in 2016 due to reduced R&D, selling and shipping and…

[Operator Instructions] First question comes from Michael Potter of Monarch Capital Group. Please go ahead.

Hi, it’s Michael Potter from Monarch Capital Group. How are you? Just a quick question, on the release there is no share count, can you give us the fully diluted share count please?

As of March 31, we have 6,213,142 shares.

Okay. And what was it same time last year?

Well last year it was 6,299, 194 because of the potential from options of issuing common shares.

Sure. Do me a favor just included next go around I'd appreciate it. With regards to the new contract, I'm sorry, let me back up, an adjusted EBITDA for the quarter, can you give us the non-cash expenses?

Through about $300,000 negative EBITDA.

And that includes stock option expense?

Yes.

Okay. So was a negative $300,000 for Q1?

Correct.

Okay. With regards to the, Glen with regard to the new contract or potential new contract, I know it's tough to put a clock on this or a timer on it. But do you anticipate this will be a Q2 event?

Hopefully yes. No guarantee.

Okay. So you're hopefully that sometime before the end of the second quarter you'll be able to make a release on the contract?

Hopefully, as soon as we know further we’ll let the shareholders know also.

Okay. And you mentioned quickly with regards to the reduction in R&D because of the - I guess the staffing issue. Can you just give us a little bit more information exactly what transpired with that line?

Not much. We had one person I believe one or two. Not senior, but they did believe.

Which line was the again, Glen, I'm sorry.

Repeat that please.

Can you give us the full story, I mean which line - which business segment was this again?

There in our application lab for R&D.

Application lab, okay.

And number of the people are working now more on new product development and new core patient activity.

Okay. So we had two people that lasts during the quarter and that's - so that was a staffing reduction and was there a further reduction in R&D expense as well or is that all from just two people leaving?

Mostly from two people leaving and also charging of time to other areas such as sales and little of R&D.

Got it. Do you anticipate this will be ongoing at least for 2016?

Possibly but not necessarily. Okay, we'll adjust it as we see fit going forward whether we want to replace those personnel or move more of the time with people back from sales to actual product development will be something we'll determine going forward.

Okay. Since we're halfway through Q2, is this at least the plan for Q2 to keep it in line with Q1?

Well, one we don't give guidance and for part of Q2, the ends will probably be yes. Can we move on because there are other people Michael.

I apologize, I'm sorry. Absolutely go ahead.

The next question comes from [Jerry Seeds] [ph], a Private Investor. Please go ahead.

It's been answered. It was the question of the reduction in personnel.

[Operator Instructions] The next question comes from [Michael Palmer] [ph], a Private Investor. Please go ahead.

Would Tesla affect you guys in any way possible because you are doing graphene and eventually they will be using graphene or graphite.

It might, I don’t know at this point.

Are you working with any graphite miners right now? Where do you get your graphite from?

Well, we don’t use graphite except in our equipment for applications there. If you are talking about it for graphene applications, typically we grow that or make it from gases.

Do you use synthetic graphite?

Well, I don’t know if you call it synthetic.

Okay. So you’re not working with any graphite mine at the moment.

No. We haven't. We did discuss certain things in R&D with some of them but we are not working directly with any of them at this point.

Who did you talk to?

It’s been a while. I don’t remember.

Okay. But eventually if Tesla starts using graphene, you guys will be one of the superiors I’d think now.

I have no idea how to answer that question, okay. It's always a possibility that we will work.

Okay. Thank you.

[Operator Instructions] The next question comes from Doug Newman of UBS. Please go ahead.

Hi. I missed the early part of the call. Did you indicate as to why there were delays in orders from your aerospace customer? Or did they indicate?

There has been no real specific - I know some of the programs maybe running a little bit late from what I can tell at least. It's been ongoing negotiations. We've been getting more equipment that we shipped up and running so they may have wanted to see how that was performing. I don't have an insight into completely varied determination of schedules.

Are they manufacturing an end product at this point using your equipment?

To the best of my knowledge, the answer is yes.

And if say - well, are they planning on scaling that up and would they then need more equipment?

They won't need more equipment and I believe we have already scaled it.

When you say you’ve already scaled it -

As mentioned in other conversations, we’ve started off with them a number of years ago, probably about four or five years, and we built smaller production equipment at that point which is in use. We’ve built some additional pilot line equipment that's in use, we've built a larger pilot line system that’s in use, and they are just bringing a lot of this online at this time.

So, if they were to run their plan at their anticipated run rate, would that require more equipment from you?

I expect so but that's really their knowledge more than mine.

Okay, thanks.

The next question comes from Brett Reiss of Janney Montgomery Scott. Please go ahead.

Hi gentlemen. The aerospace customer that was so intimately involved in, can they at this point change versus in mid-stream or they are pretty much locked into using us?

I’m sure people could do whatever they want. Nobody has ever locked in totally to another person. We've done a lot of work and business with them. I expect that are a needed asset. But what they do is still under negotiation.

Okay. Now, this question is prohibitive of the ability of the company to multitask. The year-end 10Q, you had a list, that you had 38 engineers, 9 people in sales and marketing. I appreciate that this aerospace contract is huge, material and commended so much, attention, and resources, but were all of the nine sales people in marketing barked down with just the aerospace? Why weren’t you able to simultaneously pursue other business and shepherd this big contract with the aerospace customer along?

Well, it’s not just all of our sales people being involved, a lot of has to do with our engineering capability and the amount that the engineer is assigned, which was enormous. And if you - per my previous comments, we've done five major different types of systems with them, not just one. Each one required extensive engineering and extensive field sales administration et cetera.

Okay. So the effort involved here you really had to - just focusing on and it was a distraction from the other things.

Well, yes. And it was a good distraction. It got us further along with them. We wouldn’t be in the position we are in today if we didn’t do it. Whether that's a good or bad position depends on the future. If we book additional substantial orders, it probably was a good distraction. If it doesn't occur then it’s probably a bad one. We liked them to take that path and we still feel that was a correct path at this time.

Right. And once the business with this big customer starts to flow, it will free up resources so that the opportunity in the new medical products can be pursued and other avenues so that you can utilize the surplus capacity that you have in the new plant.

Well, we already started to do that. And as I mentioned in the last quarter of 2015 and we continue to do it in 2016. Going forward even with the larger order, the distraction won't be a severe because we anticipate that the engineering involved will not be a substantial.

Okay. Now there are other major companies that are moving towards composite materials because of what you’ve been to do with this large aerospace customer, are you going to maybe become the go-to-firm for the other large companies with composites. Is that a possibility?

Well, let me see if I can answer that a little differently. We've worked with other companies in the past with composite materials, and I expect to work with other companies in the future with composite materials.

And then one last one on the lawsuit front, I mean, everything - the one or two bad breaks we had there, that's all behind us and the deck looks clean going forward?

There is nothing out there at this time and we hope there is nothing out there in the future.

Great. And I’ll drop back in queue. Thank you for taking my multiple questions.

The next question comes from Will Hamilton of Manatuck Hill. Please go ahead.

Good afternoon guys. One more question on commercial aerospace if I may. In terms of - you made the comment that this would be your largest contract you received in corporate history. I was wondering if you could just roughly size it for us. We’re talking north of $20 million.

Since we're still in negotiations, I’d prefer not to disclose any information concerning pricing at this point.

Okay. I know that in the five sort of different systems you’ve provided them in the past, one was in that $20 million range, so would it be similar to that or we’re talking smaller units?

There was no one $20 million order in the past, okay. You may be confusing a number of different ones that were associated in lumping them together.

Okay. And do you acknowledge that - still through that - there isn't a competing solution out there. If it's just a questions or timing and if they still go this route?

I'm sure there are other competing solutions potential. I don't know what they would be or who they would be. And I anticipate that based on our past performance that hopefully they will continue to work with us.

Okay. And last question from me just changing to the medical implant market or device to customer. How much as a percentage of sales was that this quarter. Do you have that?

No I don't have that information.

But is it more than 10%, I mean you would have to - I guess disclosed that in the Q.

Right, it was less than 10%.

Less than 10%. Okay, so just a question on that and what - that obviously dropped off in the fourth quarter, was that - are you waiting on follow-on orders from them as well?

No, we haven't built schedule, that's through the rest of this year.

Okay. So this was sort of temporary in terms of the law relative to what you were building for them at the second half of last year?

Not sure how to answer that one. I'm not sure I understand the question.

Well in the fourth quarter it was 30% of your sales which was about $2.5 million and so if you are talking obviously less than 10%, it's under $500,000 this quarter. So I was just wondering A, is there orders I guess in the backlog from them or are you waiting for a new order for them for more systems.

Well as I said, we haven't built schedule for the rest of the year, so there are orders in the backlog.

Okay. So pick up from this - because obviously that contributed to the drop off. So I was just wondering.

Okay.

Thanks.

The next question comes from Jeff Gilbert of [indiscernible] Investments. Please go ahead.

Thanks for taking my call, just two quick questions. Historically speaking and this just might be a, an alternate way to ask previous caller's question, but historically speaking what was and has been your largest order to date.

Largest order to date, from anyone?

Correct

Probably around $12 million.

Thank you. And then just not sure if you disclosed this but reading of your 10-K, 2015 63% of your sales were accounted for by two customers. Have you disclosed either into those two clients?

We cannot disclose the names of our customers. Most cases because we're under NDAs with them.

Sounds good. Thanks for taking my call.

This concludes the time allocated for questions. I would now like to turn the floor back over to management for closing comments.