Greetings, and welcome to CVD Equipment's 2019 Second Quarter Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. 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 Tom McNeill, Chief Financial Officer. We have posted our earnings press release and call replay information to the Investor Relations section of our website at www.cvdequipment.com. Before I begin, I’d 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 are 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, 2018. 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.

Good afternoon, everyone, and thank you for joining our earnings call. The company's focus during the second quarter has been on getting our materials facility up and running in the third quarter, moving the MesoScribe facility from California to New York and pursuing additional equipment sales. With regard to our new materials facility, the company has invested approximately $4 million in building improvements, machinery and other related expenses to-date. With the operations at our new materials facility, starting to come online during the third quarter of 2019, we have been increasing our marketing efforts by showcasing our new facility operations and offering material coatings services to new and existing customers. We have completed the move of MesoScribe into the new materials facility and they will be resuming operations during the third quarter along with bringing the first Tantaline system online. The expanded materials operations will enhance our capabilities in providing: one, corrosion-resistant coatings to our Tantaline subsidiary for medical pharma oil and gas applications; two, sensors through our MesoScribe subsidiary for defense, aerospace and turbine applications; and three, through our CVD materials subsidiary for carbon composite materials, medical coatings, electronic substrate materials and further expansion into other coatings for defense, aerospace, medical and industrial applications. The high margin growth markets in corrosion-resistant medical aerospace and defense coatings can help flatten the uneven results -- of the uneven levels of our results. We have also been working on our fluid reactor technology and have received an Applied Research & Development award in collaboration with the Center of Biotechnology at Stony Brook University. This will help further our novel patent pending technology on an improved ECMO device. We anticipate further collaboration for this promising technology and application. We know our orders in the first half of 2019 were below anticipated levels. However, we are working a number of opportunities, which we anticipate will result in an improvement during the second half of 2019. We continue to monitor our orders and expenditures and we remain committed to returning to profitable quarterly results in Q1 2020. With that, I would like to turn the call over to our CFO, Tom McNeill.

Thank you, Len, and good afternoon. In the second quarter, our revenue was $4.9 million as compared to $6.4 million in 2018, a decrease of $1.5 million or 23.6%. And our net loss was $1.4 million or $0.21 per diluted share as compared to a net loss of $1.3 million or $0.21 per diluted share in 2018. In the first half, our revenue was $8.4 million as compared to $15.6 million in 2018, a decrease of $7.2 million or 46.1%. And our net loss was $3.6 million or $0.55 per diluted share as compared to a net loss of $800,000 or $0.12 per share -- per diluted share in 2018. Our revenue decrease during the quarter and the first half of 2019 was primarily attributable to the completion of large aerospace equipment orders and not being able to replace them in a timely fashion. Our sequential revenue increased $1.5 million in the second quarter to $4.9 million, an increase of 41.8%. During the second quarter, we received orders of approximately $3.3 million, which was below our expectations and compares to approximately $6.5 million in the first quarter of 2019. This resulted in a decrease in order backlog at June 30 to approximately $4.5 million as compared to approximately $6 million at March 31, 2019. As a result, the company's return to profitability continues to be dependent upon among other things, the receipt of new equipment orders, the ramp-up of our materials business, and managing planned capital expenditures and operating expenses. With respect to our gross profit margin percent, we improved to 10% in the second quarter as compared to negative 11% in the first quarter 2019. This is the result of improved operating efficiencies and higher revenue generating improved contribution margins as compared to Q1, 2019. Turning to our operating…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of Brett Reiss with Janney Montgomery Scott. Please proceed.

Good afternoon gentlemen. Hi, Len. Hi, Tom.

Hi, there.

Good afternoon Brett.

The orders that were below expectations, have you kind of done some soul-searching or thought about why that is?

We always do soul-searching and we always think about why. The issue here I think has a lot to do with timing. At this point in time, there's nothing specifically that we saw that we lost in -- to a customer to another vendor. So it's more timing and we've seen this before, we'll see it again. Sometimes it comes in the other direction too.

Right. Right. And did nothing within your control that you can tweak or alter so that the order flow comes in at a more rapid pace in the subsequent quarters?

We've never been able to really tweak or control our customers, and when they place the order that's really their doing. That's one of the main reasons, we're moving more towards the materials facility where we hopefully will have longer-term contracts that are much more understandable and we can basically predict.

Okay. Are we fully up and running in the new building now to accept orders for the material handling business?

As I said in my statement below, we'll be operational in the third quarter in various degrees. We are accepting orders, but we're really not going to pursue to the level we would like until approximately the third quarter.

Okay. Do you expect though a good rush of orders? Because on the first quarter call in response to one of my questions, you said that new customers had kind of kicked the tires and the only thing delaying orders was the start of the facility. So third quarter comes around and the facility is up and running, can we expect the orders to really flow?

We can expect some orders to be received. We have already have some that we need to start delivering on, but it's really just starting. We did our actual first test run just yesterday. And we need basically another three, four weeks to get it up and operational completely. MesoScribe will also be coming online in the third quarter.

Has that move been fully completed? I mean, they're over from California nothing else has to be done?

Everything in California has closed down. Everything is located here. It's still in some stage of reconnection of the equipment and some of it's just starting to be tested.

Okay. The award in collaboration with Stony Brook was there any dollar amount that went to you and Stony Brook to further the development of the oxygenator cartridge?

It's matching funds. Stony Brook or the state was putting in approximately $40,000. We're putting in about $40,000 and we're getting basically the testing that we need with actual use of blood to go to the next step with the unit. We're also starting to discuss with some of the other parties out there that would be interested in the technology. And I think we'll have a lot more to say by the end of the third or for sure by the end of the fourth quarter.

Okay. Now some companies that are on a similar business to you, there's a metric where they're able to say, we've got bids outstanding on $50 million in new orders, up from $30 million in the prior quarter. Do you have any internal, similar metric that you can share with us? In other words, how many fish hooks do you have in the pond to capture orders and even new equipment or this materials handling business that's kind of a new venture for you?

We do track that information. It's typically not put out, but we're active. We're extremely active in quotations and we expect that some of them will come to fruition.

Could you though say the level of quotations? Is it higher this quarter than last quarter? Can you just give us some sense on what the future looks like?

I don't know if I personally have that data, but we are active. And as I've said in my comments earlier, we expect to return to profitability in the first quarter.

I'm going to drop back in queue because I've asked a lot. There may be others on the call, but I cannot -- I may want to come back. Thank you, though.

Thank you. [Operator Instructions] Our next question comes from the line of Martin Howard with CVD [ph]. Please proceed. Martin Howard with CVD, your line is live. Have your question, sir? Thank you. Our next question will come from -- I believe -- I beg your pardon, Martin Howard with Edison [ph]. Your line is live. Sir we’re unable to hear you. Our next question will be with Brett Reiss with Janney Montgomery Scott. Please proceed.

All right. Thanks for the opportunity to ask a few. The first half of the year, you've spent $1.4 million on the building and machinery. Are we about finished with those kind of CapEx expenditures? What is the second half of the year going to look like?

That will depend more on order levels. For the second half of the year, it's not going to change. It's going to decrease. But the next year, it will be more dependent on order levels.

Right. Now, are the margins on the old legacy equipment orders about the same, less greater than the new materials business?

I'm not sure, I totally understood your question, Brett, but I'll try to answer what I think I understood.

Okay.

We anticipate that the margins on the materials side should be better than the equipment side. That's what you're asking.

Yes. Yes. That's good. Now in the first quarter, you talked about some Air Force awards with MesoScribe. What's the status on that?

They're being worked on.

Okay. The large aerospace customer, do we still have a liaison contact person with them? Should that -- the opportunity for that business ever come back into the fold?

We're always having on and off discussions with them, whether it's for service or spare parts or for upgrades and hopefully cautiously optimistic about the future.

Right. Right. Now in terms of reducing your expenses, are you finished there, or is there more to come in the second half?

That's sort of a fluctuating situation. It will depend a lot on order levels. It will depend a lot on completion of the new building, getting the equipment up and running. So there is potentially some additional cutting there, but it's really going to be order level-determined.

Right.

Just to delve on that.

Sorry.

In Q2, the expense reductions, cost containment initiatives that we achieved were only a partial of the quarter. So I think I highlighted in the press release or our call, we'll see continued reductions from those cost containment initiatives into Q3.

Right. Also this is the first time in memory that the 10-Q was issued I think simultaneous with the quarterly release. Is that your doing Tom? Which if so thank you.

Are you talking about the Q with the press release?

Yes.

Well, I'm not sure. In the past, I think it's been done that way always been done that way. But...

All right. Well nice to see that. What's the employee headcount now versus what it was at the end of the year?

Yes. We're about 180 down from about 195 or so at the end of the year.

Right. Right. I guess my last one, Len, we've been talking to one another many, many years and you've been at this a long time. How are your spirits just -- and how's the esprit de corps at CVD today?

Well everybody does a lot better with the higher backlog and with larger orders, but we're all there participating and working hard. And we like a lot of the technology areas that we're moving into, especially in the materials area, some of the aerospace applications, some of the medical.

Okay. Thank you for answering my questions. And of course I am wishing and hoping for the best.

Thank you.

Thank you. [Operator Instructions] We have reached the end of our Q&A session. Allow me to hand the floor back over to management for closing remarks.

I thank everyone for joining our earnings call and I look forward to speaking to you at the end of the third quarter. Thank you.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.