Greetings, and welcome to the CVD Equipment Second Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded. It is now my pleasure to introduce your host Mr. 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 second 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 me Glen Charles. 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 factors 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 second quarter 2016 earnings conference call. Today I will update you on the progress we are making towards achieving our strategic goals and then Glen will walk you through a summary of our 2016 second quarter financial results. We will be happy to answer any questions after our prepared remarks. I am pleased to report that in late June our hard work and persistence paid off when we received a large order from a major aviation component supplier to go fiber coating systems for their new high volume facility. This represents an important and positive outcome of a process that began several quarters ago and commanded the majority of our collective resources. Our technology and manufacturing capability are crucial to securing this $30 million order. Our fiber coating equipment enables coatings that significantly increased engine efficiency and reduce operational costs. We believe this win helps position us for future business as a leading supplier of next generation technology for the aerospace industry and for other industrial applications. In addition to this order we have been engaged with this customer on other equipment for manufacturing the material used in the jet engines. As we mentioned in our last call a number of CVD systems have been delivered to their factory and depending on the specific equipment are either in production, being qualified for production or any initial start-ups base. We believe their level of order activity will continue as this customer ramps high volume facility to full capacity over the next few years. For the last two quarters we took the deliberate steps to increase and diversify our customer order levels. We have been very busy sourcing new opportunities and coating business to existing and new customers in markets including aerospace, medical and electronic applications. We also anticipate expanding into equipment and services for corrosion, observation and vary system coating using chemical vapor deposition, chemical vapor infiltration and thermal spray coatings. These opportunities should continue to increase order activity, revenues and profitability in the second half of the year. The expansion of our activity during Q1 and Q2 has already resulted in third quarter orders from our core business returning to the normal levels achieved in the past and we expect an upper trend going forward. In closing, we are thrilled to see how our hard work pay off this quarter with such a sizable win from an industry leader and our focus is on executing on this order, increasing order levels and diversifying our customer base. Our backlog is the highest as has ever been and we intend to continue to build on the success during the second half of the year and to position us for 2017. CVD remains at the forefront of next generation technologies that we believe will continue to differentiate us from competition and drive improved performance and create higher value over the long term. Now let me turn this back over to Glen.

Thank you, Len. Let me begin with backlog. For the second quarter orders increased 143.5% year-over-year from $13.1 million to $31.9 million. This included our largest order ever for $29.6 million from a major aviation component supplier. This resulted in a backlog of $31 million as of June 30, 2016 compared to $19.3 million as of June 30, 2015. While declining for completion of the backlog varies and is depended upon the product mix we expect these orders to be fulfilled over the next 18 months or so. As we continue to pursue our largest pilot production contract and follow-on order from the aviation component supplier we experienced a decline in revenue of 64.1% in the second quarter year-over-year from $10.4 million to $3.7 million. Revenue for additional multiple orders from this customer represented $3.2 million for the current quarter. The lower year-over-year revenues coupled with the cost of maintaining production capabilities in anticipation of the follow-on orders from our largest customer led to a gross profit of $500,000 for the second quarter with a gross margin of 13.2%. This compares to a gross profit of $4.2 million and 39.8% gross margin for the same period last year. We expect our margins to return to more normalized levels as the year progresses and revenues increase. Total operating expenses declined 39.9% from $2.3 million to $1.5 million year-over-year. This was primarily due to the results of the negotiated reduction of $629,000 in legal fees and expenses previously accrued in connection with the settlement of the Taiwan Glass litigation and a reduction independently conducted research and product development for CVD. Selling and shipping expenses for the quarter were relatively flat with the same period last year. General and administrative expenses for the second quarter of 2016 totaled $1.7 million compared to $2.1 million year-over-year, a reduction of 17.3% which was primarily the result of lower legal fees. As a result, the second quarter operating loss was $1 million compared to an operating income of $1.5 million for the same period last year. Our net loss was $496,000 or $0.08 per diluted share compared to net income of $1.3 million or $0.21 per diluted share for the second quarter of 2015. Cash and cash equivalents totaled $14 million at June 30, 2016 an increase of $1.7 million from March 31, 2016 due to timely collections of customer payments. Working capital increased $300,000 to $19.9 million at June 30, 2016 compared to that of March 31, 2016. We believe our cash is more than sufficient to meet our working capital and CapEx requirements for the coming year. In closing the large order we received coupled with the potential for future follow-on orders as well as orders and opportunities from other customer's leaves us very encouraged about the second half of 2016 and beyond. With that I will turn the call over to the operator for questions. Operator?

Thank you ladies and gentlemen. [Operator Instructions] Our first question comes from the line of Brett Reiss from Janney Montgomery Scott. Please go ahead.

Yes. Hi Len, hi Glen. How are you doing?

Good.

As your employees and engineering and sales staff fill the $29.6 million order over the next 18 months with this aerospace customer, will resources be freed up so that you can pursue the other opportunities you talk about?

Absolutely. The whole plan for a significant amount of our engineering and manufacturing will not be completely tied up over that time period. So we are definitely presuming other business.

Is there a high probability that we will see material additional orders in the second half in the year from this main aerospace customer?

Orders? That's really dependent upon them. I do not have complete knowledge of their ramp-up schedule and obviously there is no guarantee that we would be awarded those orders even if we didn't have that knowledge. But we are ramping up other orders and as I said earlier, we have already normalized our past level in the third quarter of this year and I am expecting an upper trend going into the fourth and 2017.

In the 10-Q your total orders were $34.2 million and when I take away the $29.6 million with this one customer so for the first six months you had orders of $4.6 million from other than this major aerospace customer. Could you share with us what the nature of that $4.6 million is and what the next six months look like from if you have that kind of visibility?

Well, the orders for the previous six months were combination of [indiscernible] services that we provide normally and have provided normally over the last number of years. We have already normalized the level for the third quarter and it may exceed it, it may not. But I expect it to exceed it further in the fourth quarter and going into 2017. We have spoken about one thing before obviously the large orders was a lumpy order. There is no way we can control it, but we are very happy to accept it and going forward I would be happy to accept others obviously walk away but we do need to diversify the number of customers that we have so that there is not as much concentration going forward and we have started that. We will continue to do that. But we will also continue to service our existing aerospace, medical and other customer base.

Have you started to see orders flow from the medical products coating which you in the past thought would be an area of opportunity for the company?

Well, just like with aerospace we are still shipping medical systems and we anticipate that we will ship more in 2017 also.

Right and I noticed the employee, the full time employee count went from 192 down to 180 with all of the things percolating there I would have thought that that would remain the same or even tick up a little bit. Why is that?

Couple of reasons. One is that during this sort of slower period it's a good opportunity to improve your work force or sometimes it's not by adding people, sometimes it's by deleting also. Secondly, you do get a certain amount of personnel that want to strike out and go on their own, and go other places and use their renew, we try to prevent that but it doesn't happen.

Right. One final one and I will drop back in queue. I noticed that the business that SDC, the division in [indiscernible] seem to have dropped off this last quarter and over the last six months refresh my recollection, what exactly do up there and why was business soft in that neck of the woods?

What they do up there is, they build our custom ultra-high purity gas delivery systems and they also have their own line of gas in the storage gap that they sell to industry. There is a lot of, in the past year there has been a lot of inter-company work especially associated with the aerospace and the medical customer. But when we drop off here they do see a drop off also.

Okay. Thanks for taking my questions.

And you are welcome.

Thank you. [Operator Instructions] Our next question comes from the line of Gordon Howard from Bryn Mawr Trust, please go ahead.

Hi. I know for the airplane thing is some idea that you code the stuff -- medical stuff when you talk about like industry and other industries that you are hoping to get business from could you give me some idea what kind of products you are stuffed with systems creating?

Okay. Well, on the research side we do ship a fair amount of equipment in the past and we expect to ship even more in the future to industrial and university research labs for next generation technology or products. We also do a fair amount in at times in the LED areas, semiconductors, we're doing a lot with very thin films and silicon nanowires, carbon nanotubes. So, it's a very diverse base, we ship a fair amount overseas to not only research labs but to industrial customers over there for sensor applications. So, it's not just one big area, it's a multitude of different ones.

Thanks a lot.

You're welcome.

Thank you. Ladies and gentlemen, we have no further questions in queue at this time. I would like to turn the floor back over to Mr. Leonard Rosenbaum for closing comments.

Okay. Thank you very much for participating and I look forward to talking with all of you either during the quarter or at the next conference call. Thank you.

Thank you, ladies and gentlemen. This does conclude our teleconference for today. You may now disconnect your lines at this time. Thank you for your participation and have a wonderful day.