<DOCUMENT>
<TYPE>10KSB
<SEQUENCE>1
<FILENAME>ed10ksb04.txt
<DESCRIPTION>CVD EQUIPMENT CORPORATION ANNUAL FILING
<TEXT>
  <PAGE>
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                 -------------
                                  FORM 10-KSB
  (Mark One)
  [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934.
                         For the year ended December 31, 2004
  [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934.
                         For the transition period from ______ to ______

                        Commission file number: 1-16525

                           CVD EQUIPMENT CORPORATION
               (Name of Small Business Issuer in Its charter)

                New York                        11-2621692
          --------------------              ------------------
       (State or Other Jurisdiction         (I.R.S. Employer
        of Incorporation or Organization)   Identification No.)

                             1860 Smithtown Avenue
                           Ronkonkoma, New York 11779
  (Address including zip code of registrant's Principal Executive Offices)

                                (631) 981-7081
               (Issuer's Telephone Number, Including Area Code)

          Securities registered pursuant to Section 12(b) of the Act:
                                      NONE

          Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock, Par value $0.01
                                (Title of class)

     Check whether the issuer: (1) filed all reports required to be filed by
  Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
  such shorter period that the registrant was required to file such reports),
  and (2) has been subject to such filing requirements for the past 90 days.
                            Yes  [X]        No   [ ]

     Check if there is no disclosure of delinquent filers response to Item 405
  of Regulation S-B is not contained in this form, and no disclosure will be
  contained, to the best of registrant's knowledge, in definitive proxy or
  information statements incorporated by reference in Part III of this Form
  10-KSB or any ammendment to this Form 10-KSB. [X]

     State issuer's revenues for its most recent fiscal year. $ 9,873,592

     State the aggregate market value of the voting and non-voting common
  equity held by non affiliates computed by reference to the price at which
  the common equity was sold, or the average bidand asked price of such common
  equity, as of a specified date within the past 60 days: $ 1,893,770 at March
  29, 2005.

     State the number of shares outstanding of each of the issuer's classes of
  common equity, as of the latest practicable date: 3,039,100 shares of Common
  Stock, $0.01 par value at March 29, 2005.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None.

   Transitional Small Business Disclosure Format (Check one): Yes [ ]  No [X]

    -------------------------------------------------------------------------

  <PAGE>
                                     PART I

  Item 1.      Business

  Unless otherwise set forth herein, when we use the term 'we' or any
  derivation thereof, we mean CVD Equipment Corporation, a New York
  corporation, formed in 1982 (the "Company").

  We design, develop, manufacture, market, install and service equipment
  primarily for the semiconductor industry.  Our products include (1)
  both batch and single wafer systems used for depositing, rapid thermal
  processing, annealing, diffusion and etching of semiconductor films,
  (2) gas and liquid flow control systems, (3) ultra high purity gas and
  chemical piping delivery systems, (4) standard and custom quartzware
  and (5) reflow furnaces and rework stations for surface mounting of
  components onto printed circuit boards.  We also provide equipment
  consulting and refurbishing of semiconductor processing equipment.
  Our products are generally manufactured as standard products or
  customized to the particular specifications of each of our customers.

  Semiconductor components are the fundamental electronic building
  blocks used in modern electronic equipment and systems. These
  components are classified as either discrete devices (such as
  transistors) or integrated circuits (in which a number of transistors
  and other elements are combined to form a more complicated electronic
  circuit). In an integrated circuit, these elements are formed on a
  small "chip" of silicon or gallium arsenide, which is then
  encapsulated in an epoxy, ceramic or metal package having lead wires
  for connection to a circuit board. Our products are used in the
  manufacture and mounting of these components.

  We conduct our operations through three divisions, CVD, SDC and
  Conceptronic. Each division operates reasonably autonomously on a day-
  to-day basis with its own operating manager and with sales and
  administration being handled by corporate managers. There is an
  overall corporate coordination in the day-to-day administration of the
  business, in establishing policy and consistently applying procedures.

  CVD Division

  Our CVD Division designs and manufactures both standard and custom
  equipment for the semiconductor industry. CVD's equipment, with its
  leading edge technology, is utilized for silicon, silicon germanium,
  silicon carbide and gallium arsenide processes. These processes are
  paramount in the semiconductor, optoelectronic and wireless
  communications arena.

  SDC Division

  The Stainless Design Concepts, Ltd ("SDC") division of the Company
  designs and manufactures in their Class 100 cleanroom, ultra high
  purity gas and chemical delivery control systems for the semiconductor
  industry, and also provides equipment consulting and  refurbishing of
  semiconductor equipment. The field service group provides for contract
  maintenance, high purity fab and equipment installations and equipment
  removal.

  <PAGE>
  The startup of our SDC Division provided new products for CVD to offer
  to the semiconductor industry and also improved the manufacturing of
  gas and chemical delivery systems used in most of our products.

  Conceptronic Division

  In December 2001, we acquired the assets of the Surface Mount
  Technology division of Research Inc., known as Research International
  ("RI").  RI is a manufacturer of Surface Mount Technology ("SMT")
  reflow furnaces.

  In June 2002, we purchased substantially all of the assets of
  Conceptronic Inc.'s Surface Mount Technology business. Conceptronic
  specializes in solder reflow furnaces and rework stations for the
  printed circuit board and chip scale package industries.

  In 2002 we combined the operations of RI and Conceptronic and they are
  currently being reported under the Conceptronic division.

  The startup of our RI and Conceptronic divisions provided a base for
  us to generate new and enhanced standard and custom furnace products
  to the semiconductor and Surface Mount Technology markets based on our
  own technology and technology that was purchased as part of the
  acquisition of assets.

  Principal Products

  Chemical Vapor Deposition  - A process which passes a gaseous compound
  over a target material surface that is heated to such a degree that
  the compound decomposes and deposits a desired layer onto substrate
  material. The process is accomplished by combining appropriate gases
  in a reaction chamber, of the kind produced by the Company, at
  elevated temperatures (typically 300-1,500 degrees Celsius). Our
  Chemical Vapor Deposition systems are complete and include all
  necessary instrumentation, subsystems and components. The systems
  include mass flow controllers, bellows valves, stainless steel lines
  and fittings. We provide such standard systems and also specifically
  engineered products for particular customer applications. Some of the
  standard systems we offer are for Silicon, Silicon-Germanium, Silicon
  Dioxide, Silicon Nitride, Polysillicon, Liquid Phase Epitaxial and
  Metalorganic Chemical Vapor Deposition.

  Our Chemical Vapor Deposition systems are available in a variety of
  models that can be used in production and laboratory research. All
  models can be offered with total system automation, a microprocessor
  control system by which the user can measure, predict and regulate gas
  flow, temperature, pressure and chemical reaction rates, thus
  controlling the process in order to enhance the quality of the
  materials produced. Our standard microprocessor control system is
  extremely versatile and capable of supporting the complete product
  line and most custom system requirements. These Chemical Vapor
  Deposition systems range in price from $100,000 to $2,500,000.

  <PAGE>
  Rapid Thermal Processing ("RTP") -  Used to heat semiconductor
  materials to elevated temperatures of 1,000 degrees Celsius at rapid
  rates of up to 200 degrees Celsius per second. Our RTP systems are
  offered for implant activation, oxidation, silicide formation and many
  other processes. We offer systems that can operate both at atmospheric
  or reduced pressures. A specific model of our RTP system is used for
  Thermal Desorption Spectroscopy which allows the semiconductor process
  engineer the ability to analyze the deposited films between the many
  process steps used in the complex fabrication process. Our RTP systems
  generally range in price from $75,000 to $350,000.

  Annealing and Diffusion Furnaces - Used for diffusion, oxidation,
  implant anneal, solder reflow and other processes. The systems are
  normally operated at atmospheric pressure with gaseous atmospheres
  related to the process. An optional feature of the system allows for
  the heating element to be moved away from the process chamber allowing
  the wafers to rapidly cool  or be heated in a controlled environment.
  Our cascade temperature control system enables more precise control of
  the wafers. The systems are equipped with an automatic process
  controller, permitting automatic process sequencing and monitoring
  with safety alarm provisions. Our Annealing and Diffusion Furnace
  systems generally range in price from $75,000 to $650,000.

  Gas and Liquid Control Systems - Our standard and custom designed gas
  and liquid control systems encompassing (1) gas cylinder storage
  cabinets, (2) custom gas and chemical delivery systems, (3) gas and
  liquid valve manifold boxes (VMB's) and (4) gas isolation boxes
  (GIB's) to provide safe storage and handling of pressurized gases and
  chemicals. System design allows for automatic or manual control from
  both a local and remote location. The price range for our Gas and
  Liquid Control Systems are from $20,000 to $350,000.

  Ultra High Purity Gas and Chemical Piping and Delivery Systems - We
  provide field installation of ultra high purity piping systems within
  a semiconductor plant for the distribution of gases and chemicals to
  the assorted process tools. As part of field service, we also offer
  repair service on customer equipment.

  Quartzware - We provide standard and custom fabricated quartzware used
  in the Company's equipment and other customer tools. We also provide
  repair and replacement of existing quartzware.

  Reflow Furnaces and Rework Stations - We provide a standard line for
  the printed circuit board and chip scale package industries.

  Markets and Marketing

  During 2004, sales were made by a staff of six employees and twenty-
  five sales representatives whose activities were supported by a staff
  of twelve application engineers. We continue to work on expanding our
  product offerings.

  Our web sites continue to see increased traffic. We have focused our
  efforts on being in the top listings on many search engines in order
  to increase the number of "hits" to our web sites.

  <PAGE>
  Many of our products are used in research and production applications
  by the semiconductor industry. We sell our products primarily to
  semiconductor manufacturers, institutions involved in electronic
  research such as universities, government and industrial laboratories
  and to electronic assembly manufacturers. We have both an
  international and domestic customer base in excess of 300 customers.
  For the twelve months ended December 31, 2004 approximately 32% of our
  revenues were generated from foreign exports compared to the twelve
  months ended December 31, 2003 which generated revenues from foreign
  exports equaling 26%. Sales to a single customer in any one year can
  exceed 10.0% of our total sales; however, we are not dependent on any
  single customer. In 2004 and 2003, one customer, which is a
  distributor, represented 16.7% and 12.0% of our total sales,
  respectively. In 2004, no other customer represented more than 8.2% of
  our total sales and in 2003, one other customer represented 13.4% of
  our total sales.

  Warranties

  We warrant our equipment for a period of twelve to twenty four months
  after shipment, depending on the product, and pass along any
  warranties from original manufacturers of components used in our
  products. We provide for our own equipment servicing with in-house
  field service personnel. Warrantee costs have been historically
  insignificant.

  Competition

  Our business is subject to intense competition. We are aware of other
  competitors that offer a substantial number of products comparable to
  ours. Many of our competitors (including customers who may elect to
  manufacture systems for internal use) have financial, marketing and
  other resources greater than ours. To date, we have been able to
  compete in markets that include these competitors, primarily on the
  basis of price, technical performance, quality and delivery.

  Sources of Supply

  We do not manufacture many components used in producing our products.
  They are purchased from unrelated third-party manufacturers of such
  equipment. We do not have any supply contracts covering these
  components. We are not dependent on a principal or major supplier and
  alternate suppliers are available. We do not use a large amount of raw
  or difficult to obtain materials that could cause a problem in
  production of our equipment.

  We have our own fully equipped machine shop to fabricate in house, the
  most complex designed parts of our equipment. Our previous investment
  in CNC machines for the machine shop has increased our efficiencies
  while significantly reducing costs in production. Similarly, our own
  quartz shop is capable of meeting our quartzware needs.

  Materials procured from the outside and/or manufactured internally
  undergo a rigorous quality control process to ensure that the parts
  meet or exceed the most stringent specifications. All equipment, upon
  final assembly, undergoes a final series of complete testing to ensure
  maximum product performance.

  <PAGE>
  Backlog

  As of December 31, 2004 our order backlog was approximately $2,430,000
  compared to approximately $1,738,000 at December 31 2003, an increase
  of 39.8%. The increase can primarily be attributed to our CVD Division
  which began to experience an increase in orders at the beginning of
  the fourth quarter. The timing for completion of the backlog varies
  depending on the product mix, however, there is generally a one to six
  month lag in the completion and shipping of backlogged product.
  Included in the backlog are all accepted purchase orders. Order
  backlog is usually a reasonable management tool to indicate expected
  revenues and projected profits, however it does not provide an
  assurance of future achievement or profits as order cancellations or
  delays are possible.

  Patents, Copyrights and License Agreements

  We believe that while patents are useful and will be used at times in
  the future, they are not critical or valuable in many cases on an
  individual basis. We believe the collective value of our intangible
  property such as blueprints, specifications, technical processes,
  cumulative employee knowledge, and experience provide us with a
  measure of protection for our manufacturing and design processes.

  Research and Development

  We continue to concentrate our efforts on several research and
  development projects. We develop and customize equipment for industry
  and government, university and industry research laboratories around
  the world. Our research, design and development of equipment, which
  remains proprietary to us, is used to improve our existing products
  and develop new products for customers. The amount spent on research
  and development was $410,000 and $273,000 for the years ended December
  31, 2004 and December 31, 2003, respectively.

  Government Regulations

  The Company knows of no government requirements for approval of the
  sale of its products or services except in some export cases. At that
  time, we apply for the appropriate export, license. As of December 31,
  2004, there were no pending government approvals for an export
  license.

  We know of no existing or probable governmental regulations that would
  have a serious effect on our business.

  We have and will continue to comply with any and all environmental
  laws that are applicable to our business.

  <PAGE>
  Insurance

  Some of our products are used in connection with explosive, flammable,
  corrosive and toxic gases. There are potential exposures to personal
  injury as well as property damage, particularly if operated without
  regard to the design limits of the systems and components. We believe
  that our insurance coverage is adequate. We have the following
  insurance coverages:
         o      Product liability
         o      Property and contents
         o      General liability
         o      Directors and officers
         o      Transportation
         o      Business auto
         o      Workers compensation
         o      Employee benefits liability

  Employees

  At December 31, 2004, we had 96 employees, 93 of which were full time
  personnel and 3 worked part time.  We had 55 people in manufacturing,
  14 in engineering (including research and development and efforts
  related to product improvement) 6 in field service, three in marketing
  and 18 in general management and administration.


  Item 2.      Description of Property.

  We maintain our headquarters at 1860 Smithtown Avenue, Ronkonkoma, New
  York, where we own a 50,000 square foot manufacturing facility which
  was purchased in November, 2002. Our CVD and Conceptronic divisions
  operate out of this facility. Our SDC division operates out of a
  22,000 square foot manufacturing facility situated on five acres of
  land which we purchased in December 1998 and is located at 1117 Kings
  Highway, Saugerties, New York.  Each facility is in good operating
  condition and is adequate to meet the Company's present and anticipated
  future needs.

  Item 3.      Legal Proceedings.

  In September 1999, the Company was named in a lawsuit filed by
  Precisionflow Technologies, Inc., in the United States District for
  the Northern District of New York relating to comments allegedly made
  by CVD's President, Leonard Rosenbaum, concerning the intellectual
  property obtained in the purchase of assets of Stainless Design
  Corporation. We promptly filed a counterclaim for unauthorized use of
  our intellectual property. The plaintiff is seeking monetary damages
  and injunctive relief.  In our counter claim, we are also seeking
  monetary damages and injunctive relief.   All pre-trial disclosure has
  been completed and the case is currently pending decisions on motions
  and cross motions for summary judgment. No trial date has been set.

  <PAGE>
  In May 2002, the Company instituted a new action against Precisionflow
  Technologies, Inc., in the United States District for the Northern
  District of New York seeking injunctive relief and monetary damages
  based upon copyright violations. A motion by Precisionflow
  Technologies, Inc. to dismiss this action has been pending since June
  2002.

  Item 4.      Submission of Matters to a Vote of Security Holders.

          Not applicable.

                                    PART II

  Item 5.      Market for Registrant's Common Equity and Related
  Stockholder Matters.

  The principal market for our common stock which is traded under the
  symbol CVV is the American Stock Exchange. The following table sets
  forth, for the periods indicated, the high and low sales prices of our
  common stock on the American Stock Exchange.
  <TABLE>
  <CAPTION>
                                       High       Low
                                     --------   --------
  <S>                                <C>        <C>
  Year Ended December 31, 2004:
  1st Quarter..............           $ 3.00     $ 1.28
  2nd Quarter.............              2.30       1.20
  3rd Quarter.............              1.41       0.75
  4th Quarter.............              1.47       0.90
  </TABLE>
  <TABLE>
  <CAPTION>
                                       High       Low
                                     --------   --------
  <S>                                <C>        <C>
  Year Ended December 31, 2003
  1st Quarter.............            $ 1.62     $ 0.82
  2nd Quarter............               1.35       1.00
  3rd Quarter............               1.95       1.03
  4th Quarter............               1.48       1.10
  </TABLE>

  As of March 29, 2005, there were approximately 94 holders of record
  and approximately 450 beneficial owners of our common stock. On March
  29, 2005, the closing sales price of our common stock as reported on
  the American Stock Exchange was $1.23.

  Dividend Policy

  We have never paid a dividend on our common stock and we do not
  anticipate paying dividends on the common stock at the present time.
  We currently intend to retain earnings, if any, for use in our
  business. There can be no assurance that we will ever pay dividends on
  our common stock. Our dividend policy with respect to the common stock
  is within the discretion of the Board of  Directors and its policy
  with respect to dividends in the future will depend on numerous
  factors, including earnings, financial requirements and general
  business conditions.

  <PAGE>
  Equity Compensation Plan Information

  The following table provides information about shares of our common
  stock that may be issued upon the exercise of options under all of our
  existing compensation plans as of December 31, 2004.
  <TABLE>
  <CAPTION>
                         Number of securities
                         to be issued upon      Weighted-average
                         exercise of            exercise price of      Number of securities
                         outstanding options,   outstanding options,   remaining available
                         warrants and rights    warrants and rights    for future issuance
  <S>                    <C>                    <C>                    <C>
   Plan Category

  Equity compensation
  plans approved by
  security holders (1)       355,400                 $ 1.56                  224,250

  Equity compensation
  plans not approved by
  security holders              0                       0                       0

         Total               355,400                 $ 1.56                  224,250
  __________________________
  <FN>
  (1) Reflects aggregate options outstanding under our Non-Qualified Stock Option Plan
  </TABLE>

  Recent Sales Of Unregistered Securities

    None.


  Issuer Purchases Of Equity Securities

  None

  Item 6.      Management's Discussion and Analysis of Financial Condition
  and Results of Operations.

  Except for historical information contained herein, this "Management's
  Discussion and Analysis of Financial Condition and Results of Operations"
  contains forward-looking statements within the meaning of the U.S. Private
  Securities Litigation Reform Act of 1995, as amended. These statements
  involve known and unknown risks and uncertainties that may cause our actual
  results or outcomes to be materially different from any future results,
  performance or achievements expressed or implied by such forward-looking
  statements. These forward-looking statements were based on various factors
  and were derived utilizing numerous important assumptions and

  <PAGE>
  other important factors that could cause actual results to differ materially
  from those in the forward-looking statements. Important assumptions and
  other factors that could cause actual results to differ materially from
  those in the forward-looking statements, include, but are not limited to:
  competition in the Company's existing and potential future product lines of
  business; The Company's ability to obtain financing on acceptable terms if
  and when needed; uncertainty as to the Company's future profitability,
  uncertainty as to the future profitability of acquired businesses or product
  lines, uncertainty as to any future expansion of the Company. Other factors
  and assumptions not identified above were also involved in the derivation of
  these forward-looking statements and the failure of such assumptions to be
  realized as well as other factors may also cause actual results to differ
  materially from those projected. The Company assumes no obligation to update
  these forward-looking statements to reflect actual results, changes in
  assumptions, or changes in other factors affecting such forward-looking
  statements.

  CVD Equipment Corporation designs, develops, manufactures, markets,
  installs and services equipment primarily for the semiconductor
  industry. The Company's products and services include (1) batch and
  single wafer systems used for depositing, rapid thermal processing,
  annealing, diffusion and etching of semiconductor films (2) gas and
  liquid flow control systems (3) ultra high purity gas and chemical
  piping delivery systems; (4) standard and custom quartzware, and (5)
  reflow furnaces and rework stations for surface mounting of components
  onto printed circuit boards. We also provide equipment consulting, and
  refurbishing of semiconductor processing equipment. The Company's
  products are generally manufactured as standard products, or customized
  to the particular specifications of its customers.

  Results of Operations

  Revenue for the year ended December 31, 2004 was approximately
  $9,874,000 compared to approximately $9,788,000 for the year ended
  December 31, 2003, representing an increase of $86,000 or 0.9%. Revenue
  from the Conceptronic Division was approximately $4,820,000 or 48.8% of
  the total revenue generated for the twelve months ended December 31,
  2004 compared to $4,107,000 or 42.0% of the total revenue generated in
  the twelve months ended December 31, 2003. The Company spent a
  considerable part of 2004 redesigning and reengineering its  product
  lines and in the latter half of the year, the Company had implemented
  enough of the upgrades to increase its manufacturing and shipping of
  Conceptronic equipment. Revenue from the CVD Division decreased to
  approximately $2,810,000 or 28.5% of total revenues during the year
  ended December 31, 2004, compared to $3,758,000, or 38.4% of total
  revenues, for the year ended December 31, 2003. This decrease was due
  to overall softness in the economy for the majority of the year ended
  December 31, 2004, causing existing and potential customers to reduce
  or delay their capital expenditures, resulting in our primary source of
  revenue, the manufacture of customized CVD equipment and gas and
  chemical delivery systems to be negatively impacted. However, during
  the latter portion of the year, the CVD Division began to experience an
  increase in orders and sales. The Company's third division, Stainless
  Design Concepts ("SDC") also saw an increase in revenues towards the
  end of the year, enabling it to reach $2,243,000 or 22.7% of total
  revenue for the year ended December 31, 2004 compared to $1,925,000 or
  19.7% of total revenue in the year ended December 31, 2003.

  <PAGE>
  Cost of revenue decreased for the year ended December 31, 2004 to
  approximately $6,549,000 from approximately $7,484,000 for the year
  ended December 31, 2003 representing a decrease of approximately
  $935,000 or 12.5%. The gross profit for the current year increased to
  approximately $3,325,000 from last year's $2,304,000, an increase of
  approximately $1,021,000 with a corresponding increase in gross profit
  margin to 33.7% for the current year compared to 23.5% for the prior
  year. During the current year, all three divisions experienced an
  increase in gross profit margin, with the Conceptronic Division
  experiencing the largest increase in gross profit and gross profit
  margin. The gross profit margin for Conceptronic increased from 18%
  during the year ended December 31, 2003 to 31% for the year ended
  December 31, 2004. These increases are the result of the time and
  efforts spent by the Company during the past year in redesigning and
  reengineering some of the product lines into a more cost effective and
  efficient system.

  Selling and shipping expenses were approximately $691,000 in the year
  ended December 31, 2004 compared to $740,000 in the year ended December
  31, 2003, representing a decrease of 6.6%.  The decrease is
  attributable to 2004's full year impact of reductions made in the sales
  staff during 2003.

  General and administrative expenses were approximately $2,225,000
  during the year ended December 31, 2004. This was an increase of
  approximately $101,000 or 4.8% compared to approximately $2,164,000
  during the year ended December 31, 2003. The Company experienced an
  increase in professional fees as a result of the requirements of
  complying with the Sarbanes-Oxley Act, in addition to a general
  increase in costs associated with employee benefits and building
  utilities.

  The Company earned minimal interest income for both 2004 and 2003 as a
  result of the utilization of all of its available funds for operations.

  The Company incurred $213,000 of interest expense in the year ended
  December 31, 2004, which was a slight increase of $4,000 or 1.9% over
  the interest expense incurred in the year ended December 31, 2003.  The
  primary source of this interest expense, approximately $190,000 in the
  current year and approximately $204,000 in the year ended December 31,
  2003, was the interest expense on the mortgages for the two buildings
  the Company owns. The increase in the balance of interest expense is
  due to the higher average outstanding debt on the company's revolving
  line of credit from its bank in the year ended December 31, 2004 than
  in the year ended December 31, 2003.

  Other income decreased to approximately $26,000 during the year ended
  December 31, 2004 compared to approximately $310,000 during the year
  ended December 31, 2003. This is a result of the reduction in cash
  received on the collection of accounts receivable exceeding the
  $369,000 recorded as part of the purchase of substantially all of the
  assets of Conceptronic Inc.'s Surface Mount Technology business that
  occurred in 2002, which was a nonrecurring event.

  <PAGE>
  Liquidity and Capital Resources

  As of December 31, 2004, we had aggregate working capital of
  approximately $2,878,000 compared to aggregate working capital of
  $2,857,000 at December 31, 2003 and had available cash and cash
  equivalents of approximately $171,000 compared to approximately
  $321,000 in cash and cash equivalents at December 31, 2003. The cash
  used for operations and capital expenditures exceeded the funds
  provided by financing activities.

  Accounts receivable, net of allowance for doubtful accounts increased
  by approximately $556,000 or 30.5% at December 31, 2004 to $2,375,257
  compared to $1,819,744 at December 31, 2003.

  Inventory as of December 31, 2004 was approximately $1,823,000
  representing an increase of approximately $398,000 or 27.9% over the
  inventory balance as of December 31, 2003. The increase in inventory
  was comprised of a decrease in raw materials of approximately $149,000,
  an increase in work in process of approximately $578,000 and a decrease
  in finished goods of approximately $31,000. The build-up in work in
  process is indicative of the increase in orders that the Company is
  experiencing. Accounts payable at December 31, 2004 was approximately
  $726,000 or 39.4% higher than it was at December 31, 2003. This higher
  level of accounts payable at December 31, 2004 is also attributed to
  the necessary increase in materials purchased in order to fill the
  higher level of orders.

  The Company has a line of credit with a bank permitting it to borrow up
  to $1,000,000 until June 1, 2005, at which time it is subject to
  renewal. Interest is payable on any unpaid principal balance at the
  bank's prime rate plus 3/4 of 1%. As of December 31, 2004 and 2003, the
  outstanding balances on this facility were $850,000 and $0
  respectively.

  In March, 2002, the Company received from General Electric Capital
  Corporation a $2,700,000 mortgage, secured by the real property and
  building and improvements to finance and improve a new facility in
  Ronkonkoma, New York. The mortgage, which has an outstanding balance as
  of December 31, 2004 of $2,357,668, is payable in equal monthly
  installments of $22,285 including interest at 5.67% per annum; pursuant
  to an Industrial Development bond purchase agreement with the town of
  Islip Industrial Development Agency. The final payment is due March
  2017.

  In April, 1999 the Company received from Kidco Realty Corporation a
  $900,000 purchase money mortgage, secured by the real property,
  building and improvements in Saugerties, New York. The mortgage has an
  outstanding balance at December 31, 2004 of $838,645 and is payable in
  equal monthly installments of $5,988 including interest at 7% per
  annum. The entire principal comes due in May 2009.


  The Company believes that its cash and cash equivalents, cash flow from
  operations and available credit facilities will be sufficient to meet
  its working capital and investment requirements for the next twelve
  months. However, future growth, including potential acquisitions, may
  require additional funding and from time to time we may need to raise
  capital through additional equity or debt financing.

  <PAGE>
  Significant Accounting Policies

  The Company continues to recognize revenues and income using the
  percentage-of-completion method for custom production-type contracts
  while revenues from other products are recorded when such products are
  accepted and shipped. Profits on custom production-type contracts are
  recorded on the basis of the Company's total estimated costs over the
  percentage of total costs incurred  on individual contracts,
  commencing, when progress reaches a point where experience is
  sufficient to estimate final results with reasonable accuracy. Under
  this method, revenues are recognized based on costs incurred to date
  compared with total estimated costs.

  The asset, "Costs and estimated earnings in excess of billings on
  uncompleted contracts," represents revenues recognized in excess of
  amounts billed.

  The liability, "Billings in excess of costs on uncompleted contracts,"
  represents billing in excess of revenues recognized.

  Off-Balance Sheet Arrangements

  None

  Item 7.      Financial Statements and Supplementary Data.

  The consolidated financial statements and supplementary data required in
  this item are set forth on the pages indicated in Item 13.

  Item 8.      Changes in and Disagreements with Accountants on Accounting
  and Financial Disclosure.

         None

  Item 8A.     Controls and Procedures.

  Evaluation of Disclosure Controls and Procedures. In response to the
  requirements of the Sarbanes-Oxley Act of 2002, as of the end of the period
  covering this report, the evaluation date, our Chief Executive Officer and
  Chief Financial Officer carried out an evaluation of the effectiveness of
  our "disclosure controls and procedures" (as defined in the Securities
  Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)). Based on that
  evaluation, these officers concluded that, as of the evaluation date, our
  disclosure controls and procedures were adequate and effective to ensure
  that material information relating to us and our consolidated subsidiary was
  made known to them by others within those entities, particularly during the
  period in which this report was being prepared.

  Changes in Internal Controls. There were no changes in our internal
  controls over financial reporting, identified in connection with the
  evaluation of such internal controls that occurred during our last fiscal
  quarter, that have materially affected, or are reasonably likely to
  materially affect, our internal controls over financial reporting.

  <PAGE>
  Item 8B.      Other Information

          None

                                    PART III

  Item 9.      Management

  Board of Directors and Executive Officers

  Our Certificate of Incorporation and Bylaws provide for our business 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 stockholders.
  <TABLE>
  <CAPTION>
  Name                        Age      Position(s) with the Company
  ----------------------     ------    -------------------------------
  <S>                        <C>       <C>
  Leonard A. Rosenbaum         59      Director, Chief Executive Officer, President
  Alan H. Temple Jr.           71      Director, Chairman Compensation Committee
  Martin J. Teitelbaum         55      Director, Assistant Secretary
  Conrad Gunther               56      Director, Chairman Audit Committee
  Bruce T. Swan                72      Director, Chairman Nominating, Governance
                                       and Compliance Committee
  Glen R. Charles              51      Chief Financial Officer, Secretary
  </TABLE>

  Leonard Rosenbaum

  Leonard Rosenbaum founded the Company in 1982 and has been its President,
  Chief Executive Officer and a Director since that date. From 1971 until the
  time of his affiliation with the Company in 1982, Mr. Rosenbaum was
  President, Director and principal stockholder of Nav-Tec Industries, a
  manufacturer of semiconductor processing equipment similar to the type of
  equipment presently manufactured by the Company. From 1966 to 1971, Mr.
  Rosenbaum was employed by a division of General Instrument, a manufacturer
  of semiconductor materials and equipment.

  Alan H. Temple Jr.

  Alan H. Temple Jr. has been a member of the Board of Directors since 1987.
  Mr. Temple earned an MBA at Harvard University and has been President of
  Harrison Homes Inc., a building and consulting firm located in Pittsford,
  New York since 1977.

  <PAGE>
  Martin J. Teitelbaum

  Martin Teitelbaum is an attorney, who since 1988, has conducted his own
  private practice, the Law Offices of Martin J. Teitelbaum. Prior to
  establishing his own firm, from 1977 to 1987, Mr. Teitelbaum was a partner
  in the law firm of Guberman and Teitelbaum. Mr. Teitelbaum became a member
  of the Board of Directors for the Company in 1985. He is presently the
  Secretary of the Company, a position Mr. Teitelbaum also held from 1986 to
  1998.

  Conrad Gunther

   Conrad Gunther was elected to the Board of Directors at the annual meeting
  in 2000. Mr. Gunther has extensive experience in mergers and acquisitions
  and raising capital through both public and private means. He also has
  extensive experience in executive management in the banking industry as well
  as serving on the Board of Directors of Reliance Bancorp, Childrobics and
  GVC Venture Corp, all public companies.   For the past five years, Mr.
  Gunther has been the President of E-Billsolutions, a company that provides
  credit card processing to Internet, mail order and telephone order merchants


  Bruce T. Swan

  Bruce Swan was appointed a member of the Board of Directors in September
  2003. Mr. Swan has extensive banking, export and international credit
  experience and has been retired for more than five years. He previously has
  held the positions of Deputy Manager at Brown Brothers Harriman and Co.,
  Assistant Treasurer at Standard Brands Incorporated, Assistant Treasurer at
  Monsanto Corporation, Vice President and Treasurer at AM International Inc.
  and President and Founder of Export Acceptance Company. Mr. Swan, earned his
  MBA from Harvard University and is a former adjunct faculty member of New
  York University's Stern School of Business Administration.

  Glen R. Charles

  Mr. Charles has been the Chief Financial Officer and Secretary of the
  Company since January, 2004. From 2002 until he joined the Company, he was
  the Director of Financial Reporting for Jennifer Convertibles, Inc., the
  owner and licensor of the largest group of sofabed specialty retail stores
  in the United States. From 1994 to 2002, he was the Chief Financial Officer
  of Trans Global Services, Inc., a provider of temporary technical services
  to the aerospace, aircraft, electronics and telecommunications markets. Mr.
  Charles has also had his own business in the private practice of accounting.

  Code Of Ethics

  The Company has adopted a Corporate Code of Conduct and Ethics that applies
  to its employees, senior management, and Board of Directors, including the
  Chief Executive Officer and Chief Financial Officer.  See Exhibit 14.1.

  <PAGE>
  Audit Committee

  The Board of Directors has an Audit Committee that consists of Conrad
  Gunther, Alan H. Temple Jr., Bruce T. Swan and Martin J. Teitelbaum. During
  the fiscal year ended December 31, 2004, the Audit Committee held five
  meetings. The Board of Directors has adopted and amended a written charter
  for the Audit Committee. Pursuant to  the  Audit Committee Charter, the
  Audit Committee is empowered to retain and terminate the services of our
  independent public accountants and review the independence of such public
  accounting firm. The Audit Committee also reviews financial statements, the
  scope and results of annual audits and the audit and non audit fees of the
  independent public accountants. Furthermore, the committee reviews the
  adequacy of our internal control procedures, the structure of our financial
  organization and the implementation of our financial and accounting
  policies. Messrs. Gunther, Temple and Swan are "independent" as defined in
  Section 121(B) of the American Stock Exchange original listing requirements.

  Under new SEC rules, companies are required to disclose whether their audit
  committees have an "audit committee financial expert" as defined in Item
  401(e) of Regulation S-B under the Securities Exchange Act of 1934 and
  whether that expert is "independent" as that term is used in Item
  7(d)(3)(iv) of Schedule 14A under the Exchange Act. The Board of Directors
  has determined that Conrad Gunther is an "audit committee financial expert"
  and is also "independent".

  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 stockholders. 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, 2004, all
  of the filings for our officers, directors and ten percent stockholders were
  made on a timely basis.

  Item 10.     Executive Compensation

  Summary Compensation Table

  The following table sets forth compensation paid for the years ending
  December 31, 2004, 2003 and 2002, or such shorter period as such employees
  were employed by us, to those persons who were either (a) the chief
  executive officer as of December 31, 2004 or (b) one of our four other most
  highly compensated executive officers or executive employees as of December
  31, 2004 whose total annual salary and other compensation exceeded $100,000
  (collectively with the Chief Executive Officer, the "Named Executive
  Officers").

  <PAGE>
  <TABLE>
  <CAPTION>
                              Annual Compensation       Long -term Compensation
                                                          Awards       Payouts
                                                              Securities
  Name and principal                                          Underlying
  position                  Year   Salary    Bonus            options/
  --------------------      ----  --------  --------          --------
                              $      $         $                 #
  <S>                       <C>   <C>       <C>               <C>
  Leonard A. Rosenbaum      2004   162,742                     15,000(1)
  President and Chief       2003   165,645                       0
  Executive Officer         2002   165,478   20,000              0
  Glen R. Charles           2004   105,269                       0
  Secretary and Chief       2003      0
  Financial Officer         2002      0
  ________________
  <FN>
  (1) On September 23, 2003, Mr. Rosenbaum was granted options to purchase
      15,000 shares of our common stock at $1.40 per share.
  </TABLE>

  The company is the owner of a life insurance policy on the life of Leonard
  Rosenbaum in the amount of $2,000,000. The Company is the sole beneficiary
  of said policy.

  Item 11.     Security Ownership of Certain Beneficial Owners and Management

  The following table sets forth, as of March 4, 2005, 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 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.
  <TABLE>
  <CAPTION>
                                           Amounts and Nature of       Percent of Class
  Name and Address of Beneficial Owner     Beneficial Ownership (1)            (%)
  ------------------------------------     ------------------------    ----------------
  <S>                                          <C>                         <C>
  Leonard A. Rosenbaum                         1,315,450 (2)               43.3
  Alan H. Temple Jr.                             211,000 (3)                6.9
  Martin J. Teitelbaum                            41,000 (4)                1.3
  Conrad Gunther                                  15,000 (5)                0.5
  Bruce T. Swan                                    5,000 (6)                0.2
  All directors and executive officers and
  executive employees as a group (five (5)
  persons)                                     1,587,450                   52.2

  <FN>
  ______________________________
  (1) All of such shares are owned directly with sole voting and investment
  power, unless otherwise
         noted below.

  (2) Includes 15,000 shares of our common stock underlying options which are
  currently
  exercisable.

  (3) Includes an aggregate of 21,000 shares held by Mr. Temple's wife, as to
  which he disclaims beneficial interest and 15,000 shares of our common
  stock underlying currently exercisable options.

  <PAGE>
  (4)   Includes 2,000 shares held by Mr. Teitelbaum's wife as to which
  beneficial ownership thereof is disclaimed by Mr. Teitelbaum and 15,000
  shares of our common stock underlying currently exercisable options.

  (5)  Includes 15,000 shares of our common stock underlying currently
  exercisable options.

  (6)   Includes 5,000 shares of our common stock underlying currently
  exercisable options.
  </TABLE>

  Item 12.     Certain Relationships and Related Transactions

  None.

  Exhibits

                                    PART IV

  Item 13.    Exhibits, Financial Statement Schedules and Reports on form 8-K.

        (a) (1)   Financial Statements
            The financial statements required by this item are submitted
            in a separate section beginning on Page F-1 of this report.

            (2)   Financial Statement Schedules
            Schedules have been omitted because of the absence of conditions
            under which they are required or because the required information
            is included in the financial statements or notes thereto.

            (3)   See Exhibit Index on Page 20.

        (b)   Reports on Form 8-K.

            (1) On December 23, 2004 we filed a current report on Form 8-K
            announcing the resignation of our independent accountants
            Albrecht, Viggiano, Zureck and Company, P.C. and the appointment
            of our new independent accountants Moore Stephens, P.C..

        (c)   Exhibits.

        See (a) (3) above.

        (d)   Financial Statement Schedules.

        See (a) (2) above

  <PAGE>
  Item 14.     Principal Accountant Fees and Services

  The following presents fees for professional audit services rendered by
  Moore Stephens, P.C. for the audit of our financial statements for the year
  ended December 31, 2004 and the fees for professional audit services
  rendered by Albrecht, Viggiano, Zureck and Company, P.C. for December 31,
  2003 and fees billed for other services rendered by Albrecht, Viggiano,
  Zureck and Company, P.C. during those periods.

  Audit Fees

  The aggregate fees billed audit work performed in the preparation and
  review of our annual financial statements and review of financial
  statements included in our quarterly reports filed with the Securities and
  Exchange Commission for 2003 was $57,000, and for 2004 was $72,900.

  Audit- Related Fees

  Audit related fees consisted principally of assistance in connection with
  the interpretation of comment letters we received from the SEC regarding
  our annual statement for fiscal year 2002 and quarterly statements for
  March 31, 2003, June 30, 2003 and September 30, 2003.  The aggregate fees
  billed for such services was $3,675 in 2003 and $5,900 in 2004.

  Tax Fees

  Tax fees consisted principally of tax preparation of the 2002 and 2003
  annual tax returns in addition to work performed with regard to the New
  York State tax audit for the fiscal years ended 2000-2002.  The aggregate
  fees billed for such services was $3,000 in 2003 and $5,025 in 2004.

  All Other Fees

  None

  Audit Committee Approval

    The engagement of the Company's independent auditors 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 auditors.

  <PAGE>


                                   SIGNATURES

  Pursuant to the requirements 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.

                           CVD EQUIPMENT CORPORATION

                               By:  /s/ Leonard A. Rosenbaum
                           Name:  Leonard A. Rosenbaum
                           Title: President and Chief Executive Officer

  Pursuant to the requirements of 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.
  <TABLE>
  <CAPTION>
       NAME                         POSITION                         DATE
  ------------------------  ----------------------------------  --------------
  <S>                       <S>                                 <C>
  /s/ Leonard A Rosenbaum   President, Chief Executive Officer  March 24, 2004
                              and Director
  Leonard A. Rosenbaum      (Principal Executive Officer)

  /s/ Alan H. Temple Jr.    Director                            March 24, 2004
  Alan H. Temple Jr.

  /s/ Martin J. Teitelbaum  Director and Assistant Secretary    March 24, 2004
  Martin J. Teitelbaum

  /s/ Conrad Gunther        Director                            March 24, 2004
  Conrad Gunther

  /s/ Bruce T. Swan         Director                            March 24, 2004
  Bruce T. Swan

  /s/ Glen R. Charles       Chief Financial Officer             March 24, 2004
                              and Secretary
  Glen R. Charles           (Principal Financial and Accounting Officer)
  </TABLE>

  <PAGE>
  EXHIBIT INDEX

  3.1      Certificate of Amendment dated October 12, 1982 of Certificate of
  Corporation incorporated herein by reference to Exhibit 3.1 to
  our Registration No. 2-97210-NY.

  3.2      Certificate of Amendment dated April 25, 1985 of Certificate of
  Corporation incorporated herein by reference to Exhibit 3.1 to
  our Registration No. 2-97210-NY.

  3.3      Certificate of Amendment dated August 12, 1985 of Certificate of
  Corporation incorporated herein by reference to Exhibit 3.1 to our
  Registration No. 2-97210-NY.

  3.4      Bylaws of CVD Equipment Corporation, incorporated herein by
  reference to our Registration No. 2-97210-NY.

  10.1     Form of Non-Qualified Stock Option Agreement with certain
  directors, officers and employees of CVD Equipment Corporation incorporated
  herein by reference to our Registration Statement on Form S-8 No. 33-30501,
  filed August 15, 1989.

  10.2     Purchase at public auction the inventory, tangible assets,
  intangible assets and intellectual property of Stainless Design
  Corporation incorporated herein by reference to our Form 8-K
  filed on December 31, 1998.

  10.3     Purchase a 22,000 square foot facility from Kidco Realty
  incorporated herein by  reference to our Form 8-K filed on
  December 31, 1998.

  10.4     Purchase a 50,000 square foot facility from Arrow Electronics
  incorporated herein by reference to our Form 8-K filed on
  November 12, 2001.

  10.5     Purchase substantially all of the assets of Research Inc.'s
  Surface Mount Technology business incorporated herein by
  reference to our Form 8-K filed on November 12, 2001.

  10.6     Purchase substantially all of the assets of Conceptronic Inc.'s
  Surface Mount Technology business incorporated herein by
  reference to our Form 8-K filed on July 1, 2002.

  14.1     Corporate Code of Conduct and Ethics.*

  21.1     Subsidiaries*

  31.1     Certification of Chief Executive Officer. *

  31.2     Certification of Chief Financial Officer. *

  32.1     Certification of Principal Executive Officer pursuant to U.S.C.
  Section 1350. *

  <PAGE>
  32.2     Certification of Principal Financial Officer pursuant to U.S.C.
  Section 1350. *

  * Filed herewith

  <PAGE>
                                                                Exhibit 14.1
                           CVD EQUIPMENT CORPORATION
                      CORPORATE CODE OF CONDUCT AND ETHICS
                                    FOREWORD
     This Corporate Code of Conduct and Ethics, referred to as the "Code," is
  intended to provide our associates, as defined below, with a clear
  understanding of the principles of business conduct and ethics that are
  expected of them. The standards set forth in the Code apply to us all. Every
  associate of the company must acknowledge his or her review of and agreement
  to comply with the Code as a condition of his or her relationship with the
  company. The term "associate" means every full and part-time employee of the
  company and its subsidiaries, all members of the company's senior
  management, including the company's Chief Executive Officer and Chief
  Financial Officer, and every member of the company's Board of Directors,
  even if such member is not employed by the company.

     Many of the standards outlined on the following pages will be familiar,
  for they reflect the fundamental values of fairness and integrity that are a
  part of our daily lives. Applying these standards to our business lives is
  an extension of the values by which we are known as individuals and by which
  we want to be known as a company.

     It is our responsibility to conduct ourselves in an ethical business
  manner and also to ensure that others do the same. If any one of us violates
  these standards, he or she can expect a disciplinary response, up to and
  including termination of any employment or other relationship with the
  company, and possibly other legal action. If any breach of the Code is known
  to you, you are obligated to report violations to the Corporate Compliance
  Officer or any member of the Compliance Committee, described in more detail
  below. By doing so, we ensure that the good faith efforts of all of us to
  comply with the Code are not undermined.

     The ultimate responsibility for maintaining our Code rests with each of
  us. As individuals of personal integrity, we can do no less than to behave
  in a way that will continue to bring credit to our company and ourselves.

     While it is impossible for this Code to describe every situation that may
  arise, the standards explained in this Code are guidelines that should
  govern our conduct at all times. If you are confronted with situations not
  covered by this Code, or have questions regarding the matters that are
  addressed in the Code, you are urged to consult with the Corporate
  Compliance Officer or a member of the Compliance Committee.

     The provisions of the Code regarding the actions the company will take
  are guidelines, which the company intends to follow. There may be
  circumstances, however, that in the company's judgment require different
  measures or actions and in such cases it may act accordingly while still
  attempting to fulfill the principles underlying this Code.

  ----------------
  IMPLEMENTATION OF THE CODE

     The following questions and answers address the company's implementation
  of the Code. The company has attempted to design procedures that ensure
  maximum confidentiality and, most importantly, freedom from the fear of
  retaliation for complying with and reporting violations under the Code.

  Q:  Who is responsible for administering, updating and enforcing the Code?

  A:  The Company's Board of Directors has appointed a Corporate Compliance
  Officer and a Compliance Committee Member to administer, update and enforce
  the Code. Ultimately, the Board of Directors of the company must ensure that
  the Corporate Compliance Officer and the Compliance Committee Member fulfill
  their responsibilities.

     The Corporate Compliance Officer is Karen Hamberg. The Corporate
  Compliance Officer has overall responsibility for overseeing the
  implementation of the Code. Specific responsibilities of the position are
  to:

       o    Develop the Code based on legal requirements, regulations and
            ethical considerations that are raised in
  <PAGE>
            the company's operations;

       o    Ensure that the Code is distributed to all associates and that all
            associates acknowledge the principles of the Code;

       o    Assess compliance success with the Code;

       o    Serve as a point person for reporting violations and asking
            questions under the Code; and

       o    Revise and update the Code to respond to detected violations and
            changes in the law.

       o    Recommend to Committee revisions and updates


     The Compliance Committee Member is Bruce Swan. The primary
  responsibilities of the Compliance Committee Member is to:

       o    Assist the Corporate Compliance Officer in developing and updating
            the Code;

       o    Develop internal procedures to monitor and audit compliance with
            the Code;

       o    Serve as a point person for reporting violations and asking
            questions under the Code;

       o    Set up a mechanism for anonymous reporting of suspected violations
            of the Code by associates and refer, when appropriate, such
            reports to the Audit Committee;

       o    Conduct internal investigations, with the assistance of counsel,
            of suspected compliance violations;

       o    Evaluate disciplinary action for associates who violate the Code;

       o    In the case of more severe violations of the Code, make
            recommendations regarding disciplinary action to the Board of
            Directors or a committee thereof; and

       o    Evaluate the effectiveness of the Code and improve the Code.


     The Compliance Committee Member will provide a summary of all matters
  considered under the Code to the Board of Directors or a committee thereof
  at each regular meeting thereof, or sooner if warranted by the severity of
  the matter. All proceedings and the identity of the person reporting will be
  kept as confidential as practicable under the circumstances.

  Q:        How can I contact the Corporate Compliance Officer and the
            Compliance Committee Member?

  A:        The names and phone numbers of the Corporate Compliance Officer
            and the Compliance Committee Member are listed below. Any one of
            these individuals can assist you in answering questions or
            reporting violations or suspected violations under the Code.


  Karen Hamberg                      631 981-7081 extension 213
  Corporate Compliance Officer

  Bruce Swan                         203 226-0656
  Compliance Committee Member



  GENERAL REQUIREMENTS
  To be honest, fair, and accountable in all business dealings and obligations,
  and to ensure:

       o    The ethical handling of conflicts of interest between personal and
            professional relationships;

       o    Full, fair, accurate, timely and understandable disclosure in the
            reports required to be filed by the company with the Securities
            and Exchange Commission and in other public communications made by
  <PAGE>
            the company; and


       o    Compliance with applicable governmental laws, rules and
            regulations.

  ========
  CONFLICTS OF INTEREST

  Associates should avoid any situation that may involve, or even appear to
  involve, a conflict between their personal interests and the interests of
  the company. In dealings with current or potential customers, suppliers,
  contractors, and competitors, each associate should act in the best
  interests of the company to the exclusion of personal advantage. Associates
  are prohibited from any of the following activities, which could represent
  an actual or perceived conflict of interest:

       o    No associate or immediate family member of an associate shall have
            a significant financial interest in, or obligation to, any outside
            enterprise which does or seeks to do business with the company or
            which is an actual or potential competitor of the company, without
            prior approval from the Compliance Committee Member, or in the
            case of executive officers or members of the Board of Directors,
            the full Board of Directors or a committee thereof.


       o    No associate shall conduct a significant amount of business on the
            company's behalf with an outside enterprise which does or seeks to
            do business with the company if an immediate family member of the
            associate is a principal, officer or employee of such enterprise,
            without prior approval from the Compliance Committee Member, or in
            the case of executive officers or members of the Board of
            Directors, the full Board of Directors or a committee thereof.


       o    No associate or immediate family member of an associate shall
            serve as a director of any actual or potential competitor of the
            company.


       o    No associate shall use any company property or information or his
            or her position at the company for his or her personal gain.


       o    No associate shall engage in activities that are directly
            competitive with those in which the company is engaged.


       o    No associate shall divert a business opportunity from the company
            to such individual's own benefit. If an associate becomes aware of
            an opportunity to acquire or profit from a business opportunity or
            investment in which the company is or may become involved or in
            which the company may have an existing interest, the associate
            should disclose the relevant facts to the Corporate Compliance
            Officer or the Compliance Committee Member. The associate may
            proceed to take advantage of such opportunity only if the company
            is unwilling or unable to take advantage of such opportunity as
            notified in writing by the Compliance Committee Member.


       o    No associate or immediate family member of an associate shall
            receive any loan or advance from the company, or be the
            beneficiary of a guarantee by the company of a loan or advance
            from a third party, except for customary advances or corporate
            credit in the ordinary course of business or approved by the
            Compliance Committee Member. Please see Section IV.E. below,
            "Corporate Advances", for more

  <PAGE>
            information on permitted corporate advances.


     In addition, the Audit Committee of the Board of Directors will review
  and approve all related-party transactions, as required by the Securities
  and Exchange Commission, The American Stock Exchange or any other regulatory
  body to which the company is subject.

  Each associate should make prompt and full disclosure in writing to the
  Corporate Compliance Officer or Compliance Committee Member of any situation
  that may involve a conflict of interest. Failure to disclose any actual or
  perceived conflict of interest is a violation of the Code.

  =========
  PROTECTION AND PROPER USE OF COMPANY ASSETS AND ASSETS ENTRUSTED TO IT

  Proper protection and use of company assets and assets entrusted to it by
  others, including proprietary information, is a fundamental responsibility
  of each associate of the company. Associates must comply with security
  programs to safeguard such assets against unauthorized use or removal, as
  well as against loss by criminal act or breach of trust. The provisions
  hereof relating to protection of the company's property also apply to
  property of others entrusted to it (including proprietary and confidential
  information).

  Proper Use of Company Property

  The removal from the company's facilities of the company's property is
  prohibited, unless authorized by the company. This applies to furnishings,
  equipment, and supplies, as well as property created or obtained by the
  company for its exclusive use - such as client lists, files, personnel
  information, reference materials and reports, computer software, data
  processing programs and data bases. Neither originals nor copies of these
  materials may be removed from the company's premises or used for purposes
  other than the company's business without prior written authorization from
  the Compliance Committee Member.

  The company's products and services are its property; contributions made by
  any associate to their development and implementation are the company's
  property and remain the company's property even if the individual's
  employment or directorship terminates.

  Each associate has an obligation to use the time for which he or she
  receives compensation from the company productively. Work hours should be
  devoted to activities directly related to the company's business.

  Confidential Information

  The company provides its associates with confidential information relating
  to the company and its business with the understanding that such information
  is to be held in confidence and not communicated to anyone who is not
  authorized to see it, except as may be required by law. The types of
  information that each associate must safeguard include (but are not limited
  to) the company's plans and business strategy, unannounced products and/or
  contracts, sales data, significant projects, customer and supplier lists,
  patents, patent applications, trade secrets, manufacturing techniques and
  sensitive financial information, whether in electronic or conventional
  format. These are costly, valuable resources developed for the exclusive
  benefit of the company. No associate shall disclose the company's
  confidential information to an unauthorized third party or use the company's
  confidential information for his or her own personal benefit.

  Accurate Records and Reporting

  Under law, the company is required to keep books, records and accounts that
  accurately and fairly reflect all transactions, dispositions of assets and
  other events that are the subject of specific regulatory record keeping
  requirements, including generally accepted accounting principles and other
  applicable rules, regulations and criteria for preparing financial
  statements and for preparing periodic reports filed with the Securities and
  Exchange Commission. All company reports, accounting records, sales reports,
  expense accounts, invoices, purchase orders, and other documents must
  accurately and clearly represent the relevant facts and the true nature of
  transactions.

  <PAGE>
  Reports and other documents should state all material facts of a transaction
  and not omit any information that would be relevant in interpreting such
  report or document. Under no circumstance may there be any unrecorded
  liability or fund of the company, regardless of the purposes for which the
  liability or fund may have been intended, or any improper or inaccurate
  entry knowingly made on the books or records of the company. No payment on
  behalf of the company may be approved or made with the intention,
  understanding or awareness that any part of the payment is to be used for
  any purpose other than that described by the documentation supporting the
  payment. In addition, intentional accounting misclassifications (e.g.,
  expense versus capital) and improper acceleration or deferral of expenses or
  revenues are unacceptable reporting practices that are expressly prohibited.

  The company has developed and maintains a system of internal controls to
  provide reasonable assurance that transactions are executed in accordance
  with management's authorization, are properly recorded and posted, and is in
  compliance with regulatory requirements. The system of internal controls
  within the company includes written policies and procedures, budgetary
  controls, supervisory review and monitoring, and various other checks and
  balances, and safeguards such as password protection to access certain
  computer systems.

  The company has also developed and maintains a set of disclosure controls
  and procedures to ensure that all of the information required to be
  disclosed by the company in the reports that it files or submits under the
  Securities Exchange Act is recorded, processed, summarized and reported
  within the time periods specified by the Securities and Exchange
  Commission's rules and forms.

  Associates are expected to be familiar with, and to adhere strictly to,
  these internal controls and disclosure controls and procedures.

  Responsibility for compliance with these internal controls and disclosure
  controls and procedures rests not solely with the company's accounting
  personnel, but with all associates involved in approving transactions,
  supplying documentation for transactions, and recording, processing,
  summarizing and reporting of transactions and other information required by
  periodic reports filed with the Securities and Exchange Commission. Because
  the integrity of the company's external reports to shareholders and the
  Securities and Exchange Commission depends on the integrity of the company's
  internal reports and record-keeping, all associates must adhere to the
  highest standards of care with respect to our internal records and
  reporting. The company is committed to full, fair, accurate, timely, and
  understandable disclosure in the periodic reports required to be filed by it
  with the Securities and Exchange Commission, and it expects each associate
  to work diligently towards that goal.

  Any associate who believes the company's books and records are not in accord
  with these requirements should immediately report the matter to the
  Corporate Compliance Officer or the Compliance Committee Member. The company
  has adopted explicit non-retaliation policies with respect to these matters,
  as described in Section VIII below.

  Document Retention

  Numerous federal and state statutes require the proper retention of many
  categories of records and documents that are commonly maintained by
  companies. In consideration of those legal requirements and the company's
  business needs, all associates must maintain records in accordance with the
  company's Document Retention Policy, a copy of which is available from the
  Corporate Compliance Officer.

  In addition, any record, in paper or electronic format, relevant to a
  threatened, anticipated or actual internal or external inquiry,
  investigation, matter or lawsuit may not be discarded, concealed, falsified,
  altered, or otherwise made unavailable, once an associate has become aware
  of the existence of such threatened, anticipated or actual internal or
  external inquiry, investigation, matter or lawsuit. Associates must handle
  such records in accordance with the procedures outlined in the company's
  Document Retention Policy.

  When in doubt regarding retention of any record, an associate must not
  discard or alter the record in question and should seek guidance from the
  Corporate Compliance Officer the Compliance Committee Member. Associates
  should also direct all questions regarding our Document Retention Policy and
  related procedures to the Corporate Compliance Officer or the Compliance
  Committee Member.

  <PAGE>
     E. Corporate Advances

     Under law, the company may not loan money to associates except in limited
  circumstances. It shall be a violation of the Code for any associate to
  advance company funds to any other associate or to himself or herself except
  for usual and customary business advances for legitimate corporate purposes
  which are approved by a supervisor or pursuant to a corporate credit card
  for usual and customary, legitimate business purposes.

  Company credit cards are to be used only for authorized, legitimate business
  purposes. An associate will be responsible for any unauthorized charges to a
  company credit card.

  FAIR DEALING WITH CUSTOMERS, SUPPLIERS, COMPETITORS, AND ASSOCIATES

  The company does not seek to gain any advantage through the improper use of
  favors or other inducements. Good judgment and moderation must be exercised
  to avoid misinterpretation and adverse effect on the reputation of the
  company or its associates. Offering, giving, soliciting or receiving any
  form of bribe to or from an employee of a customer or supplier to influence
  that employee's conduct is strictly prohibited.

  Giving Gifts

  An associate must not give cash or cash-equivalent gifts to any person or
  enterprise.

  Receiving Gifts

  Gifts, favors, entertainment or other inducements may not be accepted by
  associates or members of their immediate families from any person or
  organization that does or seeks to do business with, or is a competitor of,
  the company, except as common courtesies usually associated with customary
  business practices. If the gift is of more than token value, the Compliance
  Committee must approve its acceptance.

  An especially strict standard applies when suppliers are involved. If a gift
  unduly influences or makes an associate feel obligated to "pay back" the
  other party with business, receipt of the gift is unacceptable.

  It is never acceptable to accept a gift in cash or cash equivalent.

  Unfair Competition

     Although the free enterprise system is based upon competition, rules have
  been imposed stating what can and what cannot be done in a competitive
  environment. The following practices can lead to liability for "unfair
  competition" and should be avoided. They are violations of the Code.

     Disparagement of Competitors. It is not illegal to point out weaknesses
  in a competitor's service, product or operation; however, associates may not
  spread false rumors about competitors or make misrepresentations about their
  businesses. For example, an associate may not pass on anecdotal or
  unverified stories about a competitor's products or services as the absolute
  truth (e.g., the statement that "our competitors' diagnostic testing
  procedures have poor quality control").

     Misrepresentations of Price and Product. Lies or misrepresentations about
  the nature, quality or character of the company's services and products are
  both illegal and contrary to company policy. An associate may only describe
  our services and products based on their documented specifications, not
  based on anecdote or his or her belief that our specifications are too
  conservative.

  Antitrust Concerns

     Federal and state antitrust laws are intended to preserve the free
  enterprise system by ensuring that competition is the primary regulator of
  the economy. Every corporate decision that involves customers, competitors,
  and business planning with respect to output, sales and pricing raises
  antitrust issues. Compliance with the antitrust laws is in the public
  interest, in the interest of the business community at large, and in our
  company's interest.

  <PAGE>
     Failing to recognize antitrust risk is costly. Antitrust litigation can
  be very expensive and time-consuming. Moreover, violations of the antitrust
  laws can, among other things, subject you and the company to the imposition
  of injunctions, treble damages, and heavy fines. Criminal penalties may also
  be imposed, and individual employees can receive heavy fines or even be
  imprisoned. For this reason, antitrust compliance should be taken seriously
  at all levels within the company.

     A primary focus of antitrust laws is on dealings between competitors. In
  all interactions with actual or potential competitors all associates must
  follow these rules:

       o    Never agree with a competitor or a group of competitors to charge
            the same prices or to use the same pricing methods, to allocate
            services, customers, private or governmental payor contracts or
            territories among yourselves, to boycott or refuse to do business
            with a provider, vendor, payer or any other third party, or to
            refrain from the sale or marketing of, or limit the supply of,
            particular products or services.


       o    Be careful of your conduct. An "agreement" that violates the
            antitrust laws may be not only a written or oral agreement, but
            also a "gentlemen's agreement" or a tacit understanding. Such an
            "agreement" need not be in writing. It can be inferred from
            conduct, discussions or communications of any sort with a
            representative of a competitor.


       o    Make every output-related decision (pricing, volume, etc.)
            independently, in light of costs and market conditions and
            competitive prices.


       o    Carefully monitor trade association activity. These forums
            frequently create an opportunity for competitors to engage in
            antitrust violations.


     Finally, always immediately inform the Corporate Compliance Officer or
  the Compliance Committee Member if local, state or federal law enforcement
  officials request information from the company concerning its operations.

  GOVERNMENT RELATIONS

  Associates must adhere to the highest standards of ethical conduct in all
  relationships with government employees and must not improperly attempt to
  influence the actions of any public official.

  Payments to Officials

  Payments or gifts shall not be made directly or indirectly to any government
  official or associate if the gift or payment is illegal under the laws of
  the country having jurisdiction over the transaction, or if it is for the
  purpose of influencing or inducing the recipient to do, or omit to do, any
  act in violation of his or her lawful duty. Under no circumstances should
  gifts be given to employees of the United States Government.

  Political Contributions

  Company funds, property or services may not be contributed to any political
  party or committee, or to any candidate for or holder of any office of any
  government. This policy does not preclude, where lawful, company
  expenditures to support or oppose public referendum or separate ballot
  issues, or, where lawful and when reviewed and approved in advance by the
  Compliance Committee Member, the formation and operation of a political
  action committee.

  COMPLIANCE WITH LAWS, RULES AND REGULATIONS

  <PAGE>
  Insider Trading Policy

     The company expressly forbids any associate from trading on material non-
  public information or communicating material non-public information to
  others in violation of the law. This conduct is frequently referred to as
  "insider trading." This policy applies to every associate of the company and
  extends to activities both within and outside their duties to the company,
  including trading for a personal account.

     The concept of who is an "insider" is broad. It includes officers,
  directors and employees of a company. In addition, a person can be a
  "temporary insider" if he or she enters into a special confidential
  relationship in the conduct of a company's affairs and as a result is given
  access to information solely for the company's purpose. A temporary insider
  can include, among others, a company's investment advisors, agents,
  attorneys, accountants and lending institutions, as well as the employees of
  such organizations. An associate may also become a temporary insider of
  another company with which our company has a contractual relationship, to
  which it has made a loan, to which it provides advice or for which it
  performs other services.

     Trading on inside information is not a basis for liability unless the
  information is material. This is information that a reasonable investor
  would consider important in making his or her investment decisions, or
  information that is likely to have a significant effect on the price of a
  company's securities.

     Information is non-public until it has been effectively communicated to
  the marketplace. Tangible evidence of such dissemination is the best
  indication that the information is public. For example, information found in
  a report filed with the Securities and Exchange Commission or appearing in a
  national newspaper would be considered public.

  Equal Employment Opportunity

     The company makes employment-related decisions without regard to a
  person's race, color, religious creed, age, sex, sexual orientation, marital
  status, national origin, ancestry, present or past history of mental
  disorder, mental retardation, learning disability or physical disability,
  including, but not limited to, blindness and genetic predisposition, or any
  other factor unrelated to a person's ability to perform the person's job.
  "Employment decisions" generally mean decisions relating to hiring,
  recruiting, training, promotions and compensation, but the term may
  encompass other employment actions as well.

     The company encourages its associates to bring any problem, complaint or
  concern regarding any alleged employment discrimination to the attention of
  the Human Resources Administrator. Associates who have concerns regarding
  conduct they believe is discriminatory should also feel free to make any
  such reports to the Corporate Compliance Officer or the Compliance Committee
  Member.

  Sexual Harassment Policy

     The company is committed to maintaining a collegial work environment in
  which all individuals are treated with respect and dignity and which is free
  of sexual harassment. In keeping with this commitment, the company will not
  tolerate sexual harassment of associates by anyone, including any
  supervisor, co-worker, vendor, client or customer, whether in the workplace,
  at assignments outside the workplace, at company-sponsored social functions
  or elsewhere.  Reporting sexual harassment is identical to reporting Ethics
  Code Violations.

     Each associate should be familiar with and abide by the company's Sexual
  Harassment Policy. A copy of this policy is included in the employee manual
  which is given to all associates when they begin employment with the
  company. Additional copies can be provided by the Human Resources
  administrator.

  Health, Safety & Environment Laws

     Health, safety, and environmental responsibilities are fundamental to the
  company's values. Associates are responsible for ensuring that the company
  complies with all provisions of the health, safety, and environmental laws
  of the United States and of other countries where the company does business.

     The penalties that can be imposed against the company and its associates
  for failure to comply with health, safety, and environmental laws can be
  substantial, and include imprisonment and fines.

  <PAGE>
  REPORTING VIOLATIONS UNDER THE CODE: NON-RETALIATION POLICY

  Any associate of the company having any information or knowledge regarding
  the existence of any violation or suspected violation of the Code has a duty
  to report the violation or suspected violation to the Corporate Compliance
  Officer or the Compliance Committee Member. Failure to report suspected or
  actual violations is itself a violation of the Code and may subject the
  associate to disciplinary action, up to and including termination of
  employment or legal action. The Company will endeavor to keep reports
  confidential to the fullest extent practicable under the circumstances.

  Any associate who reports a suspected violation under the Code by the
  company, or its agents acting on behalf of the company, to the Corporate
  Compliance Officer the Compliance Committee Member, may not be fired,
  demoted, reprimanded or otherwise harmed for, or because of, the reporting
  of the suspected violation, regardless of whether the suspected violation
  involves the associate, the associate's supervisor or senior management of
  the company.

  In addition, any associate who reports a suspected violation under the Code
  which the associate reasonably believes constitutes a violation of a federal
  statute by the company, or its agents acting on behalf of the company, to a
  federal regulatory or law enforcement agency, may not be reprimanded,
  discharged, demoted, suspended, threatened, harassed or in any manner
  discriminated against in the terms and conditions of the associate's
  employment for, or because of, the reporting of the suspected violation,
  regardless of whether the suspected violation involves the associate, the
  associate's supervisor or senior management of the company.

  QUESTIONS UNDER THE CODE AND WAIVER PROCEDURES

     Associates are encouraged to consult with the Corporate Compliance
  Officer and the Compliance Committee Member about any uncertainty or
  questions they may have under the Code.

     If any situation should arise where a course of action would likely
  result in a violation of the Code but for which the associate thinks that a
  valid reason for the course of action exists, the associate should contact
  the Corporate Compliance Officer or the Compliance Committee Member to
  obtain a waiver prior to the time the action is taken. No waivers will be
  granted after the fact for actions already taken. Except as noted below, the
  Compliance Committee Member will review all the facts surrounding the
  proposed course of action and will determine whether a waiver from any
  policy in the Code should be granted.

     Waiver Procedures for Executive Officers and Directors. Waiver requests
  by an executive officer or member of the Board of Directors shall be
  referred by the Compliance Committee Member, with his recommendation, to the
  Board of Directors or a committee thereof for consideration. If either (i) a
  majority of the independent directors on the Board of Directors, or (ii) a
  committee comprised solely of independent directors agrees that the waiver
  should be granted, it will be granted. The company will disclose the nature
  and reasons for the waiver on a Form 8-K to be filed promptly with the
  Securities and Exchange Commission or otherwise as required by the
  Securities and Exchange Commission or The American Stock Exchange. If the
  Board denies the request for a waiver, the waiver will not be granted and
  the associate may not pursue the intended course of action.

     It is the company's policy only to grant waivers from the Code in limited
  and compelling circumstances.

  FREQUENTLY ASKED QUESTIONS AND ANSWERS

     The following questions and answers address each associate's obligation
  to comply with the Code. The company has attempted to design procedures that
  ensure maximum confidentiality and, most importantly, freedom from the fear
  of retaliation for complying with and reporting violations under the Code.

       Q:   Do I have a duty to report violations under the Code?

  <PAGE>
       A:   Yes, participation in the Code and its compliance program is
            mandatory. You must immediately report any suspected or actual
            violation of the Code to the Corporate Compliance Officer or the
            Compliance Committee Member. The Company will endeavor to keep
            reports confidential to the fullest extent practicable under the
            circumstances. Failure to report suspected or actual violations is
            itself a violation of the Code and may subject you to disciplinary
            action, up to and including termination of employment or legal
            action.

       Q:   I'm afraid of being fired for raising questions or reporting
            violations under the Code. Will I be risking my job if I do?

       A:   The Code contains a clear non-retaliation policy which is located
            in Section VIII of the Code, meaning that if you in good faith
            report a violation of the Code by the company, or its agents
            acting on behalf of the company, to the Corporate Compliance
            Officer or the Compliance Committee Member, the company will
            undertake to protect you from being fired, demoted, reprimanded or
            otherwise harmed for reporting the violation, even if the
            violation involves you, your supervisor, or senior management of
            the company. The Company will endeavor to keep confidential any
            report you make to the Corporate Compliance Officer or the
            Compliance Committee Member to the extent practicable under the
            circumstances.

  In addition, if you report a suspected violation under the Code which you
  reasonably believe constitutes a violation of a federal statute by the
  company, or its agents acting on behalf of the company, to a federal
  regulatory or law enforcement agency, you may not be reprimanded,
  discharged, demoted, suspended, threatened, harassed or in any manner
  discriminated against in the terms and conditions of your employment for
  reporting the suspected violation, regardless of whether the suspected
  violation involves you, your supervisor or senior management of the company.

          Q:      How are suspected violations investigated under the Code?

          A:     When a suspected violation is reported to the Corporate
                 Compliance Officer or the Compliance Committee Member, the
                 Corporate Compliance Officer will gather information about
                 the allegation by interviewing the associate reporting the
                 suspected violation, the associate who is accused of the
                 violation and/or any co-workers or associates of the accused
                 associates to determine if a factual basis for the allegation
                 exists. The reporting associate's immediate supervisor will
                 not be involved in the investigation if the reported violation
                 involved that supervisor. The Company will endeavor to keep the
                 identity of the reporting associate confidential to the fullest
                 extent practicable under the circumstances.

          If the report is not substantiated, the reporting associate will be
  informed and at that time will be asked for any additional information not
  previously communicated. If there is no additional information, the
  Corporate Compliance Officer will close the matter as unsubstantiated.

          If the allegation is substantiated, the Compliance Committee Member
  will make a judgment as to the degree of severity of the violation and the
  appropriate disciplinary response. In more severe cases, the Compliance
  Committee Member will make a recommendation to the Board of Directors of the
  company for its approval. The Board's decision as to disciplinary and
  corrective action will be final. In the case of less severe violations, the
  Corporate Compliance Officer may refer the violation to the Human Resources
  Department for appropriate disciplinary action.

          The Compliance Committee Member shall provide a summary of all
  matters considered under the Code to the Board of Directors or a committee
  thereof at each regular meeting thereof, or sooner if warranted by the
  severity of the matter.

          The company will endeavor to keep all proceedings and the identity
  of the reporting person as confidential as practicable under the
  circumstances.

          Q:      Do I have to participate in any investigation under the
                  Code?

          A:     Your full cooperation with any pending investigation under
                 the Code is a condition of your continued relationship with
                 the company. The refusal to cooperate fully with any
                 investigation is a violation of the Code and grounds for
                 discipline, up to and including termination.

  <PAGE>
          Q:      What are the consequences of violating the Code?

          A:     As explained above, associates who violate the Code may be
                 subject to discipline, up to and including termination of
                 employment. Associates who violate the Code may simultaneously
                 violate federal, state, local or foreign laws, regulations or
                 policies. Such associates may be subject to prosecution,
                 imprisonment and fines, and may be required to make
                 reimbursement to the company, the government or any other
                 person for losses resulting from the violation. They may be
                 subject to punitive or treble damages depending on the severity
                 of the violation and applicable law.

          Q:      What if I have questions under the Code or want to obtain a
                  waiver under any provision of the Code?

          A:     The Corporate Compliance Officer and the Compliance Committee
                 Member can help answer questions you may have under the Code.
                 Particularly difficult questions will be answered with input
                 from the Compliance Committee Member. In addition, Section IX
                 of the Code provides information on how you may obtain a waiver
                 from the Code; waivers will be granted only in very limited
                 circumstances. You should never pursue a course of action that
                 is unclear under the Code without first consulting the
                 Corporate Compliance Officer or the Compliance Committee
                 Member, and if necessary, obtaining a waiver from the Code.


  APPENDIX TO CORPORATE CODE OF CONDUCT AND ETHICS

  ASSOCIATE'S AGREEMENT TO COMPLY

  I have read CVD Equipment Corporations Corporate Code of Conduct and Ethics
  (the "Code"). I have obtained an interpretation of any provision about which
  I had a question. I agree to abide by the provisions of the Code. Based on
  my review, I acknowledge that

  ____      To the best of my knowledge, I am not in violation of, or aware of
            any violation by others of, any provision contained in the Code;

  OR

  ____      I have made a full disclosure on the reverse side of this
            acknowledgement of the facts regarding any possible violation of
            the provisions set forth in the Code.


     In addition, I understand that I am required to report any suspected or
  actual violation of the Code. I understand that I am required to cooperate
  fully with the company in connection with the investigation of any suspected
  violation. I understand that my failure to comply with the Code or its
  procedures may result in disciplinary action, up to and including
  termination.

  By:
  Date:

  Name     (Please print):
  Department/Location:



                                                                 Exhibit 21.1
  SUBSIDIARIES

  CVD Materials Corporation, a New York corporation, is a wholly owned
  subsidiary of CVD Equipment Corporation.

  33

  -36-

  <PAGE>                                                         Exhibit 31.1
    Certifications Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities
   Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-
                               Oxley Act of 2002

  I, Leonard A. Rosenbaum, certify that:
     1. I have reviewed this annual report on Form 10-KSB  of  CVD Equipment
       Corporation;
     2. Based upon my knowledge, this annual report does not contain any untrue
       statement of a material fact or omit to state a material fact necessary
       to make the statements made, in light of the circumstances under which
       such statements were made, not misleading with respect to the period
       covered by this annual report;
     3. Based upon my knowledge, the financial statements, and other financial
       information included in this annual report, fairly present in all
       material respects the financial condition, results of operations and
       cash flows of the small business issuer as of, and for, the periods
       presented in this annual report;
     4. The small business issuer's other certifying officer and I are
       responsible for establishing and maintaining disclosure controls and
       procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
       and internal control over financial reporting (as defined in Exchange
       Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and
       have:
       (a) Designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, to ensure that material information relating to the
            small business issuer, including its consolidated subsidiaries, is
            made known to us by others within those entities, particularly
            during the period in which this report is being prepared;
       (b) Designed such internal control over financial reporting, or caused
            such internal control over financial reporting to be designed
            under our supervision, to provide reasonable assurance regarding
            the reliability of financial reporting and the preparation of
            financial statements for external purposes in accordance with
            generally accepted accounting principles;
       (c) Evaluated the effectiveness of the small business issuer's
            disclosure controls and procedures and presented in this report
            our conclusions about the effectiveness of the disclosure controls
            and procedures, as of the end of the period covered by this report
            based on such evaluation; and
       (d) Disclosed in this report any change in the small business issuer's
            internal control over financial reporting that occurred during the
            small business issuer's most recent fiscal quarter (the small
            business issuer's fourth fiscal quarter in the case of an annual
            report) that has materially affected, or is reasonably likely to
            materially affect, the small business issuer's internal control
            over financial reporting and
     5. The small business issuer's other certifying officer and I have
       disclosed, based on our most recent evaluation of internal control over
       financial reporting, to the small business issuer's auditors and the
       audit committee of the small business issuer's board of directors (or
       persons performing the equivalent functions):
       (a) All significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which
            are reasonably likely to adversely affect the small business
            issuer's ability to record, process, summarize and  report
            financial data; and
       (b) Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the small business
            issuer's internal control over financial reporting.

    Dated: March 31, 2005
          /s/ Leonard A. Rosenbaum
          ----------------------------------------
          President, Chief Executive Officer and Director
  <PAGE>                                                        Exhibit 31.2
    Certifications Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities
   Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-
                               Oxley Act of 2002

  I, Glen R. Charles, certify that:
     1. I have reviewed this annual report on Form 10-KSB  of  CVD Equipment
       Corporation;
     2. Based upon my knowledge, this annual report does not contain any untrue
       statement of a material fact or omit to state a material fact necessary
       to make the statements made, in light of the circumstances under which
       such statements were made, not misleading with respect to the period
       covered by this annual report;
     3. Based upon my knowledge, the financial statements, and other financial
       information included in this annual report, fairly present in all
       material respects the financial condition, results of operations and
       cash flows of the small business issuer as of, and for, the periods
       presented in this annual report;
     4. The small business issuer's other certifying officer and I are
       responsible for establishing and maintaining disclosure controls and
       procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
       and internal control over financial reporting (as defined in Exchange
       Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and
       have:
       (a) Designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, to ensure that material information relating to the
            small business issuer, including its consolidated subsidiaries, is
            made known to us by others within those entities, particularly
            during the period in which this report is being prepared;
       (b) Designed such internal control over financial reporting, or caused
            such internal control over financial reporting to be designed
            under our supervision, to provide reasonable assurance regarding
            the reliability of financial reporting and the preparation of
            financial statements for external purposes in accordance with
            generally accepted accounting principles;
       (c) Evaluated the effectiveness of the small business issuer's
            disclosure controls and procedures and presented in this report
            our conclusions about the effectiveness of the disclosure controls
            and procedures, as of the end of the period covered by this report
            based on such evaluation; and
       (d) Disclosed in this report any change in the small business issuer's
            internal control over financial reporting that occurred during the
            small business issuer's most recent fiscal quarter (the small
            business issuer's fourth fiscal quarter in the case of an annual
            report) that has materially affected, or is reasonably likely to
            materially affect, the small business issuer's internal control
            over financial reporting and
     5. The small business issuer's other certifying officer and I have
       disclosed, based on our most recent evaluation of internal control over
       financial reporting, to the small business issuer's auditors and the
       audit committee of the small business issuer's board of directors (or
       persons performing the equivalent functions):
       (a) All significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which
            are reasonably likely to adversely affect the small business
            issuer's ability to record, process, summarize and  report
            financial data; and
       (b) Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the small business
            issuer's internal control over financial reporting.

    Dated: March 31, 2005
         /s/ Glen R. Charles
         ----------------------------------------
         Chief Financial Officer

<PAGE>
                                                                 Exhibit 32.1

                  Certification of Principal Executive Officer
                        Pursuant to U.S.C. Section 1350
        As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
                                      2002



  I, Leonard A. Rosenbaum, President and Chief Executive Officer
  of CVD Equipment Corporation, hereby certifies, to my knowledge,
  that the annual report on Form 10-KSB for the period ending
  December 31, 2004 of CVD Equipment Corporation (the "Form 10-
  KSB") fully complies with the requirements of Section 13 (a) or
  15 (d) of the Securities Exchange Act of 1934 and the
  information contained in the Form 10-KSB fairly presents, in all
  material respects, the financial condition and results of
  operations of CVD Equipment Corporation.


  Dated: March 31, 2005   /s/   Leonard A. Rosenbaum
                          Leonard A. Rosenbaum
                          Chief Executive Officer
                          (Principal Executive Officer)

<PAGE>
                                                                 Exhibit 32.2

                  Certification of Principal Financial Officer
                        Pursuant to U.S.C. Section 1350
        As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
                                      2002



  I, Glen R. Charles, Chief Financial Officer of CVD Equipment
  Corporation, hereby certifies, to my knowledge, that the annual
  report on Form 10-KSB for the period ending December 31, 2004 of
  CVD Equipment Corporation (the "Form 10-KSB") fully complies
  with the requirements of Section 13 (a) or 15 (d) of the
  Securities Exchange Act of 1934 and the information contained in
  the Form 10-KSB fairly presents, in all material respects, the
  financial condition and results of operations of CVD Equipment
  Corporation.


  Dated: March 31, 2005   /s/   Glen R. Charles
                          Glen R. Charles
                          Chief Financial Officer
                          (Principal Financial Officer)

<PAGE>

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                   Page No.

  Report of Independent Registered Public Accounting Firm   ........  F1

  Independent Auditor's Report                    ..................  F2

  Financial Statements:

  Consolidated Balance Sheets at December 31, 2004 and 2003   ......  F3

  Consolidated Statements of Operations for the years ended
     December 31, 2004 and 2003                   ..................  F4

  Consolidated Statements of Stockholders' Equity for the
     Years ended December 31, 2004 and 2003       ..................  F5

  Consolidated Statements of Cash Flows for the years ended
     December 31, 2004 and 2003                   ..................  F6

  Notes to Consolidated Financial Statements      ..................  F7


  <PAGE>
                                      F-1

            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


  To the Board of Directors and Stockholders of
    CVD Equipment Corporation
    Ronkonkoma, New York

  We have audited the accompanying consolidated balance sheet of CVD
  Equipment Corporation and its subsidiary as of December 31, 2004,
  and the related consolidated statements of operations,
  stockholders' equity, and cash flows for the year then ended.
  These consolidated financial statements are the responsibility of
  the Company's management. Our responsibility is to express an
  opinion on these consolidated financial statements based on our
  audit.

  We conducted our audit in accordance with the standards of the
  Public Company Accounting Oversight Board (United States).  Those
  standards require that we plan and perform the audit to obtain
  reasonable assurance about whether the consolidated financial
  statements are free of material misstatement.  An audit includes
  examining, on a test basis, evidence supporting the amounts and
  disclosures in the consolidated financial statements.  An audit
  also includes assessing the accounting principles used and
  significant estimates made by management, as well as evaluating the
  overall consolidated financial statement presentation.  We believe
  that our audit provides a reasonable basis for our opinion.

  In our opinion, the consolidated financial statements referred to
  above present fairly, in all material respects, the consolidated
  financial position of CVD Equipment Corporation and its subsidiary
  as of December 31, 2004, and the consolidated results of their
  operations and their cash flows for the year then ended, in
  conformity with accounting principles generally accepted in the
  United States of America.






  MOORE STEPHENS, P. C.
  Certified Public Accountants.

  Cranford, New Jersey
  February 25, 2005

  <PAGE>
                                      F-2

                            INDEPENDENT AUDIT REPORT
                            ------------------------

  To the Board of Directors and Stockholders
  CVD Equipment Corporation
  Ronkonkoma, NY

  We have audited the accompanying consolidated balance sheet of CVD
  Equipment Corporation and Subsidiary (the "Company") as of December
  31, 2003, and the related consolidated statements of income,
  stockholders' equity and cash flows for the year then ended. These
  financial statements are the responsibility of the Company's
  management. Our responsibility is to express an opinion on these
  financial statements based on our audit.

  We conducted our audit in accordance with auditing standards
  generally accepted in the United States of America. Those standards
  require that we plan and perform the audit to obtain reasonable
  assurance about whether the consolidated financial statements are
  free of material misstatement. An audit includes examining, on a
  test basis, evidence supporting the amounts and disclosures in the
  consolidated financial statements. An audit also includes assessing
  the accounting principles used and significant estimates made by
  management, as well as evaluating the overall financial statement
  presentation. We believe that our audit provides a reasonable basis
  for our opinion.

  In our opinion, the consolidated financial statements referred to
  above present fairly, in all material respects, the financial
  position of CVD Equipment Corporation and Subsidiary as of December
  31, 2003, in conformity with accounting principles generally
  accepted in the United States of America.


  ALBRECHT, VIGGIANO, ZURECK & COMPANY, P.C.
  Hauppauge, New York
  February 20, 2004


  <PAGE>
                                                            F-3
  <TABLE>
  <CAPTION>
                                         CVD EQUIPMENT CORPORATION  AND SUBSIDIARY
                                                Consolidated Balance Sheets
                                                 December 31, 2004 and 2003

                                                                                           2004               2003
                                                                                      -------------    -------------
  <S>                                                                                 <C>              <C>
  ASSETS
  Current Assets
       Cash and cash equivalents                                                      $    171,463     $    321,490
       Accounts receivable, net                                                          2,375,257        1,819,744
       Cost  and estimated earnings in excess of billings
          on uncompleted contracts                                                       1,110,362          575,734
       Inventories                                                                       1,823,453        1,425,851
       Other current assets                                                                110,743           74,247
                                                                                      -------------    -------------
                                                                Total Current Assets     5,591,278        4,217,066

  Property, plant and equipment, net                                                     5,153,017        5,400,032

  Deferred income taxes                                                                    300,743          440,362

  Other assets                                                                             398,587          144,458

  Intangible assets, net                                                                   109,558          122,977
                                                                                      -------------    -------------
                                                                        Total Assets  $ 11,553,183     $ 10,324,895
                                                                                      =============    =============

  LIABILITIES AND STOCKHOLDERS' EQUITY
  Current Liabilities
       Current maturities of long-term debt                                           $    213,394     $    177,381
       Short-term notes payable                                                            850,000              -
       Accounts payable                                                                    725,706          520,525
       Accrued expenses                                                                    584,443          426,838
       Accrued professional fees - related party                                            41,626           40,578
       Customer Deposits                                                                   298,152           20,595
       Billings in excess of costs on uncompleted contracts                                    -            174,068
                                                                                      -------------    -------------

                                                           Total Current Liabilities     2,713,321        1,359,985
  Long-term Debt, net of current portion                                                 3,140,628        3,336,400
  Commitments and Contingencies                                                                -                -
                                                                                      -------------    -------------
                                                                   Total Liabilities  $  5,853,949     $  4,696,385
                                                                                      -------------    -------------


  Stockholders' Equity:
       Common stock - $0.01 par value -10,000,000 shares authorized;
       3,039,100 shares issued & outstanding
       at December 31, 2004 and 2003                                                        30,391           30,391
       Additional paid-in capital                                                        2,902,149        2,902,149
       Retained earnings                                                                 2,766,694        2,695,970
                                                                                      -------------    -------------
                                                          Total Stockholders' Equity     5,699,234        5,628,510
                                                                                      -------------    -------------

                                          Total Liabilities and Stockholders' Equity  $ 11,553,183     $ 10,324,895
                                                                                      =============    =============
  <FN>    See Notes to Consolidated Financial Statements
  </TABLE>
  <PAGE>
                                                                     F-4
  <TABLE>
  <CAPTION>
                                         CVD EQUIPMENT CORPORATION  AND SUBSIDIARY
                                           Consolidated Statements of Operations
                                           Years ended December 31, 2004 and 2003

                                                                                          2004             2003
                                                                                      -------------    -------------
  <S>                                                                                 <C>              <C>
  Revenue
       Revenue on completed contracts                                                 $  7,647,369     $  9,065,679
       Revenue on uncompleted contracts                                                  2,226,223          722,260
                                                                                      -------------    -------------
                                                                                         9,873,592        9,787,939
                                                                                      -------------    -------------
  Costs of revenue
       Cost on completed contracts                                                       5,406,889        7,180,226
       Cost on uncompleted contracts                                                     1,142,057          303,771
                                                                                      -------------    -------------
                                                                                         6,548,946        7,483,997
                                                                                      -------------    -------------
  Gross profit                                                                           3,324,646        2,303,942
                                                                                      -------------    -------------
  Operating expenses
       Selling and shipping                                                                691,281          740,266
       General and administrative                                                        2,225,250        2,123,603
       Related party - professional fees                                                    26,464           40,578
                                                                                      -------------    -------------

  Total operating expenses                                                               2,942,995        2,904,447

  Operating income (loss)                                                                  381,651         (600,505)
                                                                                      -------------    -------------
  Other income (expense)
       Interest income                                                                         752            1,243
       Interest expense                                                                   (212,547)        (208,944)
       Other income                                                                         26,001          310,042
                                                                                      -------------    -------------
  Total other (expense) income, net                                                       (185,794)         102,341
                                                                                      -------------    -------------

  Income (loss) before income tax (expense) benefit                                        195,857         (498,164)
  Income tax (expense) benefit                                                            (125,133)         161,214
                                                                                      -------------    -------------

  Net income (loss)                                                                   $     70,724     $   (336,950)
                                                                                      =============    =============


  Basic income (loss) per common share                                                $       0.02     $      (0.11)
  Diluted income (loss)per common share                                               $       0.02     $      (0.11)

  Weighted average common shares outstanding
  basic income per share                                                                 3,039,100        3,039,100

  Weighted average common shares outstanding
  diluted income per share                                                               3,053,494        3,039,100





  <FN>    See Notes to Consolidated Financial Statements
  </TABLE>
  <PAGE>
                                                            F-5
  <TABLE>
  <CAPTION>
                                          CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                                      Consolidated Statements of Stockholder's' Equity
                                           Years ended December 31, 2004 and 2003


                                                                      Additional                            Total
                                    Common Stock                        Paid -In        Retained    Shareholder's
                                           Shares        Amount          Capital        Earnings           Equity
                                       --------------------------   -------------   -------------   --------------
  <S>                                  <C>          <C>             <C>             <C>              <C>
  Balance - December 31, 2002             3,039,100   $   30,391    $  2,902,149    $  3,032,920     $  5,965,460

  Net loss                                                                              (336,950)        (336,950)

  Balance - December 31, 2003             3,039,100       30,391       2,902,149       2,695,970        5,628,510

  Net income                                                                              70,724           70,724

  Balance - December 31, 2004             3,039,100   $   30,391    $  2,902,149    $  2,766,694     $  5,699,234






















  <FN>

  See Notes to Consolidated Financial Statements
  </TABLE>

  <PAGE>
                                                            F-6
  <TABLE>
  <CAPTION>
                                         CVD EQUIPMENT CORPORATION  AND SUBSIDIARY
                                           Consolidated Statements of Cash Flows
                                           Years ended December 31, 2004 and 2003

                                                                                          2004             2003
                                                                                      -------------    -------------
  <S>                                                                                 <C>              <C>
  Cash flows from operating activities:
       Net income (loss)                                                              $     70,724     $   (336,950)
       Adjustments to reconcile net income (loss)
       to net cash (used in) provided by operating activities:
       Depreciation and amortization                                                       356,884          351,579
       Deferred tax (benefit) provision                                                    139,619          (96,288)
       Bad debt provision                                                                    4,430            1,241
       Changes in operating assets and liabilities
       Accounts receivable                                                                (559,942)          31,808
       Cost in excess of billings on uncompleted contracts                                (534,628)         207,912
       Inventory                                                                          (397,602)         597,636
       Other current assets                                                                (36,496)         119,985
       Other assets                                                                       (302,694)         (45,902)
        Accounts payable                                                                   205,181         (417,529)
        Accrued expenses                                                                   158,655          130,712
        Customer Deposits                                                                  277,557           20,595
        Billing in excess of costs on uncompleted contracts                               (174,068)          27,681
                                                                                      -------------    -------------
    Net cash (used in) provided by operating activities                                   (792,380)         592,480
                                                                                      -------------    -------------

  Cash flows from investing activities:
       Capital expenditures                                                                (47,886)         (67,403)
                                                                                      -------------    -------------
  Net cash used in investing activities                                                    (47,886)         (67,403)
                                                                                      -------------    -------------

  Cash flows from financing activities
       Proceeds of short-term borrowings                                                 1,425,000        1,024,000
       Payments of short-term borrowings                                                  (575,000)      (1,374,000)
       Proceeds of long-term debt                                                           26,460              -
       Payments of long-term debt                                                         (186,221)        (177,124)
                                                                                      -------------    -------------
  Net cash provided by (used in) financing activities                                      690,239         (527,124)
                                                                                      -------------    -------------

  Net decrease in cash and cash equivalents                                               (150,027)          (2,047)

  Cash and cash equivalents at beginning of year                                           321,490          323,537
                                                                                      -------------    -------------

  Cash and cash equivalents at end of year                                            $    171,463     $    321,490
                                                                                      =============    =============





  <FN>    See Notes to Consolidated Financial Statements
  </TABLE>
  <PAGE>
                                      F-7

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2004 and 2003

  Note 1 - Business Description

  CVD Equipment Corporation and Subsidiary (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 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 the world.

  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 subsidiary. In
  December 1998 , a subsidiary, Stainless Design Concepts, Ltd.,
  was formed as a New York Corporation. In April 1999, this
  subsidiary was merged into CVD Equipment Corporation. The
  Company has one inactive subsidiary, CVD Materials Corporation
  as of December 31, 2004 and 2003.  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. Estimates are used when accounting for certain items such
  as long-term contracts, allowance for doubtful accounts, depreciation
  and amortization , taxes and warranties.

  Revenue and Income Recognition

  The company recognizes revenues and income using the percentage-of-
  completion method for custom production-type contracts while revenues
  from other products are recorded when such products are accepted and
  shipped. Profits on custom production-type contracts are recorded on
  the basis of the Company's estimates of the percentage-of-completion
  of individual contracts, commencing when progress reaches a point
  where experience is sufficient to estimate final results with
  reasonable accuracy. Under this method, revenues are recognized based
  on costs incurred to date compared with total estimated costs.

  <PAGE>
                                      F-8

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2004 and 2003

  The asset, "Costs and estimated earnings in excess of billings on
  uncompleted contracts," represents revenues recognized in excess of
  amounts billed.

  The liability, "Billings in excess of costs on uncompleted
  contracts," represents amounts billed in excess of revenues earned.

  Inventories

  Inventories are valued at the lower of cost (determined on the first-
  in, first-out method) or market.

  Reclassifications

  Certain items have been reclassified in the 2003 financial statements
  to conform to the 2004 presentation. These reclassifications have no
  effect on the net (loss) previously reported.

  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 the current enacted tax rates. Deferred tax expense
  (benefit) is the result of changes in the deferred tax assets and
  liabilities. A valuation allowance is not considered necessary by
  management since it is more likely than not that the deferred tax
  asset will be realized. An allowance may be necessary in the future
  based on changes in economic conditions.

  Property, Plant and Equipment

  Property, plant and equipment are stated at cost, net of accumulated
  depreciation and amortization. Expenditures for maintenance and
  repairs are charged against operations as incurred. The cost of
  certain labor and overhead which is expected to benefit future
  periods, has been capitalized and amortized. Depreciation and
  amortization are computed by the straight-line method for financial
  statement purposed over the following estimated useful lives:
  <TABLE>
  <CAPTION>
                                                          Estimated
                                                          Useful Life
                                                          ------------
                  <S>                                     <C>
                  Buildings                                39 years
                  Building improvements                    39 years
                  Machinery and equipment                   8 years
                  Capitalized labor and overhead            3 years
  </TABLE>
  <PAGE>
                                      F-9

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2004 and 2003


  <TABLE>
  <CAPTION>
                                                          Estimated
                                                          Useful Life
                                                          ------------
                  <S>                                     <C>
                  Furniture and fixtures                   8 years
                  Computer equipment                       5 years
                  Transportation equipment                 3 years
  </TABLE>

  Software Capitalization

  The Company follows Statement of Position 98-1, Accounting for Costs
  of Computer Software Developed or Obtained for Internal Use. This
  standard requires certain direct development costs associated with
  internal-use software to be capitalized including external direct
  costs of material and services and payroll costs for employees
  devoting time to the software projects. These costs totaled $235,217
  and $55,408 for the years ended December 31, 2004 and 2003
  respectively and are included in Other Assets. All software is
  amortized straight-line over its useful life of three years.
  Amortization expense related to software totaled $40,299 and $31,111
  for the years ended December 31, 2004 and 2003, respectively.

  Intangible Assets

  The cost of intangible assets is being amortized on a straight-line
  basis over their useful lives ranging from 5 to 15 years.
  Amortization expense recorded by the Company in 2004 and 2003 totaled
  $13,419 and $13,416 respectively.

  Bad Debts

  Accounts receivables are presented net of an allowance for doubtful
  accounts of $23,728 and $19,298 as of December 31, 2004 and 2003,
  respectively. The allowance is based on prior experience and
  management's evaluation of the collectibility of accounts receivable.
  Management believes the allowance is adequate. However, future
  estimates may change based on changes in economic conditions.

  Product Warranty

  The Company records warranty costs as incurred and does not provide
  for possible future costs. Management estimates such costs not to be
  material based on prior experience. However, it is reasonably
  possible that this estimate may change in the future.

  <PAGE>
                                      F-10

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2004 and 2003

  Advertising Costs

  The company expenses advertising costs which are not expected to
  benefit future periods. Advertising expenses included in selling and
  shipping expenses were $21,765 and $16,143 in 2004 and 2003,
  respectively. The Company capitalizes certain advertising costs
  included in Other Assets, totaling $63,849 to develop a web site and
  to print brochures expected to be used in the future. Capitalized
  advertising costs are amortized straight-line over three years.
  Amortization expense related to advertising costs totaled $390 and
  $1,428 in 2004 and 2003, respectively. These costs have been fully
  amortized as of December 31, 2004.

  Interest Capitalization

  The Company follows the policy of capitalizing interest as a
  component of the cost of property, plant and equipment constructed
  for its own use. The amount is included in building improvements.
  During the years ended December 31, 2004 and 2003, the Company did
  not capitalize any interest.

  Income Per Share

  Basic net income (loss) per common share is computed by dividing the
  net income (loss) by the weighted average number of shares of common
  stock outstanding during each period. Diluted income per share for
  2004 reflects the dilutive effect of the assumed exercise of options.
  Potentially dilutive shares related to the exercise of stock options
  were excluded from the diluted loss per share calculation for the
  year ended December 31, 2003, because their effects would have been
  antidilutive.

  Cash and Cash Equivalents

  The Company considers all highly liquid financial instruments
  purchased with an original maturity of three months or less at the
  date of purchase to be cash equivalents.

  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 high credit-quality financial institutions and
  invests its excess cash primarily in money market  instruments. The
  Company has established guidelines relative to credit ratings and
  maturities that seek to maintain safety 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. Generally, the Company does not
  require collateral or other security to support customer receivables.
  See Note 14 for concentration details.

  <PAGE>
                                      F-11

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2004 and 2003

  Fair value of Financial Instruments

  The carrying amounts of financial instruments including cash and cash
  equivalents, accounts receivable, other assets, accounts payable and
  accrued expenses, approximate fair value due to the relatively short
  maturity of these instruments. The fair value of securities
  available-for-sale is estimated based on quoted market prices. The
  carrying value of long-term debt approximates fair value based on
  borrowing rates currently available for loans with similar terms and
  maturities.

  Stock-Based Compensation

  The Company accounts for stock-based employee compensation under
  Accounting Principles Board ("APB") Opinion No. 25. "Accounting for
  Stock Issued to Employees", and related interpretations. The Company
  has adopted the disclosure-only provisions of Statement of Financial
  Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
  Compensation" and SFAS No. 148, "Accounting for Stock-Based
  Compensation - Transition and Disclosure", which was released in
  December 2002 as an amendment of SFAS No. 123. No stock-based
  employee compensation cost is reflected in net income (loss), as all
  options granted under the plans had an exercise price at least equal
  to the market value of the underlying common stock on the date of
  grant.

  Shipping and Handling

  It is the Company's policy to include freight in total sales. The
  amount included in sales was $18,304 and $48,288 for the years ended
  December 31, 2004 and 2003, respectively. Included in selling and
  shipping is $58,629 and $91,516 for shipping and handling costs for
  2004 and 2003, respectively.

  Recently Issued Accounting Standards

  In November 2004, the Financial Accounting Standards Board
  ("FASB") issued Statement of Financial Accounting Standards
  ("SFAS NO. 151"), "Inventory Costs-an amendment to ARB No.43,"
  effective for inventory costs incurred during fiscal years
  beginning after June 15, 2005. This statement provides guidance
  to clarify the accounting for abnormal amounts of idle facility
  expense, freight handling costs, and wasted material (spoilage),
  among other production costs. Provisions of ARB No. 43 stated
  that under some circumstances, items such as idle facility
  expense, excessive spoilage and other costs may be so abnormal
  as to require treatment as current period charges. This
  statement requires that those items be recognized as current
  period charges regardless of whether they meet the criterion of
  "so abnormal." In addition, SFAS 151 requires that allocation of
  fixed production overheads to the costs of conversion be based
  on the normal capacity of the production facilities. Adoption of
  the Statement is not expected to have a material impact on the
  financial statements of the Company.

  <PAGE>
                                      F-12

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2004 and 2003

  In November 2004, the FASB issued SFAS No. 152 "Accounting for
  Real Estate Time-Sharing Transactions-An amendment of SFAS NO.
  66 and 67. This Statement amends SFAS No. 66. "Accounting for
  Sales of Real Estate," to reference the financial accounting and
  reporting guidance for real estate time-sharing transactions
  that is provided in AICPA Statement of Position (SOP) 04-2,
  Accounting for Real Estate Time-Sharing Transactions. This
  Statement also amends SFAS No. 67, "Accounting for Costs and
  Initial Rental Operations of Real Estate Projects," to state the
  guidance for (a) incidental costs and (b) costs incurred to sell
  real estate projects does not apply to real estate time-sharing
  transactions. The accounting for those operations and costs is
  subject to guidance in SOP 04-2, effective for financial
  statements with fiscal years beginning after June 15, 2005.
  Adoption of this Statement is not expected to have a material
  impact on the financial statements of the Company.

  In November 2004, the FASB issued SFAS No. 153, "Exchanges of
  Nonmonetary Assets-an amendment to APB No. 29," effective for
  nonmonetary asset exchanges occurring in fiscal years beginning
  after June 15, 2005. This Statement amends Opinion No. 29 to
  eliminate the exception for nonmonetary exchanges of similar
  productive assets and replaces it with a general exception for
  exchanges of nonmonetary assets that do not have commercial
  substance. A nonmonetary exchange has commercial substance if
  the future cash flows of the entity are expected to change
  significantly as a result of the exchange. Adoption of this
  Statement is not expected to have a material impact on the
  financial statements of the Company.

  In December 2004, the FASB issued Statement of Financial Accounting
  Standard No. 123R (SFAS 123R), "Share-Based Payment." Under previous
  practice, the reporting entity could account for share-based payment
  under the provisions of Accounting Principles Board Opinion No. 25,
  "Accounting for Stock Issued to Employees" and disclose share-based
  compensation as if accounted for under the provisions of Statement of
  Financial Accounting Standard No. 123 (SFAS No. 123), " Accounting
  for Stock-Based Compensation." Under the provisions of SFAS No. 123R,
  a public entity is required to measure the cost of employee services
  received in exchange for an award of equity instruments based on the
  grant-date fair value of the award. That cost is recognized over the
  period during which an employee is required to provide service in
  exchange for the award.

  The Company expects to adopt SFAS No. 123R effective with the
  beginning of the quarter ended March 31, 2006. Adoption of the
  standard is currently expected to reduce future earnings by an amount
  consistent with the reductions shown in recent pro forma disclosures
  provided under the provisions of SFAS No. 123. Application of this
  pronouncement requires significant judgement regarding the
  assumptions used in the selected option pricing model, including
  stock price volatility and employee exercise behavior. Most of these
  inputs are either highly dependent on the current economic
  environment at the date of grant or forward-looking over the expected
  term of the award. As a result, the actual impact of adoption on
  future earnings could differ significantly from our current estimate.

  <PAGE>
                                      F-13

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2004 and 2003

  Note 3 - Supplemental Cash Flow Information

  During 2003, options to purchase 87,500 common shares were issued to
  certain employees and members of the board of directors. The option
  price for all options granted in 2003 was equal to or greater than
  the fair market value per share on the date the option was granted
  and no compensation cost was recognized.
  <TABLE>
  <CAPTION>
                                                    2004           2003
                                                ------------   ------------
  <S>                                           <C>            <C>
  Cash paid during the year for:
      Income taxes, net of refunds              $     3,256    $   (61,621)
      Interest                                      212,547        208,944
  <FN>
  Note 4 - Uncompleted Contracts
  </TABLE>


  Costs, estimated earnings, and billings on uncompleted contracts are
  summarized as follows:
  <TABLE>
  <CAPTION>
                                                    2004           2003
                                                ------------   ------------
  <S>                                           <C>            <C>
  Costs incurred on uncompleted contracts       $ 1,142,057    $   303,772
          Estimated earnings                      1,084,166        951,894
                                                ------------   ------------
                                                  2,226,223      1,255,666
          Billings to date                       (1,115,861)      (854,000)
                                                ------------   ------------
                                                $ 1,110,362    $   401,666
                                                ============   ============

  Included in accompanying balance sheets
      Under the following captions:

      Costs and estimated earnings in excess
        of billings on uncompleted contracts    $ 1,110,362    $   575,734
      Billings in excess of costs and estimated
        earnings on uncompleted contracts             ---         (174,068)
                                                ------------   ------------
                                                $ 1,110,362    $   401,666
                                                ------------   ------------
  </TABLE>


  <PAGE>
                                      F-14

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2004 and 2003

  Note 5 - Inventory
  <TABLE>
  <CAPTION>
                                                        December 31,
                                                    2004           2003
                                                ------------   ------------
  <S>                                           <C>            <C>
  Raw materials                                 $   628,934    $   777,893
  Work-in-process                                   686,325        108,350
  Finished goods                                    508,194        539,608
                                                ------------   ------------
                                                $ 1,823,453    $ 1,425,851
                                                ------------   ------------
  </TABLE>

  Note 6 - Property, Plant and Equipment
  Major classes of property, plant and equipment consist of the
  following:
  <TABLE>
  <CAPTION>
                                                    2004           2003
                                                ------------   ------------
  <S>                                           <C>            <C>
  Land                                          $   760,000    $   760,000
  Buildings                                       2,815,839      2,815,839
  Building improvements                           1,378,552      1,372,505
  Machinery and equipment                         1,246,470      1,222,587
  Capitalized labor and overhead                    216,602        216,602
  Furniture and fixtures                            224,542        214,903
  Computer equipment                                201,377        193,063
  Transportation equipment                           74,709         74,709
                                                ------------   ------------
          Totals at Cost                          6,918,091      6,870,208
  Accumulated depreciation and amortization      (1,765,074)    (1,470,176)
                                                ------------   ------------
                                                $ 5,153,017    $ 5,400,032
  Depreciation and amortization expense         $   294,901    $   297,747
                                                ------------   ------------

  </TABLE>

  <PAGE>
                                      F-15

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2004 and 2003

  Note 7 - Intangible Assets

  Intangible assets are summarized as follows:
  <TABLE>
  <CAPTION>
  December 31, 2004

                         Weighted Average                   Accumulated    Net of Accumulated
  Intangible Asset       Amortization Period      Cost      Amortization   Amortization
  -----------------      -------------------   ----------   ------------   ------------------
  <S>                    <C>                   <C>          <C>            <C>
  Licensing Agreement             5               10,000         10,000                0
  Patents & Copyrights           14               32,019         12,021           19,998
  Intellectual Property          15              100,000         23,335           76,665
  Other                           5               21,492          8,597           12,895


  Totals                         13              163,511         53,953          109,558
  </TABLE>


  <TABLE>
  <CAPTION>
  December 31, 2003

                         Weighted Average                   Accumulated    Net of Accumulated
  Intangible Asset       Amortization Period      Cost      Amortization   Amortization
  -----------------      -------------------   ----------   ------------   ------------------
  <S>                    <C>                   <C>          <C>            <C>
  Licensing Agreement             5               10,000         10,000                0
  Patents & Copyrights           14               32,019          9,568           22,451
  Intellectual Property          15              100,000         16,668           83,332
  Other                           5               21,492          4,298           17,194


  Totals                         13              163,511         40,534          122,977
  </TABLE>
  The estimated amortization expense related to intangible assets
  for each of the five succeeding fiscal years and thereafter as
  of December 31, 2004 is as follows:
  <TABLE>
  <CAPTION>
  Year Ended
  December 31,
  <C>                                             <C>
  2005                                            $   13,417
  2006                                                13,417
  2007                                                13,417
  2008                                                 9,119
  2009                                                 7,619
  Thereafter                                          52,569

     Total                                        $  109,558
  </TABLE>

  <PAGE>
                                      F-16

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2004 and 2003

  Note 8 - Financing Arrangements

  The Company has a line of credit with a bank which allows the
  Company to borrow up to $1,000,000 until June 1, 2005. Interest
  is payable on any unpaid principal balance at the bank's prime
  rate plus 3/4 of 1%. As of December 31, 2004 and 2003 $850,000 and
  $0 was outstanding on this facility. The prime rate was 5.25%
  and 4.0% at December 31, 2004 and 2003 respectively. The
  weighted average interest rate on the Company's short-term
  borrowings for 2004 and 2003 was 5.46% and 4.80% respectively.

  Note 9 - Long-term Debt
  <TABLE>
  <CAPTION>
  Long-term debt consists of the following:
                                                                          2004            2003
                                                                     -------------   -------------
  <S>                                                                <C>             <C>
  KIDCO REALTY CORP.
       $900,000 purchase money mortgage secured by
       real property, building and improvements in
       Saugerties, New York; payable in equal monthly
       installments of $5,988 including interest at 7%
       per annum; entire principal comes due in
       May 2009.                                                     $    838,645    $    851,308

  GENERAL ELECTRIC CAPITAL CORPORATION
       $2,700,000 mortgage payable secured by real
       property, building and improvements in
       Ronkonkoma, New York; payable in equal
       monthly installments of $22,285, including
       interest at 5.67% per annum; pursuant to an
       installment sale agreement with the Town of
       Islip Industrial Development Agency; final
       payment due March 2017.                                          2,357,668       2,476,851


  NORTH FORK BANK
       Sixty month installment note; payable in
       monthly installments of $4,922, including
       interest at 7.74% per annum; final payment
       due October 2007; collateralized by
       equipment costing $244,239.                                        140,087         185,622

  </TABLE>
  <PAGE>
                                      F-17

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2004 and 2003

  <TABLE>
  <CAPTION>
                                                                          2004            2003
                                                                     -------------   -------------
  <S>                                                                <C>             <C>
  KEY EQUIPMENT FINANCE
       Twenty-four month installment note, payable
       In monthly installments of $1,123, including
       Interest at 1.9% per annum; final payment due
       May 2006, collateralized by software
       costing $26,460.                                                    17,622               0
                                                                     -------------   -------------

                                                                        3,354,022       3,513,781
       Less: Current maturities                                           213,394         177,381
                                                                     -------------   -------------
                                                                     $  3,140,628    $  3,336,400
                                                                     -------------   -------------


  Future maturities of long-term debt as follows:

          Year ended December 31, 2005                               $    213,394
          Year ended December 31, 2006                                    217,204
          Year ended December 31, 2007                                    207,088
          Year ended December 31, 2008                                    179,394
          Year ended December 31, 2009                                    950,276
                                     Thereafter                         1,586,666
                                                                     -------------
                                                                     $  3,354,022
                                                                     =============
  </TABLE>
  Note 10 - Income per Share

  The calculation of basic and diluted weighted average common
  shares outstanding is as follows:
  <TABLE>
  <CAPTION>
                                                                          2004            2003
                                                                     -------------   -------------
  <S>                                                                <C>             <C>
  Weighted average common shares outstanding
  basic income per share                                                3,039,100       3,039,100

  Effect of potential common share issuance:
          Stock options                                                    14,394           ---
                                                                     -------------   -------------

  Weighted average common shares outstanding
  Diluted income per share                                              3,053,494       3,039,100
                                                                     =============   =============
  </TABLE>
  <PAGE>
                                      F-18

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2004 and 2003

  Outstanding options to purchase 305,900 shares were not included
  in the earnings per share calculation at December 31, 2004,
  because the exercise price was higher than the market price.
  Potentially dilutive shares related to the exercise of stock
  options to purchase 365,400 shares were excluded from the
  diluted loss per share calculation at December 31, 2003, because
  their effects would have been antidilutive. These options could
  potentially dilute earnings in the future.

  Note 11 - Income Taxes

  The provision (benefit) for income taxes includes the following:
  <TABLE>
  <CAPTION>
                                                                          2004            2003
                                                                     -------------   -------------
  <S>                                                                <C>             <C>
          Current:
              Federal                                                $      ---      $    (65,761)
              State                                                       (14,486)            835
                                                                     -------------   -------------
                  Total Current Provision (Benefit)                       (14,486)        (64,926)
          Deferred:
              Federal                                                      85,638         (77,849)
              State                                                        53,981         (18,439)
                                                                     -------------   -------------
                 Total Deferred Provision (Benefit)                       139,619         (96,288)
                                                                     -------------   -------------
                                                                     $    125,133    $   (161,214)
                                                                     =============   =============
  </TABLE>

  The Company has New York State investment tax credit
  carryforwards of $263,160 that may be offset against future
  state tax liabilities through the year 2019 and other state tax
  credits totaling $316,053 which may be carried forward
  indefinitely. The Company accounts for investment tax credits
  primarily by the flow-through method.

  As of December 31, 2004, the Company had federal and state net
  operating loss (NOL's) carryforwards totaling approximately
  $625,000 and $342,000, respectively. These NOL's were incurred
  in the 2003 tax year and may be used to offset taxable income in
  future periods through 2023.

  The Company also has capital loss carryforwards incurred in
  prior periods totaling approximately $24,000 set to expire 2005.

  The difference between the provision for income taxes at the
  Company's effective income tax rate and the federal statutory
  rate of 34% is as follows:




  <PAGE>
                                      F-19

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2004 and 2003

  <TABLE>
  <CAPTION>
                                                             2004            2003
                                                         -------------   -------------
  <S>                                                    <C>             <C>

          Statutory rate                                      34%             34%
          State taxes, net of federal benefits                 7%              7%
          Investment and other tax credits                    24%            (73%)
                                                         -------------   -------------
                                          Totals              65%            (32%)
                                                         =============   =============
  </TABLE>
  The tax effects of temporary differences giving rise to
  significant portions of deferred taxes are as follows:
  <TABLE>
  <CAPTION>
                                                             2004            2003
                                                         -------------   -------------
  <S>                                                    <C>             <C>

          Allowance for doubtful accounts                $      9,320    $      7,472
          Inventory capitalization                             67,353          39,618
          Deferred revenue                                   (425,860)       (368,573)
          Net operating loss                                  222,555         289,570
          Depreciation and amortization                      (190,376)       (157,462)
          Investment tax credit                               579,213         615,133
  Vacation Accrual                                             28,963          14,604
  Other                                                         9,575               0
                                                         -------------   -------------
                    Net deferred tax asset               $    300,743    $    440,362
                                                         -------------   -------------
  </TABLE>
  Management believes the net deferred tax asset will more likely
  than not be realized. In assessing the likelihood of
  realization, management considers estimates of future taxable
  income. However, it is at least reasonably possible that
  management's estimate of future realization may change in the
  near term.

  Note 12 - Stock Option Plans

  On June 15, 1989 the Company instituted a non-qualified stock
  option plan (the "Plan"). In connection therewith, 700,000
  shares of the Company's common stock are reserved for issuance
  pursuant to options that may be granted under the Plan through
  June 30, 2009. On June 3, 1996, the Company issued 84,000
  options which expire ten years from the date of grant. None of
  these options were exercisable until June 3, 1999. The option
  price was less than the fair market value per share on the date
  the 1996 options were granted. On April 15, 1998, 140,000
  options were granted to employees under this plan. Options
  granted in 1998 vest straight-line over a four-year period
  following the date of grant and expire five years after the date
  of grant. On July 16, 1999, 52,500 options were granted to
  employees under this Plan. Options granted in 1999 vest
  incrementally over a four-year period following the date of
  grant and expire seven years after the date of grant. On
  February 2, 2000, 242,000 options were granted to employees
  under this plan.

  <PAGE>
                                      F-20

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2004 and 2003

  On May 7, 2000 and August 8, 2000, a total of 80,000 options
  were granted to employees. On October 26, 2000, 3,500 options
  were granted to employees. All options vest over a four-year
  period. All options granted in 2000 expire seven years after the
  date of grant. The option price for options granted in 1999 and
  2000 is an amount per share of not less than the fair market
  value per share on the date the option is granted. On April 1,
  2003, the Company granted 12,500 options to employees under this
  plan which expire April 1, 2008, and on September 23, 2003
  granted 75,000 options to directors which expire on September 23,
  2010.

  In July 2001, the shareholders approved a non-qualified stock
  option plan covering key employees, officers, directors and
  other persons that may be considered as service providers to the
  Company. Options will be 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, are
  reserved for issuance or transfer upon the exercise of options
  which are granted. Unless otherwise provided in the option
  agreement, options granted under the plan shall become
  exercisable in 25% installments commencing one year from the
  anniversary date of the grant.

  The purchase price of the common stock under each option shall
  be no lower than the average bid price per share, calculated on
  a monthly basis, that the common stock (as reported by AMEX)
  traded during the calendar year immediately preceding the year
  in which the option is granted. The stock options generally
  expire five years after the date of grant. The stock option plan
  shall terminate on July 22, 2011. No options have been granted
  under the July 2001 plan.

  <TABLE>
  <CAPTION>
  A summary of stock option activity related to the Company's Plan is as follows:

                                     Beginning      Granted   Exercised   Canceled   Ending
                                     Balance        During    During      During     Balance
                                     Outstanding    Period    Period      Period    Outstanding  Exercisable
                                     -----------   ---------  ---------  ---------  -----------  -----------
  <S>                                <C>           <C>        <C>        <C>        <C>          <C>
  Year ended December 31, 2003
  Number of shares                     396,650        87,500      -0-      118,750    365,400      196,290
  Weighted average exercise price
   per share                           $  1.65       $  1.75    $ -0-      $  1.59    $  1.69      $  1.66
  Year ended December 31, 2004
  Number of shares                     365,400         -0-        -0-       10,000    355,400      296,650
  Weighted average exercise price
  Per share                            $  1.69         -0-      $ -0-      $  1.75    $  1.69      $  1.68
  </TABLE>
  <PAGE>
                                      F-21

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2004 and 2003
  <TABLE>
  <CAPTION>
  The following table summarizes information about the options at December 31, 2004.

                             Options Outstanding         Options Exercisable
                   -----------------------------------  ---------------------
                                  Weighted
                                  Average     Weighted               Weighted
                                  Remaining   Average                Average
      Exercise      Number       Contractual  Exercise     Number    Exercise
     Price Range   Outstanding      Life       Price    Exercisable  Price
    -------------  -----------  ------------  --------  -----------  --------
    <C>            <C>          <C>           <C>       <C>          <C>
    $0.13 - $1.00     49,500      1.55 years    $ 1.00      49,500     $ 1.00
    $1.25 - $1.50     75,000      5.74 years    $ 1.40      25,000     $ 1.40
    $1.51 - $1.75    169,900      2.09 years    $ 1.75     169,900     $ 1.75
    $2.00 - $2.75     45,000      2.56 years    $ 2.00      45,000     $ 2.00
    $3.00 - $3.25      3,500      2.50 years    $ 3.25       3,500     $ 3.25
    $3.75 - $4.00     12,500      4.25 years    $ 3.88       3,750     $ 3.88
  </TABLE>

  The Company accounts for the stock option plans under the
  recognition and measurement principles of APB Opinion No. 25,
  "Accounting for Stock Issued to Employees, and related
  interpretations.  The following table illustrates the effect on
  net income and earnings per share if the Company had applied the
  fair value recognition provisions of FASB Statement No. 123,
  "Accounting for Stock-Based Compensation", to its stock-based
  employee compensation: See Note 2.

  The weighted average grant date fair value of options granted
  during 2003 was $1.75. There were no options granted in 2004.
  <TABLE>
  <CAPTION>
                                                             2004            2003
                                                         -------------   -------------
          <S>                                            <C>             <C>

          Net income (loss), as reported                 $     70,724    $   (336,950)

          Add: Stock-based employee compensation
          expense included in reported net income (loss),
          net of related tax effects                            -0-             -0-

          Deduct: Total stock-based employee
          compensation expense determined under
          fair value based method for all awards, net
          of related tax effects                         $    (71,978)   $    (57,985)
                                                         -------------   -------------

          Pro-forma net (loss)                           $     (1,254)   $   (394,935)
                                                         =============   =============
  </TABLE>
  <PAGE>
                                      F-22

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2004 and 2003
  <TABLE>
  <CAPTION>
  Income (loss) per share:                                    2004            2003
                                                         -------------   -------------
                    <S>                                  <C>             <C>
                    Basic-as reported                      $   .02         $  (.11)
                    Basic-pro forma                        $   .00         $  (.13)

                    Diluted -as reported                   $   .02         $  (.11)
                    Diluted -pro forma                     $   .00         $  (.13)
  </TABLE>

  The fair value used in the pro forma data was estimated by using the
  Black-Scholes option-pricing model which took into account as of the grant
  date, the exercise price and the expected life of the option, the current
  price of the underlying stock and its expected volatility, expected
  dividends on the stock and the risk-free interest rate for the expected
  term of the option. The following is the average of the data used for the
  following items.
  <TABLE>
  <CAPTION>
                         Risk-Free                   Expected    Expected
  Year Ended           Interest Rate  Expected Life  Volatility  Dividends
  -------------------  -------------  -------------  ----------  ---------
  <S>                  <C>            <C>            <C>         <C>
  December 31, 2003        2.5%         5.7 Years     47.725%       None
  <FN>
  There were no options granted in 2004.
  </TABLE>

  Note 13 - Defined Contribution Plan

  On August 1, 1998, the Company adopted 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
  who became employed after August 1, 1998, would 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. During the
  years ended December 31, 2004 and 2003 the Company incurred
  administrative costs totaling $2,530 and $2,869 respectively. No
  employer contribution has been made for 2004 and 2003.

  <PAGE>
                                      F-23

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2004 and 2003

  Note 14 - Concentration of Credit Risk

  Cash

  The Company places most of its temporary cash investments with
  one financial institution. Balances normally exceed the federal
  Deposit Insurance Corporation limit. The amount at risk at
  December 31, 2004 was approximately $76,000. The Company has not
  experienced any loss to date as a result of this policy.

  Significant Customers

  The Company's sales encompass markets wherein the demands of any
  one customer may vary greatly due to changes in technology. In
  2004, one customer from the Conceptronic division represented
  approximately 17% of the Company's total revenue for the year
  and 16% of the Company's total billed and unbilled receivables
  at December 31, 2004. Two other customers, one each from the CVD
  and SDC divisions, represented approximately 11% and 23% of
  total billed and unbilled receivables at December 31, 2004. In
  2003, one customer of Conceptronic represented approximately 12%
  and one customer of the CVD division represented 13% of the
  Company's annual revenue. These customers represented less than
  1% of total billed and unbilled receivables at December 31,
  2003.

  Export Sales

  Export sales to unaffiliated customers represented approximately
  32% and 26% of sales for the years ended December 31, 2004 and
  2003, respectively, Export sales in 2004 and 2003 were primarily
  to customers in Asia. All contracts are denominated in U.S.
  dollars. The Company does not enter into any foreign exchange
  contracts.

  Note 15 - Related Party Transactions

  The general counsel for the Company is also a director. The
  Company incurred legal fees for his professional services of
  approximately $26,000 and $41,000 for the years ended December
  31, 2004 and 2003, respectively. As of December 31, 2004 and
  2003, the Company owed the general counsel approximately
  $41,000.

  Note 16 - Other Income

  Other income for the year ended December 31, 2003 consists of
  approximately $140,000 in cash received on the collection of
  accounts receivable exceeding the amount booked as part of the
  purchase of assets on June 17, 2002.

  <PAGE>
                                      F-24

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2004 and 2003

  Note 17 - Segment Reporting

  The Company adopted SFAS 131, "Disclosures about Segments of an
  Enterprise and Related Information." The Company operates through
  (3) segments, CVD, SDC and Conceptronic. The CVD division 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.
  Conceptronic  is a manufacturer of Surface Mount Technology
  equipment. The accounting policies of CVD, SDC and Conceptronic
  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.

  The following table presents certain information regarding the
  Company's segments at December 31, 2004 and for the year then ended:

  <TABLE>
  <CAPTION>
                               CVD             SDC        Conceptronic    Eliminations    Consolidated
                          -------------   -------------   -------------   -------------   -------------
  <S>                     <C>             <C>             <C>             <C>             <C>

  Assets                  $ 10,026,553    $  2,604,804    $  2,878,597    $ (3,956,771)   $ 11,553,183
                          =============   =============   =============   =============   =============
  Revenue                 $  2,885,410    $  2,843,293    $  4,948,170    $   (803,281)   $  9,873,592
  Interest Income                -0-               752           -0-                               752
  Interest Expense              76,678          59,190          76,679                         212,547
  Depreciation and
  amortization                 201,958         130,876          24,050                         356,884
  Capital
    expenditures                36,721           8,150           3,015                          47,886
  Pretax (loss) earnings      (38,052)         140,380          93,529                         195,857

  </TABLE>
  <PAGE>
                                      F-25

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2004 and 2003

  The following table presents certain information regarding the
  Company's segments at December 31, 2003 and for the year then
  ended:
  <TABLE>
  <CAPTION>
                               CVD             SDC        Conceptronic    Eliminations    Consolidated
                          -------------   -------------   -------------   -------------   -------------
  <S>                     <C>             <C>             <C>             <C>             <C>

  Assets                  $  9,227,302    $  2,245,712    $  2,361,457    $ (3,509,577)   $ 10,324,894
                          =============   =============   =============   =============   =============

  Revenue                 $  3,779,878    $  2,360,711    $  4,106,780    $   (459,430)   $  9,787,939
  Interest Income                  586             657           -0-                             1,243
  Interest Expense             170,735          60,044         (21,835)                        208,944
  Depreciation and
    amortization               188,789         140,229          22,562                         351,580
  Capital
    expenditures                47,168          17,413           2,822                          67,403
  Pretax earnings (loss)        87,950        (205,884)       (380,230)                       (498,164)
  </TABLE>

  Note 18- Commitments and Contingencies

  Legal Proceedings

  On September 24, 1999 the Company was named in a lawsuit.  The
  nature of this legal proceeding focused on the intellectual
  property obtained during the purchase of assets of Stainless
  Design Corporation.  On November 10, 1999, the Company responded
  with a counterclaim.  It is legal counsels' belief that the
  lawsuit against the Company is without merit.  The Company
  considers its potential exposure to be negligible and/or covered
  by insurance. Presently, cross-motions for summary judgment are
  pending before the court.

  In May 2002, the Company instituted a new action against
  Precisionflow Technologies, Inc., in the United States District
  for the Northern District of New York also seeking injunctive
  relief and monetary damages based upon additional copyright
  violations. A motion by Precisionflow Technologies, Inc. to
  dismiss this action has been pending since June 2002.
</TEXT>
</DOCUMENT>
