CVD EQUIPMENT CORP 10-K

Item 9A. Controls and Procedures.   Disclosure Controls and Procedures . We maintain a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 13d-15(e) under the Exchange Act of 1934, as amended, (the “Exchange Act”)). As required by Rule 13a-15(b) under the Exchange Act, management of the Company, under the direction of our Chief Executive Officer and Chief Financial Officer, reviewed and performed an evaluation of the effectiveness of design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of December 31, 2021.   Based on that review and evaluation, our Chief Executive Officer and Chief Financial Officer, along with others in our management, have determined that as of the end of the period covered by this Report on Form 10-K, the disclosure controls and procedures were effective to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding disclosures.   43     Changes in Internal Controls   There were no changes in our internal controls over financial reporting as defined in Rule 13a-15(f) or Rule 15d-15(f) under the Exchange Act that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the internal controls over financial reporting.   Limitations on the Effectiveness of Controls   We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control systems are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.   Management’s Annual Report on Internal Control Over Financial Reporting. Our management is responsible for establishing and maintaining effective internal control over financial reporting (as defined in Rule 13a – 15(f) of the Exchange Act). There are inherent limitations to the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time. We have assessed the effectiveness of our internal controls over financial reporting (as defined in Rule 13a -15(f) of the Exchange Act) as of December 31, 2021. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control – Integrated Framework (2013)”. Management concluded that, as of December 31, 2021, our internal control over financial reporting was effective based on the criteria established by the COSO Internal Control Framework.   This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.   Item 9B. Other Information.   None.   44     PART III   Item 10. Directors, Executive Officers, and Corporate Governance.   Background and Experience of Directors   When considering whether directors and nominees have the experience, qualifications, attributes or skills, taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of our business and structure, the Nominating, Governance and Compliance Committee focused primarily on each person’s background and experience as reflected in the information discussed in each of the directors’ individual biographies set forth immediately below.  We believe that our directors provide an appropriate mix of experience and skills relevant to the size and nature of our business. As more specifically described in such person’s individual biographies set forth below, our directors possess relevant and industry-specific experience and knowledge in the engineering financial and business fields, as the case may be, which we believe enhances the Board’s ability to oversee, evaluate and direct our overall corporate strategy. The Nominating, Governance and Compliance Committee annually reviews and makes recommendations to the Board regarding the composition and size of the Board so that the Board consists of members with the proper expertise, skills, attributes, and personal and professional backgrounds needed by the Board, consistent with applicable regulatory requirements.   The Nominating, Governance and Compliance Committee believes that all directors, including nominees, should possess the highest personal and professional ethics, integrity, and values, and be committed to representing the long-term interests of our shareholders. The Nominating, Governance and Compliance Committee will consider criteria including the nominee’s current or recent experience as a senior executive officer, whether the nominee is independent, as that term is defined in existing independence requirements of the NASDAQ Capital Market and the Securities and Exchange Commission, the business, scientific or engineering experience currently desired on the Board, geography, the nominee’s industry experience, and the nominee’s general ability to enhance the overall composition of the Board.   The Nominating, Governance and Compliance Committee does not have a formal policy on diversity; however, in recommending directors, the Board and the Committee consider the specific background and experience of the Board members and other personal attributes in an effort to provide a diverse mix of capabilities, contributions and viewpoints which the Board believes enables it to function effectively as the Board of Directors of a company with our size and the nature of our business.   Legal Proceedings Involving Directors   None.   45     Board Leadership   In January 2021, the Board appointed Lawrence J. Waldman to serve as the Chairman, which separated the positions of Chairman and CEO. Mr. Waldman also continues to serve as the Lead Independent Director. The Lead Independent Director is appointed by the Board and is responsible for coordinating the activities of the independent directors and the Chief Executive Officer of the Company to set agendas for Board meetings and chair executive sessions of the independent directors. The Lead Independent Director is also responsible for meeting, from time to time, with our Compensation Committee to discuss the Chief Executive Officer’s performance.   Our Corporate Governance practices contain several features which we believe will ensure that the Board maintains effective and independent oversight of management, including the following:     ● Executive sessions without management and non-independent directors present are a standing Board agenda item. Executive sessions of the independent directors are held at any time requested by an independent director and, in any event, are held in connection with at least 100% of regularly schedule Board meetings.   ● The Board regularly meets in executive session with the CEO without other members of management present.   ● All Board committee members are independent directors. The committee chairs have authority to hold executive sessions with management and non-independent directors present.   While our Board has no formal policy with respect to separation of the positions of Chairman and CEO or with respect to whether the Chairman should be a member of management or an independent director, we believe that the creation of the position of Lead Independent Director properly facilitates better communication between the Independent Directors on the one hand and the non-Independent Directors and members of management on the other hand and leads to improved oversight and discussions by the Board as a whole. The Chief Executive Officer of the Company, Emmanuel Lakios, is tasked with the responsibility or implementing our corporate strategy, we believe he is best suited for leading discussions with input from the Lead Independent Director, at the Board level, regarding performance relative to our corporate strategy and this discussion accounts for a significant portion of the time devoted at the Board meetings.   Our Certificate of Incorporation and Bylaws provide for our Company to be managed by or under the direction of the Board of Directors. Under our Certificate of Incorporation and Bylaws, the number of directors is fixed from time to time by the Board of Directors. The Board of Directors currently consists of five members. Directors are elected for a period of one year and thereafter serve, subject to the Bylaws, until the next annual meeting at which their successors are duly elected by the shareholders.   46     The following table sets for the names, ages and positions with the Company of each of our directors and executive officers, as of March 15, 2022.   Name Age Position(s) with the Company Emmanuel Lakios 60 Chief Executive Officer, President, Director Lawrence J. Waldman 75 Chairman of the Board of Directors, Lead Independent Director, Chairman-Audit Committee Conrad J. Gunther 75 Director, Chairman-Compensation Committee Raymond A. Nielsen 71 Director, Chairman-Nominating, Governance and Compliance Committee Robert M. Brill 75 Director, Chairman- Strategic Planning Committee Thomas McNeill 59 Chief Financial Officer, Executive Vice President, Secretary and Treasurer Kevin R. Collins 56 Vice President and General Manager-SDC Division Jeffrey A. Brogan 52 Vice President of Sales and Marketing Maxim Shatalov 51 Vice President of Engineering and Technology   Emmanuel Lakios   Emmanuel Lakios was appointed to serve as President and Chief Executive Officer of the Company on January 22, 2021, and on July 15, 2021 was elected by the shareholders as a member of the Board of Directors. Mr. Lakios joined the Company as Vice President Sales and Marketing in February 2017. Mr. Lakios has over thirty (30) years of experience serving the aerospace, semiconductor, data storage and optical device industries and is the holder of several patents in the field of process equipment and device structure. From January 2015 through February 2017, Mr. Lakios was the President and Chief Executive Officer at Sensor Electronic Technology, Inc., overseeing that company’s transition from R&D to a leading global commercial UV LED supplier. From 2003 to 2011 he was the Executive Vice President of Field Operations and President and Chief Operating Officer at Imago Scientific, bringing it from pre-revenue to a commercial leadership position in the 3D atomic scale tomography field. Mr. Lakios was previously employed at Veeco Instruments Inc. from 1984 until 2003, where he held several positions, including President of the Process Equipment Group and Executive Vice President of Field Operations. He has been involved in several acquisitions and numerous product line launches. He received his BE in Mechanical Engineering with focus in Material Science from SUNY Stony Brook in 1984.   47     Lawrence J. Waldman   Lawrence J. Waldman was appointed a member of the Board of Directors on October 5, 2016 and currently serves as Chairman of the Board and Chairman of the Audit Committee as well as the Lead Independent Director. Mr. Waldman has over forty years of experience in public accounting. He joined First Long Island Investors LLC, an investment and wealth management firm, as a Senior Advisor in May 2016. Prior to that Mr. Waldman served as an advisor to the accounting firm of EisnerAmper LLP, where he was previously the Partner-in-Charge of Commercial Audit Practice Development for Long Island since September 2011. Prior to joining EisnerAmper LLP, Mr. Waldman was the Partner-in-Charge of Commercial Audit Practice Development for Holtz Rubenstein Reminick, LLP from July 2006 to August 2011. Mr. Waldman was the Managing Partner of the Long Island office of KPMG LLP from 1994 through 2006, the accounting firm where he began his career in 1972. Mr. Waldman serves as a director of Apyx Medical Corporation, formerly Bovie Medical Corporation, since 2011 and he is currently the Chair of the Audit Committee and Lead Independent Director of the Board. Mr. Waldman has served as a member of the Board of Directors of Northstar/RXR Metro Income Fund, a non-traded Real Estate Investment Trust, and has served as a member of its audit committee from 2014 until October of 2018. Mr. Waldman was elected to the Board of Directors of Comtech Telecommunications Corp. in August of 2015, since December 2015, serves as Chair of its Audit Committee and since December 28, 2021 serves as Lead Independent Director. Mr. Waldman is also the Chair of the Supervisory Committee of Bethpage Federal Credit Union. Mr. Waldman previously served as a member of the State University of New York's Board of Trustees and as chair of its audit committee. He also previously served as the Chairman of the Board of Trustees of the Long Island Power Authority and as Chair and a member of the finance and audit committee of its Board of Trustees. Mr. Waldman is a Certified Public Accountant. Mr. Waldman qualifies to serve as a director, Audit Committee Chairman and Lead Independent Director because of his more than 40 years’ experience in public accounting and his service on various boards.   Conrad J. Gunther   Conrad J. Gunther has served as a member of our Board of Directors since 2000. Mr. Gunther has extensive experience in mergers and acquisitions and in raising capital through both public and private means. He has been an executive officer and director of several banks, both public and private, and has served on the boards of two other public companies. Since December 2016, Mr. Gunther has served as an Executive Officer and Chief Lending Officer for Dime Community Bank, a Long Island, New York based commercial bank, where he is responsible for all lending. From July 2015 to December 2016, Mr. Gunther served as an Executive Vice President and Senior Loan Officer for First Federal Savings Bank, a Long Island, New York based Thrift. Mr. Gunther qualifies to serve on our board of directors as a result of his experience and expertise in the financial community.   Raymond Nielsen   Raymond Nielsen was appointed a member of the Board of Directors on October 5, 2016. Mr. Nielsen was the Director of Finance for The Beechwood Organization until January 2019 and has been responsible for Project and Corporate Finance including Strategic Planning Initiatives since 2014. He has been a member of the Board of Directors of Dime Community Bank since its merger on February 1, 2021 with Bridge Bancorp Inc. In addition, he is Chairman of the Credit Risk Committee and a member of the Audit and Compliance Committees. Prior to the merger, he was a member of the Board of Directors of Bridgehampton National Bank and Bridge Bancorp Inc., its Parent holding company since 2013, and served on the Audit Committee, Compensation Committee, Corporate Governance & Nominating Committee, as well as on the ALCO and Loan Committees and the Compliance BSA & CRA Committee. Mr. Nielsen also served as a Director of North Fork Bancorporation and its subsidiary North Fork Bank from 2000 to 2006 where he chaired both the Compensation Committee and Audit Committee as well as having served as Lead Independent Director. Mr. Nielsen is the former CEO of Reliance Federal Savings Bank and Herald National Bank, and a 45-year veteran of the banking industry. Mr. Nielsen’s extensive public company, banking and real estate development experience will provide a valuable resource to the Board of Directors and Executive Management.   48     Dr. Robert M. Brill   Dr. Brill was appointed a Director of the Company on March 5, 2021. Dr. Brill was co-founder and managing partner of Newlight Management from 1997-2019, which managed venture capital funds that focused on early stage technology companies. Prior to co-founding Newlight, Dr. Brill was a general partner of Poly Ventures, a Long Island based venture capital fund. Dr. Brill is a member of the Board of Directors of the L.I. Angel Network, the L.I. High Tech Incubator and several private companies. Dr. Brill has also previously served on the Board of Directors of multiple public and private companies. Dr. Brill served as General Manager of Harris Corporation’s CMOS Semiconductor Division. He also held various technical and management positions at IBM’s semiconductor operation. Dr. Brill holds a Ph.D. in nuclear physics from Brown University and a B.A. and a B.S. in Engineering Physics from Lehigh University. Dr. Brill had previously served on the Company’s Board from April 2018 until October 2019.   Thomas McNeill   Thomas McNeill was appointed as the Company’s Chief Financial Officer, Secretary and Treasurer effective as of March 4, 2019, and on June 1, 2021 was appointed to Executive Vice President. Mr. McNeill has been a Chief Financial Officer ("CFO") since 1996 and has in excess of twenty years' of SEC reporting experience, as well as a full range of financial and operational experience. From April 2015 to March 2019 he was CFO at Century Direct, LLC, a printing and mailing company serving the direct mail marketing industry. From November 2014 to April 2015, he was a consultant at Mailmen Inc. until its assets were purchased by Century Direct, LLC. Mr. McNeill was CFO/COO at Nina McLemore from July 2013 to June 2014, a woman's retail apparel Company. On the Public reporting side, he was CFO at DineWise, Inc. from April 2006 to April 2013, a direct to consumer prepared frozen foods company, and from October 1996 to April 2006, was CFO at Global Payment Technologies, Inc, a hi-tech manufacturing and engineering company. Mr. McNeill is a Certified Public Accountant who began his career at KPMG, achieving the position of audit manager. Mr. McNeill holds a BBA in accounting from Hofstra University.   Kevin R. Collins   Prior to his appointment as Vice President and General Manager-SDC Division, Mr. Collins served as the General Manager of CVD’s SDC Division since 1999. From 1990 to 1999 he was employed by Stainless Design Corp. as Manager of Field Operations and Product Development Advisor. Mr. Collins attended Columbia University School of Engineering and Applied Science.    49     Jeffrey A. Brogan   Dr. Jeffrey Brogan was appointed as Vice President Sales and Marketing for CVD Equipment on March 23, 2021. Previously he was Director of Sales and Marketing for CVD Materials Corporation since November 2017 with General Management responsibilities of CVD MesoScribe Technologies Corporation. Dr. Brogan served as the President and CEO of MesoScribe Technologies, Inc., spearheading its sale to CVD in 2017. He has over 20 years of experience in strategic sales & marketing, technology management, and advanced research & development. Dr. Brogan has led the development of innovative sensor products, transitioning high performance products to manufacturing using the Company’s Direct Write MesoPlasma™ printing technology. He received his PhD in Materials Science and Engineering from Stony Brook University in 1996.   Maxim Shatalov   Dr. Shatalov joined CVD as Vice President of Engineering and Technology in April 2018.  Prior to CVD Mr. Shatalov was employed by Sensor Electronic Technology Inc. (SETi) a LED company where he held multiple technical and management positions from 2006 thru 2018. In 2017 Dr. Shatalov became Vice President of Technology responsible for UV LED technology and LED application development at SETi.  Dr. Shatalov has over twenty years of experience in semiconductor research and devices and holds more than 12 U.S. patents.    Code of Ethics   We have adopted a Corporate Code of Conduct and Ethics that applies to our employees, senior management and Board of Directors, including the Chief Executive Officer and Chief Financial Officer. The Corporate Code of Conduct and Ethics is available on our website, http://www.cvdequipment.com , by clicking on “About Us” and then clicking on “Corporate Overview.”   Audit Committee   Our Board of Directors has an Audit Committee that currently consists of, Lawrence J. Waldman, Chairman, Conrad J. Gunther, Raymond A. Nielsen and Robert M. Brill. During the fiscal year ended December 31, 2021, the Audit Committee held five meetings. Pursuant to the Audit Committee Charter, the Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of any independent registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for us, and each such independent auditor shall report directly to the Committee. The Audit Committee also reviews with management and the independent auditors, our annual audited financial statements (including the disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”), the scope and results of annual audits and the audit and non-audit fees of the independent registered public accounting firm. Messrs. Waldman, Gunther, Nielsen and Brill are “independent” under the requirements of the NASDAQ Stock Market.   50     The Board of Directors has determined that Mr. Waldman is an “audit committee financial expert” as that term is defined in the rules and regulations of the Securities and Exchange Commission.   Section 16(a) Beneficial Ownership Reporting Compliance   The rules of the Securities and Exchange Commission require us to disclose late filings of reports of stock ownership and changes in stock ownership by our directors, officers and ten percent shareholders. To our knowledge, based solely on our review of (a) the copies of such reports and amendments thereto furnished to us and (b) written representations that no other reports were required, during our fiscal year ended December 31, 2021, all of the filings for our officers, directors and ten percent shareholders were made on a timely basis, except for Mr. Waldman, Mr. Gunther, Mr. Nielsen and Mr. Brill for which one Form 4 each was inadvertently filed untimely.   Item 11. Executive Compensation.   Summary Compensation Table   The following table sets forth the compensation of our chief executive officer and chief financial officer, and our “named executive officers,” for the years ended December 31, 2021 and 2020.                           Option     Stock                                   Bonus ($)     Awards     Awards     All Other     Total   Name and principal position   Year   Salary ($)     (6)     ($)(1)     ($)(1)     Compensation     ($)                                                         Emmanuel Lakios   2021     294,190       101,000 (7)     258,400       12,505       -       666,095    President and Chief Executive Officer (2)    2020     195,270       1,000       -       14,339       -       210,609                                                         Thomas McNeill (4)                                                     Secretary, Chief Financial Officer and   2021     237,306       74,000 (7)     129,200       -       4,192 (3)     444,698   Executive Vice President   2020     228,000       1,000       -       -       -        229,000                                                         Jeffrey A. Brogan   2021     183,179       21,000 (7)     48,660       -       -       252,839   Vice President Sales & Marketing (5)   2020     162,817       1,000       -       -       -       163,817                                                         Leonard A. Rosenbaum   2021     23,846       -       -       12,860 (6)     55,343 (6)     92,049   Former President and Chief Executive Officer (6)   2020     310,000       1,000       -       -       5,962 (3)     316,962       (1) Amounts shown do not reflect compensation actually received by the named executive officer. Instead, the amounts shown reflect the total remaining compensation on restricted stock and option awards granted, that have not previously been shown, as determined pursuant to ASC 718. The assumptions used to calculate the value of stock and option awards are set forth under Note 10 of the Notes to Consolidated Financial Statements. This column represents the grant date fair value of the awards as calculated in accordance with FASB ASC 718 (Stock Compensation). Pursuant to SEC rule changes effective February 28, 2010, we are required to reflect the total grant date fair values of the option grants in the year of grant, rather than the portion of this amount that was recognized for financial statement reporting purposes in a given fiscal year which was required under the prior SEC rules, resulting in a change to the amounts reported in prior Annual Reports, which was valued utilizing the grant date fair value in the year granted.   51       (2) Effective January 22, 2021, Emmanuel Lakios was appointed President and Chief Executive Officer.   (3) Represents payment for accrued and unused vacation time.   (4) Effective March 4, 2019, Thomas McNeill was appointed CFO, Secretary and Treasurer, and effective June 1, 2021, Mr. McNeill was appointed Executive Vice President.   (5) Effective March 23, 2021, Jeffrey Brogan was appointed Vice President Sales and Marketing effective.   (6) Effective January 22, 2021, Leonard A. Rosenbaum’s employment with the Company terminated. From January 23, 2021 until July 15, 2021 he was a non-employee Director. Stock awards in 2021 were for services rendered as a non-employee Director. In addition, included in all other compensation includes $9,603 cash compensation as a non-employee Director, as well as payment of accrued and unused vacation time of $45,740.   (7) Includes an accrued bonus for 2021 performance expected to be paid in April 2022 related to Mr. Lakios, Mr. McNeill and Mr. Brogan in the approximate amount of $81,000, $54,000 and $21,000, respectively.   Employment Agreements and Potential Payments Upon Termination or Change in Control   Emmanuel Lakios Employment Agreement   On June 1, 2021, the Company entered into an Employment Agreement with Emmanuel Lakios, the Company’s President and Chief Executive Officer (the “Lakios Agreement”). The term of Mr. Lakios’s employment under the Lakios Agreement commenced as of the effective date thereof and shall continue until terminated in accordance with the terms of the Lakios Agreement. Under the Lakios Agreement, Mr. Lakios will receive an initial annual base salary of $288,000, which shall be reviewed from time to time and may be increased, but not decreased, by the Compensation Committee of the Board of Directors (the “Committee”) in its sole and exclusive discretion. Mr. Lakios shall be entitled to participate in any bonus or incentive plan available to the Company’s senior executives generally, on such terms as the Committee may determine in its discretion.   In the event of the termination of the Lakios Agreement and Mr. Lakios’s employment thereunder, Mr. Lakios or his estate (in the event of his death) shall be entitled to (A) receive any unpaid base salary earned and accrued under the Lakios Agreement prior to the date of termination (and reimbursement for expenses incurred prior to the date of termination), (B) indemnification in accordance with any applicable indemnification plan, program, corporate governance document or other arrangement, and any vested rights pursuant to any insurance plan, benefit plan or retirement plan, and, except in the event of Mr. Lakios’s termination by the Company for Cause (as defined in the Lakios Agreement, (C) treatment of his stock option grants in accordance with the terms of the applicable plan and award agreement.   In the event Mr. Lakios’s employment is terminated as a result of death or disability, Mr. Lakios shall also be entitled to receive a pro rata bonus payment under the Company’s bonus Plan for the year of termination, if applicable.   52     In the event Mr. Lakios’s employment is terminated by the Company for Cause, Mr. Lakios’s stock option grants, whether vested or unvested, shall immediately terminate and be null and void.   In the event Mr. Lakios’s employment is terminated by the Company without Cause, or by Mr. Lakios for Good Reason (as defined in the Lakios Agreement), Mr. Lakios shall also be entitled to (A) a pro rata bonus for the year of termination, and (B) continued payment of his base salary and the Company’s portion of Mr. Lakios’s then existing medical benefits for the nine (9) month period following the date of termination.   The Lakios Agreement contains customary non-competition, non-solicitation, and confidentiality provisions in favor of the Company.   Thomas McNeill Employment Agreement   On June 1, 2021, the Company entered into an Employment Agreement with Thomas McNeill, the Company’s Executive Vice President, Chief Financial Officer and Secretary (the “McNeill Agreement”). The term of Mr. McNeill’s employment under the McNeill Agreement commenced as of the effective date thereof and shall continue until terminated in accordance with the terms of the McNeill Agreement. Under the McNeill Agreement, Mr. McNeill will receive an initial annual base salary of $238,000, which shall be reviewed from time to time and may be increased, but not decreased, by the Committee in its sole and exclusive discretion. Mr. McNeill shall be entitled to participate in any bonus or incentive plan available to the Company’s senior executives generally, on such terms as the Committee may determine in its discretion.   In the event of the termination of the McNeill Agreement and Mr. McNeill’s employment thereunder, Mr. McNeill or his estate (in the event of his death) shall be entitled to (A) receive any unpaid base salary earned and accrued under the McNeill Agreement prior to the date of termination (and reimbursement for expenses incurred prior to the date of termination), (B) indemnification in accordance with any applicable indemnification plan, program, corporate governance document or other arrangement, and any vested rights pursuant to any insurance plan, benefit plan or retirement plan, and, except in the event of Mr. McNeill’s termination by the Company for Cause (as defined in the McNeill Agreement, (C) treatment of his stock option grants in accordance with the terms of the applicable plan and award agreement.   In the event Mr. McNeill’s employment is terminated as a result of death or disability, Mr. McNeill shall also be entitled to receive a pro rata bonus payment under the Company’s bonus Plan for the year of termination, if applicable.   In the event Mr. McNeill’s employment is terminated by the Company for Cause, Mr. McNeill’s stock option grants, whether vested or unvested, shall immediately terminate and be null and void.   In the event Mr. McNeill’s employment is terminated by the Company without Cause, or by Mr. McNeill for Good Reason (as defined in the McNeill Agreement), Mr. McNeill shall also be entitled to (A) a pro rata bonus for the year of termination, and (B) continued payment of his base salary and the Company’s portion of Mr. McNeill’s then existing medical benefits for the nine (9) month period following the date of termination.   The McNeill Agreement contains customary non-competition, non-solicitation, and confidentiality provisions in favor of the Company.   53     Other then as set forth above, there are no arrangements for compensation of directors or Named Executive Officers and there are no employment contracts between the Company and its directors or any change in control arrangements.     Outstanding Equity Awards at December 31, 2021   The following table sets forth the outstanding equity awards held by our named executive officers as of December 31, 2021.       OPTION AWARDS   STOCK AWARDS   Name   Number of Securities Underlying Options Exercisable     Number of Securities Options Unexercisable     Exercise Price   Option Expiration Date   Number of shares or units of stock that have not vested     Market value of shares or units of stock that have not vested     Equity Incentive Plan Awards: Number of unearned shares or units that not vested     Equity Incentive Plan Awards: Market or payout value of unearned shares or units that have not vested                                                               Emmanuel Lakios (1)     100,000       100,000     $ 4.26   6/1/2031                     -     $ -         100,000       20,000     $ 10.30   2/6/2027                                                                                             Thomas McNeill (2)     50,000       50,000     $ 4.26   6/1/2031                     5,000 (3)   $ 20,650                                                               Jeffrey A. Brogan (4)     20,000       20,000     $ 4.01   7/15/2031                     -     $ -         20,000       -     $ 11.61   10/31/2027                                     (1) Effective January 22, 2021, Emmanuel Lakios was appointed President and Chief Executive Officer.   (2) Effective March 4, 2019, Thomas McNeill was appointed CFO, Secretary and Treasurer, and effective June 1, 2021, Mr. McNeill was appointed Executive Vice President.   (3) Restricted stock units vest as to 5,000 shares on March 4, 2022.   (4) Effective March 23, 2021, Jeffrey Brogan was appointed Vice President Sales and Marketing effective.   2021 Director Compensation   The following table sets forth a summary of the compensation we paid to our non-employee directors in 2021.   Name   Fees Earned or Paid in Cash     Option Awards (1)       Restricted Stock Awards (1)     Total   Conrad J. Gunther   $ 29,000       -     $ 34,204     $ 63,204   Lawrence J. Waldman     73,250       -       46,248       119,498   Raymond A. Nielsen     29,000       -       34,204       63,204   Robert M. Brill     26,233       -       36,341       62,574   Leonard A. Rosenbaum (2)     9,603       -       12,860       22,463   Martin J. Teitelbaum (3)     8,778       -       8,514       17,292     54       (1) Amounts shown do not necessarily reflect compensation actually received by the named director. Instead, the amounts shown are the compensation costs recognized by CVD in fiscal 2021 for awards as determined pursuant to ASC 718. The assumptions used to calculate the value of option awards are set forth under Note 10 of the Notes to Consolidated Financial Statements.     (2) Effective January 22, 2021, Leonard A. Rosenbaum’s employment with the Company terminated. From January 23, 2021 until July 15, 2021 he was a non-employee Director.     (3) Effective January 22, 2021, Martin J. Teitelbaum’s employment with the Company terminated. From January 23, 2021 until May 7, 2021 he was a non-employee Director.     On May 9, 2016, the Board of Directors adopted a Director Compensation Plan for all non-employee directors, which retroactively from January 1, 2016, provided for annual compensation of approximately fifty thousand dollars ($50,000) to each non-employee director in a combination of 40% cash and 60% stock grant.   On December 14, 2018, the Board of Directors approved a new Director Compensation Plan for all non-employee directors which is effective January 1, 2019 and provides for additional compensation to Committee Chairs as well as for the Independent Lead Director. The independent Lead Director receives $30,000 in cash, the Audit Chairman receives $25,000 in combination of cash and stock grants, and the other Committee Chairs receive amounts ranging from $5,000-$10,000 in a combination of cash and stock grants.   On October 11, 2021, the Board of Directors, following the unanimous recommendation of the Board’s Compensation Committee, unanimously approved a director compensation plan, effective October 1, 2021 (the “Plan”). The Plan is based on the recommendations of an independent compensation consultant engaged by the Board’s Compensation Committee. Pursuant to the Plan, each director is entitled to Director Compensation, divided into the following pay components: (i) Annual Board Cash Compensation in the amount of $40,000 and (ii) an Annual Equity Retainer in the amount of $40,000, to be automatically granted on the date of the Company’s annual meeting of shareholders (directors may elect to receive payment in restricted stock, stock options or a combination thereof). Additionally, a director serving as a chairman for the Board’s Compensation Committee, Nominating & Governance Committee, or Strategic Planning Committee is entitled to Chair Compensation in the amount of $10,000. The director serving as the chairman for the Board’s Audit Committee is entitled to Chair Compensation in the amount of $25,000. Furthermore, the director serving as the Non-Executive Chairman is entitled to Board Leadership Compensation in the amount of $48,000.   55     Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.   The following table sets forth, as of March 15, 2022, information regarding the beneficial ownership of our common stock by (a) each person who is known to us to be the owner of more than five percent (5%) of our common stock, (b) each of our directors, (c) each of the named executive officers, and (d) all directors and executive officers and executive employees as a group. For purposes of the table, a person or group of persons is deemed to have beneficial ownership of any shares that such person has the right to acquire within 60 days of March 15, 2022.   Name and Address of Beneficial Owner (1)   Amounts and Nature of Beneficial Ownership (2)     Percent of Class (%)                     Leviticus Partners, L.P.     660,000       9.8   Leonard A. Rosenbaum     353,862       5.3   Emmanuel Lakios     106,368   (3)   1.6   Kevin R. Collins     91,660   (3)   1.4   Conrad J. Gunther     91,478   (4)   1.4   Lawrence J. Waldman     55,000   (5)   *   Raymond A. Nielsen     46,300   (5)   *   Jeffrey A Brogan     24,519   (6)   *   Maxim Shatalov     20,000   (6)   *   Thomas McNeill     10,000   (7)   *   Robert M. Brill     7,400   (5)   *   All directors and executive officers and executive employees as a group (nine persons)     452,725       6.7       *Less than 1% of the outstanding common stock or less than 1% of the voting power   (1) The address of Messrs. Lakios, Gunther, Waldman, Nielsen, Brogan, Shatalov, McNeill and Brill is c/o CVD Equipment Corporation, 355 South Technology Drive, Central Islip, New York 11722. The address of Mr. Collins is c/o Stainless Design Concepts, 1117 Old Kings Highway, Saugerties, NY 12477. The address of Leviticus Partners, L.P. is 200 Park Avenue, Suite 1700, New York, NY 10166. The Address of Mr. Rosenbaum is 10 Parsons Landing, Islip, NY 11751.   (2) All of such shares are owned directly with sole voting and investment power, unless otherwise noted below.   (3) Does not include unvested options to purchase 100,000 shares of our common stock.   56     (4) Does not include unvested options to purchase 10,000 shares of our common stock.   (5) Does not include shares to be issued per Director compensation agreement related to the Annual Equity Retainer in the amount of $40,000, to be determined at the 2022 shareholder meeting. (Director may elect to receive payment in restricted stock, stock options, or a combination thereof).   (6) Does not include unvested options to purchase 20,000 shares of our common stock.   (7) Does not include unvested options to purchase 50,000 shares of our common stock.     See Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities under the heading “Equity Compensation Plan Information” for information regarding our securities authorized for issuance under equity compensation plans.     Item 13. Certain Relationships and Related Transactions, and Director Independence.   Transactions with related persons, promoters and certain control persons.   None.   Director Independence   The current members of our Board of Directors are Lawrence J. Waldman, Emmanuel Lakios, Conrad J. Gunther, Raymond A. Nielsen and Robert M. Brill. Messrs. Waldman, Gunther, Nielsen and Brill have been determined to be “independent” as defined under Rule 4200 of the Nasdaq Stock Market.   57     Item 14. Principal Accountant Fees and Services.   Effective September 20, 2019, the Company authorized the engagement of Marcum, LLP, Certified Public Accountants (“Marcum”) to serve as the Company’s independent registered public accounting firm. The following presents fees for professional audit services rendered by Marcum, for the year ended December 31, 2021 and 2020.       2021     2020                     Audit Fees   $ 149,000     $ 147,500   Audit-Related Fees     15,000       10,000   All Other Fees     -       -   Total Fees   $ 164,000     $ 157,500   Audit-Fees   Audit fees consisted of the review of the first three quarters and audit of the year-end by Marcum.   Audit -related Fees   Consisted of the audit of the Company’s Defined Contribution Plan 401(k) by Marcum.   Audit Committee Approval   The engagement of the Company’s independent registered public accounting firm is pre-approved by the Company’s Audit Committee. The Audit Committee pre-approves all fees billed and all services rendered by the Company’s independent registered public accounting firm.   58     PART IV   Item 15. Exhibits, Financial Statement Schedules   3.1 Certificate of Incorporation dated October 12, 1982 (Incorporated herein by reference to the Company’s Form S-1 filed on July 3, 2007).   3.2 Certificate of Amendment of Certificate of Corporation, dated April 25, 1985 (Incorporated herein by reference to the Company’s Form S-1 filed on July 3, 2007).   3.3 Certificate of Amendment of Certificate of Corporation, dated August 12, 1985 (Incorporated herein by reference to the Company’s Form S-1 filed on July 3, 2007).   3.4 Certificate of Amendment of the Certificate of Incorporation, dated December 9, 2016 (Incorporated herein by reference the Company’s Current Report on Form 8-K filed on December 14, 2016).   3.5 Amended and restated By-laws of CVD Equipment Corporation, dated as of October 5, 2016 (Incorporated herein by reference to the Company’s Current Report on Form 8-K filed on October 11, 2016).   4.1 Description of the Company’s Securities (Incorporated herein by reference to the Company’s Annual Report on Form 10-K filed on March 30, 2020).   10.1 CVD Equipment Corporation 2001 Stock Option Plan (Incorporated herein by reference to the Company’s Form S-1 filed on July 3, 2007).*   10.2 Form of Non-Qualified Stock Option Agreement (Incorporated herein by reference to the Company’s Annual Report on Form 10-KSB filed on March 26, 2007).*   10.3 CVD Equipment Corporation 2007 Share Incentive Plan (Incorporated herein by reference to the Company’s Schedule 14A filed on November 5, 2007).*   10.4 Lease Agreement, dated February 9, 2012, by and between FAE Holdings 411519R, LLC and the Company (Incorporated by reference from the Company’s Report on Form 10-Q filed with the Commission on May 15, 2012).   10.5 Assignment Agreement, dated February 9, 2012, by and between FAE Holdings 411519R, LLC and the Company (Incorporated by reference from the Company’s Report on Form 10-Q filed with the Commission on May 15, 2012).   10.6 Joint and Several Hazardous Material Guaranty and Indemnification Agreement, dated March 15, 2012, by and between FAE Holdings 411519R, LLC and the Company (Incorporated by reference from the Company’s Report on Form 10-Q filed with the Commission on May 15, 2012).   10.7 Assignment of Leases and Rents, dated March 15, 2012, by and among FAE Holdings 411519R, LLC, the Town of Islip Industrial Development Agency and HSBC Bank USA, National Association (Incorporated by reference from the Company’s Report on Form 10-Q filed with the Commission on May 15, 2012).   59     10.8 Amended and Restated Fee and Leasehold Mortgage, dated March 15, 2012, by and among FAE Holdings 411519R, LLC, the Town of Islip Industrial Development Agency and HSBC Bank USA, National Association (Incorporated by reference from the Company’s Report on Form 10-Q filed with the Commission on May 15, 2012).   10.9 Amended and Restated Note, dated March 15, 2012, by and among FAE Holdings 411519R, LLC, the Town of Islip Industrial Development Agency and HSBC Bank USA, National Association (Incorporated by reference from the Company’s Report on Form 10-Q filed with the Commission on May 15, 2012).   10.10 Note and Mortgage Assumption Agreement, dated March 15, 2012, by and among FAE Holdings 411519R, LLC, the Town of Islip Industrial Development Agency and HSBC Bank USA, National Association (Incorporated by reference from the Company’s Report on Form 10-Q filed with the Commission on May 15, 2012).   10.11 Guaranty of Payment, dated March 15, 2012, by the Company (Incorporated by reference from the Company’s Report on Form 10-Q filed with the Commission on May 15, 2012).   10.12 Reaffirmation of Unlimited Continuing Guaranty, dated as of August 5, 2019, by and between CVD Equipment Corporation and HSBC Bank USA, National Association (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on August 5, 2019).   10.13 Note Modification Agreement, dated as of August 5, 2019, by and between FAE Holdings 411519R and HSBC Bank USA, National Association (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on August 5, 2019).   10.14 Agreement to Purchase and Sale, the building and real estate property located at 555 N Research Place, Central Islip, NY, dated March 29, 2021, by and between 555 N Research Corporation, a wholly-owned subsidiary of the Company, and Steel K, LLC. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 13, 2021).   10.15 Employment Agreement, dated June 1, 2021, by and between Emmanuel Lakios, the Company’s President and Chief Executive Officer, and the Company. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the Commission on August 16, 2021).   10.16 Employment Agreement, dated June 1, 2021, by and between Thomas McNeill, the Company’s Executive Vice President and Chief Financial Officer, and the Company. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the Commission on August 16, 2021).   10.17 Assignment, Assumption and Amendment Agreement dated as of July 26, 2021, by and between Town of Islip Industrial Development Agency, 555N Research Corporation and Steel 555 NRP, LLC. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q/A filed with the Commission on March 1, 2022).   60     10.18 Second Amended and Restated Lease and Project Agreement, dated as of July 1, 2021, by and between Town of Islip Industrial Development Agency and FAE HOLDINGS 411519R, LLC. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q/A filed with the Commission on March 1, 2022).   10.19 Agency Compliance Agreement, dated as of July 1, 2021, by and between Town of Islip Industrial Development Agency, CVD Equipment Corporation and CVD Materials Corporation. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q/A filed with the Commission on March 1, 2022).   10.20 Amended and Restated Sublease Agreement, dated as of July 26, 2021, by and between FAE HOLDINGS 411519R, LLC, CVD Equipment Corporation and CVD Materials Corporation. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q/A filed with the Commission on March 1, 2022).   23.1 **Consent of MARCUM, Certified Public Accountants and Advisors, A Professional Corporation (S-8).   31.1 **Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.   31.2 **Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.   32.1 **Section 1350 Certification of Principal Executive Officer.   32.2 **Section 1350 Certification of Principal Financial Officer.     101.INS*** Inline XBRL Instance     101.SCH*** Inline XBRL Taxonomy Extension Schema     101.CAL*** Inline XBRL Taxonomy Extension Calculation     101.DEF*** Inline XBRL Taxonomy Extension Definition     101.LAB*** Inline XBRL Taxonomy Extension Labels     101.PRE*** Inline XBRL Taxonomy Extension Presentation     104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). * Management contract or compensatory plan or arrangement required   ** Filed herewith   *** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.   61     SIGNATURES   In accordance with 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.   DATE: March 31, 2022   CVD EQUIPMENT CORPORATION   By:   /s/ Emmanuel Lakios Name:   Emmanuel Lakios Title:   President and Chief Executive Officer    By:   /s/ Thomas McNeill Name:   Thomas McNeill Title:   Executive Vice President, Chief Financial Officer and Secretary Principal Financial and Accounting Officer     In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated below.   NAME POSITION DATE       /s/ Emmanuel Lakios President, Chief Executive Officer 3/31/2022 Emmanuel Lakios (Principal Executive Officer)         /s/ Lawrence J. Waldman Director, Chairman of the Board 3/31/2022 Lawrence J. Waldman           /s/ Conrad J. Gunther Director 3/31/2022 Conrad J. Gunther           /s/ Raymond A. Nielsen Director 3/31/2022 Raymond A. Nielsen           /s/ Robert M. Brill Director 3/31/2022 Robert M. Brill       62     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS       Page No.     Report of Independent Registered Public Accounting Firm (PCAOB ID Number 688 ) F-1     Financial Statements:       Consolidated Balance Sheets as of December 31, 2021 and 2020 F-3     Consolidated Statements of Operations for the years ended December 31, 2021 and 2020 F-4     Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2021 and 2020 F-5     Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020 F-6     Notes to Consolidated Financial Statements F-7     63     REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM     To the Shareholders and Board of Directors of CVD Equipment Corporation and Subsidiaries     Opinion on the Financial Statements   We have audited the accompanying consolidated balance sheets of CVD Equipment Corporation and Subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2021 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020 and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.   Basis for Opinion   These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.   We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.   Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.     The accompanying notes are an integral part of the consolidated financial statements     F-1     Critical Audit Matters   The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.   Revenue Recognition – Estimated Total Contract Costs Description of the Matter   As discussed in Notes 2 and 3 to the consolidated financial statements, the Company recognizes revenue from the sale of systems (“System Projects”) over time by using an input method based on costs incurred as it best depicts the Company’s progress toward satisfaction of the performance obligation. Under this method, revenue arising from such contracts is recognized as work is performed based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations. The estimation of these costs requires judgment by the Company given the unique product specifications and requirements for contracts related to the design, development, and manufacture of the system. During the year ended December 31, 2021, the Company recognized approximately $8.8 million of revenue recognized over time.   Subjective judgment is required by management in determining the assumptions in estimating the estimated costs to complete on contracts for which revenue is recognized over time using a cost-to-cost model. Complex auditor judgment was required in evaluating initial cost estimates and expected costs to complete.   How We Addressed the Matter in Our Audit   The primary procedures we performed to address this critical audit matter included the following:   ● Obtaining an understanding of management’s process in developing the cost estimates;   ● Evaluating management’s ability to reasonably estimate costs by performing a comparison of the actual costs to prior period estimates, including evaluating the timely identification of circumstances that may warrant a modification to the estimated costs;   ● Evaluate management’s methodologies and the consistency of management’s methodologies over the life of the contracts;   ● Tested the original estimated costs and profit margins on System Projects that were commenced and completed during the year ending December 31, 2021, by obtaining the original estimates, compare to the actual costs and profit margin for the completed contracts and investigate significant changes; and   ● Tested the estimated costs to complete Systems Projects that were not completed during the year ended December 31, 2021 by comparing the estimated cost to complete at December 31, 2021 to actual cost incurred subsequent to December 31, 2021.       /s/ Marcum LLP   Marcum LLP   We have served as the Company’s auditor since 2019.   Melville, NY March 31, 2022   The accompanying notes are an integral part of the consolidated financial statements   F-2       CVD EQUIPMENT CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets As of December 31, 2021 and 2020       2021     2020   ASSETS                 Current Assets                 Cash and cash equivalents   $ 16,651,371     $ 7,699,335   Accounts receivable, net     1,446,354       1,047,728   Contract assets     2,538,373       494,281   Inventories, net     1,225,015       1,123,839   Taxes Receivable     715,599       715,599   Other current assets     493,788       709,175                                       Total Current Assets     23,070,500       11,789,957                     Property, plant and equipment, net     12,261,321       28,843,563   Intangible assets, net     182,838       288,657   Other assets     9,570       13,748   Total Assets   $ 35,524,229     $ 40,935,925                                       LIABILITIES AND STOCKHOLDERS ’ EQUITY                 Current Liabilities                 Accounts payable   $ 1,161,381     $ 817,933   Accrued expenses     1,758,939       1,409,039   Current maturities of long-term debt     1,765,508       690,667   Contract Liabilities     1,650,426       786,657   Total Current Liabilities     6,336,254       3,704,296                     Long-term debt, net of current portion     -       13,106,057                     Total Liabilities     6,336,254       16,810,353                     Commitments and contingencies (see note 13)                                       Stockholders’ Equity:                 Common stock - $0.01 par value – 20,000,000 shares authorized; issued and outstanding 6,723,438 at December 31, 2021 and 6,678,698 at December 31, 2020     67,234       66,786   Additional paid-in capital     27,277,154       26,961,684   Retained earnings (accumulated deficit)     1,843,587       ( 2,902,898 ) Total Stockholders’ Equity     29,187,975       24,125,572                     Total Liabilities and Stockholders’ Equity   $ 35,524,229     $ 40,935,925       The accompanying notes are an integral part of the consolidated financial statements   F-3       CVD EQUIPMENT CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations Years ended December 31, 2021 and 2020       2021     2020                     Revenue   $ 16,446,813     $ 16,920,219                     Cost of revenue     13,907,974       14,037,813                     Gross profit     2,538,839       2,882,406                     Operating expenses                 Research and development     481,186       372,648   Selling and shipping     810,074       580,468   Impairment Charge     -       3,599,322   General and administrative     6,054,832       6,153,925                     Total operating expenses     7,346,092       10,706,363                     Operating loss     ( 4,807,253 )     ( 7,823,957 )                   Other income (expense):                 Interest income     5,994       62,667   Interest expense     ( 261,377 )     ( 444,337 ) Gain on Sale of Building     6,894,109       -   Gain on Debt extinguishment     2,443,418       -   Other Income     499,971       603,320   Total other income, net     9,582,115       221,650                     Income (loss) before income tax     4,774,862       ( 7,602,307 )                   Income tax expense (benefit)     28,377       ( 1,527,355 )                   Net income (loss)   $ 4,746,485     $ ( 6,074,952 )                                     Basic income (loss) per common share   $ 0.71     $ ( 0.91 ) Diluted income (loss) per common share   $ 0.71     $ ( 0.91 )                   Weighted average common shares                 Outstanding-basic     6,688,087       6,640,272                     Weighted average common shares                 Outstanding-diluted     6,703,709       6,640,272       The accompanying notes are an integral part of the consolidated financial statements   F-4       CVD EQUIPMENT CORPORATION AND SUBSIDIARIES Consolidated Statements of Changes in Stockholders ’ Equity     Years ended December 31, 2021 and 2020                                       Common stock                                           Additional     Retained                         paid-in     Earnings /             Shares     Par Value     Capital     (Accumulated     Total                                   Deficit)                                                                                                                                                                                   Balance at January 1, 2020     6,623,793     $ 66,237     $ 26,719,554     $ 3,172,054     $ 29,957,845   Net loss     -       -       -       ( 6,074,952 )     ( 6,074,952 ) Stock-Based Compensation     54,905       549       242,130       -       242,679   Balance at December 31, 2020     6,678,698     $ 66,786     $ 26,961,684     $ ( 2,902,898 )   $ 24,125,572                                             Net income     -       -       -       4,746,485       4,746,485   Stock-Based Compensation     44,740       448       315,470       -       315,918   Balance at December 31, 2021     6,723,438     $ 67,234     $ 27,277,154     $ 1,843,587     $ 29,187,975     The accompanying notes are an integral part of the consolidated financial statements   F-5       C VD EQUIPMENT CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended December 31, 2021 and 2020         2021     2020   Cash flows from operating activities:                 Net income (loss)   $ 4,746,485     $ ( 6,074,952 ) Adjustments to reconcile net income (loss) to net cash used in operating activities                 Impairment charge     -       3,599,322   Gain on sale of building     ( 6,894,109 )     -   Gain on debt extinguishment     ( 2,443,418 )     -   Stock-based compensation     315,918       242,679   Depreciation and amortization     742,287       1,389,145   Bad debt expense     -       140,044   (Increase)/decrease in operating assets                 Accounts receivable     ( 398,626 )     1,357,765   Contract assets     ( 2,044,092 )     18,671   Inventories     ( 101,176 )     585,874   Tax receivable     -       ( 715,599 ) Other current assets     219,565       24,162   Increase/(decrease) in operating liabilities                 Accounts payable     343,448       282,539   Accrued expenses     377,349       ( 493,819 ) Contract liabilities     863,769       ( 1,488,579 )                   Total adjustments     ( 9,019,085 )     4,942,204   Net cash used in operating activities     ( 4,272,600 )     ( 1,132,748 )                   Cash flows from investing activities:                 Net proceeds from sale of building     23,075,477       -   Capital expenditures     ( 235,595 )     ( 1,577,175 ) Net cash provided by (used in) investing activities     22,839,882       ( 1,577,175 )                   Cash flows from financing activities                 Proceeds from Payroll Protection Plan Loan     -       2,415,970   Payments of long-term debt     ( 9,615,246 )     ( 670,965 ) Net cash (used in) provided by financing activities     ( 9,615,246 )     1,745,005                     Net increase (decrease) in cash and cash equivalents     8,952,036       ( 964,918 )                   Cash and cash equivalents at beginning of period     7,699,335       8,664,253                     Cash and cash equivalents at end of period   $ 16,651,371     $ 7,699,335                     Supplemental disclosure of cash flow information:                 Income taxes paid   $ 28,391     $ 3,040   Interest paid   $ 261,376     $ 445,109     F-6     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020     Note 1 – Business Description   CVD Equipment Corporation and its subsidiaries (the “Company”), a New York corporation, was organized and commenced operations in October 1982. Its principal business activities include the manufacturing of chemical vapor deposition equipment, customized gas control systems, the manufacturing of process equipment suitable for the synthesis of a variety of one -dimensional nanostructures and nanomaterials and a line of furnaces, all of which are used primarily to produce semiconductors and other electronic components. The Company engages in business throughout the United States and internationally.     Note 2 - Summary of Significant Accounting Policies   Principles of Consolidation   The consolidated financial statements include the accounts of CVD Equipment Corporation and its wholly owned subsidiaries. The Company has five wholly owned subsidiaries: CVD Materials Corporation, which provides material coatings, process development support and process startup assistance through Tantaline ApS and CVD MesoScribe Technologies Corporation, FAE Holdings 411519R, LLC, a real estate holding company whose sole asset is its interest in the real estate and building housing our corporate headquarters and 555 N Research Corporation whose sole asset was its interest in the real estate and building located at 555 North Research Place, Central Islip, NY, until sold in July 2021. All significant intercompany accounts and transactions have been eliminated in consolidation.   Use of Estimates   The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.   The Company’s significant estimates are the accounting for certain items such as revenues on long-term contracts recognized on the input method, valuation of inventories at the lower of cost or net realizable value; allowance for doubtful accounts receivable; valuation allowances for deferred tax assets, estimated lives and impairment considerations of long-lived assets and valuation of stock-based compensation.   F- 7     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020   Note 2 - Summary of Significant Accounting Policies (continued)   Revenue Recognition             The Company designs, manufactures and sells custom chemical vapor deposition equipment through contractual agreements. These system sales require the Company to deliver functioning equipment that is generally completed within three to eighteen months from commencement of order acceptance. The Company recognizes revenue over time by using an input method based on costs incurred as it depicts the Company’s progress toward satisfaction of the performance obligation. Under this method, revenue arising from fixed price contracts is recognized as work is performed based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations, typically within three months to eighteen months.   Incurred costs include all direct material and labor costs and those indirect costs related to contract performance, such as supplies, tools, repairs and depreciation costs. Contract material costs are included in incurred costs when the project materials have been purchased or moved to work in process, and installed, as required by the project’s engineering design. Cost based input methods of revenue recognition require the Company to make estimates of costs to complete the projects. In making such estimates, significant judgment is required to evaluate assumptions related to the costs to complete the projects, including materials, labor and other system costs. If the estimated total costs on any contract are greater than the net contract revenues, the Company recognizes the entire estimated loss in the period the loss becomes known and can be reasonably estimated.   “Contract assets,” include unbilled amounts typically resulting from system sales under contracts and revenue recognition exceeds the amount billed to the customer. The amount may not exceed their estimated net realizable value. Contract assets are classified as current based on our contract operating cycle.   “Contract liabilities,” include advance payments and billings in excess of revenue recognized. The Company typically receives down payments upon receipt of order and progress payments during the manufacturing cycle. Contract liabilities are classified as current based on our contract operating cycle and reported on a contract-by-contract basis, net of revenue recognized, at the end of each reporting period   For outright sales of products, revenue is recognized when control of the promised products or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services (the transaction price). A performance obligation is a promise in a contract to transfer a distinct product or service to a customer and is the unit of account under ASC 606 (“Revenue from Contracts with Customers”).   Inventories   Inventories are valued at the lower of cost (determined on the first -in, first -out method) or net realizable value.   F- 8     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020   Note 2 - Summary of Significant Accounting Policies (continued)   Income Taxes   Deferred tax assets and liabilities are determined based on the estimated future tax effects of temporary differences between the financial statements and tax bases of assets and liabilities, as measured by using the future enacted tax rates. Deferred tax expense (benefit) is the result of changes in the deferred tax assets and liabilities. The Company records a valuation allowance against deferred tax assets when it is more likely than not that future tax benefits will not be utilized based on a lack of sufficient positive evidence.   Investment tax credits are accounted for by the flow-through method, reducing income taxes currently payable and the provision for income taxes in the period the assets giving rise to such credits are placed in service. To the extent such credits are not currently utilized on the Company’s tax return, deferred tax assets, subject to considerations about the need for a valuation allowance, are recognized for the carryforward amount.   The Company recognizes the tax benefit from an uncertain tax position only if it is more-likely-than- not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.   The accounting guidance on accounting for uncertainty in income taxes also addresses derecognition, classification, interest and penalties on income taxes, and accounting in interim periods. The Company does not believe it has any uncertain tax positions through the year ending December 31, 2021 which would have a material impact on the Company’s consolidated financial statements.   The Company and its subsidiaries file combined income tax returns in the U.S. Federal and New York State jurisdiction. In addition, the parent company files standalone tax returns in California, Delaware, Florida, Michigan, Minnesota, New Hampshire and Wisconsin. The Company is no longer subject to U.S. federal and state income tax examinations for tax periods before 2017.   Impairment of Long Lived Assets and Intangibles   Long-lived assets consist primarily of property, plant, and equipment. Intangibles consist of patents, copyrights and intellectual property, licensing agreements and certifications. Long-lived assets are reviewed for impairment whenever events or circumstances indicate their carrying value may not be recoverable. When such events or circumstances arise, an estimate of the future undiscounted cash flows produced by the asset, or the appropriate grouping of assets, is compared to the asset’s carrying value to determine if impairment exists pursuant to the requirements of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360 - 10 - 35, “Impairment or Disposal of Long-Lived Assets.” If the asset is determined to be   F- 9     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020   Note 2 - Summary of Significant Accounting Policies (continued)   impaired, the impairment loss is measured on the excess of its carrying value over its fair value. Assets to be disposed of are reported at the lower of their carrying value or net realizable value. During the year ended December 31, 2020, based upon continued operating losses and negative cash flows from the Tantaline product line and the Company’s updated forecasting, the expected future cash flows of the Tantaline product line was negative and thus management had recorded an impairment charge related to long-term Tantaline assets of $ 3.6 million in the fourth quarter and year ended December 31, 2020. The Company had no recorded impairment charges in the consolidated statement of operations during the year ended December 31, 2021.   Property, Plant and Equipment   Property, plant and equipment are recorded at cost. Depreciation is determined on a straight-line basis for buildings and building improvements over  5  to  39  years and for machinery and equipment over  5  to  8  years. Depreciation and amortization of assets used in manufacturing are recorded in Cost of revenue. Depreciation and amortization of all other assets are recorded in Operating Expenses-General and Administrative.   Intangible Assets   The cost of intangible assets is being amortized on a straight-line basis over their estimated initial useful lives which ranged from 5 to 20 years. Amortization expense recorded by the Company during the years ended December 31, 2021 and 2020 totaled $ 112,310 and $ 124,550 , respectively.   Research & Development   Research and development costs are expensed as incurred. The Company’s laboratory staff conducts research and development independent of customer orders. For the years ended December 31, 2021 and 2020, the Company incurred approximately $481,000 and $373,000, respectively, of research and development expenses.   Product Warranty   The Company records warranty costs as incurred and does not provide for possible future costs. Management estimates such costs are immaterial, based on historical experience.   Earnings Per Share   Basic earnings per common share is computed by dividing the net income by the weighted average number of shares of common stock outstanding during each period. When applicable, diluted earnings per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be adjusted upon exercise of common stock options, unvested restricted shares and warrants.   F- 10     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020   Note 2 - Summary of Significant Accounting Policies (continued)   Potential common shares issued are calculated using the treasury stock method, which recognizes the use of proceeds that could be obtained upon the exercise of options and warrants in computing diluted earnings per share. It assumes that any proceeds would be used to purchase common stock at the average market price of the common stock during the period.   Cash and Cash Equivalents   The Company had cash and cash equivalents of $ 16.7 million and $ 7.7 million at December 31, 2021 and 2020, respectively. The Company invests excess cash in treasury bills, certificates of deposit or deposit accounts, all with maturities of less than three months. Cash equivalents were $ 7.0 million and $ 1.0 million at December 31, 2021 and December 31, 2020, respectively.   The Company places most of its temporary cash investments with financial institutions, which from time to time may exceed the Federal Deposit Insurance Corporation limit. The amount at risk at December 31, 2021 and at December 31, 2020 was $ 8,613,000 and $ 5,822,000 respectively.   Concentration of Credit Risk   Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, and accounts receivable. The Company places its cash equivalents with financial institutions and invests its excess cash primarily in treasury bills, certificates of deposit or deposit accounts. The Company has established guidelines relative to credit ratings and maturities that seek to maintain stability and liquidity.   The Company sells products and services to various companies across several industries in the ordinary course of business. The Company routinely assesses the financial strength of its customers and maintains allowances for anticipated losses based upon historical experience.   Accounts Receivable   The Company sells products and services to various companies across several industries in the ordinary course of business. The Company performs ongoing credit evaluations to assess the probability of accounts receivable collection based on a number of factors, including past transaction experience, evaluation of their credit history and review of the invoicing terms of the contract to determine the financial strength of its customers. The Company has accounts receivables from certain customers that exceed 10%. As of December 31, 2021, the accounts receivable balance includes amounts from two customers which totals 50 %, and as of December 31, 2020 two customers totaled 35 %.   F- 11     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020   Note 2 - Summary of Significant Accounting Policies (continued)   Accounts receivable is presented net of an allowance for doubtful accounts of $ 59,000 and $ 164,000 as of December 31, 2021 and 2020, respectively. The allowance is based on historical experience and management’s evaluation of the collectability of accounts receivable. Management believes the allowance is adequate. However, future estimates may fluctuate based on changes in economic and customer conditions. The Company doesn’t require collateral from its customers.   Sales Concentrations   Revenue to a single customer in any one year can exceed 10.0% of our total sales. There were no customers in fiscal year 2021 that exceeded 10% of our revenues, while two customers represented 30.5 % of our annual revenues in fiscal year 2020. The Company believes that its relationships with these customers are positive and may provide it with continuous sustainability for years to come, however the loss of a large customer would have to be replaced by others, and the Company’s inability to do so may have a material adverse effect on its business and financial condition.   Export sales to customers represented approximately 26.0 % and 16.8 % of sales for the years ended December 31, 2021 and 2020, respectively. Export sales in both 2021 and 2020 were primarily to customers in Europe and Asia. Primarily all contracts except those entered into by CVD Tantaline ApS are denominated in U.S. dollars. The Company has not entered into any foreign exchange contracts.   Fair Value of Financial Instruments   The carrying amounts of financial instruments including cash and cash equivalents, accounts receivable, net, accounts payable, contract liabilities and customer deposits approximate fair value due to the relatively short-term maturity of these instruments. The carrying value of long-term debt approximates fair value based on prevailing borrowing rates currently available for loans with similar terms and maturities.   Stock-Based Compensation   The Company records stock-based compensation in accordance with the provisions set forth in ASC 718, “Stock Compensation”. ASC 718 requires companies to recognize the cost of employee services received in exchange for awards of equity instruments based upon the grant date fair value of those awards over the vesting period. The Company uses the Black-Scholes option-pricing model to compute the estimated fair value of option awards and includes assumptions regarding expected volatility, expected option term, dividend yields and risk-free interest rates.   F- 12     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020   Note 2 - Summary of Significant Accounting Policies (continued)   Shipping and Handling   It is the Company’s policy to include freight charges billed to customers in total revenue. The amount included in revenue was $ 30,000 and $ 6,000 for the years ended December 31, 2021 and 2020, respectively.     Recently Issued Accounting Standards   In June 2016, the FASB issued Accounting Standard Update (“ASU”) 2016 - 13, Financial Instruments – Credit Losses (Topic 326 ) , which require that financial assets measured at amortized cost be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected. The income statement reflects the measurement of credit losses for newly recognized financial assets, as well as the increase or decreases of expected credit losses that have taken place during the period. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. On November 15, 2019, the FASB delayed the effective date for smaller reporting companies. The amendments in this update are now effective for fiscal years beginning after December 15, 2022 and interim periods within those annual periods. Early adoption for fiscal years beginning after December 15, 2018 is permitted. Management is currently evaluating the effect of this update on the Company’s consolidated financial statements and currently believes it will not have a material impact.   The Company believes there is no additional new accounting guidance adopted, but not yet effective that is relevant to the readers of our financial statements. However, there are numerous new proposals under development which, if and when enacted, may have a significant impact on our financial reporting.   F- 13     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020   Note 3 – Revenue   The following table represents a disaggregation of revenue from contracts for the years ended December 31, 2021 and December 31, 2020 ( in thousands):           Year Ended December 31, 2021                                         Over time     Point in time     Total   Aerospace   $ 386     $ 2,214     $ 2,600   Industrial   $ 6,130     $ 3,863     $ 9,993   Research   $ 2,294     $ 1,560     $ 3,854   Total   $ 8,810     $ 7,637     $ 16,447             Year Ended December 31, 2020                                         Over time     Point in time     Total   Aerospace   $ 1,607     $ 6,013     $ 7,620   Industrial   $ 1,849     $ 3,565     $ 5,414   Research   $ 3,208     $ 678     $ 3,886   Total   $ 6,664     $ 10,256     $ 16,920       The Company has unrecognized contract revenue of approximately $ 6.5 million at December 31, 2021, which it expects to recognize as revenue within the next twelve months.   Judgment is required to evaluate assumptions including the amount of net contract revenues and the total estimated costs to determine our progress towards contract completion and to calculate the corresponding amount of revenue to recognize.   Changes in estimates for sales of systems occur for a variety of reasons, including but not limited to (i) build accelerations or delays, (ii) product cost forecast changes, (iii) cost related change orders or add-ons, or (iv) changes in other information used to estimate costs. Changes in estimates may have a material effect on the Company’s consolidated statements of operations.   Contract Assets and Liabilities   Contract assets consist of (i) retainage which represent the earned, but unbilled, portion for which payment is deferred by the customer until certain contractual milestones are met; and (ii) unbilled receivables which represent revenue that has been recognized in advance of billing the customer, which is common for long-term contracts. Contract liabilities consist of customer advances and billings in excess of revenue recognized.   F- 14     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020   Note 3 – Revenue (continued)     As of December 31, 2021, 2020 and January 1 2020, contract assets were $2.5 million, $.5 million and $.5 million, respectively. At December 31, 2021, 2020 and January 1, 2020, contract liabilities were $1.5 million, $.2 million and $.8 million, respectively, and the ending balance of the contract liabilities are generally recognized as income in the following year.   Contract assets and contract liabilities on input method type contracts in progress are summarized as follows:       2021     2020   Costs incurred on contracts in progress   $ 7,418,433     $ 4,464,471   Estimated earnings     5,071,039       2,087,396         12,489,472       6,551,867   Billings to date     ( 11,408,605 )     ( 6,212,229 )     $ 1,080,867     $ 339,638   Deferred revenue related to non-systems contracts     ( 192,920 )     ( 632,014 )       887,947     $ ( 292,376 ) Included in accompanying balance sheets                 Under the following captions:                 Contract assets   $ 2,538,373     $ 494,281   Contract liabilities   $ ( 1,650,426 )   $ ( 786,657 )         Note 4 - Inventories             Inventories consist of:                     2021     2020                     Raw materials   $ 1,030,955     $ 928,221   Work-in-process     194,060       195,618   Inventories   $ 1,225,015     $ 1,123,839     F- 15     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020     Note 5 – Property, Plant and Equipment   Major classes of property, plant and equipment consist of the following:       2021     2020                     Land   $ 2,220,000     $ 6,929,000   Buildings     6,634,039       15,917,000   Building improvements     5,842,989       8,141,791   Machinery and equipment     3,289,860       3,340,005   Furniture and fixtures     546,765       613,765   Computer equipment     504,037       493,349   Software     431,331       435,593   Transportation equipment     114,511       114,511   Lab equipment     1,992,179       1,992,179   Construction in Progress     127,106       93,936   Totals at cost   $ 21,702,817     $ 38,071,129                     Less: Accumulated depreciation and amortization     ( 9,441,496 )     ( 9,227,566 )                   Property, plant and equipment, net   $ 12,261,321     $ 28,843,563                     Depreciation and amortization expense (1)   $ 742,287     $ 1,389,145     ( 1 ) Includes amortization expense of $ 112,310 and $ 124,550 for the year ending December 31, 2021 and the year ended December 31, 2020, respectively. Such amortization expense relates to other capitalized and intangibles assets.   F- 16     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020     Note 6 – Intangible Assets   Intangible assets consisted of the following:   2021                         Intangible Assets   Cost     Accumulated Amortization     Carrying Amount   Patents, Copyrights and Intellectual Property   $ 601,769     $ 421,583     $ 180,186   Licensing Agreement     10,000       10,000       0   Certifications     54,207       51,555       2,652   Totals   $ 665,976     $ 483,138     $ 182,838         2020                         Intangible Assets   Cost     Accumulated Amortization     Carrying Amount   Patents, Copyrights and Intellectual Property   $ 792,821     $ 515,665     $ 277,156   Licensing Agreement     10,000       10,000       0   Certifications     85,032       73,531       11,501   Totals   $ 887,853     $ 599,196     $ 288,657     The estimated amortization expense related to intangible assets for each of the five succeeding fiscal years and thereafter as of December 31, 2021 is as follows:   Year Ended         2022   $ 34,318   2023     19,756   2024     16,214   2025     16,214   2026     8,246   Thereafter     88,090   Total   $ 182,838     F- 17     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020     Note 7 – Long-term Debt   Long-term debt as of December 31 consists of the following:                         2021     2020   HSBC $10,387,500 Mortgage payable secured by real property Buildings and improvements at 555 N Research Drive, Central Islip, NY payable in monthly principal installments of $62,481 including Interest at a rate of 3.9148% . On July 26, 2021 the loan was satisfied.   $ -     $ 9,315,246                       PPP Loan $2,415,970 , maturing on April 21, 2022, with interest accruing at 1% per annum. On June 10, 2021 the loan was forgiven.     -       2,415,970   HSBC $6,000,000 Mortgage payable secured by building Buildings and improvements at 355 South Technology Drive, Central Islip, NY payable in monthly principal installments of $25,000 plus interest. Interest presently accrues at our option, at the variable rate of LIBOR plus 1.75% or HSBC’s Prime rate minus 0.50% The loan was satisfied on March 1, 2022.     1,765,508       2,065,508   Total long-term debt   $ 1,765,508     $ 13,796,724                     Less: Current maturities     ( 1,765,508 )     ( 690,667 ) Long-term debt   $ -     $ 13,106,057     Future maturities of long-term debt as of December 31, 2021 are as follows:   2022   $ 1,765,508             Total long-term debt   $ 1,765,508     The Company has a loan agreement with HSBC which was secured by a mortgage against its Central Islip, NY Headquarters. The loan was payable in 120 consecutive equal monthly installments of $ 25,000 in principal plus interest and a final balloon payment upon maturity in March 1, 2022. The balances as of December 31, 2021 and December 31, 2020 were approximately $ 1.8 million and $ 2.1 million respectively. Interest accrued on the Loan, at the Company’s option, at the variable rate of LIBOR plus 1.75 % or Prime less 0.5 % ( 1.86 % and 1.89 % at December 31, 2021 and 2020, respectively). The Company was in compliance with its financial covenant under this mortgage at December 31, 2021. This loan was satisfied on March 1, 2022 ( see Note 15 )   On November 30, 2017, the Company purchased the premises located at 555 North Research Place, Central Islip, NY. The purchase price of the building was $ 13,850,000 exclusive of closing costs. The Company’s wholly-owned subsidiary, 555 N Research Corporation (the “Assignee”) and the Islip IDA, entered into a Fee and Leasehold Mortgage and Security   F- 18     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020   Note 7 – Long-term Debt (continued)   Agreement (the “Loan”) with HSBC in the amount of $ 10,387,500 , which was used to finance a portion of the purchase price to acquire the premises located at 555 North Research Place, Central Islip, New York. The Loan was evidenced by the certain Note, dated November 30, 2017 ( the “Note”), by and between Assignee and the Bank, and secured by a certain Fee and Leasehold Mortgage and Security Agreement (the “Mortgage”), dated November 30, 2017, as well as a collateral Assignment of Leases and Rents. The Note was payable in 60 consecutive equal monthly installments of $ 62,481 including interest at the fixed rate of 3.9148 %, and a final balloon payment upon maturity in December 2022. On July 26, 2021, the Company closed on the sale of the 555 Building and satisfied the loan. (see Note 14 ).     On April 21, 2020, the Company entered into a loan agreement (the “Loan Agreement”) with HSBC Bank USA, National Association pursuant to which the Company was granted a loan in the principal amount of $ 2,415,970 , pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted by the United States Congress on March 27, 2020.   The PPP loan, the obligation of which is represented by a note issued by the Company, was to mature on April 21, 2022 and bore interest at a rate of 1% per annum. The note may be prepaid by the Company at any time prior to maturity with no prepayment penalties. Under the terms of the PPP, all or a portion of the Loan may be forgiven, based upon payments made in the first twenty-four weeks following receipt of the proceeds, related to payroll costs, continue group health care benefits, utilities and mortgage interest on other debt obligations incurred before February 15, 2020. The Company filed an application for forgiveness in April 2021 and on June 14, 2021 the Company received a notification from its lender that on June 10, 2021 the SBA approved the Company’s PPP Loan forgiveness application and remitted payment to the lender for the entire principal amount of the PPP Loan and accrued interest. As a result, the Company has recognized in the year ended December 31, 2021 a Gain on Debt Extinguishment in the amount of $ 2,443,418 .   F- 19     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020     Note 8 – Earnings per Share   The calculation of basic and diluted weighted average common shares outstanding is as follows:       2021     2020   Weighted average common shares outstanding basic earnings per share     6,688,087       6,640,272   Effect of potential common share issuance:                 Dilutive effect of Stock options and unvested shares     15,622       -                     Weighted average common shares outstanding                 Diluted earnings per share     6,703,709       6,640,272     At December 31, 2021, stock options to purchase 618,500 shares of common stock were outstanding and 265,000 were exercisable. Stock options to purchase 417,000 shares of common stock were outstanding and 377,000 were exercisable at December 31, 2020. At December 31, 2021 and 2020, respectively, 287,000 and 417,000 , stock options were not included in the computation of diluted earnings per share because their effect was antidilutive.       Note 9 – Income Taxes   At December 31, 2021, the Company had $ 1,671,893 of federal research and development tax credits. If not utilized, the research and development tax credits expire from 2028 - 2040. For the year ended December 31, 2021 and 2020, the Company has provided a full valuation allowance against all of the net deferred tax assets in the amount of $ 2,990,093 and $ 3,381,133 , respectively. This was based on management’s assessment, including the last two years of operating losses, that it is more likely than not that the net deferred tax assets may not be realized in the future.   On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted by the United States Congress. As a result of the enactment of the CARES Act, net operating losses (“NOL’s”) generated in 2018 - 2020 can now be carried back for five years and resulted in the Company recognizing approximately $ 1.5 million of a tax benefit, of which $. 7 million is a receivable at December 31, 2021. We continue to evaluate for potential utilization of the Company’s deferred tax asset, which has been fully reserved for, on a quarterly basis, reviewing our economic models, including projections and timing of orders, the commencement of operations of the CVD Materials segment and cost containment measures.   F- 20     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020   Note 9 – Income Taxes (continued)   The expense/(benefit) for income taxes includes the following:       2021     2020   Current:                 Federal   $ 14,978     $ ( 1,528,305 ) State     13,399       950   Total current tax provision     28,377       ( 1,527,355 ) Deferred:                 Federal     -       -   State     ---       ---   Total deferred tax provision     -       -   Income tax expense / (benefit)   $ 28,377     $ ( 1,527,355 )       The tax effects of temporary differences giving rise to significant portions of the net deferred taxes are as follows:                                                                                       2021     2020   Deferred income tax assets:                 Allowance for doubtful accounts   $ 12,926     $ 35,442   Inventory capitalization     6,620       6,969   Impairment Charge     722,720       712,683   Research & development tax credits     1,671,893       1,719,598   Compensation costs     148,958       211,363   Vacation accrual     141,079       89,626   Interest expense carryforward     -       223,768   Net operating loss carryforward     808,163       925,912   Other items     94,235       12,248   Total deferred tax asset     3,606,594       3,937,609   Deferred incomes tax liability:                 Property and equipment - tax over book depreciation     ( 616,501 )     ( 556,476 ) Less valuation allowance     ( 2,990,093 )     ( 3,381,133 ) Net long-term deferred tax asset   $ -     $ -     F- 21     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020   Note 9 – Income Taxes (continued)   The reconciliation of the federal statutory income tax rate to our effective tax rate is as follows:         2021     2020   Expected provision at federal statutory tax rate ( 21% )   $ 1,002,721     $ ( 1,596,485 )                   PPP loan forgiveness     ( 513,118 )     -   Provision for valuation allowance     ( 346,209 )     883,796   Foreign tax (income) loss     ( 115,863 )     70,492   Net operating loss carryback     -       ( 1,527,355 ) State taxes, net of federal benefit     5,787       ( 36,832 ) Federal research & development credit     ( 56,761 )     ( 64,266 ) Other permanent differences     51,820       743,295   Income (benefit) / tax expense   $ 28,377     $ ( 1,527,355 )       The Company’s foreign subsidiary, CVD Tantaline ApS recognized income (loss) of approximately $ 552,000 and ($ 336,000 ) for the years ended December 31, 2021 and 2020, respectively. Based on the standard corporate tax rate of 22 % in Denmark, the Company would have incurred a tax expense (benefit) in the amount of $ 121,000 and ($ 74,000 ) for the years ended December 31, 2021 and 2020, respectively, however, as sufficient uncertainty exists as to the realization of these assets, a full valuation allowance is necessary for the losses incurred prior to December 31, 2021.       Note 10 – Stockholders ’ equity   2001 Non-Qualified Stock Option Plan   In November 2006, the Company registered a non-qualified stock option plan that the shareholders had approved in July 2001, covering key employees, officers, directors and other persons that may be considered as service providers to the Company. Options were awarded by the Board of Directors or by a committee appointed by the Board. Under the plan, an aggregate of 300,000 shares of Company common stock, $.01 par value, were reserved for issuance or transfer upon the exercise of options which were granted. Unless otherwise provided in the option agreement, options granted under the plan would vest over a four -year period commencing one year from the anniversary date of the grant. The stock option plan expired on July 22, 2011. As of December 31, 2021 there were no options outstanding under this plan.   F- 22     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020   Note 10 – Stockholders ’ equity (continued)   2007 Share Incentive Plan   On December 12, 2007, shareholders approved the Company’s 2007 Share Incentive Plan (“Incentive Plan”), in connection therewith, 750,000 shares of the Company’s common stock are reserved for issuance pursuant to options or restricted stock that may be granted under the Share Incentive Plan through December 12, 2017. The Plan expired in December, 2017. As of December 31, 2021 there were 220,000 options outstanding under this plan.   2016 Share Incentive Plan   On December 9, 2016, shareholders approved the Company’s 2016 Share Incentive Plan ( “2016 Incentive Plan”), in connection therewith 750,000 shares of the Company’s common stock are reserved for issuance pursuant to options or restricted stock that may be granted under the 2016 Incentive Plan through December 9, 2026. As of December 31, 2021, there were 398,500 options outstanding under this plan.   The purchase price of the common stock under each option plan shall be determined by the Committee, provided, however, that such purchase price shall not be less than the fair market value of the shares on the date such option is granted. The stock options generally expire seven to ten years after the date of grant. The Company recorded into general and administrative expenses stock-based compensation of $ 316,000 and $ 243,000 for the years ended December 31, 2021 and 2020, respectively.     A summary of the stock option activity related to the 2001 Stock Option Plans, the 2007 Share Incentive Plan and the 2016 Share Incentive Plan for the period from January 1, 2020 through December 31, 2021 is as follows:   F- 23     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020   Note 10 – Stockholders ’ equity (continued)     2001 Non-Qualified Stock Option Plan                                               Beginning Balance Outstanding     Granted During Period     Exercised During Period     Canceled During Period     Ending Balance Outstanding     Exercisable   Year ended December 31, 2020                                                 Number of shares     22,930       -       -       ( 15,930 )     7,000       7,000   Weighted average exercise price per share   $ 5.36       -       -     $ 4.25     $ 7.90     $ 7.90   Year ended December 31, 2021                                                 Number of shares     7,000       -       -       ( 7,000 )     -       -   Weighted average exercise price per share   $ 7.90       -       -     $ 7.90       -       -     2007 Share Incentive Plan                                                       Beginning Balance Outstanding       Granted During Period       Exercised During Period       Canceled During Period       Ending Balance Outstanding       Exercisable   Number of shares     345,000       -       -       -       345,000       305,000   Weighted average exercise price per share   $ 12.33       -       -       -     $ 12.33     $ 12.60   Year ended December 31, 2021                                                 Number of shares     345,000       -       -       ( 125,000 )     220,000       200,000   Weighted average exercise price per share   $ 12.33       -       -     $ 11.94     $ 12.56     $ 12.78     2007 Share Incentive Plan                                                       Beginning Balance Outstanding       Granted During Period       Exercised During Period       Canceled During Period       Ending Balance Outstanding       Exercisable   Year ended December 31, 2020                                                 Number of shares     65,000       -       -       -       65,000       -   Weighted average exercise price per share   $ 5.94       -       -       -     $ 5.94       -   Year ended December 31, 2021                                                 Number of shares     65,000       333,500       -       -       398,500       65,000   Weighted average exercise price per share   $ 5.94     $ 4.13       -       -     $ 4.43     $ 5.94     F- 24     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020   Note 10 – Stockholders ’ equity (continued)   For the year ended December 31, 2021, the Company granted 333,500 stock options, vesting 25 % per year over four years, with a ten -year life. The Company determined the fair value of stock options granted during the year ended December 31, 2021 is based upon weighted average assumptions as provided below.   Stock Price   $ 4.13   Exercise Price   $ 4.13   Dividend yield     0 % Expected volatility     67 % Risk-Free interest rate     1.36 % Expected life (in years)     6.00       The Company has 618,500 of outstanding stock options under the three plans at December 31, 2021.   The following table summarizes information about the outstanding and exercisable options at December 31, 2021.           Options Outstanding                     Options Exercisable           Exercise Price Range       Number Outstanding     Weighted Average Remaining Contractual       Weighted Average Exercise Price       Intrinsic Value       Number Exercisable     Weighted Average Exercise Price     Intrinsic Value   $ 4.00 - 7.00       378,500       9.3     $ 4.23     $ 21,000       45,000     $ 5.00     $ 0   $ 7.01 - 10.00       20,000       6.3     $ 8.07     $ 0       20,000     $ 8.07     $ 0   $ 10.01 - 12.00       120,000       3.6     $ 10.52     $ 0       100,000     $ 10.56     $ 0   $ 12.01 - 15.00       100,000       .6     $ 15.00     $ 0       100,000     $ 15.00     $ 0     No options were exercised for the year ended December 31, 2021 and 2020. As of December 31, 2021, there was $ 730,000 of unrecognized compensation costs related to stock options expected to be recognized over a weighted average period of 3.49 years   F- 25     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020   Note 10 – Stockholders ’ equity (continued)   Restricted Stock Awards   The following table summarizes restricted stock awards for the years ended December 31, 2021 and 2020:       Shares of Restricted Stock     Weighted Average Grant Date Fair Value   Unvested outstanding at January 1, 2020     0     $ 0   Granted     30,200     $ 3.74   Vested     ( 30,200 )   $ 3.74   Forfeited/Cancelled     -       -   Unvested outstanding at December 31, 2020     0     $ 0                     Granted     42,800     $ 4.65   Vested     ( 36,000 )   $ 4.60   Forfeited/Cancelled     ( 6,800 )   $ 4.90   Unvested outstanding at December 31, 2021     0     $ 0     The total fair value of shares of restricted stock awards vested for the years ended December 31, 2021 and 2020 was approximately $ 160,000 and $ 113,000 respectively. The fair value of the outstanding restricted stock awards is recorded as stock compensation expense over the vesting period.   Restricted Stock Units   The following table summarizes restricted stock units for the years ended December 31, 2021 and December 31, 2020:       Shares of Restricted Stock Units     Weighted Average Grant Date Fair Value   Unvested outstanding at January 1, 2020     22,575     $ 4.66   Granted     -       -   Vested     ( 12,825 )   $ 8.81   Forfeited/Cancelled     ( 1,000 )   $ 5.45                     Unvested outstanding at December 31, 2020     8,750     $ 5.00   Granted     -       -   Vested     ( 3,250 )   $ 5.29   Forfeited/Cancelled     (- )   $ - -                     Unvested outstanding at December 31, 2021     5,500     $ 4.82     F- 26     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020   Note 10 – Stockholders ’ equity (continued)   The total fair value of vested restricted stock units was $ 38,000 and $ 91,000 respectively for the years ended December 31, 2021 and 2020.   The fair value of the outstanding restricted stock units will be recorded as stock compensation expense over the vesting period. As of December 31, 2021, there was $ 3,000 of total unrecognized compensation costs related to restricted stock units, which is expected to be recognized over a weighted-average period of .2 years.         Note 11 – Defined Contribution Plan   The Company maintains 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 is eligible to 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. No discretionary employer contribution has been made for 2021 and 2020.         Note 12 – Segment Reporting   The Company operates through three segments, CVD, SDC and CVD Materials. The CVD segment is utilized for silicon, silicon germanium, silicon carbide and gallium arsenide processes. SDC is the Company’s ultra-high purity manufacturing division in Saugerties, New York. The accounting policies of CVD and SDC are the same as those described in the summary of significant accounting policies (see Note 2 ). The Company evaluates performance based on several factors, of which the primary financial measure is earnings before taxes. Included in the CVD Materials segment are the Company’s wholly owned subsidiaries, CVD Tantaline Aps and CVD MesoScribe Technologies Corporation.   F- 27     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020   Note 12 – Segment Reporting (continued)   The following table presents certain information regarding the Company’s segments as of December 31, 2021 and December 31, 2020 and for the years then ended:   2021                                                 (In thousands)   CVD     SDC     Materials     Corporate     Eliminations *     Consolidated   Assets   $ 26,360     $ 7,409     $ 1,755                     $ 35,524                                                     Revenue   $ 8,590     $ 4,849     $ 3,354             $ ( 346 )   $ 16,447   Operating (loss)/income     ( 3,454 )     922       910       ( 3,185 )             ( 4,807 ) Gain on Sale of Building                     6,894                       6,894   Pretax (loss)/income     ( 1,055 )     922       8,093       ( 3,185 )             4,775     2020                                                 (In thousands)   CVD     SDC     Materials     Corporate     Eliminations *     Consolidated   Assets   $ 31,284     $ 6,068     $ 3,593             $ ( 9 )   $ 40,936                                                     Revenue   $ 10,385     $ 4,429     $ 2,556             $ ( 450 )   $ 16,920   Operating (loss)/income     ( 863 )     473       ( 4,283 ) (1)     ( 3,151 )             ( 7,824 ) Pretax (loss)/income     ( 878 )     481       ( 4,054 ) (1)     ( 3,151 )             ( 7,602 )   ( 1 ) During the year ended December 31, 2020, the Materials segment includes an impairment charge of $ 3.6 million related to the Tantaline product line.     *All elimination entries represent intersegment transactions eliminated in consolidation for external reporting.     F- 28     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020     NOTE 13:           Significant Events- COVID- 19   The Company has been actively monitoring the coronavirus (COVID- 19 ) outbreak and resulting pandemic and its impact on both the global economic and operating environment and specifically on its impact to the Company, its employees, its operations and its financial condition.  In March 2020, the World Health Organization recognized the COVID- 19 outbreak as a pandemic based on the global spread of the disease, the severity of illnesses it causes and its effects on society. In response to the COVID- 19 outbreak, the governments of many countries, states, cities and other geographic regions have taken preventative or protective actions, such as imposing restrictions on travel and business operations, including complete or partial government shutdowns of many schools and businesses, including the Company, and advising or requiring individuals to limit or forego their time outside of their homes. Accordingly, the COVID- 19 outbreak has severely restricted the level of economic activity in many countries, including the United States, and continues to materially and adversely impact global economic activity.  In particular, the aerospace sector, for which the Company relies on a significant part of its business, has been faced with significant reductions to its business due to lack of air travel. The Company’s new order levels during the year ended December 31, 2020 and into the first quarter of 2021 have seen substantial reductions which have materially and adversely affected revenues commencing in its second quarter of 2020, and is anticipated to continue into 2022. While the financial results for the Company’s first quarter of 2020 reflected the initial impact of COVID- 19, and the twelve months ended December 31, 2020 and 2021 reflected a substantial adverse effect, management is unable to predict the extent of the impact the pandemic will have on the Company’s financial position and operating results for 2022 due to numerous uncertainties, but the impact could be material during any future period affected either directly or indirectly by this pandemic.  The Company intends to continue to evaluate the various government sponsored plans and programs put in place in response to the COVID- 19 pandemic and further plans to take advantage of any such government benefits reasonably available to it.  Moreover, the Company will continue to monitor developments in that area as new government initiatives are passed.   The COVID- 19 pandemic has adversely impacted worldwide supply chains and the ability to obtain sufficient amounts of component parts. In addition, disruptions and delays in the ability of the Company’s third party freight carriers to transport these items to the Company’s manufacturing facility also continues to be a challenge. During the third and fourth quarters in 2021, the Company experienced increased costs on certain components as well as delays in supply chain delivery, which may also impact its ability to recognize revenue and reduce the Company’s gross profit margins, as well as extend our manufacturing lead times and reduce its manufacturing efficiencies. The Company has commenced placing orders with more lead time to help mitigate the manufacturing delays, as well as assessing other suppliers or components to attempt to mitigate the potential cost impacts. In addition, the Company is utilizing its in-house flexible manufacturing to attempt to further mitigate both potential schedule delivery delays and material cost increase. While management has initiated actions to mitigate the potential negative impacts to our revenue and profitability, there can be no assurance of the ultimate impact and the length of time period that the supply chain factors may impact its revenues and profitability.   F- 29     CVD EQUIPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 and 2020     NOTE 14:           SALE OF 555 BUILDING   In order to increase the Company’s liquidity and to provide necessary working capital to support its on-going business and operations, the Company sold the 555 Building. Management had determined the 555 Building was not needed for business operations, and any remaining elements of the Materials Business would be consolidated into the 355 Building, which management believes can accommodate any needs for the Company’s growth for the foreseeable future.   On March 29, 2021, the Company entered into an agreement with Steel K, LLC for the sale of its 555 Building, and on July 26, 2021 the Company closed on the sale of the 555 Building. The sale price was $ 24,360,000 , subject to adjustment for apportionments, adjustments and credits. A portion of the sale proceeds was used to satisfy the existing mortgage debt on the 555 Building, including interest and fees, in the amount of $ 9,352,719 , as well as various costs related to the closing of the transaction. The Company recognized a gain on the sale of the building in the amount of $ 6,894,109 and received approximately $ 14,000,000 in net proceeds.       Note 15 – Subsequent Events   The Company had a loan agreement with HSBC (see Note 7 ) which was secured by a mortgage against its Central Islip, NY Headquarters. On March 1, 2022, according to the terms of the agreement, the loan amount outstanding of approximately $ 1.7 million was satisfied.   F-30