Welcome to the CVD Equipment Third Quarter 2016 Earnings Conference Call. [Operator Instructions]. It is now my pleasure to introduce your host Ms. Annie Leschin, Investor Relations.. Thank you. You may begin.

Thank you, Operator. Good afternoon everyone, and thank you for joining us today for our third 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 Glen Charles, CFO. As a reminder, today's call is being recorded. Additionally, we have posted our earnings release and call replay information on 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 forward-looking statements based on certain assumptions, expectations and projections and are subject to a number of risks and uncertainties as described in our press release and in our filings with the SEC including, including but not limited to the risk factors section of our 10-K for the year ended December 31, 2015. 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 third quarter 2016 earnings conference call. Today I will update you on the progress we're making towards achieving our strategic goals and then Glen will walk you through a summary of our quarterly financial results, after that we will be happy to answer any questions. The third quarter was one that helped set the stage for the coming year. Everyone received a large order from a major aviation component supplier at the end of June and leased [ph] report that for the second quarter in a row our backlog has reached record levels, given the size and scope of the large order to build fiber coating systems for the aviation customers new high volume facility this order requires an engineering purchasing parts and into production and system start up. As a result third quarter total third quarter revenues were lower year-over-year. Over the last few months the majority of the engineering completed parts [indiscernible] and we are on schedule with the delivery requirements. As a project progresses we will see an increase in revenue over the next five, six quarters, we remain engaged with this customer for additional equipment needed to bring that high volume facility to full capacity over the next few years. Our differentiated technology and ability to meet this customer is dynamically changing needs allowed us to secure this large order, the same capabilities are enabling us to pursue other markets and opportunities for other new and existing customers. This quarter we saw an increased demand for major universities and government research labs such as Princeton University, and Avon [ph] Research Laboratory for R&D equipment. We also doubled the level of investment in our independent R&D for areas for corrosion resistance coatings, chemical vapor deposition and…

Thank you, Len. Our backlog in the third quarter increased to its highest level yet at 31.8 million a year-over-year increase of 176.9%. We received $5 million in new orders during the quarter 92% of the orders came from customers other than our large aviation customer. While the timing for completion of a backlog varies we expect a significant portion of current background to be fulfilled over the next five or six quarters. Although third quarter revenues decrease year over year from 10.6 million to 4.9 million they increase 30% over the second quarter. As we began the initial phase of the large pilot production contract from the aviation component supplier. The lower year-over-year revenues coupled with the cost of maintaining production capabilities in anticipation of the fall-on order from our largest customer let their gross margin of 34.6% compared to 38.8% for the same period last year. Total operating expenses for the third quarter decreased 35.9% year over year from 3.3 million to 2.1 million largely due to a onetime $1 million litigation settlement expense last year. Excluding this charge operating expenses decreased 7.7% year-over-year. Selling and shipping expenses for the quarter decreased 16.5% from 312,000 to 261,000. General and administration expenses for the quarter decreased 10.5% from 1.9 million to 1.7 million primarily into a decrease in legal fees this quarter. As Len mentioned this quarter we expanded our internal R&D activities resulting in higher costs than the same period a year ago. As a result our third quarter net loss was 85,000 or $0.01 per diluted share compared to net income of $812,000 or $0.13 per diluted share for the third quarter of 2015. Our cash and cash equivalents as of September 30, 2016 total 16.6 million, an increase of 2.6 million from June 30, 2016. Similar for last quarter our working capital was 19.9 million at September 30, 2016. We believe our cash is sufficient to meet our working capital and CapEx requirements for the next 12 months. Looking ahead with a strong backlog and a growing pipeline we believe we are setting a stage for continuing growth. With that I'll turn the call over to the operator for questions. Thank you.

[Operator Instructions]. Our first question is from Brett Reiss from Janney Montgomery Scott. Please go ahead.

Len, I listened to your introductory comments and I wasn't sure are you anticipating add-on orders from the big aerospace customer in the becoming let's say 3 to 5 quarters?

We are working with the customer for potentially additional equipment needs that they may have as they expand their facility.

Okay. And would be a material number over and above that $31 million order?

Not at liberty to really give it.

Okay. Len you know the cash went up $2.6 million is that a rough number of what the free cash flow for the quarter was?

Pretty much yes. We have to this point we've received some of the installment payments from the large aerospace supplier in advance of purchasing the parts and therefore our cash has increased. We expect over the next coming months it's used a good portion of that to purchase the parts required for the job done.

The next question comes from Gordon Howard with Bryn Mawr Trust. Please go ahead.

I'm a long term stockholder. I sort of feel like we've been with Moses in the desert and we can see the promised land over the horizon. So we’re seeing the promised land I'm happy about that. Way back months ago you had hoped and I use the word why don't you use the word hope don't worry about the lawyers because you can say hope, I dream I think, you're so careful about what you say but that you'd be doing maybe a 100 million and the plant could do a 100 million and you would need more plants. Now is that still a possibility?

Everything is possible.

That was a dumb question if you can allow me. Way back when I first come into stock 10 years ago whenever it was, the [indiscernible] has maybe five or six pages. Now it's a 100, is that because lawyers want you to answer every possible contingency seems like such a waste of paper, a waste of your time, a waste of your stockholders time. Can't we cut back to five pages again?

You're preaching to the client, talk to the SEC, we just have to follow their regulations. If anything as we grow it's going to get more [indiscernible].

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

So maybe this question have been asked this question in a slightly different way, your aviation customer making the assumption or not making the assumption that you get any more orders from them. If they were -- if they had to fill out their factory with the equipment such as yours, what percentage increase over the order that you currently have would that be? Again not making any assumption that they place that order with you.

Again I'm not at liberty to really answer that question.

Okay. How big is the factory and what percentage of capacity is it equipped to operate?

That I think you're going to have to take a look at what they're saying, it's a fairly substantial factory and they are taking on a very significant project. I think they're going to do well.

We have Brett Reiss with a supplemental question. Please go ahead, Brett.

Thanks for taking the additional one or two, you know there was quite a bit of selling and volume leading up to the call and I know there was a major shareholder and friend to the company that unfortunately some time ago passed away. Was this selling coming from those interests and do you know whether this selling is finished?

I have no information concerning the question.

Jerry, can you hear me?

[Indiscernible], following up on an earlier conversation earlier question, have you gone to contract or are you in negotiations to acquire additional space?

No we're not in negotiations at this point and we have not acquired additional space.

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

The new areas that you might be working at, are you making any particular progress that we can talk about, putting aside your space--

We’re making progress. I'd rather postpone talking about those for a little bit longer and I think everybody will be appreciative and pleased with the progress we’re making.

The next question comes from Gordon Howard, he has a supplemental question. Please go ahead.

Way back there was talk of, you’re working on new products sort of with different companies where if they were successful commercial you might get a piece of the action. Are you working on any projects of that nature where if something you want another corporation is trying to develop and it turns out to be a commercial product you would get recurring royalties is that not a factor?

We are working with of the companies, working in areas of electronics, LED applications in some cases. We’re working with medical company concerning nanotechnology, we’re working with some corrosion resistant coating company. All of these things are being pursued to enhance 2017.

Would anyone live through royalties?

Potentially.

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

Where is your number of people employed at the end of the third quarter stand compared to the number of people employed at the end of the second quarter and also at the end of third quarter last year?

Okay. Well at the end of the third quarter this year we have 177 full time employees compared to I believe we had 192, at the end of 2015. I think at the end of the second quarter of this year we may have had about a 180 and off hand at the end of September of last year -- I don’t have exactly yet I think we probably had posted 200 between 195 to 200 people. At the end of third quarter of last year.

This seems counter-intuitive to have your payroll decreasing and business moving. Is it change in mix of your people so you've got more people doing R&D and fewer people doing actual construction?

No, basically what's happened is we have I won't even saying reduced we just have a few people have left the employee over the past 9 to 12 months, we haven't replaced them mainly because of the delays that we incurred with the negotiations with large aerospace buyer and now that we've got it it's still in the beginning stages and we do intend to increase our staff as the needs are warranted over the next several months.

Do you anticipate any problem in getting skilled labor out there?

There's always some types of problems involved but again the engineering skills we've held on to its more the production people which are easiest to hire, that we will be getting back as the needs arise.

This concludes the question and answer session. I would like to turn the floor back to Len for closing remarks.

Thank you everyone for joining us today. We anticipate as Glen and I mentioned it's for the growth and diversification as we prepare for a strong 2017. I look forward to talking with everyone either during the quarter or hopefully at our shareholder meeting on December 9th. Thank you.

This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.