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<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                    |X| ANNUAL REPORT PURSUANT TO SECTION 13
                OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999
                                       or
                     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 0-23227

                                 ---------------
                                    CVC, INC.

             (Exact name of registrant as specified in its charter)

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

                 DELAWARE                               16-1383279
     (State or other jurisdiction                      (I.R.S. Employer
   of incorporation or organization)                  Identification No.)
                                  525 LEE ROAD
                            ROCHESTER, NEW YORK 14626
               (Address of principal executive offices, zip code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (716) 458-2550

                    SECURITIES REGISTERED PURSUANT TO SECTION
                        12(B) OF THE ACT: NONE SECURITIES
                     REGISTERED PURSUANT TO SECTION 12(G) OF
                                    THE ACT:

                     COMMON STOCK, $.01 PAR VALUE PER SHARE


     Indicate by check mark  whether the  Registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  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 /   /  no / X /

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. [|X|]

     The aggregate  market value of the voting stock held by  non-affiliates  of
the  Registrant  based on the closing price of Common Stock on November 12, 1999
of $10.94 as reported on the Nasdaq  National Market was  approximately  $48.270
million.  Shares of Common  Stock held by each  officer and director and by each
person who owns 5% or more of the outstanding Common Stock have been excluded in
that such person may be deemed to be affiliates. This determination of affiliate
status is not necessarily a conclusive determination for other purposes.

     As of November 12, 1999,  11,492,707 shares of Common Stock, $.01 par value
per share, were outstanding.

                  DOCUMENTS INCORPORATED BY REFERENCE
                               / None /

<PAGE>
                                       i

                                Table of Contents

PART I

Item 1.   Business.............................................................1
Item 2.   Properties..........................................................14
Item 3.   Legal Proceedings...................................................14
Item 4.   Submission of Matters to a Vote of Security Holders.................14

PART II

Item 5.   Market for the Company's Common Equity and Related
          Stockholder Matters.................................................15
Item 6.   Selected Financial Data.............................................16
Item 7.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations.................................17
Item 8.   Financial Statements and Supplementary Data.........................26
Item 9.   Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosure.................................29

PART III

Item 10.  Directors and Executive Officers of the Registrant..................30
Item 11.  Executive Compensation..............................................33
Item 12.  Security Ownership of Certain Beneficial Owners and Management......34
Item 13.  Certain Relationships and Related Transactions......................36

PART IV

Item 14.  Exhibits, Financial Statement Schedule and Reports on Form 8-K......38

Item 15.  Signatures..........................................................41


<PAGE>


PART I

ITEM 1.  BUSINESS

INTRODUCTION

     CVC is a worldwide supplier of process equipment used in the
manufacture   of  magnetic   recording   heads  for  disk  drives  and  advanced
semiconductor devices for computers and communications  equipment. Our equipment
either  deposits  or  removes  thin  film  layers  as  steps in the  process  of
manufacturing magnetic recording heads and semiconductor devices. Since 1993, we
have shipped more than 100 CONNEXION  Cluster Tool systems,  including more than
400 process modules. Our customers include many of the leading  manufacturers of
magnetic  recording heads for the data storage  industry such as Alps,  Fujitsu,
IBM, Read-Rite,  Seagate Technology, TDK and Yamaha, as well as manufacturers of
semiconductor devices such as Anadigics, Analog Devices, Honeywell and M/A-COM.


RECENT DEVELOPMENTS

     Stock  split

     On August 30, 1999,  the CVC declared a  two-for-three  reverse stock split
which  became  effective  in  connection  with its  initial  public  offering in
November  1999.  This reverse stock split  decreased the number of common shares
outstanding by 1,172,688.  Accordingly,  all share and per share amounts for all
periods presented herein have been retroactively adjusted to give effect to this
stock split.

     Public offering

     On November  12, 1999,  CVC  received net proceeds of $27.9  million from a
public equity  offering,  consisting of 3,000,000 shares of common stock sold by
CVC and 500,000 shares of common stock sold by certain shareholders of CVC at an
initial  offering  price of $10.00 per share.  Total common  shares  outstanding
after the offering were 11,492,707.  CVC used a portion of the net proceeds from
the offering to repay approximately $15.0 million of debt, $10.0 million for the
redemption  of the  Series D  Redeemable  Preferred  Stock and the  balance  for
general  corporate  purposes.  CVC did not receive any of the proceeds  from the
sale of shares by the selling shareholders.


INDUSTRY BACKGROUND

     THE DATA STORAGE INDUSTRY

     In  order to  satisfy  market  demand  for  devices  with  greater  storage
capacity,  the disk drive  industry has developed  new types of recording  heads
enabling greater areal density.  Areal density is the measure of stored bits per
square  inch in the  recording  surface  of a disk.  According  to data  storage
industry  sources,  areal densities have been increasing  approximately  60% per
year since 1990.  The growth in areal  density,  or storage  capacity,  has been
facilitated by the evolution of recording head manufacturing technology from IR,
or inductive  recording  heads,  to MR, or  magnetoresistive  heads, to the more
recent introduction of giant magnetoresistive heads, or GMR heads.

     According to TrendFocus, giant magnetoresistive head shipments are expected
to increase from 0.4 billion  units in 1999 to 1.2 billion units in 2002,  while
the shipment of magnetoresistive heads are expected to decrease from 0.5 billion
units in 1999 to limited  shipments by 2002. The disk drive industry's  expected
growth and  transition to  technologically  advanced  recording  heads reflect a
number of factors, including:

o    the exchange of increasing  volumes of data among users across the Internet

<PAGE>
                                       2

     and intranets;

o    the rapid  accumulation  of data resulting from growth of digital  content,
     including audio, video and data;

o    continued improvements in computing price performance ratios, including the
     emergence of the sub-$1,000 personal computer; and

o    the  introduction of new  applications  for storage devices such as digital
     cameras, auto navigation,  video on demand and personal digital assistants,
     or PDAs.

     Magnetic recording heads are manufactured using various thin film
deposition and etch processes, which provide magnetic, conductive and insulating
properties.   More  advanced   heads   typically   require  the   deposition  of
approximately  18 to 28 thin film layers of  different  materials.  CVC believes
that  the  data  storage   industry's   current   transition  to  more  advanced
technologies  will  require the data  storage  industry to make  investments  in
advanced  processing  equipment to support both the  technology  transition  and
anticipated volume growth.

     THE SEMICONDUCTOR INDUSTRY

     The manufacture of semiconductors involves multiple thin film
processing steps. Semiconductor devices that utilize exotic substrates,  such as
Gallium  Arsenide,  or GaAs,  are more  difficult  to  produce  due to  physical
characteristics such as lower maximum tolerable processing temperatures and less
mechanical  strength of the substrates.  However,  these  substrates  enable the
fabrication of high-speed,  high-performance  devices with low power consumption
that make them ideally suited for advanced communications applications,  such as
portable  communication  devices,  including digital pagers and cellular phones.
Due to the  characteristics  of these  exotic  substrates,  the  fabrication  of
devices involving these substrates  requires advanced process equipment that can
provide multiple, highly uniform, precision thin film materials.

     In  order  to  increase  the   performance   and  reduce  the  cost  of
semiconductor devices, manufacturers have continued to shrink line widths, while
at the  same  time  adding  multiple  layers  of metal  interconnect  materials.
Semiconductor  manufacturers  currently  use  aluminum  or  aluminum  alloys  to
interconnect the various layers of a semiconductor device. As semiconductor line
widths  shrink below 0.18  microns,  or 0.18  millionths  of a meter,  copper is
increasingly  being used as an  alternative  to aluminum  interconnects.  Copper
provides  less  resistance  to electron  flow at narrow line widths and makes it
possible to build high speed devices using fewer interconnect  layers than would
be necessary  with  aluminum.  The  deposition of copper  interconnect  material
requires  two steps:  (1) the  deposition  of a barrier  layer,  to protect  the
insulating layers from being  contaminated by copper,  and (2) the deposition of
seed and copper fill layers, which serve as the interconnect.  The deposition of
interconnect  material involves very specialized substrate processing equipment,
including metal deposition equipment.  According to Dataquest, copper deposition
equipment  sales are  expected to grow from $200 million in 1999 to $700 million
in 2003.

     SUBSTRATE PROCESSING

     The  manufacture of magnetic  recording heads and  semiconductors  requires
from tens to  hundreds  of  fabrication  processing  steps.  Many of these steps
involve the controlled  application or removal of layers of materials to or from
a  base  material,  or  substrate,  or  on a  previously  deposited  layer.  The
application of materials to a wafer, known as deposition,  involves the building
up of extremely thin films of electrically  insulating or conducting  materials.
These layers can range from over  one-thousandth to less than one-millionth of a
millimeter in thickness.  A wide range of materials and deposition processes are
used to build up thin film layers on substrates to achieve specific  performance
characteristics.  The removal of  material  from  substrates,  known as etching,
involves the precise  removal of residue or excess  material using dry plasma or
ion  beams  in  order  to  build a  specific  pattern,  for  example,  to form a
semiconductor device.
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                                       3


     The process of manufacturing magnetic recording heads and semiconductors is
constantly  evolving  to address  the demand for  smaller  devices  with  higher
performance.   Devices  with  smaller   features  sizes  and  higher  levels  of
performance require new materials or more manufacturing steps involving multiple
layers  of thin  film  materials.  To  successfully  develop  new  manufacturing
processes,  thin film recording  head and  semiconductor  manufacturers  require
sophisticated processing equipment that:

o    incorporates highly specialized processing and systems knowledge;

o    enables  the  precise,  uniform  deposition  of a wide  range of thin  film
     materials;

o    supports a variety of  deposition  and etching  processes on an  integrated
     platform; and

o    provides  the  ability  to  transition  to new  materials  and  fabrication
     processes efficiently.

THE CVC SOLUTION

     CVC is a worldwide  supplier of process  equipment for the data storage and
semiconductor  industries.   CVC  provides  thin  film  deposition  and  etching
equipment  based on a central  substrate-handling  platform to which a series of
interchangeable  process  modules  can be  connected.  CVC's  process  equipment
incorporate its expertise in:

o    the  deposition  and removal of multiple  thin film  materials  in a vacuum
     environment;

o    advanced physics and material science;

o    engineering of microelectronic and atomic components; and

o    proprietary software that controls the deposition and etching processes.

     CVC's  products  are  designed  for the highly  uniform,  repetitive  steps
required for the  manufacturing of devices  involving  multiple thin film layers
and a wide range of materials.

     CVC's  CONNEXION  Cluster Tool system is a modular system with stations for
connecting up to six modules around a central substrate-handling  platform. Each
module  performs  a  different  manufacturing  process on the  substrate.  CVC's
CONNEXION  Cluster Tool system enables the  integration  of modules  supplied by
either CVC or  third-parties.  CVC  currently  offers a wide  range of  advanced
process  modules for deposition  and etching of thin film layers.  The CONNEXION
Cluster  Tool,  combined with a wide range of process  modules,  helps to create
highly uniform devices through the integration of various  processes in a vacuum
controlled   environment.   CVC's  integrated,   modular-based  systems  provide
functional flexibility that enables data storage and semiconductor manufacturers
to quickly  transition to new process  technologies,  improve  time-to-market of
higher performance products and improve manufacturing yields.

STRATEGY

     CVC's objective is to enhance its position as a worldwide developer of thin
film processing technologies for the data storage and semiconductor  industries.
Key elements of CVC's strategy include:

MAINTAIN TECHNOLOGICAL  EXPERTISE IN THE DATA STORAGE INDUSTRY.  Since 1990, CVC
has focused on the development of integrated thin film process technologies that
are part of the  manufacturing  process of advanced  magnetic heads used in data
storage applications. To date, CVC has shipped more than 100 of its cluster tool
systems,  including  more than 400 process  modules.  CVC intends to continue to
combine its expertise in the processing of thin films with the modular design of
its  CONNEXION  Cluster  Tool  system  to  develop  increasingly  efficient  and
cost-effective integrated process solutions for the data storage industry.


<PAGE>
                                       4


EXPAND DATA STORAGE  EXPERTISE  INTO THE  SEMICONDUCTOR  MARKET.  CVC intends to
leverage its  accumulated  expertise in thin film head  processing  by targeting
selected  semiconductor  markets that require advanced thin film processes.  CVC
believes  that  its  CONNEXION  Cluster  Tool  systems  is well  suited  for the
fabrication of advanced  semiconductors,  advanced  storage  devices and optical
components.  CVC plans to continue to identify and develop products that address
integrated  process  solutions  where  thin  film  process  technologies  play a
critical role.

CAPITALIZE ON CLOSE  RELATIONSHIPS  WITH INDUSTRY  LEADERS.  CVC has established
strategic  relationships  with a number of  industry-leading  data  storage  and
semiconductor  manufacturers.  By working closely with industry leaders early in
their research and development  stage,  CVC can identify and develop  customized
integrated process solutions that better address customers'  existing and future
processing  requirements.  Having met the specific  needs of market leaders with
innovative integrated process solutions,  CVC is able to leverage the experience
gained to create  products  that will meet the  demands  of an  expanded  set of
customers across a range of applications and process technologies. CVC's ability
to  implement  new  process   solutions  also  helps  CVC  meet  its  customers'
time-to-market demands and advances CVC's goal of having products designed early
into its customers' production and planning cycles.

TARGET ADVANCED INTERCONNECT  OPPORTUNITIES IN THE SEMICONDUCTOR INDUSTRY. Since
1993,  CVC has committed  significant  resources to the  development of advanced
interconnect technology for high-performance integrated circuit fabrication. CVC
has developed a module that enables deposition of both barrier and copper layers
in an integrated system. CVC has delivered a developmental integrated copper and
barrier  deposition  system to one of its  strategic  customers  and  intends to
continue to develop  solutions  to meet the  requirements  of emerging  advanced
interconnect technologies.

CONTINUE  TO PROVIDE  SUPERIOR  CUSTOMER  SERVICE ON A WORLDWIDE  BASIS.  CVC is
focused  on  delivering  a high  level of  customer  satisfaction  by  providing
superior customer service through a dedicated  customer service group consisting
of 53 full-time  employees and a research  development  group  consisting of 103
full-time employees,  as well as through distributors and sales  representatives
in the United States,  Japan, East Asia and Europe.  CVC believes that its focus
on customer  service  combined  with CVC's  process and  systems  expertise  has
enhanced its reputation in the data storage and semiconductor industries.  CVC's
CONNEXION  Cluster  Tool system is used by a majority  of the  leading  magnetic
recording head  manufacturers  in the data storage  industry.  CVC believes this
broad industry  representation is due in part to its superior worldwide customer
service.

BROADEN PRODUCT  OFFERINGS THROUGH INTERNAL  DEVELOPMENT AND  ACQUISITIONS.  CVC
plans to  continue  to  expand  its  product  offerings  through  both  internal
development  and   acquisitions  of  complementary   businesses,   products  and
technologies. Since the market introduction of the CONNEXION Cluster Tool system
in 1993,  CVC has  continuously  enhanced and expanded its product  offerings in
response to the evolving needs of its customers  through  internal  research and
development.  In 1998,  CVC developed  and  introduced  capabilities  that allow
precise  measurement  and testing  functions  to take place in a process  module
without  disrupting  the production  process and without  disturbing the tightly
controlled vacuum environment.  In May 1999, CVC expanded its existing family of
process modules through the acquisition of Commonwealth  Scientific Corporation,
a provider of ion beam deposition and etching modules.

PRODUCTS

     CONNEXION CLUSTER TOOL SYSTEM

     CVC's principal product is its CONNEXION Cluster Tool system. The CONNEXION
Cluster  Tool system  provides  some of the  processes  required to  manufacture
magnetic recording heads and semiconductor  devices.  The CONNEXION Cluster Tool
system  is based  on a  central  substrate-handling  platform  and a  series  of
interchangeable  thin-film  deposition  and etching  processing  modules.  CVC's
CONNEXION  Cluster  Tool  system  enables  the  integration  of process  modules
supplied by either CVC or third  parties.  Since 1993, CVC has shipped more than
100 of these systems, including more than 400 process modules.
<PAGE>
                                       5

     Depending on the configuration, individual systems range from $1.0
million to more than $4.0 million,  and  individual  process  modules range from
approximately $350,000 to $2.0 million.

     CVC believes that the advantages provided by its CONNEXION Cluster Tool
system include the following:

ABILITY  TO  PROCESS  A WIDE  RANGE OF  MATERIALS.  The  modular  design  of the
CONNEXION  Cluster Tool system provides  customers the ability to process a wide
range of materials. This ability allows CVC's customers to address their rapidly
evolving manufacturing and material requirements across multiple applications.
<PAGE>
                                       6

     The following table provides an overview of the materials and  applications
addressed  by CVC's  CONNEXION  Cluster  Tool  systems for the data  storage and
semiconductor industries:

<TABLE>
<CAPTION>
                                             DATA STORAGE
                                             ------------
MATERIALS GROUPS                        SPECIFIC MATERIALS                      PRODUCT APPLICATIONS
----------------                        ------------------                      --------------------
<S>                                     <C>                                     <C>
Conductors               Aluminum                 Tantalum
                         Chromium                 Titanium
                         Copper                   Titanium/Tungsten
                         Gold                     Tungsten
                         Molybdenum
                         Platinum


Magnetic                 Aluminum Silicon Iron    Iridium Manganese             Inductive,
Materials                Cobalt Chromium          Iron Manganese                Magnetoresistive
                         Platinum                 Iron Tantalum Nitride         and Giant
                         Cobalt Iron              Nickel Iron                   Magnetoresistive
                         Cobalt Platinum          Nickel Iron Rhodium           Recording Heads
                         Cobalt Zirconium         Nickel Manganese              for Disk Drives
                         Tantalum                 Platinum Chromium
                         Cobalt Zirconium         Manganese
                         Niobium                  Platinum Manganese

Insulating               Aluminum Nitride         Silicon Nitride
                         Aluminum Oxide           Silicon Oxide

Wear-Resistant           Diamond-like-carbon, or DLC
Coatings
</TABLE>
<TABLE>

                                        SEMICONDUCTOR DEVICES
                                        ---------------------

MATERIALS GROUPS                        SPECIFIC MATERIALS                      PRODUCT APPLICATIONS
----------------                        ------------------                      --------------------
<S>                                     <C>                                     <C>
Conductors              Aluminum (alloys)         Titanium
                        Cobalt                    Titanium Silicide
                        Copper                    Titanium Tungsten Nitride
                        Gold                      Tungsten                      Gallium Arsenide
                        Nickel                                                  and Silicon
                        Platinum                                                Semiconductors

Barrier/Liner/          Tantalum                  Titanium                      Logic and Memory
Glue/                   Tantalum Nitride          Titanium Nitride              Integrated Circuits
Layers

High-k                  Barium Strontium          Tantalum Pentoxide
Dielectrics             Titanate                  Titanium Oxide                Analog and Mixed
                                                                                Signal Integrated
                                                                                Circuits

Other                   Blue Phosphor             Silicon Chromium Carbon
Specialty               Chromium Silicon Nitride  Tantalum Nitride
Materials               Nickel Chromium           Zinc Oxide
                        Silicon Chromium
</TABLE>
<PAGE>
                                       7

FLEXIBILITY OF MODULAR DESIGN.  The modular design of the CONNEXION Cluster Tool
system provides  customers the flexibility to cost  effectively  transition from
the development stage to full production.  In the development  stage,  customers
can use a process module as a fully-functional,  stand-alone tool to develop and
test  individual  fabrication  steps.  Following the  successful  development of
individual  process steps, a customer can combine  multiple process modules with
CVC's CONNEXION Cluster Tool platform to form an integrated  production  system.
Furthermore, the modular design allows customers to reconfigure systems that are
in  production  to address  the  evolving  manufacturing  processes  required by
magnetic  recording head and  semiconductor  manufacturers.  The  flexibility to
exchange modules enables customers to quickly develop new fabrication processes,
improving  time-to-market of higher performance  products,  with a lower capital
investment.

BENEFITS OF  INTEGRATED  PLATFORM.  The  integrated  platform  of the  CONNEXION
Cluster  Tool system  provides  customers  with the  ability to combine  various
deposition  and  etching  modules on a single  platform  in a vacuum  controlled
environment.  The  benefits  of a vacuum  controlled  environment  include  high
uniformity  and  reduced  incidences  of cross  contamination  and  damage  from
external  handling.  CVC's  integrated  platform  enables  customers  to achieve
improved  manufacturing yields,  enhanced tool uptime and device reliability and
performance.

HIGHLY SPECIALIZED PROCESS SOLUTIONS.  CVC provides customers highly specialized
process solutions,  including a variety of energy sources and components.  These
solutions enable CVC's customers to achieve high uniformity over a wide range of
substrate materials and sizes, as well as control of the composition  materials,
atomic microstructures and surface/interface properties.

     CVC PROCESS MODULES

     CVC offers process  modules for different  methods of depositing thin films
on a wafer, or substrate,  such as physical vapor deposition,  mainly a physical
technique, and chemical vapor deposition,  mainly a chemical technique. CVC also
offers modules for different methods of removing,  or etching,  portions of thin
films from a wafer or a substrate. CVC obtained its ion beam deposition, etching
and its diamond  like carbon  processing  modules  through  its  acquisition  of
Commonwealth Scientific Corporation in May 1999.

     Below is a brief description of CVC's process modules:

PHYSICAL VAPOR DEPOSITION - PLASMA SPUTTERING MODULE

     Physical vapor deposition,  or PVD, by plasma sputtering is used to deposit
a wide  range of  magnetic,  conductive  and  insulating  materials  on  various
substrates  with  different  topographies.  PVD is  performed  in a high  vacuum
chamber by applying a strong direct current or radio frequency electric field to
an inert gas, usually argon, to create a plasma.  The electrically  charged ions
are  accelerated  toward a target made of the material which is to be deposited.
When the ions hit the target,  atoms are  physically  knocked off the target and
are scattered on the wafer or substrate,  slowly  building up a thin film layer.
CVC offers both a single wafer PVD module and a multi-station PVD module for the
sequential deposition of various materials within a single vacuum chamber.
<PAGE>
                                       8


PHYSICAL VAPOR DEPOSITION - ION BEAM DEPOSITION MODULE

     PVD by ion beam  deposition  is used to  deposit a wide  range of very thin
magnetic,  conductive  and  insulating  materials  on  various  substrates  with
different  topographies.  Ion beam  deposition  is  performed  in a high  vacuum
chamber by focusing an ion beam generated by a radio frequency or direct current
ion beam source  toward a target made of the desired  material to be  deposited.
The beam of  energetic  ions hits the  target and  ejects  atoms of the  desired
material  toward  the wafer or  substrate,  building  up a thin film  layer in a
slower,  more  directional  manner than with  sputtering.  In addition,  in some
processes,  a second ion beam is directed  toward the  substrate  to control the
microstructure of the thin film while depositing the desired material.

METAL-ORGANIC CHEMICAL VAPOR DEPOSITION MODULE

     Metal-organic  chemical  vapor  deposition,  or MOCVD,  is used to  deposit
various  materials  such  as  aluminum,  copper,  tungsten,  titanium,  titanium
nitride,  tantalum and tantalum  nitride.  The MOCVD  process  causes  precursor
materials  that  contain  atoms of the  material to be deposited to react at the
heated wafer or substrate  surface  resulting in the  formation of the thin film
layer of the material. MOCVD uses a metal organic compound distributed through a
liquid delivery system as the source of the material to be deposited.

ION BEAM ETCH MODULE

     Etching  by ion beam is used to  transfer a desired  device  pattern to the
substrates. An ion beam directed toward the substrate can also be used to remove
contaminants  such as oxide  layers or for  substrate  conditioning  to  improve
adhesion.  Ion beam etching is performed in a high vacuum chamber by focusing an
ion beam  generated  by a radio  frequency  and direct  current  ion beam source
toward the wafer or substrate.

DIAMOND-LIKE-CARBON MODULE

     Ion beam deposition of thin diamond-like-carbon, or DLC, is used to deposit
hard coating  layers as wear and corrosion  protection  for thin-film  heads and
magnetic   media.   The  ion   beam   diamond-like-carbon   module   employs   a
carbon-containing  gas flow through an ion source  mounted onto a vacuum process
chamber  to  deposit  thin  layers  of  diamond-like-carbon  on  wafers or other
substrates.  CVC's ion beam  diamond-like-carbon  deposition  system sources are
currently used in production by the thin-film head  manufacturers.  As hard disk
storage densities increase, the distance between the recording head and magnetic
media are decreasing to below 100 Angstroms.  The next-generation advanced giant
magnetoresistive  heads will require dense and  defect-free  diamond-like-carbon
films below 50  Angstroms.  To address  this  requirement,  CVC has  developed a
filtered  cathodic  arc  diamond-like-carbon  deposition  cluster  module  which
enables  controlled  deposition of  high-quality  ultrathin  diamond-like-carbon
layers.   This  cluster  module  will  enable  CVC  to  effectively   serve  the
diamond-like-carbon  application  for several  future  generations  of thin film
recording heads and magnetic media.

INDUCTIVELY-COUPLED-PLASMA SOFT CLEAN MODULE

     CVC  offers a  multi-zone  inductively-coupled-plasma,  or ICP,  soft clean
module for surface preparation prior to material  depositions.  CVC's ICP module
technology  employs the design  features of the ICP system  licensed by CVC from
Texas Instruments and enhanced by CVC through internal developments. The license
from Texas Instruments covering the design features of the ICP system expires in
2014. The ICP module design provides the capability for damage-free  cleaning of
semiconductor   surfaces  in  order  to  enable  formation  of  low  resistivity
interconnect  structures such as with copper  metallization  and with controlled
device interfaces for enhanced interconnect reliability and performance.

RAPID THERMAL PROCESSING/RAPID THERMAL CHEMICAL VAPOR DEPOSITION MODULE

     CVC's rapid thermal processing,  or RTP, module with multi-zone temperature
control optimizes temperature and process uniformity and repeatability  control.
CVC's RTP and rapid  thermal  chemical  vapor  deposition,  or RTCVD,  module is
designed for various thermal processing applications including anneal, oxidation
and CVD processes.


<PAGE>
                                       9


     600 SERIES PHYSICAL VAPOR DEPOSITION SYSTEMS

     Introduced in 1988, the 610 and 611 products are PVD sputtering  deposition
systems,  handling up to 6-inch diameter substrates.  The 611 system is equipped
with a loadlock  and eight work  stations  enabling up to eight  materials to be
deposited with sequential or co-sputter deposition processes. The CVC 600 Series
system is the basic  design with many 611  features but without the loadlock and
less automated process control.  A soft clean ion source can be installed in any
work station for low damage cleaning of semiconductor surfaces.

     ION BEAM SOURCES AND POWER SUPPLIES

     With its acquisition of Commonwealth,  CVC obtained a range of ion sources,
as well as the power supplies used to operate these sources. Ion beam processing
is used in a variety of advanced research and development applications,  as well
as the  production of thin film etch and deposition  applications  where precise
control and  repeatability  of multilayer thin films are critical.  CVC provides
these products as components to companies  supplying  equipment to the precision
optics, opthalmics and optoelectronics industries. In addition, CVC uses its ion
beam sources and power supplies in its IBD, IBE and DLC process modules.

CUSTOMERS

     CVC's  customers  include  many of the leading  manufacturers  of thin film
magnetic recording heads for the data storage industry, as well as manufacturers
of semiconductor  devices.  During fiscal year 1999,  approximately 85% of CVC's
revenues  were  derived  from sales made to thin film  magnetic  recording  head
manufacturers  and  approximately  9% of  CVC's  revenues  were  from  sales  to
semiconductor device manufacturers. Customers of CVC who have purchased at least
one Connexion Cluster Tool system from it during fiscal 1998 and 1999 are:

<TABLE>
<CAPTION>
         DATA STORAGE                               SEMICONDUCTOR
         ------------                               -------------
<S>     <C>                                         <C>
         Alps Electronics                           Anadigics

         Applied Magnetics                          Analog Devices

         Fujitsu                                    Honeywell

         Headway Technologies Inc.                  Kodak

         Hitachi Metals                             M/A-COM

         IBM                                        Viking Tech

         Read-Rite                                  Xerox

         Samsung Electronics

         Seagate Technology

         Sony

         TDK

         Yamaha
</TABLE>

     Of these customers, Seagate, IBM and TDK each accounted for 10% or more
of CVC's  revenues in fiscal 1999 and Seagate,  Headway and Alps each  accounted
for 10% or more of CVC's revenues in fiscal 1998.

RELATIONSHIP WITH SEAGATE TECHNOLOGY

     Seagate  Technology,  which  provides  products for  storing,  managing and
accessing digital information on computers and data  communications  systems, is
CVC's largest customer,  as well as its largest stockholder.  Seagate Technology
accounted  for 47% of CVC's  total  revenue in fiscal  1997,  31% of CVC's total
revenue  in fiscal  1998 and 34% of CVC's  total  revenue  in fiscal  1999.  The
decline in fiscal 1998 in the percentage of CVC's total revenues attributable to
sales to Seagate Technology is due primarily to a decline in the absolute dollar
amount of CVC's sales to Seagate  Technology  in fiscal 1998.  CVC believes that
decline, in turn, reflects  competitive market conditions and weakness in demand
for disk drive products.  The increase in fiscal 1998 in the percentage of CVC's
total revenues  attributable to sales to Seagate Technology reflects an increase
in the absolute  dollar amount of CVC's sales to Seagate  Technology,  partially
offset by  increased  sales to CVC's other  customers  due to  expansion  of its
customer base.
<PAGE>
                                       10


     In 1995, Seagate Technology made an equity investment of approximately $9.0
million in CVC. In connection with this investment,  Seagate Technology obtained
the  right  to elect  two  members  of CVC's  Board  of  Directors.  That  right
terminated upon  consummation of CVC's initial public offering in November 1999.
See  "Business - Recent  Developments  - Public  Offering."  As of September 30,
1999,  Seagate Technology owned shares  representing  approximately 29% of CVC's
outstanding  common stock. In addition,  pursuant to a warrant acquired by it in
1995,  Seagate  Technology has the right to acquire an additional 790,760 shares
of common stock at an exercise price of $5.58 per share.  Assuming full exercise
of this warrant,  Seagate Technology would own an aggregate of approximately 35%
of CVC's outstanding common stock as of September 30, 1999.


BACKLOG

     CVC's  backlog  consists  generally of product  orders for which a purchase
order has been received and which are  scheduled for shipment  within 12 months.
Because a large percentage of CVC's orders require products to be shipped in the
same quarter in which the orders are  received,  and due to possible  changes in
delivery schedules, cancellations of orders and delays in shipment, CVC does not
believe that the level of backlog at any point in time is an accurate  indicator
of its performance.

MARKETING AND SALES

     CVC sells its products in the United States and Europe through its
direct  sales  force that is  supported  by its  29-person  marketing  and sales
organization.  In Japan and Europe,  CVC uses distributors to sell its products.
CVC markets its  products  in China,  Korea,  Taiwan,  Malaysia,  Singapore  and
Thailand  through   independent  sales   representatives.   International  sales
accounted for 31% of CVC's total  revenues for fiscal 1997,  38% for fiscal 1998
and  53%  for  fiscal  1999.  CVC's  sales  and  marketing  organization  uses a
consultative  sales  process,  working  closely with customers to understand and
define their deposition  process and equipment needs and to determine that those
needs are  addressed by CVC's  process  technologies,  as well as  complementary
technologies  offered by other equipment  providers.  CVC works closely with the
senior  management  and  research  and  development  personnel  of its  existing
customer base to gain insight into their industries and to focus on offering new
process technologies tailored to their customers' requirements.

     The sales cycles for CVC's systems vary  depending  upon whether the system
is an  initial  purchase  or a repeat  order.  New  customer  sales  cycles  are
typically 12 to 18 months,  whereas repeat order sales cycles are typically four
to six months.  The sales cycle for a new customer begins with the generation of
a sales lead, which is followed by qualification of the lead, an analysis of the
customer's particular applications needs and problems, one or more presentations
to the customer,  frequently  including extensive  participation by CVC's senior
management,  two to three product  sample  demonstrations,  followed by customer
testing of the results and  extensive  negotiations  regarding  the  equipment's
process and reliability specifications.  New customer sales cycles are monitored
closely by senior management for correct strategy approach and prioritization.

CUSTOMER SERVICE AND SUPPORT

     Prompt and  effective  field service and support is critical to CVC's sales
efforts,  due to the  substantial  commitments  made by customers  that purchase
CVC's  equipment.  As of  September  30, 1999,  CVC had 53  full-time  employees
dedicated to customer  service and support.  CVC's  strategy of  supporting  its
installed base through both customer support and research and development groups
has served to encourage the use of CVC's  equipment and process  technologies in
customer  production  applications.  CVC's engineers and field support personnel
work  closely  with  customers  to help  define  their  production  and  process
requirements,  and customers often collaborate in trial production runs at CVC's
Fremont, California,  Rochester, New York and Alexandria,  Virginia research and
demonstration  facilities.  CVC believes that its marketing efforts are enhanced
by the technical  expertise of its engineers who also provide  customer  process
support and participate in industry forums, conferences and user groups.
<PAGE>
                                       11


     CVC  generally  warrants  its new  systems  for 15 months  from the date of
shipment.  CVC  generally  warrants to an original  purchaser of its new systems
that the products and parts manufactured or assembled by CVC and the application
software  supplied will be free from defects in materials and workmanship  under
normal use.  Installation  is  included in the price of the system.  CVC's field
service  engineers  provide  customers  with  call-out  repair  and  maintenance
services for a fee. Customers may also enter into repair and maintenance service
contracts  covering CVC's systems.  For a fee, CVC trains its customers' service
engineers  to perform  routine  services,  and, in  addition,  CVC  provides its
customers with 24-hour a day, seven day a week, telephone consultation services.
CVC also has customer  support centers located in New York,  California,  Texas,
Minnesota, Virginia, Northern Ireland and Japan.

RESEARCH AND DEVELOPMENT

     The data storage and semiconductor manufacturing industries are
characterized  by rapid  technological  change and  requirements for new product
introductions  and  enhancements.  CVC's ability to remain  competitive  in this
market will depend in part upon its ability to develop new and enhanced  systems
and to  introduce  these  systems  at  competitive  prices  and on a timely  and
cost-effective  basis.  Accordingly,  CVC devotes a  significant  portion of its
personnel and financial resources to research and development programs and seeks
to maintain close relationships with its customers to remain responsive to their
equipment needs. CVC continuously  conducts research and development  efforts in
existing products to extend  performance and process  capabilities as well as on
next generation products.

     In the data storage market, CVC has recently developed and introduced
capabilities that allow precise  measurement and testing functions to take place
in a process  module  without  disrupting  the  production  process  and without
disturbing the tightly controlled vacuum  environment.  CVC has also developed a
magnetic   orientation   device  to  achieve  more  accurate  and   programmable
characteristics  of magnetic  thin films.  In the area of advanced  interconnect
technologies,  CVC has been developing leading-edge metal-organic chemical vapor
deposition  barrier  and copper  metallization  processes  for  high-performance
semiconductor  interconnect  applications.  CVC operates process development and
applications engineering facilities in New York, California,  Virginia and Texas
with process and  metrology  capabilities  for data storage thin film  recording
head and semiconductor technologies.

     As of September 30, 1999, CVC had 103 full-time  employees dedicated to its
research and development  programs.  In fiscal 1997, 1998 and 1999, CVC expended
$9.1 million,  $12.6 million and $12.6 million on these  programs,  constituting
15%, 19% and 15% of revenues  during those periods,  respectively.  Research and
development  expenditures  consist primarily of salaries,  project materials and
other costs associated with CVC's ongoing research and development  efforts. CVC
expects in future years that research and development expenditures will continue
to represent a  substantial  percentage  of revenues.  CVC augments its internal
technology   development  efforts  by  licensing   technology  from  others  and
establishing strategic research and development  relationships with universities
and various major customers.

     Trade, industry standards and development consortia, such as SEMI, SEMATECH
and  SEMI/SEMATECH,   help  to  define  the  methods,   measurement  parameters,
manufacturing    requirements   and   specifications    influencing   commercial
transactions  within the data  storage  and  semiconductor  industry.  Christine
Whitman, the chief executive officer of CVC, serves on the Board of Directors of
SEMI/SEMATECH.  CVC believes that its involvement with these  organizations  has
helped to ensure  that CVC's new  products  conform to  industry  standards  and
emerging requirements.
<PAGE>
                                       12


MANUFACTURING

     CVC's manufacturing  activities consist primarily of assembling and testing
components and  subassemblies  which are acquired from third party suppliers and
then integrated by CVC into finished systems.  The manufacturing  operations are
conducted in CVC's 90,000 square foot  facility in  Rochester,  New York and its
32,000 square foot facility in Alexandria,  Virginia.  As of September 30, 1999,
CVC had 168 full-time  employees  dedicated to its  manufacturing  efforts.  CVC
manufactures its systems in controlled clean  environments  which are similar to
the clean rooms used by data storage and semiconductor manufacturers.  All final
assembly and systems tests are performed within CVC's manufacturing  facilities.
Quality  control of suppliers is maintained  through  incoming  verification  of
components, in-process inspection during equipment assembly and final inspection
and operation of all manufactured  equipment prior to shipment.  CVC's customers
frequently  participate  in  systems  testing  during  the  final  assembly  and
inspection process.

     CVC's Rochester and Fremont facilities are ISO 9001 certified. CVC believes
that ISO 9001  certification,  a  quality  assurance  model for  companies  that
design, produce,  install and inspect items as part of their businesses,  offers
CVC a competitive  advantage  over  competitors  that are not ISO 9001 certified
and, in some cases, is a condition of doing business with its customers.

     CVC procures components and subassemblies included in its products from
a limited group of suppliers and occasionally from a single source. CVC does not
maintain  long-term  supply  contracts  with its key suppliers but believes that
alternative suppliers could be found if necessary.

COMPETITION

     The data storage and semiconductor manufacturing equipment industries
are highly  competitive.  A  substantial  investment  is required to install and
integrate  capital  equipment  into a data storage or  semiconductor  production
line.  CVC believes  that once a device  manufacturer  has selected a particular
supplier's  capital  equipment,  that  manufacturer  generally  relies upon that
supplier's  equipment for the specific  production line  application and, to the
extent possible,  subsequent generations of similar systems. Accordingly, it may
be extremely  difficult to achieve  significant  sales to a particular  customer
once  another  supplier's  manufacturing  equipment  has been  selected  by that
customer,  unless  there are  compelling  reasons to do so, such as  significant
performance or cost  advantages.  Increased  competitive  pressure could lead to
lower prices for CVC's  products,  thereby  adversely  affecting CVC's operating
results.

     In the data storage  market,  CVC's  current  competitors  include  Balzers
Process Systems,  Nordiko and Veeco  Instruments.  In the semiconductor  market,
CVC's  competitors  include  Applied  Materials,  Balzers  Process  Systems  and
Novellus.  Some  of  CVC's  competitors  have  substantially  greater  financial
resources,  more extensive  engineering,  manufacturing,  marketing and customer
service  and  support  capabilities,  larger  installed  bases of  semiconductor
capital equipment and broader  semiconductor process equipment offerings as well
as greater name recognition than CVC.

     CVC believes that its ability to compete in the data storage and
semiconductor  manufacturing  equipment  markets depends on a number of factors,
including:

o    the ability to develop and introduce new products rapidly

o    product and technology innovation

o    product quality and reliability

o    product performance

o    breadth of its product line

o    price

o    technical service and support

o    adequacy of manufacturing quality and capacity and sources of raw materials

o    efficiency of production
<PAGE>
                                       13


o    delivery capabilities

o    protection of CVC's products by intellectual property laws

CVC  believes  it  competes  favorably  in the data  storage  and  semiconductor
manufacturing  markets based on its multiple processing  capabilities,  customer
support and the cost of ownership of its equipment.

     CVC expects its competitors in the data storage and  semiconductor  process
equipment  industries to continue to improve the design and performance of their
current  systems and processes  and to introduce new systems and processes  with
improved price and performance characteristics.

PATENTS AND OTHER INTELLECTUAL PROPERTY

     CVC relies on a  combination  of  patent,  copyright,  trademark  and trade
secret laws and non-disclosure agreements to protect its proprietary process and
equipment  technology.  Although  CVC  believes  that its  patents and its other
intellectual  property rights may have significant value, CVC also believes that
due to the rapid  technological  changes that  characterize the data storage and
semiconductor equipment industries,  the innovative skills,  technical expertise
and know-how of its personnel may be more  important  than patent  protection or
similar rights.

     As of September 30, 1999,  CVC had obtained 16 issued U.S.  patents and had
29 U.S. patent applications  pending.  CVC has also obtained two foreign patents
from the United  Kingdom and had 13 foreign patent  applications  pending on its
behalf as of that date.  In addition,  in  connection  with the  acquisition  of
Commonwealth Scientific  Corporation,  CVC has licensed and been assigned rights
to  several  jointly-owned  patents  but  there  can be no  assurance  that such
licensed and assigned rights are sufficiently  broad for current or contemplated
uses.

     CVC holds patents which it believes to be material to its business covering
the  components  used  for  physical  vapor  deposition  for  the  data  storage
marketplace  and rapid  thermal  processing.  As of September  30,  1999,  these
patents have  durations of not less than 11 years.  Through its  acquisition  of
Commonwealth, CVC also holds patents covering ion beam processing with durations
of not less  than 11  years,  as of  September  30,  1999.  In  addition,  as of
September  30,  1999,  CVC holds  exclusive  licenses  to ion source  technology
obtained in the  acquisition  of  Commonwealth,  which extend to the term of the
underlying  patents,  varying in length from five to 11 years. In addition,  CVC
has licensed the design features in its  inductively-coupled-plasma  technology.
This license will expire in 2014.

     The data storage and semiconductor industries are characterized by frequent
litigation regarding patent and other intellectual property rights. Although CVC
is not aware of any pending or threatened patent litigation  involving it, there
can be no assurance  that third parties will not assert claims  against CVC with
respect  to  existing  or  future  products  or  technologies.  In the  event of
litigation to determine the validity of any third-party claims, that litigation,
whether or not determined in favor of CVC,  could result in significant  expense
to CVC and divert the efforts of CVC's  technical and management  personnel from
productive  tasks. In the event of an adverse ruling in this type of litigation,
CVC  might  be  required  to  discontinue  the  use  of  processes,   cease  the
manufacture,  use and sale of infringing products,  expend significant resources
to develop  non-infringing  technology,  or obtain  licenses  to the  infringing
technology.  In the event of a successful claim against CVC and CVC's failure to
develop or license a substitute  technology at a reasonable cost, CVC's business
could be harmed.
<PAGE>
                                       14


     CVC cannot give any assurance that its pending patent  applications will be
approved,  that any patents will provide it with competitive  advantages or will
not be challenged by third parties,  or that the patents of others will not have
an negative impact on CVC's business.  CVC cannot give any assurance that others
will not independently  develop similar products,  duplicate its products or, if
patents are issued to CVC,  design  around these  patents.  CVC also relies upon
trade secret protection and employee and third-party nondisclosure agreements to
protect its confidential and proprietary information. Despite these efforts, CVC
cannot  give  any  assurance   that  others  will  not   independently   develop
substantially  equivalent  proprietary  information  and techniques or otherwise
gain access to its trade  secrets or  disclose  its  technology  or that CVC can
meaningfully protect its trade secrets.

EMPLOYEES

     As of September 30, 1999, CVC had a total of 394 full-time employees at all
of its  locations,  consisting  of 168 in  manufacturing,  103 in  research  and
development,  29 in marketing and sales, 53 in customer service and support,  35
in administration and 6 in facilities maintenance.

     As of September 30, 1999, 47 employees at CVC's site in Rochester, New York
were members of Local 342 of the International Union of Electronic,  Electrical,
Salaried,  Machine  &  Furniture  Workers  union  and  covered  by a  collective
bargaining agreement scheduled to expire in October, 2001. CVC believes that its
relations with its employees, and the bargaining unit which represents the Local
342 members, are good.


ITEM 2.  PROPERTIES

     CVC's principal  office is located in Rochester,  New York, and consists of
90,000  square  feet  used  for  manufacturing,  research  and  development  and
administration. CVC entered into a financing agreement with the County of Monroe
Industrial  Development  Agency in 1974 under which this  agency's bond proceeds
were used to purchase the land and construct the Rochester facility for lease to
CVC. On September 29, 1997, CVC entered into an amended lease agreement with the
County of Monroe  Industrial  Development  Agency that  extended the term of the
original  lease from the year 2000 to December 31, 2007.  Upon the expiration of
this amended  lease,  CVC is obligated to purchase the  Rochester  facility from
this agency for nominal consideration.

     As part of its  acquisition of Commonwealth  Scientific  Corporation in May
1999,  CVC obtained two operating  facilities.  These  facilities are located in
Alexandria,  Virginia.  The  principal  administrative  office  is in  an  owned
building  which is  approximately  22,000  square feet.  The  manufacturing  and
engineering functions are located in a separate leased facility of approximately
32,000  square  feet.  This  facility is leased  under two  separate  leases for
approximately  28,000 square feet and 4,250 square feet of contiguous space. The
leases  on this  facility  are  scheduled  to  expire on  January  31,  2000 and
September 14, 2001.

     In addition,  CVC leases  14,400  square feet in Fremont,  California,  for
research and process development, product engineering and as a base for regional
sales and field service for the West Coast of the United States and 3,400 square
feet in Dallas, Texas, for engineering,  equipment design,  process development,
sales and customer  support.  CVC also leases space in  Minneapolis,  Minnesota,
Japan,  Northern  Ireland,  Singapore and Taiwan for sales and customer support.
Although  CVC  believes  that its current  facilities  are  adequate to meet its
current  requirements  for the  near  term,  it may  seek to  lease  or  acquire
additional facilities in the future.

ITEM 3.  LEGAL PROCEEDINGS

     In  the  ordinary  course  of  business,  CVC  may  be  involved  in  legal
proceedings  from  time  to  time.  Currently,   there  are  no  material  legal
proceedings pending against CVC.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     In December  1998,  in  connection  with a private  placement  (the "Advent
Private  Placement")  by CVC of preferred  stock with entities  affiliated  with
Advent International Corporation,  CVC shareholders consented in writing in lieu
of  meeting  to the  following:
<PAGE>
                                       15


o    the sale by CVC of an aggregate of 100,000  shares of Series C  Convertible
     Preferred  Stock for a price of $100.00 per share and a warrant to purchase
     an aggregate of 200,000 shares of common stock to entities  affiliated with
     Advent  International  Corporation;

o    an Amended and Restated Registration Rights Agreement with Advent,  Seagate
     Technology,  Nikko Tecno and certain executive officers and stockholders of
     CVC which  grants  demand  and  piggy-back  registration  rights to Seagate
     Technology and Advent, as well as piggy-back registration rights to certain
     executive officers and stockholders of CVC;

o    an Amended  and  Restated  Stockholders'  Agreement  with  Advent,  Seagate
     Technology,  Nikko Tecno and certain executive officers and stockholders of
     CVC  providing  for  voting  and  pre-emptive  rights  with  respect to the
     acquisition  and  sale of  shares  by CVC,  as  well as  matters  affecting
     corporate governance; and

o    the election of Douglas Kinglsey, a Managing Director of Advent, to the CVC
     Board of Directors.

     62,161 and 835,233  preferred  and common  shares,  respectively,  voted in
favor of these  transactions  and 16 and 222,698  preferred  and common  shares,
respectively, abstained.

     In April 1999, in connection  with the  acquisition by CVC of  Commonwealth
Scientific Corporation, CVC shareholders consented in writing in lieu of meeting
to the following:

o    the  acquisition  by CVC of  Commonwealth  for  consideration  of 1,268,799
     shares of CVC common stock,  the exchange and  assumption  of  Commonwealth
     options for options to purchase  286,228  shares of CVC common  stock,  and
     related acquisition costs;

o    amendments  to  the   Company's   Amended  and  Restated   Certificate   of
     Incorporation  with  respect to voting  rights of the  Company's  preferred
     stock;

o    an Amended and Restated Registration Rights Agreement with Advent,  Seagate
     Technology,  Nikko Tecno and  executive  officers and  stockholders  of CVC
     which  grants  demand  and  piggy-back   registration  rights  to  Seagate
     Technology and Advent, as well as piggy-back registration rights to certain
     executive  officers and  stockholders  of CVC;

o    an Amended  and  Restated  Stockholders'  Agreement  with  Advent,  Seagate
     Technology,  Nikko Tecno and certain executive officers and stockholders of
     CVC  providing  for  voting  and  pre-emptive  rights  with  respect to the
     acquisition  and  sale of  shares  by CVC,  as  well as  matters  affecting
     corporate governance; and

o    the election of George R. Thompson,  former President of  Commonwealth,  to
     the CVC Board of Directors.

     162,031 and 690,983  preferred and common  shares,  respectively,  voted in
favor  of  these  actions  and 146 and  366,948  preferred  and  common  shares,
respectively, abstained.

     The Series C Convertible  Preferred  Stock issued in connection with Advent
Private  Placement was  automatically  converted  into  1,016,260  shares of CVC
common stock,  as well as 100,000 shares of Series D Redeemable  Preferred Stock
upon  consummation  of CVC's  initial  public  offering  in  November  1999.  In
addition,  the Amended and  Restated  Stockholders'  Agreement  and the warrants
issued in the Advent Private Placement terminated upon the consummation of CVC's
initial public offering in November 1999. See "Business - Recent  Developments -
Public Offering."
<PAGE>
                                       16

PART II


ITEM 5.  MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

PRICE RANGE OF COMMON STOCK

     Market for Common Stock and Holders of Record

     As of September  30, 1999,  there was no public  market for shares of CVC's
Common Stock. On such date, there were approximately 66 holders of record of CVC
common stock,  assuming the conversion of all outstanding  shares of Convertible
Preferred Stock of CVC.

     During fiscal year ended September 30, 1999, CVC has issued securities to a
limited number of persons,  as described  below.  No underwriter or underwriting
discounts or  commissions  were involved.  There was no public  offering in such
transaction  and CVC  believes  that  such  transaction  were  exempt  from  the
registration  requirements  of the  Securities  Act of  1933,  as  amended  (the
"Securities  Act"),  by reason of Section 4(2) or  Regulation D thereof based on
the private nature of the transactions and the sophistication of the purchasers,
all of whom had access to information concerning CVC and acquired the securities
for investment and not with a view to the distribution thereof.

     The following figures give effect to a 2-3 reverse stock split in September
1999.

     In December  1998,  the Company  issued and sold 100,000 shares of Series C
Convertible  Preferred Stock to Advent International  Corporation for a price of
$100.00 per share.  Upon completion of CVC's initial public offering in November
1999, such shares  automatically  converted into 1,016,260  shares of CVC common
stock and Series D Redeemable  Preferred  Stock. The Company also sold to Advent
International Corporation warrants to purchase an aggregate of 133,333 shares of
common  stock at an  exercise  price  of  $15.00  during  the  four-year  period
commencing on December 1, 2001. This warrant terminated upon the consummation of
CVC's  initial  public  offering  in  November  1999.  See  "Business  -  Recent
Developments - Public Offering."

     In May  1999,  CVC  issued  1,268,799  shares of  common  stock,  to former
shareholders of Commonwealth  Scientific  Corporation as part of its acquisition
of Commonwealth.

     On May 14,  1999,  CVC  issued  10,665  shares of common  stock to  various
non-employee directors as payment of their annual retainer.

     On July 2, 1999, Robert Matthews purchased 8,000 shares of common stock for
$10,000 pursuant to the exercise of such individual's stock options.

     On September 14, 1999,  Kitaek Kang purchased  2,133 shares of common stock
for $9,670 pursuant to the exercise of such individual's stock options.

     On September 23, 1999,  David  Kolczynski  purchased 7,200 shares of common
stock for $29,052 pursuant to the exercise of such individual's stock options.

     On September 30, 1999,  Zeming Liu  purchased  1,200 shares of common stock
for $6,870 pursuant to the exercise of such individual's stock options.

     On September 30, 1999, David Day purchased 4,841 shares of common stock for
$18,007 pursuant to the exercise of such individual's stock options.

     During the fiscal year ended  September  30, 1999,  CVC granted  options to
acquire  an  aggregate  of 311,669  shares of common  stock at  exercise  prices
ranging from $6.00 to $11.70 to various  directors,  officers,  employees and/or
consultants. In addition, CVC assumed 286,228 shares of common stock at exercise
prices ranging from $3.72 to $6.95 as part of its acquisition of Commonwealth.
<PAGE>
                                       17


DIVIDENDS

     CVC has never paid or declared  cash  dividends  on its common  stock.  CVC
currently  intends to retain all future  earnings  for its business and does not
anticipate  paying cash dividends in the foreseeable  future.  CVC is restricted
under the terms of some of its credit  agreements  from paying any  dividends to
stockholders without the prior written consent of the lenders. Future dividends,
if any, will depend on, among other things:  (1) CVC's  operating  results,  (2)
capital requirements and (3) restrictions in loan agreements.

USE OF PROCEEDS FROM REGISTERED SECURITIES

     Not applicable.


ITEM 6.  SELECTED FINANCIAL DATA

     The  selected  consolidated  financial  data of CVC set  forth  below as of
September 30, 1998 and 1999 and for each of the years ended  September 30, 1997,
1998 and 1999 are derived from CVC's audited consolidated  financial statements,
which appear  elsewhere in this Form 10-K. The selected  consolidated  financial
data as of September  30, 1995,  1996,  and 1997 and for each of the years ended
September  30,  1995  and 1996  have  been  derived  from  audited  consolidated
financial  statements  of CVC not  included  in this  Form  10-K.  The pro forma
September 30, 1999 balance  sheet data reflects the automatic  conversion of all
the  outstanding  shares of Series A  Convertible  Preferred  Stock and Series B
Convertible  Preferred  Stock into common  stock,  as well as the  conversion of
Series C  Convertible  Preferred  Stock  into  common  stock  and into  Series D
Redeemable  Preferred  Stock.  The data should be read in  conjunction  with the
Consolidated  Financial  Statements and the Notes thereto and with  Management's
Discussion  and  Analysis  of  Financial  Condition  and  Results of  Operations
appearing elsewhere in this Form 10-K.

<TABLE>
<CAPTION>
                                                                   YEAR ENDED SEPTEMBER 30,
                                                       1995        1996        1997         1998        1999
                                                       ----        ----        ----         ----        ----
                                                            (IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENTS OF OPERATIONS DATA:
<S>                                                   <C>        <C>         <C>          <C>          <C>
Revenues........................................     $21,358     $48,378     $62,588      $68,173     $82,915
Cost of goods sold..............................      15,630      33,755      41,286       42,019      50,502
                                                      ------      ------      ------       ------      ------
Gross margin....................................       5,728      14,623      21,302       26,154      32,413
Operating expenses:
   Research and development.....................       1,214       4,346       9,055       12,615      12,630
   Sales and marketing..........................       2,924       4,777       5,613        7,696      10,081
   General and administrative...................       1,447       2,124       2,539        3,476       4,822
   In-process R&D write-off.....................           -           -           -            -       1,174
                                                                                                        -----
   Total........................................       5,585      11,247      17,207       23,787      28,707
Income from operations..........................         143       3,376       4,095        2,367       3,706
Interest and other, net.........................       (559)       (197)       (593)      (1,154)       (198)
Write-off of deferred charges...................           -           -           -        (675)           -
                                                                                            ----
Income (loss) before income taxes...............       (416)       3,179       3,502          538       3,508
Income taxes (benefit)..........................       (546)           -       1,457          274       1,937
                                                       ----                    -----          ---       -----
Net income......................................        $130      $3,179      $2,045         $264      $1,571
                                                        ====      ======      ======         ====      ======
Net income per share:
   Basic........................................       $0.18       $4.32       $2.67        $0.26       $1.01
   Diluted......................................        0.02        0.46        0.29         0.04        0.18
Weighted average shares outstanding:
   Basic........................................         735         735         765        1,021       1,561
   Diluted......................................       5,302       6,914       6,992        7,070       8,589
</TABLE>
<PAGE>
                                       18


     Assuming the conversion of the outstanding shares of Series A
Convertible Preferred Stock and Series B Convertible Preferred Stock into common
stock and the  conversion  of Series C Convertible  Preferred  Stock into common
stock and into Series D Redeemable Preferred Stock, basic pro forma earnings per
share for the year ended  September  30, 1999 was $0.21.  Diluted  earnings  per
share is unchanged from the historical diluted earnings per share amount.

<TABLE>
<CAPTION>
                                                                AS OF SEPTEMBER 30,
                                        1995        1996        1997         1998        1999       PRO FORMA
                                        ----        ----        ----         ----        ----       ---------
                                                                 (IN THOUSANDS)
BALANCE SHEET DATA:
<S>                                    <C>          <C>          <C>          <C>         <C>            <C>
Cash and cash equivalents........      $3,157        $730      $2,161         $106        $434           $434
Working capital..................       5,429       8,816       9,259       10,904      22,104         22,104
Total assets.....................      23,554      31,837      43,833       42,764      75,917         75,917
Short term borrowings and
   current portion of long-term
   debt..........................         188         894       2,295        5,689      13,217         13,217
Long-term debt, less current
   portion.......................       3,528       5,635       5,309       11,379       8,493          8,493
   Preferred stock...............      10,040      10,040      10,040       10,040      19,895         10,000
   Common stockholders' equity,
     (deficit)                         (3,857)       (721)      1,388        1,940      11,698         21,593
Total stockholders' equity.......       6,183       9,319      11,428       11,980      31,593         31,593
</TABLE>

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

     CVC is a worldwide supplier of process equipment used in the manufacture of
magnetic recording heads for disk drives and advanced  semiconductor devices for
computers and communications equipment. CVC's principal product is the CONNEXION
Cluster Tool system,  which  provides  integrated  deposition and etch equipment
based on a central substrate  handling platform and a series of  interchangeable
thin film deposition and etch processing modules.  CVC also derives revenue from
the sale of sources,  spare parts,  enhancements,  and field service  contracts.
System  revenues  represented  71% in fiscal 1999, 83% in fiscal 1998 and 85% in
fiscal  1997 of CVC's  total  revenue.  In order to expand  its  technology  and
broaden its offering of process modules,  CVC acquired  Commonwealth  Scientific
Corporation in May 1999.  Commonwealth's primary products are ion beam etch, ion
beam  deposition and  diamond-like  carbon process  modules for the data storage
industry  and  ion  beam  sources  principally  used  by  suppliers  of  optical
equipment.

     CVC's growth in the past four years has been primarily due to the expansion
of the disk drive industry and  transition of the industry to  magnetoresistive,
or MR, heads and giant  magnetoresistive,  or GMR,  heads.  During  fiscal 1999,
fiscal 1998 and fiscal 1997,  85%, 77% and 88% of CVC's revenue was derived from
sales made to manufacturers of magnetic  recording heads and 9%, 21%, and 9% was
derived from sales to manufacturers of semiconductor devices, with the remainder
of the revenue  derived from  ancillary  products and  services.  CVC's top four
customers  for  fiscal  1999,  were  Seagate,  IBM,  TDK and  Alps,  all of whom
manufacture  magnetic  recording  heads.  CVC expects that these  customers will
continue to account for a significant  portion of CVC's fiscal 2000 revenues and
that  significant  customer  concentration  will  continue  for the  foreseeable
future.
<PAGE>
                                       19


     CVC recognizes  revenue from system sales,  enhancements and spare parts at
the time of shipment.  Provisions for estimated  installation and warranty costs
are  recorded  at the time  revenue  is  recognized.  Revenue  on field  service
contracts is deferred and recognized on a straight-line basis over the period of
the contract.

     Revenue  derived from system sales is dependent  upon the timing of orders,
customer requirements for additional manufacturing capacity and CVC's ability to
respond on a timely basis to rapid technological  developments.  CVC's customers
typically   place  large  orders,   which  could  cause  revenues  to  fluctuate
significantly from period to period. Orders for system sales range in price from
approximately  $1.0 million to $4.0 million,  depending on the  configuration of
the system. For example, in the second half of fiscal 1998 and the first quarter
of fiscal 1999,  CVC's revenues were  adversely  affected by reduced orders from
magnetic  head  manufacturers,   who  experienced  reduced  demands,   inventory
surpluses  and  poor  operating  results  and  as  a  result,  deferred  capital
expenditures  of  fabrication  equipment.  In  recent  quarters,  magnetic  head
manufacturers   have   increased   capital   spending  to  acquire  new  process
technologies that enable them to produce GMR heads. Because the data storage and
semiconductor  industries are highly  cyclical,  and orders in CVC's backlog are
subject to cancellation or rescheduling, CVC's visibility on revenues for future
periods is limited, and its operating results could fluctuate significantly from
period to period.

     International sales accounted for 53%, 38% and 31% of our total revenues in
fiscal 1999, fiscal 1998 and fiscal 1997. CVC expects that  international  sales
will  continue  to  account  for a  significant  portion  of our  revenue in the
foreseeable  future.  CVC's international sales are denominated in U.S. dollars.
As a result, changes in the value of foreign currencies relative to the value of
the U.S. dollar can render our products  comparatively more expensive.  Although
CVC has not  been  significantly  negatively  impacted  in the  past by  foreign
currency  changes in Japan,  Korea,  Taiwan and Europe,  currency  changes could
negatively impact its international sales in future periods.

     CVC's gross margin is influenced by a number of factors  related to the mix
of revenues  within a particular  period.  For example,  systems for new process
applications  tend to have  lower  margins  initially  than  those for  existing
processes.  As a result,  sales to  semiconductor  manufacturers,  whose process
requirements  tend to be unique,  generally have a lower gross margin than sales
to magnetic  recording head  manufacturers,  who typically  purchase systems for
which we have significantly more processing  experience.  Sales to international
customers  typically have a lower gross margin than sales to domestic customers.
In addition, revenues from ion beam sources, enhancements, spare parts and field
service contracts typically have a higher gross margin than system margins. As a
result of these  factors,  CVC expects its gross margin to fluctuate from period
to period.

RESULTS OF OPERATIONS

     The following table sets forth for the periods  indicated the percentage of
revenues for the following items in CVC's  consolidated  statement of operations
data.
<PAGE>
                                       20


<TABLE>
<CAPTION>
                                                                             YEAR ENDED SEPTEMBER 30,

                                                                            1997        1998      1999
                                                                            ----        ----      ----
<S>                                                                        <C>          <C>      <C>
Revenues................................................................   100.0%      100.0%    100.0%
Cost of goods sold......................................................    66.0        61.6      60.9
                                                                            ----        ----      ----
Gross margin............................................................    34.0        38.4      39.1
Operating expenses
   Research and development.............................................    14.5        18.5      15.2
   Sales and marketing..................................................     9.0        11.3      12.2
   General and administrative...........................................     4.0         5.1       5.8
   In-process R&D write-off.............................................        -           -       1.4
                                                                                                    ---
   Total................................................................    27.5        34.9      34.6
Income from operations..................................................     6.5         3.5       4.5
Interest and other, net.................................................    (0.9)       (1.7)     (0.3)
Write-off of deferred charges...........................................       -        (1.0)        -
                                                                                        ----
Income before income taxes..............................................     5.6         0.8        4.2
Income taxes............................................................     2.3         0.4        2.3
                                                                             ---         ---        ---
Net income..............................................................     3.3         0.4        1.9
                                                                             ===         ===        ===
</TABLE>

YEAR ENDED SEPTEMBER 30, 1999 COMPARED TO YEAR ENDED SEPTEMBER 30, 1998

 REVENUES.  Revenues   increased   21.6%  to  $82.9  million  for the year ended
September 30, 1999 from $68.2 million for the year ended September 30, 1998. The
increase is  primarily  attributable  to  additional  sales  resulting  from the
Commonwealth  acquisition  of $13.3 million and increased  sales to data storage
customers  of $7.0  million,  which  offset  lower  sales  of CVC's  systems  to
semiconductor customers of $7.0 million. CVC believes that the decrease in sales
to  semiconductor  customers  reflected  residual  effects of the  semiconductor
market downturn in 1998.

 GROSS  MARGIN.  Gross margin  increased to 39.1% of revenues for the year ended
September  30,  1999 from 38.4% for the year ended  September  30,  1998.  Gross
margin contribution in fiscal 1999 was affected by the lower margins of 30.9% on
sales of the product  lines from the  Commonwealth  acquisition.  Gross  margins
excluding the impact of the  Commonwealth  acquisition  product lines would have
been 40.7%. The lower gross margins in fiscal 1998 reflect the higher percentage
of new  system  sales to  semiconductor  customers,  which  usually  have  lower
margins.

 RESEARCH AND DEVELOPMENT.  Research and development  expenses were unchanged at
$12.6  million  for fiscal 1999  compared to fiscal  1998.  As a  percentage  of
revenues,  research and development  expenses decreased to 15.2% for fiscal 1999
compared to 18.5% for fiscal  1998.  The higher  relative  expenditure  level in
fiscal  1998 is  primarily  attributable  to material  expenses of $0.9  million
associated with the completion of a government contract. Expenses in fiscal 1999
reflect  additional  research and development  expenses of $1.3 million from the
acquisition of Commonwealth,  higher depreciation expense of $1.1 million due to
additional  capitalization  of  demonstration  tools,  partially offset by lower
personnel costs of $0.9 million and lower material costs of $0.2 million related
to internal development  projects.  Although fiscal 1999 expenditure levels were
unchanged  compared to fiscal 1998,  CVC believes that research and  development
expenditures  are essential to maintaining its competitive  position in the data
storage  and  semiconductor  markets  and expects  these  expenditure  levels to
increase in absolute dollars for the foreseeable future.
<PAGE>
                                       21


 SALES AND MARKETING.  Sales and marketing  expenses increased by 31.0% to $10.1
million for fiscal 1999 from $7.7  million for fiscal 1998.  As a percentage  of
revenues,  sales and marketing  expenses increased to 12.2% for fiscal 1999 from
11.3% for fiscal 1998. The increase is attributable to the addition of personnel
and their  related  expenses  of $1.6  million  as a result of the  Commonwealth
acquisition,  additional personnel and related expenses in field service of $0.6
million to support  CVC's  expanded  product  offering  and customer  base,  and
increased expenses of $0.4 million for product demonstrations.

 GENERAL AND ADMINISTRATIVE. General and administrative expenses increased 38.7%
to $4.8  million  for  fiscal  1999 from $3.5  million  for  fiscal  1998.  As a
percentage of revenues,  administrative  expenses were 5.8% for fiscal 1999, and
5.1% for fiscal  1998.  The  increase  in general  and  administrative  expenses
reflects  additional   administration  expenses  of  $0.5  million  due  to  the
Commonwealth  acquisition,  as well as additional accruals for doubtful accounts
of $0.3 million,  and other accruals for post-employment and pension benefits of
$0.2 million.

 IN-PROCESS  R&D  WRITE-OFF.  During  fiscal  1999,  as part of the  purchase of
Commonwealth,  the value  assigned to research  expenditures  on products in the
development stage which have not reached technological feasibility and for which
there  is no  alternative  future  use  were  written  off  in  accordance  with
applicable  accounting  rules.  This write-off  amounted to  approximately  $1.2
million.

     The  in-process  technology  acquired  from  Commonwealth  consists of four
technology groupings: ion source products, etch modules, deposition modules, and
dielectric deposition modules,  which have assigned values of $0.2 million, $0.5
million,  $0.3 million and $0.2 million.  Descriptions of these groupings are as
follows:

o    Ion source  products,  including both ion sources and power  supplies,  are
     being designed for use in applications  that include  etching,  deposition,
     surface modification, and ion assist.

o    The etch modules are being designed to support the market  requirements for
     ion beam processing applications.

o    The  deposition  modules are being  designed to support very thin  metallic
     film through ion beam sputter deposition of target materials.

o    The dielectric  deposition  modules are being designed to support very thin
     dielectric film through ion beam sputter deposition of target materials.

     As of the date of  acquisition,  $4.5 million had been  expended to develop
these  R&D  projects.   The  estimated   cost  to  complete  these  projects  is
approximately $2.9 million, to be incurred through fiscal 2000.

     There is a risk associated with the completion of the R&D projects, and CVC
cannot assure that any of the projects will have  technological  and  commercial
success  without the  successful  completion of the remaining R&D efforts on the
acquired  in-process  technologies.  Without the  successful  completion  of the
remaining  R&D  efforts,  CVC would not realize the future  revenues and profits
attributed to the acquired R&D. CVC believes,  however,  that the failure of any
particular  in-process R&D project would not materially  impact CVC's  financial
position or operating results.

     At September 30, 1999, the estimated development completion dates and costs
of the in-process R&D projects  acquired from  Commonwealth  are consistent with
the estimates made at the acquisition date.

 INTEREST AND OTHER,  NET. Interest and other, net decreased to $0.2 million for
fiscal 1999 from the $1.2 million for fiscal 1998.  The decrease in interest and
other,  net primarily  reflects  reduced interest expense of $0.1 million due to
the reduction of borrowings  with the proceeds from the sale of preferred  stock
in December  1998, a one-time gain of $0.4 million  associated  with the sale of
two non-core product lines and a one-time lawsuit settlement of $0.5 million for
infringement by a third party of a CVC patent.
<PAGE>
                                       22


 INCOME  TAXES.  Income tax  expense for fiscal  1999  amounted to $1.9  million
compared to $0.3 million for fiscal 1998. The effective tax rate for fiscal 1999
was 55.2%  compared to the effective rate of 50.9% for fiscal 1998. The increase
is the result of the non-deductible in-process R&D write-off.
<PAGE>
                                       23


YEAR ENDED SEPTEMBER 30, 1998 COMPARED TO YEAR ENDED SEPTEMBER 30, 1997

     REVENUES.  Revenues  increased  8.9% to $68.2  million in fiscal  1998 from
$62.6 million in fiscal 1997. The increase in revenues is primarily attributable
to  increased  systems  sales of $7.4 million and spare sales of $0.9 million to
new  semiconductor  customers.  The majority of this increased volume was to new
customers  placing  their  initial  system  order.  Partially  offsetting  these
increases was decreased  system sales to data storage  customers by $5.0 million
as demand decreased due to a general downturn in the industry.

 GROSS MARGIN.  Gross margin  increased to 38.4% of revenues in fiscal 1998 from
34.0% in fiscal 1997. The margin  improvement was  attributable to lower systems
manufacturing costs as the result of efficiencies derived from repeat orders and
increased sales of higher margin spares at 57% and enhancements at 64%.

 RESEARCH AND DEVELOPMENT.  Research and development expenses increased 39.3% to
$12.6  million in fiscal 1998 from $9.1 million in fiscal 1997.  As a percentage
of revenues, research and development expenses increased to 18.5% in fiscal 1998
from  14.5%  in  fiscal  1997.  The  increase  is   attributable   to  increased
expenditures for an expanded  demonstration  program of $0.3 million,  increased
personnel  costs due to the hiring of  engineers  in the fourth  quarter 1997 to
support the expanded  demonstration program and new development projects of $1.5
million,  increased  depreciation of $0.6 million as well as expenses related to
government contracts of $0.5 million.

 SALES AND  MARKETING.  Sales and  marketing  expenses  increased  37.1% to $7.7
million in fiscal 1998 from $5.6  million in fiscal  1997.  As a  percentage  of
revenues,  sales and marketing  expenses  increased to 11.3% in fiscal 1998 from
9.0% in fiscal 1997. The increase is  attributable  to the addition of marketing
personnel to support the semiconductor  market of $0.5 million,  the addition of
field service  personnel of $0.8 million,  increased  trade show and advertising
expense of $0.3 million, and higher commissions  resulting from increased system
sales of $0.1 million.

 GENERAL AND ADMINISTRATIVE. General and administrative expenses increased 36.9%
to $3.5 million in fiscal 1998 from $2.5 million in fiscal 1997. As a percentage
of revenues,  general and  administrative  expenses  increased to 5.1% in fiscal
1998 compared to 4.0% in fiscal 1997. The increase is  attributable  to the full
year impact of additional  employees hired in fiscal 1997 as well as several new
hires in fiscal 1998 of $0.4 million,  an increase of $0.2 million in consulting
services directly related to the  implementation of a new computer system and an
increase of $0.1  million in  depreciation  for  computer  systems  installed in
fiscal 1998 and fiscal 1997.

 INTEREST AND OTHER,  NET.  Interest and other, net increased to $1.2 million in
fiscal  1998 from $0.6  million  in  fiscal  1997,  reflecting  an  increase  in
borrowings  on the credit line and  interest  expense on a new $8.0 million term
loan.

 WRITE-OFF OF DEFERRED CHARGES.  In fiscal 1997, costs were incurred relative to
preparing  CVC for its initial  public  offering.  During the fourth  quarter of
fiscal 1998, CVC determined to suspend  efforts to complete the public  offering
due to continued  weakness in the data storage and semiconductor  industries and
the equity market for initial  public  offerings and,  accordingly,  these costs
were charged against current period earnings.

 INCOME  TAXES.  Income tax expense in fiscal 1998 was $0.3 million  compared to
$1.5 million in fiscal 1997.  The  effective  tax rate for fiscal 1998 was 50.9%
compared to the effective rate of 41.6% in fiscal 1997. The increase of 9.3% was
due to permanent non-tax  deductible  expenses and a low level of profitability,
partially  offset by the  utilization  of a valuation  allowance  related to net
operating loss carryforwards.
<PAGE>
                                       24


LIQUIDITY AND CAPITAL RESOURCES

     In  recent  years,  CVC  has  financed  its  capital  and  operating  needs
principally  through  the sale of $10.0  million  of its  preferred  securities,
advances from customers,  and borrowings under various credit facilities.  As of
September 30, 1999, CVC had working capital of $22.1 million, including cash and
cash  equivalents of $0.4 million,  compared to working capital of $10.9 million
and $9.3 million at September 30, 1998 and 1997.  Operating activities in fiscal
1999 used cash flow of $4.8  million,  as  compared  with  fiscal  1998 in which
operating  activities  used  cash of  $6.9  million  and  fiscal  1997 in  which
operating  activities provided cash of $3.1 million.  In fiscal 1999,  increased
accounts receivable and reduced customer advances used cash of $12.0 million and
$2.4 million,  respectively, and were partially offset by increased depreciation
of $4.2 million,  increased net income of $1.6 million  reduced  inventories  of
$1.4  million,  in process R&D  write-off of $1.2  million,  increased  accounts
payable  of $0.7  million,  and  decreased  other  assets of $0.5  million.  The
significant  increase in the use of cash for accounts  receivables  from 1998 to
1999 is due to the increased  fourth  quarter  revenue year over year from $13.9
million to $27.1 million. The use of cash in operating activities in fiscal 1998
was a direct  result of a $7.5  million  decrease  in  advances  from  customers
generally  attributable to lower order rates from customers,  and a $2.8 million
decrease in accounts payable.  These decreased liabilities were partially offset
by $2.2 million in depreciation and reduced levels of receivables and inventory,
which  provided cash of $1.3 million and $1.7 million,  respectively.  These net
changes  reflect lower fourth quarter sales in fiscal 1998 as compared to fiscal
1997 by  approximately  $5.1  million  combined  with  overall  inventory  level
reductions.  Of the cash provided from operating  activities in 1997, net income
provided $2.0 million,  depreciation and amortization  another $1.3 million, and
increases in accounts  payable,  advances from customers,  and other liabilities
provided $4.6 million, $3.0 million and $1.3 million, respectively. Increases in
accounts  receivable  and  inventories  used $3.4  million  and $5.8  million of
operating cash flow in 1997.

     In fiscal 1999, 1998 and 1997, CVC invested $4.0 million,  $6.6 million and
$2.8 million,  respectively,  in capital expenditures.  The capital expenditures
were primarily for  facilities,  machinery and equipment,  computers and related
equipment,   and  demonstration  system  tools.  CVC  has  invested  heavily  in
demonstration  tools  for use at its  facilities  in  order to  demonstrate  new
product  capabilities for its magnetic head and semiconductor  device customers.
Although CVC currently has no  significant  capital  commitments,  it expects to
spend  approximately  $6.0  million  on  capital  expenditures  over the next 12
months.

     As of September 30, 1999, CVC's principal source of liquidity  consisted of
a $15.0  million  line of credit  under a demand  line and term loan  agreement,
under which there were $10.7 million in  borrowings.  As of the end of the third
quarter  in fiscal  1999,  CVC was not in  compliance  with one  financial  test
relating to minimum  backlog  levels to be met under the agreement and thus, CVC
was in technical default of the agreement.  The lender has waived in writing its
rights regarding prior lack of compliance and, as of September 30, 1999, CVC was
in compliance with all covenants in this agreement.  Borrowings  associated with
term loans from a  commercial  bank as of  September  30, 1999  amounted to $8.0
million.  One of these loans requires monthly payments of principal and interest
at prime  plus 1/2%  while the other  term loan  requires  monthly  payments  of
principal  and interest at 8.39%.  CVC also has  available an equipment  line of
credit at  September  30,  1999 which  allows  for  maximum  borrowings  of $3.0
million.  Borrowings under the agreement are at an interest rate of prime. There
are no amounts  outstanding  under the equipment line of credit at September 30,
1999. CVC has a mortgage  credit  facility which  requires  monthly  payments of
principal  and interest at 5.29% on the first  $500,000 of the  mortgage  credit
facility  through  October  1, 1999,  after  which the rate  increases  to 8.29%
through  September 30, 2002,  consistent with the interest rate on $1,500,000 of
the credit  facility.  Subsequent  to  September  30,  2002,  CVC may select the
interest rate on the remaining  principal  from fixed or variable  interest rate
alternatives.

YEAR 2000

     The Year 2000 issue is the  result of  computer  programs  using two digits
rather than four to define the applicable  year. Any of CVC's computer  programs
or hardware or other  equipment  that have  date-sensitive  software or embedded
chips may  recognize  a date  using "00" as the year 1900  rather  than the year
2000.  This  could  result  in  a  system  failure  or  miscalculations  causing
disruptions of operations,  including, among other things, a temporary inability
to process  transactions,  send  invoices or engage in similar  normal  business
activities.
<PAGE>
                                       25


     In order to upgrade its overall business systems' hardware and software
and to enable those systems to properly use dates beyond  December 31, 1999, CVC
installed  a new  business  system in May 1999 which has been  certified  by the
vendor as Year 2000 compliant.  In addition, CVC is in the process of completing
its inventory and assessment of its desktop  systems and laptops.  CVC currently
uses standard "off the shelf"  vendor-supplied  software on its desktop  systems
and  laptops.  Many of these  vendors  are still  implementing  their  Year 2000
compliance  programs and CVC will implement the Year 2000 compliant  versions as
required when those  solutions are available.  CVC has run internal tests on its
desktop  systems and laptops and believes it has  identified  those  systems and
laptops which require upgrade or replacement.  CVC currently  expects that these
remediation  efforts will be complete in November  1999.  CVC believes that with
these and other  modifications or replacements of its business systems' existing
software and, in some cases,  hardware,  its computer programs should be able to
continue to operate  effectively  after  December  31, 1999.  However,  if these
modifications  and  replacements  are not made, or are not completed in a timely
manner,  the Year 2000  issue  could  have a  material  adverse  impact on CVC's
operations. With respect to its facilities and technical support systems such as
security, voice mail and phone systems, CVC has contacted its suppliers of those
systems and  suppliers  have  informed CVC that the  non-information  technology
systems they provide to CVC are Year 2000 compliant.

     CVC also relies  directly and  indirectly  on the  external  systems of its
customers,  suppliers,  subcontractors,  utilities  providers  and  other  third
parties.  CVC has contacted these third parties about their Year 2000 readiness.
These third  parties have  informed CVC that the systems they provide to CVC are
either Year 2000 compliant or are in the process of upgrading those systems that
are not Year 2000 compliant. For those systems that are not Year 2000 compliant,
CVC and the  particular  supplier are in the process of  upgrading  the affected
systems,  a process which CVC currently expects to be complete in November 1999.
To date,  CVC is not  aware of any  third-party  Year  2000  issues  that  could
materially  impact its results of  operations,  liquidity or capital  resources.
However,  CVC has no means of ensuring that the third parties that it deals with
will be Year 2000  ready.  If the  systems of any third  parties  with which CVC
interacts experience Year 2000 problems, CVC's business,  financial condition or
results of operations  could be  materially  adversely  affected.  CVC cannot be
certain  that the  systems of third  parties  with which it  interacts  will not
suffer from Year 2000 problems.

     CVC has warranted that all of its products shipped after June 1999 are Year
2000 ready. The Company believes that, based on internal testing, these products
are Year 2000 ready and therefore any remediation  expense with respect to these
products will be minimal.  Some of CVC's  products  shipped before June 1999 may
require  upgrades  to be Year  2000  ready.  Although  these  products  were not
warranted by CVC to be Year 2000 ready, CVC has offered to provide the necessary
upgrades to customers who use these  products.  A substantial  majority of these
customers  have  accepted or  requested  the  upgrades.  Although in general CVC
charges a fee for upgrading  products that it shipped prior to June 1999, it has
not charged all customers for these upgrades.  The Company does not believe that
the costs it may incur in providing all upgrades requested by its customers will
be material.  Notwithstanding  these efforts,  if any of CVC's products fails to
perform or causes a system malfunction due to the onset of Year 2000,  customers
could bring claims  against CVC,  which could have a material  adverse effect on
CVC's business,  results of operations or financial condition.  Moreover,  CVC's
customers  could choose to convert to other Year 2000 ready products in order to
avoid these kinds of malfunctions, which could have a material adverse effect on
CVC's  business,  results of operations or financial  condition.  CVC has worked
with its  customers  to plan for any impact the Year 2000 has on its  customers'
businesses  as it relates to CVC  products  used by its  customers.  In general,
however,  CVC  has  not  taken  efforts  to  determine  whether  its  customers'
businesses  as a whole are Year 2000 ready.  If our  customers'  businesses  are
negatively  impacted  by their  failure  to be Year 2000  ready as a whole,  our
business may be harmed.

     CVC has formulated a Year 2000 contingency  plan.  CVC's reasonably  likely
worst case  scenario  with respect to the Year 2000 issue would be disruption of
its internal operating systems, particularly its accounting and billing systems.
A disruption  of this type may  adversely  impact  CVC's  business by creating a
delay in payment by our customers and a corresponding increase in CVC's accounts
receivable.  We may  also be  required  to  purchase  alternative  hardware  and
software  systems,  incurring  additional costs and suffering  additional delays
associated  with  implementing  new systems.  While we are confident we would be
able to remediate these problems,  the delays  associated with remediation would
harm our business.  CVC cannot be certain,  however, that any measures it adopts
will prevent the occurrence of Year 2000  problems,  which could have a material
adverse effect on its business, results of operations or financial condition.
<PAGE>
                                       26


RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     Effective October 1, 1998, the Company adopted Statement of Financial
Accounting  Standards (SFAS) No. 130, "Reporting  Comprehensive  Income",  which
establishes new rules for the reporting and display of comprehensive  income and
its components;  however, the adoption had no impact on the Company's net income
or  stockholders'  equity.  SFAS No. 130 requires changes to the minimum pension
liability,  to be included in other comprehensive  income.  Prior year financial
statements  have been  reclassified  to conform to the  requirements of SFAS No.
130.

     In  April  1998,  the  Accounting   Standards  Executive  Committee  issued
Statement  of  Position  (SOP)  98-5,   "Reporting  on  the  Costs  of  Start-Up
Activities."   Start-up   activities  are  defined  broadly  as  those  one-time
activities  relating  to opening a new  facility,  introducing  a new product or
service, conducting business in a new territory,  conducting business with a new
class of customer,  commencing  some new  operation or  organizing a new entity.
Under SOP 98-5, the cost of start-up  activities should be expensed as incurred.
SOP 98-5 is effective for CVC's fiscal year 2000  financial  statements  and CVC
does  not  expect  its  adoption  to have a  material  effect  on its  financial
condition or results of operations.

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The new standard
establishes  accounting  and  reporting  standards for  derivative  instruments,
including types of derivative  instruments embedded in other contracts,  and for
hedging  activities.  SFAS No. 133 is effective for all quarters of fiscal years
beginning  after  June 15,  2000.  CVC does not  expect  SFAS No.  133 to have a
material effect on its financial condition or results of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     At  September  30, 1999 the Company did not hold any market risk  sensitive
instruments.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The  financial  statements  of the  Company  are listed in the Index to the
Consolidated Financial Statements and Financial Statement Schedule filed as part
of this Form 10-K under Item 14.

QUARTERLY RESULTS OF OPERATIONS

     The  following  tables set forth  CVC's  operating  results for each of the
eight  quarters  ended  September 30, 1999.  The  information  for each of these
quarters  is  unaudited  but has been  prepared on the same basis as the audited
consolidated  financial  statements  appearing  elsewhere  in this Form 10-K and
includes all adjustments,  consisting only of normal recurring adjustments, that
CVC  considers  necessary  to  present  fairly  this  information  when  read in
conjunction with CVC's Consolidated  Financial  Statements and Notes thereto and
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations included elsewhere in this Form 10-K. CVC's operating results for any
one quarter are not necessarily indicative of results for any future period.
<PAGE>
                                       27


<TABLE>
<CAPTION>
                               DEC 31,    MAR 31,   JUNE 30,   SEPT 30,     DEC 31,    MAR 31,   JUNE 30,   SEPT 30,
                                 1997      1998      1998       1998         1998      1999       1999       1999
                               -------    -------   --------   --------     -------    -------   --------   --------
                                                                     (in thousands)
STATEMENTS OF
   OPERATIONS:
<S>                           <C>          <C>       <C>           <C>       <C>          <C>      <C>        <C>
Revenues .................   $ 19,346    $ 20,529    $ 14,400    $ 13,898    $ 14,655    $17,788   $ 23,352    $27,120
Cost of goods sold .......     12,307      13,108       8,265       8,339       8,249     10,983     14,934     16,336
                               ------      ------       -----       -----       -----     ------     ------     ------
Gross margin .............      7,039       7,421       6,135       5,559       6,406      6,805      8,418     10,784
Operating expenses
   Research and
      development ........      2,867       4,009       2,968       2,771       2,439      2,546      3,504      4,141
   Sales and
      marketing ..........      1,885       1,913       1,620       2,278       1,930      1,832      2,633      3,686
   General and
      administrative......      1,028        865       1,006         577         812         902      1,238      1,870
   In-process R&D
      write-off ..........       --          --          --          --          --         --        1,174       --
                                                                                                      -----
     Total ...............      5,780       6,787       5,594       5,626       5,181      5,280      8,549      9,697
                                -----       -----       -----       -----       -----      -----      -----      -----
Income (loss) from .......      1,259         634         541         (67)      1,225      1,525       (131)     1,087
 operations
Interest and other,
 net .....................       (211)       (305)       (414)       (224)       (326)       190       (220)       158
Write-off of deferred
 charges .................       --          --          --          (675)       --         --         --         --
                                                                     ----
Income (loss)before
 income taxes ............      1,048         329         127        (966)        899      1,715       (351)     1,245
Income taxes
 (benefit) ...............        436         137          53        (352)        419        757        348        413
                                  ---         ---          --        ----         ---        ---        ---        ---
Net income (loss)  .......   $    612    $    192    $     74    $   (614)   $    480    $   958   $   (699)   $   832
                             ========    ========    ========    ========    ========    =======   ========    =======
</TABLE>
<TABLE>
<CAPTION>
                               DEC 31,      MAR 31,    JUNE 30,       SEPT 30,     DEC31,      MAR 31,     JUNE 30,     SEPT 30,
                                1997         1998        1998          1998        1998         1999         1999         1999
                                ----         ----        ----          ----        ----         ----         ----         ----
PERCENTAGE OF
   REVENUE:
<S>                           <C>          <C>           <C>           <C>          <C>          <C>          <C>        <C>
Revenues ..............        100.0%       100.0%       100.0%       100.0%       100.0%       100.0%      100.0%       100.0%

Gross margin ..........         36.4         36.1         42.6         40.0         43.7         38.3        36.0         39.8
Operating expenses
   Research and
     development ......         14.8         19.5         20.6         19.9         16.6         14.3        15.0         15.3
   Sales and
     marketing ........          9.8          9.3         11.2         16.4         13.2         10.3        11.3         13.6
   General and
     administrative ...          5.3          4.2          7.0          4.2          5.5          5.1         5.3          6.9
   In-process R&D
     write-off ........          --           --           --           --           --           --          5.0          --
                                                                                                              ---
   Total ..............         29.9         33.0         38.8         40.5         35.3         29.7        36.6         35.8
                                ----         ----         ----         ----         ----         ----        ----         ----
Income (loss) from
   operations .........          6.5          3.1          3.8         (0.5)         8.4          8.6         --           4.0
Interest and other, net         (1.1)        (1.5)        (2.9)        (1.6)        (2.2)         1.1        (0.9)         0.6
Write-off of deferred .
   charges ............          --           --           --          (4.9)         --           --          --           --
                                                                       ----
Net income (loss) .....          3.2%         0.9%         0.5%        (4.4%)        3.3%         5.4%       (3.0%)        3.1%
                                 ===          ===          ===         ====          ===          ===        ====          ===
</TABLE>
<PAGE>
                                       28


     CVC's quarterly and annual operating results are affected by a wide variety
of factors that could materially and adversely affect revenues and profitability
from period to period, including:

o    specific  economic   conditions  in  the  data  storage  and  semiconductor
     industries

o    the  timing of  significant  orders

o    cyclical patterns of capital  spending by customers

o    modification or cancellation of customer orders

o    continued market acceptance of our systems and our customers' products

o    shipment delays

o    loss of a significant customer

o    increased  research and development or marketing costs  associated with our
     introduction of new products

o    introduction of new products by our customers

o    our ability to successfully introduce new products on a timely basis

o    changes in our pricing policies or those of our competitors

o    production and quality  problems

o    the publication of opinions by industry  analysts about us, our products or
     our competitors

     Due to potential quarterly  fluctuations in operating results, CVC believes
that  quarter-to-quarter  comparisons of its results of operations should not be
relied upon as indicators of future  performance.  Further, in the event that in
some  future  quarter  CVC's  net  sales or  operating  results  were  below the
expectations of public market  securities  analysts and investors,  the price of
the common stock would likely be materially adversely affected.

UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS

     The following unaudited pro forma statements of operations for the year
ended  September  30,  1999  give  effect  to the May 10,  1999  acquisition  of
Commonwealth  Scientific  Corporation.  The  unaudited  pro forma  statements of
operations  are  based  on the  statements  of  operations  for  CVC,  appearing
elsewhere in this Form 10-K, and the statements of operations of Commonwealth as
if the acquisition  occurred on October 1, 1998. The Commonwealth  statements of
operations  have been  modified to conform to CVC's fiscal year end by combining
the quarterly  operating  results for the quarters  ended  December 31, 1998 and
March 31, 1999 with the interim  results for the period  April 1 to May 9, 1999.
These unaudited pro forma statements of operations should be read in conjunction
with  the  historical   financial  statements  and  notes  thereto  of  CVC  and
Commonwealth included elsewhere in this Form 10-K.

     The unaudited pro forma combined statements of operations give effect
to the following pro forma  adjustments  necessary to reflect the acquisition of
Commonwealth:

o    Reduction in operating  expenses  related to the  restructuring  activities
     undertaken,  solely comprised of Commonwealth employees terminated as of or
     shortly after the acquisition;

o    Elimination of the write-off of the portion of the purchase price allocated
     to in-process research and development, due to its one-time nature;

o    Amortization  of goodwill and other  intangibles  over periods ranging from
     five to seven years; and

o    Decrease in income taxes related to adjustments.
<PAGE>
                                       29


     Amounts are in thousands, except for per share data.

<TABLE>
<CAPTION>
                                                             YEAR ENDED SEPTEMBER 30, 1999

                                                   CVC        COMMONWEALTH       ADJUSTMENTS    COMBINED
                                                   ---        ------------       -----------    --------
                                                       (In thousands, except for per share data)

   STATEMENTS OF OPERATIONS:
<S>                                               <C>            <C>                 <C>            <C>
   Revenues...................................     $82,915         $18,926              $-    $101,841
   Cost of goods sold.........................      50,502          17,350               -      67,852
                                                    ------          ------                      ------
   Gross margin...............................      32,413           1,576               -      33,989
   Operating expenses.........................      27,482           6,538           (840)      33,180
   In-process R&D write-off...................       1,174               -         (1,174)           -
   Goodwill and intangibles amortization......          51               -              80         131
                                                        --                              --         ---
      Total operating expenses................      28,707           6,538         (1,934)      33,311
                                                    ------           -----         ------       ------
   Income (loss) from operations..............       3,706         (4,962)           1,934        678
   Interest and other, net....................       (198)           (305)               -       (503)
                                                     ----            ----                        ----
   Income (loss) before income taxes..........       3,508         (5,267)           1,934        175
   Income taxes (benefit).....................       1,937         (1,488)           (336)        113
                                                     -----         ------            ----         ---
   Net income (loss)..........................      $1,571        $(3,779)          $2,270        $62
                                                    ======        =======           ======        ===
   Net income per share:
      Basic...................................       $1.01                                      $0.03
      Diluted.................................        0.18                                       0.01

   Weighted average shares outstanding:
      Basic...................................       1,561                             772      2,333
      Diluted.................................       8,589                             772      9,361
</TABLE>


ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

     Not applicable.
<PAGE>
                                       30


PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers and directors of CVC are as follows:

<TABLE>
<CAPTION>

NAME                      AGE           POSITION
----                      ----          --------
<S>                       <C>           <C>

Christine B. Whitman .... 48  President, Chief Executive Officer and Chairman
Giovanni Nocerino, Ph.D . 47  Executive Vice President, Sales & Service
Emilio O. DiCataldo ..... 48  Senior Vice President and Chief Financial Officer
Mehrdad M. Moslehi, Ph.D  39  Senior Vice President and Chief Technology Officer
Christopher J. Mann ..... 41  Senior Vice President, Marketing
Richard J. Chicotka, Ph.D 58  Vice President, Engineering
Richard A. Kellogg ...... 57  Vice President, Manufacturing
Judd C. Prozeller ....... 48  Vice President, Quality & Human Resources
Robert C. Fink .......... 64  Director
Maurice F. Holmes ....... 56  Director
Douglas A. Kingsley ..... 37  Director
Thomas C. McDermott ..... 63  Director
Seiya Miyanishi ......... 53  Director
George R. Thompson, Jr.*  69  Director
Donald L. Waite ......... 66  Director
<FN>
-----------

*    Upon  consummation  of CVC's initial public  offering in November 1999, Mr.
     Thompson retired as a director of CVC.

</FN>
</TABLE>

     Ms. Whitman joined CVC Products in 1978 and has served as President,  Chief
Executive  Officer and Chairman of CVC since its  acquisition of CVC Products in
1990.  Ms.  Whitman  received a BA from Syracuse  University and is a member and
Secretary  of the Board of  Directors  of  SEMI/SEMATECH.  She also  serves as a
member of the Board of Directors of Frontier  Telephone of Rochester and The M&T
Bank. Ms. Whitman serves on the Executive Committee of the Board of Directors of
the  Industrial  Management  Council,  the  Board of  Trustees  for the  Greater
Rochester  Chamber of Commerce,  the United Way Board of Directors,  the Al Sigl
Center  Partners'  Foundation Board of Governors and is a member of the Board of
Trustees of Rochester Institute of Technology.

     Dr.  Nocerino  joined  CVC in 1997 as  Executive  Vice  President,  Sales &
Service.  From 1994 to 1997, Dr.  Nocerino  worked as Vice President and General
Manager of Sales and Marketing at Varian Associates, a supplier of semiconductor
manufacturing  equipment.  Prior to his  employment  at Varian  Associates,  Dr.
Nocerino was Executive Vice President with  Materials  Research  Corporation,  a
subsidiary of Sony and a  manufacturer  of thin film  equipment and material for
the data storage and semiconductor industries. Dr. Nocerino holds a joint honors
B.Sc. in Physics and Electronic  Engineering  and a Ph.D. from the University of
Manchester, England.

     Mr.  DiCataldo  joined  CVC in 1995 as  Senior  Vice  President  and  Chief
Financial  Officer.  From 1991 to 1995,  Mr.  DiCataldo  served  as Senior  Vice
President,  Finance and  Administration  of MedImmune,  Inc., a therapeutic  and
vaccine company.  Prior to his employment at MedImmune,  Mr. DiCataldo held Vice
President-level positions at Bausch & Lomb, Inc. and Praxis Biologics and worked
for the firm of Price  Waterhouse  LLP.  Mr.  DiCataldo  is a  Certified  Public
Accountant and holds a BS in Accounting from St. John Fisher College.

     Dr.  Moslehi  joined  CVC in  1994  as  Senior  Vice  President  and  Chief
Technology  Officer.  From 1988 to 1994, Dr. Moslehi served in various positions
at Texas  Instruments,  a  semiconductor  manufacturer,  most recently as Branch
Manager in their  Semiconductor  Process and Design  Center  where he  developed
process and equipment technologies such as RTP, PVD and photochemical  cleaning.
Dr.  Moslehi  is named as an  inventor  on over 80 U.S.  patents  and in 1993 he
earned the American Electronics Association's Technologist/Inventor of the Year.
Dr. Moslehi received a BS in Electrical  Engineering at Arya-Mehr  University of
Technology  and  a  MS  and  Ph.D.  in  Electrical   Engineering  from  Stanford
University.  Dr.  Moslehi  also  serves on the  consulting  faculty of  Stanford
University.

     Mr.  Christopher  Mann joined CVC Products in 1979 and now serves as Senior
Vice President,  Marketing  after having served as Senior Vice  President,  Data
Storage from 1997 to June 1999.  Mr. Mann has  previously  held the positions of
Field Service Manager,  Engineering  Services  Manager and Vice President,  Data
Storage at CVC.  Prior to joining CVC in 1979, Mr. Mann worked for Sperry in the
United Kingdom.
<PAGE>
                                       31


     Dr. Chicotka joined CVC in 1995 as Vice  President,  Operations,  and since
1998 has served as Vice President,  Engineering. From 1994 to 1995, Dr. Chicotka
served  as  Director  of  Development  Engineering  of  Conner  Peripherals,   a
manufacturer of disk drives.  From 1993 to 1994, Dr. Chicotka served as Director
of Process  Engineering of Seagate Magnetics,  a division of Seagate Technology.
From  1962 to 1992,  Dr.  Chicotka  served in  various  positions  at IBM,  most
recently as Manager of Head Process  Manufacturing  and  Engineering  of Storage
Products  Development and  Manufacturing in San Jose,  California.  Dr. Chicotka
received  a BS and MS in  Metallurgical  Engineering  and a Ph.D.  in  Materials
Science from Polytechnic Institute of Brooklyn.

     Mr. Kellogg joined CVC in 1999 and currently serves as Vice President,
Manufacturing.  From 1998 to 1999, he consulted  with CVC and other firms in the
materials  management  area. From 1997 to 1998, Mr. Kellogg held the position of
Vice  President,  Materials  for Lam Research  Corporation,  a  manufacturer  of
semiconductor  processing  equipment.  From 1994 to 1997,  Mr.  Kellogg was Vice
President of Operations for Varian Thin Film Systems,  a manufacturer  of plasma
vapor deposition systems and, after its acquisition,  with Novellus Systems.  He
spent the  period  from 1989 to 1994 with  Libbey  Owens  Ford  Glass as General
Manager of its Shelbyville  operations.  Mr. Kellogg holds a BA from Lake Forest
College.

     Mr.  Prozeller  joined CVC in 1995 and currently  serves as Vice President,
Quality and Human  Resources.  From 1990 to 1995,  Mr.  Prozeller  served as the
Senior  Program  Director  for  the  Department  of  Training  and  Professional
Development  at the Rochester  Institute of  Technology.  From 1990 to 1995, Mr.
Prozeller  also  served  as a total  quality  consultant  for a number  of large
institutional  clients.  From 1979 to 1988,  Mr.  Prozeller  served  in  various
positions at the Xerox Corporation, most recently as a Total Quality Consultant,
providing consulting services to various suppliers.  Mr. Prozeller received a BS
from New York State  University  at Brockport,  an MED from Nazareth  College of
Rochester and an MBA from Rochester Institute of Technology.

     Mr. Fink has been a director of CVC since  1997.  In 1993,  Mr. Fink joined
Lam Research Corporation,  a manufacturer of semiconductor processing equipment,
and formerly served as the Chief Operating Officer,  following Lam's acquisition
of Drytek,  Inc.  Mr. Fink served as the  President of Drytek from 1983 to 1988.
Prior to Drytek, Mr. Fink spent four years with ITT Corporation's  Semiconductor
Division  as  Director of VLSI  Operations  for North  America and 12 years with
General  Instrument  Corporation's  Microelectronics  Division  as  Director  of
Worldwide Manufacturing Resources. Mr. Fink's career also includes 13 years with
General Electric Corporation. He received a BS in Metallurgical Engineering from
Polytechnical Institute of New York.

     Mr. Holmes has been a director of CVC since October 1999. Since January
1999,  Mr.  Holmes  has been a  Professor  of the  Practice  of  Management  and
Engineering  Systems at the  Massachusetts  Institute of Technology,  as well as
holding a dual professorship with both its Sloan School of Management and School
of Engineering. Prior to this, Mr. Holmes served as Corporate Vice President and
the Chief Engineer for Xerox Corporation  beginning in 1994. Mr. Holmes received
a BS  degree  from the  University  of  Pittsburgh  and a MS in  Mechanical  and
Aerospace  Science from the University of Rochester.  He currently is a director
of Frontier  Telephone  Company of Rochester,  Optical Dynamics  Corporation and
Storage Technology  Corporaton.  In addition,  Mr. Holmes serves on the Board of
Trustees of Rochester Institute of Technology and the Ford Design Institute.

     Mr. Kingsley has been a director of CVC since 1998. Mr. Kingsley is a
Senior Vice President of Advent  International  Corporation,  a venture  capital
firm, where he has been employed since 1990. From 1985 through 1988 Mr. Kingsley
was a sales  engineer for  Teradyne,  Inc.,  a  manufacturer  of automatic  test
equipment for the electronics industry.  Mr. Kingsley is a graduate of Dartmouth
College and Harvard Business School. He is a director of LeCroy  Corporation and
a member of the Board of Overseers of the Boston Symphony Orchestra.
<PAGE>
                                       32


     Mr.  McDermott has been a director of CVC since October 1999.  From 1994 to
1997,  Mr.  McDermott  was Chairman of the Board,  Chief  Executive  Officer and
President  of Goulds  Pumps,  Inc.  From  1986 to 1993,  Mr.  McDermott  was the
President  and Chief  Operating  Officer  of Bausch & Lomb.  Prior to this,  Mr.
McDermott served in a variety of management positions at Bausch & Lomb, and also
was a member of its Board of  Directors  from 1983  until  1993.  Mr.  McDermott
received a BS degree and an Honorary Doctoral Degree from Providence College. He
currently  is a  director  of  Canandaigua  Brands,  Inc.  and  Thomas  &  Betts
Corporation.  In  addition,  Mr.  McDermott  serves on the Board of Governors of
Strong Memorial Hospital and as a Trustee of Rochester Institute of Technology.

     Mr.  Miyanishi  has been a director  of CVC since  1990.  Since  1987,  Mr.
Miyanishi has served as President and Chief Executive  Officer of Nikko Tecno, a
company  based in Japan  and  involved  in the  import  and  export  of  capital
equipment,  which  was  founded  in 1946.  Mr.  Miyanishi  has  served as owner,
President and Chief Executive  Officer of several other companies in Japan.  Mr.
Miyanishi received a BS of managerial economics from Keio University.

     Mr.  Thompson  became a director of, as well as a  consultant  to, CVC upon
CVC's  acquisition  of  Commonwealth  Scientific  Corporation  in May 1999.  Mr.
Thompson was a co-founder of Commonwealth Scientific and was President,  CEO and
Chairman  of the Board from 1970 to 1999.  Prior to  founding  Commonwealth,  he
served in various  engineering  and marketing  positions  with Systems  Research
Laboratories, Barry Controls Inc., and Bromion, Inc. Mr. Thompson is Chairman of
the Board of Marshall  National  Bank and Trust Co. in Marshall,  Virginia.  Mr.
Thompson  attended  the  University  of  Virginia  and  received a BS in General
Engineering  from M.I.T.  Upon  consummation of CVC's initial public offering in
November 1999, Mr. Thompson retired as a director of CVC.

     Mr. Waite has been a director of CVC since 1995. Since 1983, Mr. Waite
has served in various positions for Seagate Technology,  most recently as Senior
Administrative  Officer,  Senior Financial Officer and Executive Vice President.
Mr. Waite received a BS in Accounting  from  Creighton  University and a JD from
Georgetown University Law Center. Mr. Waite is a Certified Public Accountant.

     All directors hold office until the next annual meeting of the
stockholders  and until  their  successors  have  been  elected  and  qualified.
Executive  officers of CVC are elected by CVC's board of  directors on an annual
basis and serve until their successors are duly elected and qualified. There are
no family relationships among any of the executive officers or directors of CVC.
Mr.  Thompson has advised CVC that upon  consummation  of this  offering he will
resign his directorship.

     Mr.  Douglas  Kingsley and Mr. George R. Thompson did not file Form 3s with
the Securities and Exchange  Commission at the time they became directors of CVC
(Mr.  Kingsley in December 1998 and Mr. Thompson in May 1999). Both Mr. Thompson
and Mr.  Kingsley  filed Form 3s on November 10, 1999 in  connection  with CVC's
initial public  offering.  Advent  International  did not file a Form 3 with the
Securities  and Exchange  Commission at the time it became a 10%  shareholder of
CVC pursuant to a private  placement of CVC preferred  stock December 1998. Upon
completion  of  CVC's  initial  public   offering  in  November   1999,   Advent
International Corporation was no longer a 10% shareholder of CVC.
<PAGE>
                                       33



ITEM 11.    EXECUTIVE COMPENSATION

     The following table sets forth the total compensation for fiscal 1997, 1998
and 1999,  respectively,  of the chief  executive  officer and each of the other
four most highly  compensated  executive  officers of CVC whose total salary and
bonus for fiscal 1999 exceeded $100,000:
<TABLE>
<CAPTION>
                                          SUMMARY COMPENSATION TABLE

                                                                                    NUMBER OF
                                                                                    SECURITIES
                                                                                    UNDERLYING
                                                                                   OPTIONS/SARS
                                                   ANNUAL COMPENSATION              LONG-TERM
                                                   -------------------
                                                                                                  ALL
                                                                    OTHER ANNUAL   COMPENSATION  OTHER
NAME AND PRINCIPAL POSITION       YEAR      SALARY       BONUS     COMPENSATION(1)    AWARDS      (2)
---------------------------       ----      ------       -----     ---------------    ------      ---
<S>                                <C>       <C>          <C>         <C>            <C>          <C>
Christine B. Whitman
President, Chief Executive
   Officer and Chairman ..        1999     $178,652     $28,000         --           33,333     $2,936
                                  1998      173,040      47,600         --             --        2,647
                                  1997      167,250      46,600         --           51,000      2,325

Giovanni Nocerino
Executive Vice President,
   Sales & Service .......        1999      224,950        --       $ 75,654(3)        --        3,085
                                  1998      183,333        --         16,535        160,000       --
                                  1997(4)      --          --           --             --         --

Mehrdad M. Moslehi
Senior Vice President and
   Chief Technical Officer        1999      158,489      10,000         --           16,667      2,700
                                  1998      147,054      31,100         --             --        2,576
                                  1997      140,078      29,100         --           12,000      1,905
Christopher J. Mann
Senior Vice President,
   Marketing .............        1999      158,487        --         41,127(5)      16,667      3,810
                                  1998      147,290      27,100       77,731(5)        --        4,153
                                  1997      122,406      28,500       31,962(5)      22,500      2,506

Emilio O. DiCataldo
Senior Vice President and
   Chief Financial Officer        1999      152,148      25,000         --           30,000      2,213
                                  1998      146,692      31,800         --             --        1,900
                                  1997      142,551      34,400       46,930(6)      48,000      1,330
<FN>
-----------

(1)  In accordance  with the rules of the  Securities  and Exchange  Commission,
     other  compensation in the form of perquisites and other personal  benefits
     has been  omitted  in those  instances  where  such  perquisites  and other
     personal benefits constituted less than the lesser of $50,000 or 10% of the
     total  annual  salary and bonus for the  executive  officer for each fiscal
     year.

(2)  Represents  matching  contributions  made by CVC on behalf of the executive
     officer to its 401(k) Plan.

(3)  Represents automobile allowance of $1,901 and sales commissions of $73,754.

(4)  No information  for fiscal 1997 is presented as Mr.  Nocerino joined CVC in
     fiscal 1998. Mr. Nocerino became one of our executive  officers in the fall
     of 1997.

(5)  Represents automobile allowance of $10,488 and sales commissions of $30,639
     in 1999,  automobile  allowance of $10,488 and sales commissions of $67,243
     in 1998 and  automobile  allowance  of  $10,488  and sales  commissions  of
     $21,474 in 1997.

(6)  Represents  relocation expense of $17,500,  relocation allowance of $26,670
     and dues of $2,760.
</FN>
</TABLE>
<PAGE>
                                       34


     The following table sets forth information regarding the option grants
made during fiscal 1999 to each of the executive  officers.  CVC issued no stock
appreciation rights in fiscal 1999.
<TABLE>
<CAPTION>
                                                       OPTION GRANTS

                                                                                                  INDIVIDUAL GRANTS
                                                                                                  -----------------
                                                                                                   VALUE AT ASSUMED
                                               PERCENT OF                                          ANNUAL RATES OF
                              NUMBER OF       TOTAL OPTIONS                                          STOCK PRICE
                              SECURITIES       GRANTED TO      EXERCISE OR                        APPRECIATION FOR
                              UNDERLYING      EMPLOYEES IN     BASE PRICE   EXPIRATION               OPTION TERM
NAME                           OPTIONS        FISCAL 1999      ($/SHARE)      DATE              5%               10%
----                           -------        -----------      ---------      ----              --               ---
<S>                           <C>                 <C>            <C>          <C>              <C>               <C>
Christine B. Whitman          33,333             10.70%       $   6.00       5/14/09          $255,254          $322,099
Giovanni Nocerino ..              --                --              --           --                --                --
Mehrdad M. Moslehi .          16,667              5.35            6.00       5/14/09           127,631           161,054
Christopher J. Mann           16,667              5.35            6.00       5/14/09           127,631           161,054
Emilio O. DiCataldo           30,000              9.63            6.00       5/14/09           229,731           289,892
</TABLE>

     The following table sets forth  information  regarding  exercise of options
and the number and value of options held at September  30, 1999,  by each of the
officers listed below.
<TABLE>
<CAPTION>
                                                       YEAR END OPTION VALUES


                                      NUMBER OF                     VALUE OF UNEXERCISED
                                   UNEXERCISED OPTIONS              IN-THE-MONEY OPTIONS
                                  AT FISCAL YEAR END                AT FISCAL YEAR END(1)
                             EXERCISABLE     UNEXERCISABLE      EXERCISABLE       UNEXERCISABLE
                             -----------     -------------      -----------       -------------
<S>                           <C>                 <C>            <C>                 <C>
Christine B. Whitman          353,600           53,733          $3,263,456          $293,880
Giovanni Nocerino ..           53,333          106,667             227,732           455,468
Mehrdad M. Moslehi .            3,200           21,467              13,664            85,868
Christopher J. Mann           206,000           25,667           1,905,332           113,666
Emilio O. DiCataldo           142,800           49,200           1,081,812           241,152

<FN>
-----------
(1)      The value of the  unexercised,  in-the-money  options on September  30,
         1999 is based on the  difference  between the initial  public  offering
         price of the  common  stock and the per share  option  exercise  price,
         multiplied  by the  number of shares of  common  stock  underlying  the
         options.
</FN>
</TABLE>

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table  sets  forth  information  regarding  the  beneficial
ownership of CVC's common stock as of October 15, 1999, by each person or entity
known to CVC to own  beneficially  more  than 5% of the  outstanding  shares  of
common stock,  each of CVC's directors and the named executive  officers and all
directors and executive officers as a group.  Unless otherwise  indicated below,
to the  knowledge  of CVC,  all  persons  listed  below  have  sole  voting  and
investment  power with  respect to their shares of common  stock,  except to the
extent authority is shared by spouses under applicable law.
<TABLE>
<CAPTION>

                                                      SHARES BENEFICIALLY OWNED
                                                     PRIOR TO THE OFFERING(1)(2)
                                                     ---------------------------
BENEFICIAL OWNER                                       NUMBER            PERCENT
----------------                                       ------            -------
<S>                                                    <C>                <C>
Seagate Technology(3) ..........................       3,219,073           34.7%
     920 Disc Drive
     Scotts Valley, CA  95066-4544
Nikko Tecno(4) .................................       1,412,316           16.6
     P.O. Box 139
     Central Tokyo, Japan
Advent International Group(5) ..................       1,017,593           12.0
     75 State Street
     Boston, MA  02109
Anne G. Whitman(6) .............................       1,108,800           13.1
     370 Canfield Drive
     Pittsford, NY  14534
Christine B. Whitman(7) ........................         726,400            8.2
Giovanni Nocerino ..............................         106,667            1.2
Emilio O. DiCataldo ............................         146,000            1.7
Mehrdad M. Moslehi .............................         307,200            3.6
Christopher J. Mann(8) .........................         283,676            3.2
Richard J. Chicotka ............................          85,600            1.0
Richard A. Kellogg .............................           8,267              *
Judd C. Prozeller ..............................          28,133              *
Robert C. Fink .................................           4,888              *
Douglas A. Kingsley(7)(9) ......................       1,017,593           12.0
Seiya Miyanishi(7)(10) .........................       1,412,316           16.6
George R. Thompson, Jr.(7)(11) .................         862,449           10.2
Donald L. Waite(7)(12) .........................       3,219,073           34.7
Thomas C. McDermott ............................            --              --
Maurice F. Holmes ..............................            --              --
All directors and executive
    officers as a group
    (15 persons)(13) ...........................       8,208,262           80.2%

<FN>
-----------
*    Less than one percent.

(1)  The  number  of  shares  of  common  stock  shown  in the  table  above  as
     beneficially  owned  includes  shares  issuable  pursuant  to  options  and
     warrants  that may be exercised  within 60 days after  September  30, 1999.
     Shares   issuable   pursuant  to  such  options  and  warrants  are  deemed
     outstanding  for  computing the  percentage of beneficial  ownership of the
     person holding such options and warrants but are not deemed outstanding for
     computing the percentage of beneficial ownership of any other person.
<PAGE>
                                       35


(2)  Includes  shares of common  stock  issuable  upon  exercise of options,  as
     follows:  Christine B. Whitman-358,400  shares;  Giovanni  Nocerino-106,667
     shares;  Emilio  O.  DiCataldo-146,000  shares;  Mehrdad  M.  Moslehi-3,200
     shares;  Christopher  J.  Mann-207,400  shares;  Richard  J.Chicotka-85,600
     shares;  Richard A. Kellogg-8,267 shares; Judd C. Prozeller-28,133  shares;
     and Robert C. Fink-2,222 shares.

(3)  Includes  2,419,680  shares of common stock  issuable  upon  conversion  of
     outstanding  shares of Series B  Convertible  Preferred  Stock and  790,760
     additional  shares of common stock issuable upon exercise of a warrant held
     by Seagate Technology.

(4)  Includes  1,392,000  shares of common stock  issuable  upon  conversion  of
     Series A Convertible Preferred Stock.

(5)  Includes ownership by the following venture capital funds managed by Advent
     International  Corporation:  (1) 853,658 shares of common stock issuable to
     Global  Private  Equity  III  Limited   Partnership   upon   conversion  of
     outstanding  shares of Series C Convertible  Preferred  Stock,  (2) 130,793
     shares of common stock issuable to Advent PGGM Global  Limited  Partnership
     upon  conversion of  outstanding  shares of Series C Convertible  Preferred
     Stock,  (3) 12,907 shares of common stock  issuable to Advent  Partners GPE
     III Limited  Partnership upon conversion of outstanding  shares of Series C
     Convertible  Preferred  Stock, (4) 3,861 shares of common stock issuable to
     Advent  Partners  (NA)  GPE III  Limited  Partnership  upon  conversion  of
     outstanding  shares of Series C Convertible  Preferred Stock and (5) 15,041
     shares of common stock issuable to Advent Partners Limited Partnership upon
     conversion of outstanding  shares of Series C Convertible  Preferred Stock.
     Advent is the general partner for all of the above limited partnerships.

(6)  Includes  an  aggregate  of  38,400  shares  of  common  stock  held by Ms.
     Whitman's  three  children  pursuant  to trust  agreements  with The  Chase
     Manhattan Bank. Ms. Whitman disclaims beneficial ownership of these shares.
     Anne G.  Whitman is not related to  Christine B. Whitman and has at no time
     held any position, office or other material relationship with CVC or any of
     its predecessors or affiliates, except as a shareholder of CVC.

(7)  The stockholders' address is: c/o CVC, Inc., 525 Lee Road,  Rochester,  New
     York, 14606.

(8)  Includes 20,316 shares of common stock held in an irrevocable trust for Mr.
     Mann's children. Mr. Mann disclaims beneficial ownership of these shares.

(9)  Represents  1,017,593 shares owned by Advent. Mr. Kingsley is a Senior Vice
     President of Advent  International  Corporation,  the venture  capital firm
     which is the manager of the funds affiliated with the Advent  International
     Group. Mr. Kingsley disclaims  beneficial ownership of the shares of common
     stock  owned by Advent  except  to the  extent  of his  indirect  pecuniary
     interest therein as a partner in Advent.

(10) Represents  1,412,316  shares of common stock  beneficially  owned by Nikko
     Tecno  of  which  Mr.  Miyanishi  is  a  director,  officer  and  principal
     stockholder.  Mr. Miyanishi disclaims beneficial ownership of the shares of
     common  stock  owned by Nikko  Tecno  except to the extent of his  indirect
     pecuniary interest therein as a stockholder of Nikko Tecno. Mr. Miyanishi's
     address is: c/o  Nikko Tecno, P.O. Box 139, Central Tokyo, Japan.

(11) Includes  50,869  shares of common stock held by Mr.  Thompson's  daughter,
     Eleanor  Thompson,  and 50,869  shares of common  stock held by his son, G.
     Richard Thompson. Mr. Thompson disclaims beneficial ownership of the shares
     of common stock held by his children.  Upon  consummation  of CVC's initial
     public  offering in November  1999, Mr.  Thompson  retired as a director of
     CVC.

(12) Represents  3,219,073 shares beneficially owned by Seagate Technology.  Mr.
     Waite is an executive  officer and stockholder of Seagate  Technology.  Mr.
     Waite disclaims beneficial ownership of the shares of common stock owned by
     Seagate  Technology except to the extent of his indirect pecuniary interest
     therein as a stockholder of Seagate Technology.
<PAGE>
                                       36


(13) Includes (1) 1,412,316  shares held of record by Nikko Tecno, the ownership
     of which is  attributed  to Mr.  Miyanishi,  (2)  1,017,593  shares held of
     record by Advent, the ownership of which is attributed to Mr. Kingsley, (3)
     3,219,073  shares held of record by Seagate  Technology,  the  ownership of
     which is attributed to Mr. Waite, (4) 50,869 shares of common stock held by
     Mr.  Thompson's  daughter,  Eleanor  Thompson,  and 50,869 shares of common
     stock held by his son, G. Richard Thompson and (5) 20,316 shares held in an
     irrevocable  trust  for Mr.  Mann's  children,  the  ownership  of which is
     attributed to Mr. Mann.

</FN>
</TABLE>

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Advent International Group is a principal stockholder of CVC. Mr.
Kingsley, a director of CVC, is a Managing Director of Advent.

     Seagate  Technology is a principal  stockholder  of CVC, as well as a major
customer.  Mr.  Waite,  a director of CVC, is an officer of Seagate  Technology.
Total revenues  attributed to sales of CVC products to Seagate  Technology  were
$29.2 million in fiscal 1997,  $21.3 million in fiscal 1998 and $28.4 million in
fiscal 1999.

     In  December  1998,  CVC sold an  aggregate  of 100,000  shares of Series C
Convertible  Preferred  Stock for a price of $100.00  per share and a warrant to
purchase an aggregate of 200,000  shares of common stock to entities  affiliated
with  Advent  International  Corporation  in a private  placement.  The Series C
Convertible Preferred Stock was automatically converted into 1,016,260 shares of
common stock,  as well as 100,000 shares of Series D Redeemable  Preferred Stock
upon  consummation  of CVC's  intitial  public  offering  in November  1999.  In
addition,  the Series D Redeemable  Preferred Stock was redeemed by CVC upon the
consummation  of such  offering for a redemption  price of $10.0 million and the
warrant  to  purchase  common  stock  was  terminated.  See  "Business  - Recent
Developments - Public Offering."

     Also, in connection with that transaction,  CVC entered into an Amended and
Restated  Registration Rights Agreement with Advent,  Seagate Technology,  Nikko
Tecno and  executive  officers and  stockholders  of CVC who are parties to this
agreement.  This agreement grants demand and piggy-back  registration  rights to
Seagate  Technology  and Advent with respect to shares of common stock  issuable
upon  conversion of all  outstanding  shares of the Series B and Series C Senior
Convertible Redeemable Preferred Stock, and also grants piggy-back  registration
rights to the executive officers and stockholders of CVC who are parties to this
agreement.  In addition,  CVC entered into an Amended and Restated Stockholders'
Agreement  with  Advent,  Seagate  Technology,  Nikko  Tecno  and the  executive
officers and stockholders of CVC who are parties to this agreement providing for
voting and pre-emptive rights with respect to the acquisition and sale of shares
by CVC, as well as matters affecting  corporate  governance.  This agreement and
the rights contained  therein  terminated upon the consummation of CVC's initial
public  offering in November 1999. See "Business - Recent  Developments - Public
Offering."

     As part of CVC's  acquisition of Commonwealth in May 1999, CVC entered into
a consulting agreement with George R. Thompson,  Jr., the former Chief Executive
Officer of Commonwealth  and a current  director of CVC. Under the terms of this
consulting  agreement,  CVC is obligated to pay Mr. Thompson an aggregate amount
of  $525,000  over  the  three-year   period  following  the   acquisition,   as
consideration for consulting  services provided by him to CVC. In addition,  Mr.
Thompson is entitled to benefits,  such as an  automobile  allowance  and health
insurance coverage.  This consulting agreement may be terminated by Mr. Thompson
for any reason at any time and by the Company in the following circumstances:

o    if  Mr.  Thompson  (1)  materially   breaches  his   obligations   under  a
     non-competition  agreement;  (2) is  convicted  of a felony or any  offense
     involving  misappropriation  of money; or (3) willfully fails or refuses to
     perform his duties under this agreement or

o    upon Mr. Thompson's death.
<PAGE>
                                       37


     Nikko  Tecno,  a Japanese  corporation,  is a principal  stockholder  and a
distributor of CVC's products in Japan. Mr. Miyanishi, a director of CVC, is the
President and Chief  Executive  Officer of Nikko Tecno.  CVC borrowed from Nikko
Tecno $1.5 million in November  1990 and $1.0 million in December 1991 under two
unsecured  notes that  required  quarterly  interest  payments  calculated at an
annual rate of 9%. The  principal  of the $1.0  million note was paid in October
1997.  The  principal  of the $1.5 million  note was paid in January  1999.  See
"Notes to Consolidated Financial Statements."

     Christine Whitman,  CVC's Chairman,  President and Chief Executive Officer,
currently serves as a director of M&T Bank, with whom CVC has outstanding credit
agreements.  Net  proceeds  borrowed  from M&T Bank were $1.7  million in fiscal
1997, $9.5 million in fiscal 1998 and $3.9 million in fiscal 1999.
<PAGE>
                                       38


PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(1)  The  Registrant's  financial  statements  together with a separate table of
     contents are annexed hereto.

(2)  There were no financial  statement  schedules  required to be filed because
     they  are not  applicable  or the  required  information  is  shown  in the
     Consolidated Financial Statements or notes thereto.

(3)  Exhibits:

<TABLE>
<S>       <C>
1.1       Underwriting Agreement.**

3.1       Amended and Restated Certificate of Incorporation of the Registrant.**

3.1.1     Amendment to the Restated  Certificate of  Incorporation to be effective on
          or about the time of pricing of CVC's initial public offering.**

3.1.      Restated  Certificate of  Incorporation  to be effective at the closing of
          CVC's intial public offering.**

3.2       Restated By-Laws of the Registrant.**

4.1       Specimen Certificate for Common Stock of the Registrant.**

5.1       Opinion of Dewey Ballantine LLP.**

10.1      Amended and Restated 1997 Stock Option Plan.**

10.3      Nonemployee Directors' Stock Option Plan.**

10.4      Form of Employment  Agreement.**

10.5      Union  Agreement,  dated August 25, 1995,  between  the  Registrant  and  Local  342,  International  Union  of
          Electronic, Electrical, Salaried, Machine & Furniture Workers.**

10.6      Securities Purchase  Agreement,  dated May 22, 1995, between the Registrant
          and Seagate Technology, Inc.**

10.7      Amended and Restated  Registration  Rights  Agreement,  dated May 10, 1999,
          among the Registrant, Seagate Technology, Inc. and certain stockholders of the Registrant.**

10.8      Series B Preferred Stock Purchase Warrant,  dated May 22, 1995, between the
          Registrant and Seagate Technology, Inc.**

10.9      U.S.  $1,000,000  Subordinated  Promissory  Note,  dated November 14, 1990,
          between the Registrant and Nikko Tecno Co., Inc.**

10.10     U.S.  $500,000  Subordinated  Promissory  Note,  dated  November  14, 1990,
          between the Registrant and Nikko Tecno Co., Inc.**

10.11     Letter   extending   repayment  of  U.S.   $1,000,000  and  U.S.   $500,000
          Subordinated Promissory Notes, dated August 18, 1997, by Nikko Tecno Co., Inc.**

10.12     Mortgage Note,  dated September 29, 1997,  between  Registrant and M&T Real
          Estate, Inc.**

10.13     Mortgage,  dated  September  29,  1997,  between  Registrant  and M&T  Real
          Estate, Inc.**

10.14     Continuing  Guaranty,  dated September 29, 1997, between Registrant and M&T
          Real Estate, Inc.**

10.15     General Assignment of Rights,  dated September 29, 1997, between Registrant
          and M&T Real Estate, Inc.**

10.16     Amendment No. 1 to General Security Agreement, dated September 29, 1997, by
          and among the Registrant, M&T Trust Company and the County of Monroe Industrial
          Development Agency.**

10.17     Amended and Restated Lease  Agreement,  dated  September 29, 1997,  between
          Registrant and the County of Monroe Industrial Development Agency.**

10.18     Bill of Sale, dated September 29, 1997, executed by Registrant.**

10.19     Lease  Agreement,  dated  November  7,  1995,  between  Registrant  and SCI
          Limited Partnership.**

10.20     $3,000,000  Term Loan  Agreement,  dated  September 30, 1996, by Registrant
          and M&T Trust Company.**

10.21     Letter of Credit Reimbursement  Agreement,  dated November 21, 1995 between
          CVC Holdings Inc. and M&T Trust Company.**

<PAGE>
                                       39


10.22     Continuing   Guaranty  of  CVC  Holdings,   dated   February  2,  1996,  by
          Registrant.**

10.23     Continuing   Guaranty  of  CVC  Products,   dated   February  2,  1996,  by
          Registrant.**

10.24     General  Security  Agreement of CVC  Products,  dated  February 2, 1996, by
          Registrant.**

10.25     General  Security  Agreement of CVC  Holdings,  dated  February 2, 1996, by
          Registrant.**

10.26     U.S.  $1,000,000  subordinated  Promissory  Note,  dated December 20, 1991,
          between the Registrant and Nikko Tecno Co., Inc.**

10.27     Employment   Agreement,   dated  as  of  December  15,  1997,  between  the
          Registrant and Christine B. Whitman.**

10.28     Employment   Agreement,   dated  as  of  December  15,  1997,  between  the
          Registrant and Giovanni Nocerino.**

10.29     Employment   Agreement,   dated  as  of  December  15,  1997,  between  the
          Registrant and Emilio O. DiCataldo.**

10.30     Employment   Agreement,   dated  as  of  December  15,  1997,  between  the
          Registrant and Mehrdad M. Moslehi.**

10.31     Employment   Agreement,   dated  as  of  December  15,  1997,  between  the
          Registrant and Christopher J. Mann.**

10.32     Employment   Agreement,   dated  as  of  December  15,  1997,  between  the
          Registrant and Richard J. Chicotka.**

10.33     Securities  Purchase   Agreement,   dated  December  10,  1998,  among  the
          Registrant and entities affiliated with Advent International Corporation.**

10.34     Common Stock Purchase Warrant, dated December 10, 1998, between the Registrant and Global Private Equity III Limited
          Partnership.**

10.35     Common Stock Purchase Warrant, dated December 10, 1998, between the Registrant and Advent PGGM Global Limited
          Partnership.**

10.36     Common Stock Purchase Warrant, dated December 10, 1998, between the Registrant and Advent GPE III Limited
          Partnership.***

10.37     Common Stock Purchase Warrant, dated December 10, 1998, between the Registrant and Advent Partners (NA) GPE III.**

10.38     Common Stock Purchase Warrant, dated December 10, 1998, between the Registrant and Advent Partners Limited
          Partnership.**

10.39     Merger  Agreement,  dated as of April 1, 1999,  among the Registrant,  CVC
          Acquisition Corp., Commonwealth Scientific Corporation and the 5% Shareholders.**

10.40     Escrow  Agreement,  dated  as of May  10,  1999,  among  the  Registrant,
          Commonwealth Scientific Corporation and M&T Company.**

10.41     Consulting  Agreement,  dated as of April 1, 1999,  between the Registrant
          and George R. Thompson, Jr.**

10.42     Union Agreement,  dated October 31, 1998, between the Registrant and Local
          342, International Union of Electronic, Electrical, Salaried, Machine & Furniture Workers.**

10.43     Amended and Restated  Stockholders  Agreement,  dated as of May 10, 1999,
          among the Registrant and certain of its stockholders.**

10.44     Loan Agreement,  dated March 31, 1998, between CVC Products,  Inc. and M&T
          Trust Company.**

10.45     Letter  Amendment,  dated September 30, 1998 to Loan Agreement dated March
          31, 1998, between CVC Products, Inc. and M&T Trust Company.**

10.46     Letter  Amendment,  dated February 19, 1999 to Loan Agreement  dated March
          31, 1998, between CVC Products, Inc. and M&T Trust Company.**

<PAGE>
                                       40


10.47     Amendment, dated September 22, 1999 to Loan Agreement, dated March 31, 1998 between CVC Products, Inc. and M&T Trust
          Company.**

10.48     Patent Collateral Assignment and Security Agreement, dated September 22, 1999, between Commonwealth Scientific
          Corporation and M&T Trust Company.**

10.49     Amended and Restated Patent Collateral Assignment and Security Agreement, dated September 22, 1999, among, CVC

10.50     Trademark Collateral Assignment and Security Agreement, dated September 22, 1999, between Commonwealth Scientific
          Corporation and M&T Trust Company.**

10.51     Acknowledgement and Agreement, dated September 22, 1999 among Registrant, CVC Products, Inc. and M&T Trust Company.**

10.52     General Security Agreement, dated September 22, 1999 between CVC Process Solutions, Inc. and M&T Trust Company.**

10.53     General Security Agreement, dated September 3, 1999 between Commonwealth Scientific Corporation and M&T Trust
          Company.**

10.54     Continuing Guaranty, dated September 22, 1999 among Registrant, Commonwealth Scientific Corporation and M&T Trust
          Company.**

10.55     Continuing Guaranty, dated September 22, 1999 among Registrant, CVC Process Solutions, Inc. and M&T Trust Company.**

10.56     Master Equipment Lease No. 1, dated April 7, 1998 between CVC Products, Inc. and M&T Financial Corporation.**

10.57     Lease Agreement, dated February 1, 1995, between North Point Associates Limited Partnership and Commonwealth
          Scientific Corporation.**

10.58     Lease  Agreement,  dated  August 14, 1996  between  North Point  Associates Limited Partnership and Commonwealth
          Scientific Corporation.**

11.0      Computation of Earnings Per Share.**

21.1      List of Subsidiaries.**

23.1      Consent of PricewaterhouseCoopers LLP.*

23.2      Consent of Arthur Andersen LLP.*

23.3      Consent of Dewey Ballantine LLP (contained in Exhibit 5.1).**

24.1      Power of Attorney (included on page II-5).**

27.1      Financial Data Schedule.*

<FN>

*    Filed herewith.

**   Previously filed as an Exhibit to the Registrant's  Registration  Statement
     on Form  S-1  (Registration  No.  333-38057)  and  incorporated  herein  by
     reference.
</FN>
</TABLE>
<PAGE>
                                       41


ITEM 15.  SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                            CVC, INC.

                                            By:   /s/ Christine B. Whitman
                                                -----------------------------
                                                    Christine B. Whitman

                                                Chairman of the Board,
                                                President and Chief Executive
                                                Officer

Dated:  December 28, 1999

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report has been signed by the following persons in the capacities  indicated and
on the dates indicated:

<TABLE>
<CAPTION>
             SIGNATURE                                        TITLE                                       DATE
             ---------                                        -----                                       ----
<S>            <C>                                             <C>                                         <C>

                                           Chairman of the Board, Chief Executive Officer              December 28, 1999
/s/  Christine B. Whitman                  and President (principal executive officer)
----------------------------------
          Christine B. Whitman


                                           Senior Vice President and Chief Financial                   December 28, 1999
                                           Officer (principal accounting and financial
/s/  Emilio O. DiCataldo                   officer)
----------------------------------
          Emilio O. DiCataldo


/s/  Robert C. Fink                        Director                                                    December 28, 1999
----------------------------------
          Robert C. Fink


/s/  Maurice F. Holmes                     Director                                                    December 28, 1999
----------------------------------
          Maurice F. Holmes


/s/  Douglas A. Kingsley                   Director                                                    December 28, 1999
----------------------------------
          Douglas A. Kingsley


/s/  Thomas C. McDermott                   Director                                                    December 28, 1999
----------------------------------
          Thomas C. McDermott


/s/  Seiya Miyanishi                       Director                                                    December 28, 1999
----------------------------------
          Seiya Miyanishi


/s/  Donald L. Waite                       Director                                                    December 28, 1999
----------------------------------
          Donald L. Waite


</TABLE>
<PAGE>




<TABLE>
<CAPTION>
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

CVC, INC.
<S>                                                                          <C>
Report of Independent Accountants ........................................   F-2
Consolidated Balance Sheets ..............................................   F-3
Consolidated Statements of Operations ....................................   F-4
Consolidated Statements of Stockholders' Equity ..........................   F-5
Consolidated Statements of Cash Flows ....................................   F-6
Notes to Consolidated Financial Statements ...............................   F-7
</TABLE>
<TABLE>
<CAPTION>

ACQUIRED COMPANY (COMMONWEALTH SCIENTIFIC CORPORATION)
<S>                                                                         <C>
Report of Independent Public Accountants .................................  F-23
Balance Sheets ...........................................................  F-24
Statements of Operations .................................................  F-26
Statements of Stockholders' Equity .......................................  F-27
Statements of Cash Flows .................................................  F-28
Notes to Financial Statements ............................................  F-29
</TABLE>

<PAGE>
                                      F-2


                        REPORT OF INDEPENDENT ACCOUNTANTS

To Board of Directors and Stockholders of CVC, Inc.

                  In our opinion,  the accompanying  consolidated balance sheets
         and the related  consolidated  statements of operations,  stockholders'
         equity and cash flows present  fairly,  in all material  respects,  the
         financial position of CVC, Inc. (the "Company") and its subsidiaries at
         September 30, 1999 and 1998,  and the results of their  operations  and
         their  cash  flows  for each of the  three  years in the  period  ended
         September 30, 1999 in conformity  with  generally  accepted  accounting
         principles.  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 audits. We conducted our audits
         of these  statements in accordance  with  generally  accepted  auditing
         standards  which  require  that we plan and perform the audit to obtain
         reasonable assurance about whether the financial statements are free of
         material  misstatement.  An audit includes examining,  on a test basis,
         evidence  supporting  the  amounts  and  disclosures  in the  financial
         statements,  assessing the accounting  principles  used and significant
         estimates  made by management,  and  evaluating  the overall  financial
         statement presentation. We believe that our audits provide a reasonable
         basis for the opinion expressed above.

PricewaterhouseCoopers LLP

October 18, 1999
<PAGE>
                                      F-3


<TABLE>
<CAPTION>
                                                               CVC, Inc.
                                                      Consolidated Balance Sheets
                                                   (In Thousands, Except Share Data)

                                                                                              At September 30,
                                                                                              ----------------
                                                                                                                     1999 Pro Forma
                                                                                 1998               1999                (Note 1)
                                                                                 ----               ----                --------
<S>                                                                             <C>                 <C>                 <C>
Assets
Current assets:
   Cash and cash equivalents...........................................          $106                $434                   $434
   Accounts receivable-trade (includes related party receivables of
     $1,397 and $4,105 at September 30, 1998 and 1999, respectively),
     less allowance for doubtful accounts of $345 and $887 at
     September 30, 1998 and 1999, respectively                                  7,026              21,559                 21,559
   Inventories.........................................................        18,811              29,187                 29,187
   Deferred income taxes...............................................         1,431               2,819                  2,819
   Other current assets................................................         1,055               1,396                  1,396
                                                                                -----               -----                  -----
                                                                               28,429              55,395                 55,395
Property, plant and equipment, net.....................................        13,901              19,374                 19,374
Goodwill and other intangible assets, net..............................           434               1,148                  1,148
                                                                                  ---               -----                  -----
           Total assets................................................       $42,764             $75,917                $75,917
                                                                              =======             =======                =======
Liabilities and Stockholders' Equity
Current liabilities:
   Short-term borrowings and current portion of long-term debt.........        $5,689             $13,217                $13,217
   Accounts payable....................................................         7,221              11,279                 11,279
   Advances from customers (includes related party amounts of $463 at
     September 30, 1998)..............................................          1,167               1,483                  1,483
  Other current liabilities...........................................          3,448               7,312                  7,312
                                                                                -----               -----                  -----
                                                                               17,525              33,291                 33,291
Long-term debt (includes related party note of $1,500 at September 30,
     1998).............................................................        11,379               8,493                  8,493
Deferred income taxes..................................................         1,393               1,554                  1,554
Other liabilities......................................................           487                 986                    986
                                                                                  ---                 ---                    ---
           Total liabilities...........................................        30,784              44,324                 44,324
Commitments (Note 14)
Stockholders' equity:
   Preferred stock, $.01 par value per share; 502,500 shares
     shares issued and outstanding:
   Series C-100,000 shares at September 30, 1999 (liquidation
     preference of $10,000,000)........................................             -               9,855                      -
   Series D-100,000 shares pro forma (liquidation preference of
     $10,000,000)......................................................             -                   -                 10,000
   Series B-60,492 shares at September 30, 1998 and 1999 (liquidation
     preference of $9,000,000).........................................         8,355               8,355                      -
   Series A-1,685 shares at September 30, 1998 and 1999 (liquidation
     preference of $1,685,000).........................................         1,685               1,685                      -
Common Stock, $.01 par value per share; 50,000,000 shares authorized;
     1,057,929 shares issued and outstanding at September 30, 1998 and
     2,360,767 shares issued and outstanding at September 30, 1999.....            11                  24                     85
Additional paid-in capital.............................................         1,099               9,305                 19,139
Warrant................................................................             -                  14                      -
Unamortized deferred compensation......................................         (252)               (135)                  (135)
Retained earnings......................................................         1,213               2,784                  2,798
Minimum pension liability..............................................         (131)               (294)                  (294)
                                                                                ----                ----                   ----
Total stockholders' equity.............................................        11,980              31,593                 31,593
                                                                               ------              ------                 ------
Total liabilities and stockholders' equity.............................       $42,764             $75,917                $75,917
                                                                              =======             =======                =======


                         The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
                                      F-4

<TABLE>
<CAPTION>

                                                               CVC, Inc.
                                                 Consolidated Statements of Operations
                                                 (In Thousands, Except Per Share Data)

                                                                                                    For the Year Ended September 30,
                                                                                                    --------------------------------
                                                                                                      1997        1998        1999
                                                                                                      ----        ----        ----
<S>                                                                                                   <C>          <C>         <C>
Revenues (includes sales to related party of $29,244, $21,322, and $28,408, for the years
     September 30, 1997, 1998 and 1999, respectively).........................................       $62,588     $68,173     $82,915
Cost of goods sold (includes cost of goods sold to related party of $17,352, $11,115, and
     for the years ended September 30, 1997, 1998 and 1999, respectively).....................        41,286      42,019      50,502
                                   --- ----- ----     -----                                           ------      ------      ------
Gross margin..................................................................................        21,302      26,154      32,413
Operating expenses
   Research and development...................................................................         9,055      12,615      12,630
   In-process R&D write-off...................................................................             -           -       1,174
   Sales and marketing........................................................................         5,613       7,696      10,081
   General and administrative.................................................................         2,539       3,476       4,822
                                                                                                       -----       -----       -----
                                                                                                      17,207      23,787      28,707
                                                                                                      ------      ------      ------
Income from operations........................................................................         4,095       2,367       3,706
Other income/(expense)
   Write-off of deferred charges..............................................................             -       (675)           -
   Interest and other income..................................................................            11         171       1,037
   Interest expense...........................................................................         (604)     (1,325)     (1,235)
                                                                                                       ----      ------      ------
                                                                                                       (593)     (1,829)       (198)
                                                                                                       ----      ------        ----
Income before income taxes....................................................................         3,502         538       3,508
Income taxes..................................................................................         1,457         274       1,937
                                                                                                       -----         ---       -----
Net income....................................................................................        $2,045        $264      $1,571
                                                                                                      ======        ====      ======

Net income per share:
   Basic......................................................................................         $2.67       $0.26       $1.01
                                                                                                       =====       =====       =====
   Diluted....................................................................................         $0.29       $0.04       $0.18
                                                                                                       =====       =====       =====

                         The  accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
                                      F-5


<TABLE>
<CAPTION>
                                                               CVC, Inc.
                                            Consolidated Statements of Stockholders' Equity
                                                   (In Thousands, Except Share Data)

                          Series C       Series B       Series A
                         Preferred      Preferred      Preferred
                           Stock          Stock          Stock        Common Stock                Unamort-
                           -----          -----          -----        ------------                 ized
                        Number         Number        Number        Number         Paid-           Deferred           Minimum
                          of            of             of           of     Par     in             Compen-  Retained  Pension
                        Shares Amount  Shares Amount Shares Amount Share  Value  Capital  Warrant  Sation  Earnings  Liability Total
                        ------ ------  ------ ------ ------ ------ -----  -----  -------  -------  ------  --------  --------- -----
<S>                      <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>      <C>       <C>    <C>          <C>    <C>
Balance at October 1,
     1996............                  60,492 $8,355 1,685 $1,685 735,160  $7     $454                       $(1,096)  $(86) $9,319
Net income ..........                                                                                          2,045          2,045
Minimum pension
    liability........                                                                                                    (2)     (2)
Tax impact on pension
    liability........                                                                                                     1       1
                                                                                                                                  -
   Comprehensive
     earnings........                                                                                                         2,044
Deferred compensation                                                              261            $(261)                         --
Amortization of
    deferred
    compensation.....                                                                                 7                           7
Issuance of common
    stock............                                             114,100   2       56                                           58
                                                                  -------   -       --                                           --
Balance at September
    30, 1997.........       --    --   60,492 8,355  1,685 1,685  849,260   9      771             (254)      949      (87)  11,428
Net income ..........                                                                                         264               264
Minimum pension
    liability........                                                                                                  (74)     (74)
Tax impact on pension
    liability........                                                                                                   30       30
                                                                                                                                 --
   Comprehensive
     earnings........                                                                                                           220
Deferred compensation                                                              109              (109)                        --
Amortization of
     deferred
     compensation...                                                                                 111                        111
Issuance of common
     stock...........                                              208,669  2      219                                          221
Balance at September
     30, 1998........       --    --   60,492 8,355  1,685 1,685 1,057,929 11    1,099      --      (252)   1,213     (131)  11,980
Net income ..........                                                                                       1,571             1,571
Minimum pension
      liability                                                                                                       (271)    (271)
Tax impact on pension
      liability......                                                                                                  108      108
                                                                                                                                ---
     Comprehensive
      earnings.......                                                                                                         1,408
Deferred compensation                                                             (12)               12                          --
Amortization of
      deferred
      compensation...                                                                               105                         105
Issuance of preferred
      stock and
      warrant........   100,000 $9,855                                                     $14                                9,869
Issuance of common
      stock..........                                             1,302,838 $13   8,218                                       8,231
                                                                  --------- ---   -----                                       -----
Balance at September
      30, 1999.......   100,000 $9,855 60,492 $8,355 1,685 $1,685 2,360,767 $24  $9,305    $14    $(135)   $2,784   $(294)  $31,593
                        ======= ====== ====== ====== ===== ====== ========= ===  ======    ===    =====    ======   =====   =======

                         The accompanying notes are an integral part of these financial statements.

</TABLE>
<PAGE>
                                      F-6



<TABLE>
<CAPTION>

                                                               CVC, Inc.
                                                 Consolidated Statements of Cash Flows
                                                            (In Thousands)
                                                                                                    For the Year Ended September 30,
                                                                                                    --------------------------------
                                                                                                    1997          1998          1999
                                                                                                    ----          ----          ----
<S>                                                                                                 <C>           <C>           <C>
Cash flows from operating activities:
        Net income........................................................................         $2,045          $264       $1,571

Adjustments  to reconcile  net income to net cash  provided  (used) by operating
activities:
   In-process R&D write-off...............................................................              -             -        1,174
   Depreciation and amortization..........................................................          1,285         2,167        4,180
   Provision for deferred taxes...........................................................            461         (259)        (166)
   Changes in operating assets and liabilities -
      Accounts receivable (including related party).......................................        (3,406)         1,262     (12,046)
      Inventories.........................................................................        (5,767)         1,721        1,449
      Other assets........................................................................          (405)         (931)          456
      Accounts payable....................................................................          4,556       (2,772)          746
      Advances from customers (including related party)...................................          3,035       (7,485)      (2,402)
      Other liabilities...................................................................          1,299         (890)          200
                                                                                                    -----         ----           ---
        Total adjustments.................................................................          1,058       (7,187)      (6,409)
                                                                                                    -----       ------       ------
        Net cash provided (used) by operating activities..................................          3,103       (6,923)      (4,838)
                                                                                                    -----       ------       ------
Cash flows from investing activities:
   Capital expenditures...................................................................        (2,805)       (4,817)      (1,755)
                                                                                                  ------        ------       ------
        Net cash used by investing activities.............................................        (2,805)       (4,817)      (1,755)
                                                                                                  ------        ------       ------
Cash flows from financing activities:
   Net proceeds from line of credit.......................................................            527         3,612        6,540
   Payments on notes payable (including related party)....................................              -       (1,127)      (1,500)
   Proceeds from long-term debt...........................................................          2,000         8,000            -
   Payments on long-term debt and capital lease obligations...............................        (1,452)       (1,021)      (8,111)
   Net proceeds from issuance of preferred stock and warrant..............................              -             -        9,869
   Net proceeds from issuance of common stock.............................................             58           221          123
                                                                                                       --           ---          ---
        Net cash provided by financing activities.........................................          1,133         9,685        6,921
                                                                                                    -----         -----        -----
Net increase (decrease) in cash and cash equivalents......................................          1,431       (2,055)          328
Cash and cash equivalents, beginning of period............................................            730         2,161          106
                                                                                                      ---         -----          ---
Cash and cash equivalents, end of period..................................................         $2,161          $106         $434
                                                                                                   ======          ====         ====

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Non-cash investing transaction:
   Equipment capitalized from inventory...................................................             $-        $1,828       $2,258
   Equipment transferred to inventory.....................................................              -            $-         $198
   Net tangible assets acquired by issuing common stock (Note 2)..........................                                    $6,298
Cash paid during the year for:
   Interest...............................................................................           $542        $1,287       $1,237
   Income taxes...........................................................................           $782        $1,430       $1,100

                         The  accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
                                      F-7


                                    CVC, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1-NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATION

     The consolidated financial statements of CVC, Inc. and subsidiaries (CVC or
the Company) include the consolidated  accounts of CVC, Inc., CVC Products Inc.,
Commonwealth Scientific Corporation,  since acquisition on May 10, 1999, and CVC
Process  Solutions,  Inc. CVC is a worldwide  supplier of fabrication  equipment
providing thin film process solutions for the manufacture of magnetic  recording
heads and  advanced  semiconductor  devices  for  computers  and  communications
systems.  The Company  maintains  offices in  Rochester,  New York;  Alexandria,
Virginia; Fremont, California; Garland, Texas; Minneapolis, Minnesota; Japan and
Northern Ireland.

     All significant intercompany balances and transactions have been eliminated
in consolidation.

UNAUDITED PRO FORMA BALANCE SHEET

     The  Company's   Series  A  and  Series  B  Convertible   Preferred   Stock
automatically  convert into common stock and the Company's  Series C Convertible
Preferred Stock automatically converts into common stock and Series D Redeemable
Preferred Stock  concurrent with the closing of an initial public offering (Note
10). Accordingly,  the unaudited pro forma balance sheet has been presented on a
basis to give effect to the automatic conversion of such stock as of the closing
date of the initial  public  offering which for pro forma purposes is assumed to
occur as of September 30, 1999.

USE OF ESTIMATES

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure  of  contingent  assets and  liabilities  at  year-end as well as the
reported  amounts of revenues and expenses during the reporting  period.  Actual
results could differ from those estimates.

CONCENTRATION OF CREDIT RISK

     Financial  instruments which potentially  expose the Company to significant
concentrations  of credit risk consist  principally of bank deposits,  temporary
investments,  accounts receivable (including related party  receivables-Note 12)
and  accrued  expenses.  Cash is placed  primarily  in high  quality  short-term
interest bearing financial instruments.

     The Company performs ongoing credit evaluations of its customers' financial
condition  and the Company  maintains an allowance  for  uncollectible  accounts
receivable based upon the expected collectibility of all accounts receivable.

FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying amount of the Company's financial instruments,  including cash
and  cash  equivalents,   accounts  receivable,  accounts  payable  and  accrued
expenses,  approximates  their fair value at September 30, 1998 and 1999, as the
maturities of these  instruments  are all short term.  Due to differences in the
stated interest rates on certain short and long-term debt  obligations  compared
to prevailing  rates,  the fair value of these  instruments does vary from their
carrying amounts; however, such differences are immaterial.

<PAGE>
                                      F-8


                                    CVC, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1-NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(CONTINUED)

REVENUE RECOGNITION

     Revenue from the sale of equipment is recognized upon shipment.
Provisions for estimated product warranty and installation costs are recorded at
the time revenue is recognized.  The Company generally  warrants its new systems
for 15  months  from the date of  shipment.  Such  warranties  provide  that new
systems are free from defects in materials and workmanship under normal use.

     Amounts received from customers prior to product shipment are classified as
advances from customers.

CASH AND CASH EQUIVALENTS

     Cash and cash equivalents consist of highly liquid debt instruments
with original maturities of three months or less.

INVENTORIES

     Inventories,  which include materials,  labor and overhead, are recorded at
the lower of cost,  determined  by the  first-in,  first-out  method,  or market
value.  The  Company  provides  inventory  reserves  for  excess,   obsolete  or
slow-moving   inventory  based  on  changes  in  customer   demand,   technology
developments, and other economic factors.

PROPERTY, PLANT AND EQUIPMENT

     Property,  plant and equipment are stated at cost. Depreciation is provided
on a  straight-line  basis over the estimated  useful lives of 3 to 10 years for
equipment,   furniture  and  fixtures  and  40  years  for  buildings.  Building
improvements  are depreciated over the shorter of 10 years or the remaining life
of the building or the useful life of the  improvement.  Maintenance and repairs
are expensed as incurred. Improvements which extend the useful life of property,
plant and equipment are  capitalized.  Upon  retirement or disposal of an asset,
the asset and the  related  accumulated  depreciation  are  eliminated  from the
accounts,  with any  gains or losses  from sale  recorded  in the  statement  of
operations.

CAPITALIZED SOFTWARE COSTS

     The Company capitalizes the costs associated with purchased software
for resale and subsequently amortizes such costs on a units-of-production  basis
over their estimated remaining economic life,  generally 3 years. These amounts,
which are included in other assets, are reported at the lower of the unamortized
cost or net realizable value and are immaterial.

ASSET IMPAIRMENT

     The Company regularly  assesses all of its long-lived assets for impairment
when events or circumstances indicate, in accordance with Statement of Financial
Accounting   Standards  (SFAS)  No.  121,  "Accounting  for  the  Impairment  of
Long-Lived  Assets and for Long-Lived  Assets to be Disposed Of." The assessment
is accomplished by comparing the estimated undiscounted future cash flows of the
asset grouping with the respective carrying amount as of the date of assessment.
Should  aggregate  future  cash  flows be less  than the  carrying  value of the

<PAGE>
                                      F-9


                                    CVC, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1-NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(CONTINUED)

assets, a write-down would be required,  measured by the difference  between the
carrying value of the assets and the discounted future cash flows.

RESEARCH AND DEVELOPMENT

     Research and development costs are expensed as incurred.

INCOME TAXES

     The  Company  accounts  for  income  taxes  using the  asset and  liability
approach which requires  recognition of deferred tax  liabilities and assets for
the  expected  future tax  consequences  of  temporary  differences  between the
financial  statement  carrying  amounts  and the tax  basis of such  assets  and
liabilities.

     The asset and  liability  method  utilizes  enacted  statutory tax rates in
effect for the year in which the temporary  differences  are expected to reverse
and gives  immediate  effect to  changes  in income  tax rates  upon  enactment.
Deferred  tax  assets  are  recognized,  net of  any  valuation  allowance,  for
deductible  temporary   differences  and  net  operating  loss  and  tax  credit
carryforwards.

NEW ACCOUNTING STANDARDS

     Effective  October 1, 1998,  the Company  adopted  Statement  of  Financial
Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive Income", which
establishes new rules for the reporting and display of comprehensive  income and
its components;  however, the adoption had no impact on the Company's net income
or  stockholders'  equity.  SFAS 130  requires  changes to the  minimum  pension
liability,  to be included in other comprehensive  income.  Prior year financial
statements have been reclassified to conform to the requirements of SFAS 130.

     In  April  1998,  the  Accounting   Standards  Executive  Committee  issued
Statement  of  Position  (SOP)  98-5,   "Reporting  on  the  Costs  of  Start-Up
Activities."   Start-up   activities  are  defined  broadly  as  those  one-time
activities  relating  to opening a new  facility,  introducing  a new product or
service, conducting business in a new territory,  conducting business with a new
class of customer,  commencing  some new  operation or  organizing a new entity.
Under SOP 98-5, the cost of start-up  activities should be expensed as incurred.
SOP 98-5 is effective for the Company's  fiscal year 2000  financial  statements
and the Company  does not expect its  adoption to have a material  effect on the
Company's financial condition or results of operations.

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The new standard
establishes  accounting  and  reporting  standards for  derivative  instruments,
including certain derivative  instruments  embedded in other contracts,  and for
hedging  activities.  SFAS No. 133 is effective for all quarters of fiscal years
beginning  after June 15, 2000. The Company does not expect SFAS No. 133 to have
a material effect on the Company's financial condition or results of operations.
<PAGE>
                                      F-10




                                    CVC, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1-NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(CONTINUED)

STOCK SPLITS

     On October 14, 1997, the Company declared a 3-for-1 stock split in the form
of a stock  dividend  to  stockholders  of record at the  close of  business  on
October  31,  1997.  This stock  split  increased  the  number of common  shares
outstanding by 849,260. All references in the consolidated  financial statements
referring to share prices,  conversion  rates,  per share amounts,  stock option
plans and common shares issued and outstanding have been adjusted  retroactively
for the 3-for-1 stock split.

     On August 30, 1999, the Company  declared a 2-for-3  reverse stock split to
become  effective  in  connection  with  the  completion  of an  initial  public
offering.  This  reverse  stock  split  decreased  the  number of common  shares
outstanding  by  1,172,688.   All  references  in  the  consolidated   financial
statements referring to share prices, conversion rates, per share amounts, stock
option plans and common  shares  issued  and/or  outstanding  have been adjusted
retroactively for the 2-for-3 reverse stock split.

NOTE 2-ACQUISITION

     On May 10, 1999, the Company acquired Commonwealth  Scientific  Corporation
(Commonwealth),  a Virginia  based  company  which  offers ion beam  modules and
systems which provide ion beam etching, deposition and diamond-line carbon (DLC)
processes and ion beam sources for research and  development  (R&D) and original
equipment manufacturer customers. The purchase price of $8,498,000 was comprised
of the issuance of 1,268,799 shares of the Company's common stock, exchanged and
assumed  options in Commonwealth  for options to purchase  286,228 shares of the
Company's  common  stock,  and related  acquisition  costs.  The issuance of the
Company's stock was recorded at fair market value,  and the assumed options were
recorded at fair market value using the Black-Scholes  option pricing model. The
acquisition  was  accounted  for using the purchase  method of  accounting.  The
purchase price was allocated as follows (in thousands):
<TABLE>
<CAPTION>
<S>                                                                        <C>
Net tangible assets of Commonwealth ..........................            $6,298
Purchased in-process R&D .....................................             1,174
Intangible assets:
   Workforce in place ........................................               704
   Current technology ........................................               265
   Goodwill ..................................................                57
                                                                              --
Total purchase price .........................................            $8,498
                                                                          ======
</TABLE>

     The net tangible assets includes a write-up of  Commonwealth's  property to
fair market value by $600,000 and the recognition of a  restructuring  liability
approximating  $550,000.  Approximately $140,000 of the restructuring  liability
relates to severance  costs  associated  with the  reduction  of  Commonwealth's
workforce by approximately 20%, or 29 employees.  The reduction of the workforce
and the payment of  termination  benefits was  completed by September  30, 1999.
Approximately $410,000 of the restructuring  liability relates to existing lease
obligations or cancellation  penalties  associated with facilities which will be
exited.  Lease payments will be made through fiscal 2000. At September 30, 1999,
approximately $200,000 has been charged against the restructuring liability. The


<PAGE>
                                      F-11


                                    CVC, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2-ACQUISITION (CONTINUED)

Company believes that the amounts  remaining under the  restructuring  liability
are adequate to cover the remaining lease obligations.

     The  purchased  in-process  R&D  includes  the  value  of  products  in the
development  stage,  which have not reached  technological  feasibility  and for
which  there  is no  alternative  future  use.  In  accordance  with  applicable
accounting  rules,   purchased  in-process  R&D  is  required  to  be  expensed.
Accordingly,  the amount of  $1,174,000  was  expensed  in the third  quarter of
fiscal 1999.

     The Company used independent  professional  appraisal consultants to assess
and allocate  value to the acquired  in-process  R&D.  The  allocated  value was
determined using the income approach,  which involves  estimating the discounted
after-tax cash flows  attributable  to projects based on the projects'  stage of
completion.

     A discount  rate of 35% was applied to the  projects'  cash flows and there
were no material changes from historical pricing,  margins,  and expense levels.
Management  believes that the assumptions  used in the forecasts were reasonable
at the time of the business  combination.  No assurance  can be given,  however,
that  the  underlying  assumptions  used to  estimate  expected  project  sales,
development  costs, or  profitability  will be realized as estimated.  For these
reasons, actual results may vary from the projected results.

     Estimated  net cash  inflows from the acquired  in-process  technology  are
projected to commence in fiscal 2001.

     The amortization periods of intangible assets related to workforce in
place,  current  technology  and goodwill are seven years,  five years and seven
years, respectively.

     The operating  results of Commonwealth  have been included in the Company's
consolidated statement of operations from the date of acquisition. The unaudited
pro forma results below assume the  acquisition  occurred on October 1, 1997 (in
thousands):
<TABLE>
<CAPTION>
                                                       Pro Forma
                                                       ---------
                                        For the Year Ended    For the Year Ended
                                        September 30, 1998    September 30, 1999
                                        ------------------    ------------------
<S>                                          <C>                      <C>
Net sales ................................       $112,060           $101,841
Operating income .........................          4,782                678
Net income ...............................          1,524                 62
Net income per share:
   -Basic ................................       $   0.67           $   0.03
   -Diluted ..............................       $   0.18           $   0.01
</TABLE>

     The pro forma results include amortization of the intangibles presented
above and cost reductions related to the restructuring charges, and excludes the
write-off of the  in-process  R&D in each period.  The pro forma results are not
necessarily  indicative of what actually would have occurred if the  acquisition
had been completed as of the beginning of each of the fiscal periods  presented,
nor are they necessarily indicative of future consolidated results.

<PAGE>
                                      F-12


                                    CVC, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3-INVENTORIES

     Inventories  consisted of the  following at September 30, 1998 and 1999 (in
thousands):
<TABLE>
<CAPTION>
                                                          1998            1999
                                                          ----            ----
<S>                                                        <C>             <C>
Component parts ................................       $  8,976        $ 15,421
Work-in-process ................................          5,615          11,674
Finished goods .................................          4,917           4,117
                                                         19,508          31,212
                                                         ------          ------
      Less-reserve for obsolescence ............           (697)         (2,025)
                                                           ----          ------
                                                       $ 18,811        $ 29,187
                                                       ========        ========
</TABLE>

NOTE 4-PROPERTY, PLANT AND EQUIPMENT

     Property,  plant and equipment  consisted of the following at September 30,
1998 and 1999 (in thousands):
<TABLE>
<CAPTION>

                                                         1998             1999
                                                         ----             ----
<S>                                                       <C>              <C>
Land .........................................        $    625         $  2,225
Buildings and improvements ...................           5,954            7,548
Machinery and equipment ......................          10,358           22,048
                                                        ------           ------
                                                        16,937           31,821
   Less-Accumulated depreciation .............          (4,721)         (12,447)
                                                        ------          -------
                                                        12,216           19,374
Construction-in-process ......................           1,685             --
                                                         -----
                                                      $ 13,901         $ 19,374
                                                      ========         ========
</TABLE>

     Construction-in-process  was mainly  comprised of machinery  and  equipment
which was placed in service subsequent to September 30, 1998.

     Included in property,  plant and equipment is $2,220,000 and $2,494,000 for
a  building  and  certain  equipment  held under  capital  lease  agreements  at
September 30, 1998 and 1999,  respectively.  Related accumulated amortization at
September 30, 1998 and 1999 was $403,000 and $558,000, respectively.

     Total  depreciation  and  amortization  expense on plant and  equipment was
$1,215,000,  $1,874,000  and  $3,697,000 in 1997,  1998 and 1999,  respectively.
Total  depreciation  expense on assets under capital  leases was $56,000 in 1997
and 1998 and $102,000 in 1999.
<PAGE>
                                      F-13




                                    CVC, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5-OTHER CURRENT LIABILITIES

     Other current liabilities  consisted of the following at September 30, 1998
and 1999 (in thousands):
<TABLE>
<CAPTION>

                                                           1998            1999
                                                           ----            ----
<S>                                                       <C>             <C>
Accrued payroll and benefits ...................          $  874          $1,981
Other current liabilities ......................           2,574           5,331
                                                           -----           -----
                                                          $3,448          $7,312
                                                          ======          ======
</TABLE>

NOTE 6-NOTES PAYABLE AND LONG-TERM DEBT

     In  August  1974,  the  Company  entered  into  an  agreement  with a local
government agency under which the agency's bond proceeds of $2,400,000 were used
to purchase land and  construct an operating  facility for lease to the Company.
The industrial  revenue bond obligation  required  monthly payments of principal
and interest at 8%  (approximately  $19,000 in total).  In September  1997,  the
Company  refinanced the remaining  principal of the industrial revenue bond with
the proceeds of a new mortgage  credit  facility with a principal of $2,000,000.
The lease term extends to December 31, 2007, at which time title to the property
passes, upon payment of nominal  consideration by the Company.  The new mortgage
credit  facility  requires  monthly  payments of  approximately  $16,000 through
October 1, 2007,  calculated based upon an amortization  period of twenty years.
In addition,  on October 1, 2007, the Company will pay a final installment equal
to the outstanding  principal and interest on the credit facility based upon the
actual term of this facility  which is ten years.  The interest rate on $500,000
of the mortgage  credit  facility is 5.29% until October 1, 1999 after which the
rate increases to 8.29% through September 30, 2002, consistent with the interest
rate on  $1,500,000  of the credit  facility.  Beginning  October  1, 2002,  the
Company will likely elect to pay interest on the remaining principal at the then
prime rate plus one-half percent,  or a rate equal to 225 basis points above the
yield on U.S.  treasury  bonds.  The  obligation  is secured by certain land and
buildings with a net book value of $2,386,000 at September 30, 1999.

     In November  1990,  the Company  borrowed  $1,500,000  from a company whose
president is a director and  shareholder  of the Company.  In December 1991, the
Company borrowed an additional $1,000,000 from this company. The borrowings were
evidenced  by notes,  which  were  unsecured  and  required  quarterly  interest
payments at 9%. The  $1,000,000  note was paid in full in November  1997 and the
$1,500,000  note was paid in full in  January  1999.  Interest  expense on these
notes  totaled   $225,000,   $138,000  and  $34,000  in  1997,  1998  and  1999,
respectively.

     In September 1996, the Company borrowed  $3,000,000 from a commercial bank.
The five year term loan requires  monthly  payments OF PRINCIPAL AND INTEREST AT
PRIME PLUS 1/2% through  October 1, 2001.  The  obligation is secured by certain
equipment and capital assets.

     In April 1998, the Company borrowed  $8,000,000 from a commercial bank. The
seven year term loan  requires  monthly  payments of  principal  and interest at
8.39% until April 2005. The obligation is secured by certain  personal  property
and other intangibles of the Company including patents,  patent applications and
trademarks.

     In connection with the acquisition of Commonwealth, the Company assumed
a $1,214,000 unsecured note payable to a third party. The 18-month note requires
payments of principal and interest at 8% until October 2000.
<PAGE>
                                      F-14


                                    CVC, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6-NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)

     The Company also has a  $15,000,000  bank line of credit at  September  30,
1999 which allows for maximum  borrowings based on certain  financial  criteria.
Allowable  borrowings  based  on  this  criteria  at  September  30,  1999  were
$13,819,000.  Borrowings  under the agreements are at an interest rate of prime.
There  was  approximately  $10,679,000  outstanding  under the line of credit at
September 30, 1999.

     The Company also has available an equipment line of credit at September 30,
1999  which  allows  for  maximum  borrowings  of  $3,000,000  based on  certain
financial  criteria.  Borrowings  under the agreement are at an interest rate of
prime.  There were no amounts  outstanding under the line of credit at September
30, 1999.

     The debt agreements  contain financial  covenants  requiring the Company to
maintain certain debt to equity, capital, and current ratios, as well as certain
customer  order,  income,  and operating  cash flow levels.  The agreement  also
imposes  limitations  on the  incurrence of additional  debt. The Company was in
compliance with all covenants at September 30, 1998 and 1999.

     A summary of the notes payable and long-term debt  outstanding at September
30, 1998 and 1999 is as follows (in thousands):
<TABLE>
<CAPTION>
                                                            1998          1999
                                                            ----          ----
<S>                                                         <C>            <C>
Term loan, 5 year ................................      $  1,850       $  1,250
Term loan, 7 year ................................         7,624          6,723
Notes payable due related party ..................         1,500           --
Mortgage credit facility .........................         1,955          1,906
Note payable to third party ......................          --              891
Future minimum payments under capital
     leases payable through January 2002 .........          --              261
Borrowings on line of credit .....................         4,139         10,679
                                                           -----         ------
                                                          17,068         21,710
      Less-Current portion .......................        (5,689)       (13,217)
                                                          ------        -------
                                                        $ 11,379       $  8,493
                                                        ========       ========
</TABLE>

     The aggregate  maturities  for debt over the next five years and thereafter
are  as  follows  (in  thousands):   2000-$13,217,   2001-$1,900,   2002-$1,296,
2003-$1,313, and 2004-$1,433.
<PAGE>
                                      F-15




                                    CVC, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7-INCOME TAXES

     The components of income taxes  (benefit) for the years ended September 30,
1997, 1998 and 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
                                        1997            1998            1999
<S>                                     <C>              <C>             <C>
Current:
   Federal ...............           $  604           $  417           $1,806
   State .................              392              116              297
                                        ---              ---              ---
                                        996              533            2,103

Deferred:
   Federal ...............              475              (211)           (143)
   State .................              (14)              (48)            (23)
                                        ---               ---             ---
                                        461              (259)           (166)
                                        ---              ----            ----
                                    $ 1,457           $   274         $ 1,937
                                    =======           =======         =======
</TABLE>

     The  significant  components  of  deferred  tax assets and  liabilities  at
September 30, 1998 and 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
                                                             1998         1999
<S>                                                          <C>          <C>
Deferred tax assets:
Net operating loss carryforwards .................         $  175         $  344
Inventories ......................................            455          1,076
State and federal tax credits ....................            122            209
Allowance for doubtful accounts ..................            138            373
Accrued compensation and benefits ................            240            398
Other accruals ...................................            577          1,053
                                                              ---          -----
                                                            1,707          3,453
                                                            -----          -----
Deferred tax liabilities:
Unamortized inventory accounting change ..........          (605)          (424)
Property, plant and equipment ....................          (962)        (1,343)
                                                            ----         ------
                                                          (1,567)        (1,767)
                                                          ------         ------
Deferred tax asset valuation allowance ...........          (102)          (421)
                                                            ----           ----
Net deferred tax asset ...........................       $    38        $ 1,265
                                                         =======        =======
</TABLE>
<PAGE>
                                      F-16



                                    CVC, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7-INCOME TAXES (CONTINUED)

     The differences  between income taxes (benefit) at the U.S.  statutory rate
and the effective rate for the years ended September 30, 1997, 1998 and 1999 are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
                                                  1997       1998         1999
                                                  ----       ----         ----
<S>                                            <C>         <C>          <C>
Provision at federal statutory rate ......     $ 1,191     $   183      $ 1,193
State taxes, net of federal benefit ......         213          45          226
Permanent items ..........................          53         101          546
Release of valuation allowance ...........        --           (53)        (130)
Other ....................................        --            (2)         102
                                                                --          ---
Income tax expense .......................     $ 1,457     $   274      $ 1,937
                                               =======     =======      =======
</TABLE>

     During  1998 and  1999,  the  valuation  allowance,  which  relates  to net
operating  loss  carryforwards  and state  investment  credits,  was  reduced by
$53,000 and $130,000, respectively, due to the increased likelihood the benefits
will be recognized.  As a result of the acquisition of Commonwealth,  in 1999, a
number of  permanent  items  were  recorded  by the  Company  and the  valuation
allowance increased by the assumed amount of $449,000.

     The net operating tax loss carryforwards of approximately $820,000
expire at various times through 2019.
<PAGE>
                                      F-17




                                    CVC, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8-EMPLOYEE BENEFIT PLANS

     The Company  maintains a 401(k) profit sharing plan covering  substantially
all  employees  who meet  certain  age and length of service  requirements.  The
Company contributes a percentage of the amount of salary deferral  contributions
made by each participating employee. Any additional contributions by the Company
are  discretionary.  The  amounts  charged to expense  related to this plan were
approximately  $92,000,  $222,000 and  $278,000 in fiscal  years 1997,  1998 and
1999, respectively.

     The Company had a noncontributory defined benefit pension plan. The Company
froze this plan effective  September 30, 1991 at which time all benefits  became
fully vested. Benefits were based on historical compensation levels and years of
service. The Company's funding policy is to contribute annually an amount, based
on actuarial  computations,  which would satisfy the Internal Revenue  Service's
funding  standards.  Approximately  $122,000  and  $381,000 is included in other
liabilities at September 30, 1998 and 1999,  respectively,  for accrued  pension
costs. Further, the Company has recorded an additional minimum pension liability
representing the excess of the unfunded accumulated benefit obligation over plan
assets.  The additional  minimum liability was charged to stockholders'  equity,
net of income taxes.

NOTE 9-POSTRETIREMENT HEALTH CARE BENEFITS

     The Company  provides  health care and life  insurance  benefits to certain
retired  hourly  employees as well as health care benefits to salaried  retirees
employed  prior  to  December  31,  1996.  As  permitted  under  SFAS  No.  106,
"Employers'  Accounting for  Postretirement  Benefits Other Than  Pensions," the
Company has elected to amortize  the  unfunded  accrued  postretirement  benefit
obligation at adoption over a 20-year period.

     Details of costs for retiree  benefits  for the years ended  September  30,
1997, 1998 and 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
                                                      1997       1998       1999
                                                      ----       ----       ----
<S>                                                   <C>        <C>        <C>
Service cost ..................................       $ 68       $ 90       $150
Interest cost on benefit obligation ...........         82         78         90
Amortization ..................................         56         56         60
                                                        --         --         --
Retiree health care cost ......................       $206       $224       $300
                                                      ====       ====       ====
</TABLE>

     An analysis of amounts shown in the consolidated balance sheet at September
30, 1998 and 1999 is as follows (in thousands):
<TABLE>
<CAPTION>
                                                           1998         1999
                                                           ----         ----
<S>                                                         <C>          <C>
Accumulated postretirement benefit obligation:
   Retirees ....................................        $   810         $   607
   Active participants .........................            465             787
                                                            ---             ---
                                                          1,275           1,394
Unrecognized prior service cost ................            (39)            (65)
Unrecognized net gain ..........................             73             163
Unrecognized transition obligation .............           (944)           (889)
                                                           ----            ----
Retirement benefit liability ...................        $   365         $   603
                                                        =======         =======
</TABLE>
<PAGE>
                                      F-18



                                    CVC, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9-POSTRETIREMENT HEALTH CARE BENEFITS (CONTINUED)

     The funding policy for retiree  health care and life insurance  benefits is
generally to pay covered expenses as they are incurred.

     The actuarial  calculation  assumes a health care average inflation rate of
9.5% in 1999  and  grades  down  uniformly  to 4.5% in 2010  and  remains  level
thereafter.  The  health  care cost  trend  rate has an  effect  on the  amounts
reported.  Increasing  the health care  inflation  rate by 1% would increase the
September 30, 1999 accumulated  postretirement  benefit  obligation by $190,000,
and the 1999 service cost plus interest by $55,000.  Decreasing  the health care
inflation  rate  by  1%  would  decrease  the  September  30,  1999  accumulated
postretirement  benefit  obligation by $155,000,  and the 1999 service cost plus
interest by $42,000.  The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 7.50%.

NOTE 10-STOCKHOLDERS' EQUITY

     In 1990,  the Company  issued  1,685  shares of 8% Series A  Non-Cumulative
Convertible  Preferred Stock (Series A Preferred Stock).  The Series A Preferred
Stock is  convertible  at any time at the option of the holder into common stock
at the rate of 1,600 shares of common stock for each share of Series A Preferred
Stock.  The liquidation  preference of each share of Series A Preferred Stock is
$1,000 and all declared but unpaid  dividends.  Preferred  voting rights are one
vote for each  share of common  stock  into  which the  preferred  shares may be
converted.  The Series A  Preferred  Stock will be  automatically  converted  to
2,696,000  shares of common stock upon the closing of an initial public offering
with a price  per share in excess of $12.50  and  aggregate  gross  proceeds  of
$10,000,000.

     In May 1995,  the Company  issued 60,492 shares of Series B  Non-Cumulative
Convertible  Preferred Stock (Series B Preferred Stock).  The Series B Preferred
Stock is  convertible  at any time at the option of the holder into common stock
at the rate of 40 shares of common  stock for each  share of Series B  Preferred
Stock.  Preferred voting rights are one vote for each share of common stock into
which the preferred  shares may be converted.  The Series B Preferred Stock will
be automatically  converted to 2,419,680 shares of common stock upon the closing
of an  initial  public  offering  with a price per share in excess of $12.50 and
aggregate gross proceeds of $10,000,000.

     In connection with the issuance of Series B Preferred Stock, the holder was
granted a  seven-year  warrant to purchase  19,769  shares of Series B Preferred
Stock at an exercise  price of $223.17  per share of Series B  Preferred  Stock.
Expenses directly  associated with this issuance of approximately  $645,000 were
netted against  proceeds.  The liquidation  preference of each share of Series B
Preferred  Stock is $148.78  and all  declared  but unpaid  dividends.  Upon the
automatic  conversion  of the  Company's  then  outstanding  shares  of Series B
Preferred  Stock  coincident to the closing of an initial public  offering,  the
Company  will  execute a new  warrant to the holder,  with terms  similar to the
original Series B warrant,  to purchase  790,760 shares of the Company's  Common
Stock at an  exercise  price of $5.58 per  share in lieu of  Series B  Preferred
Stock.

     In  December   1998,   the  Company  issued  100,000  shares  of  Series  C
Non-Cumulative  Convertible  Preferred  Stock  (Series C Preferred  Stock).  The
Series C Preferred  Stock is convertible at any time at the option of the holder
into common  stock at the rate of 10.1626  shares of common stock for each share
of Series C Preferred Stock. Preferred voting rights are one vote for each share
of common stock into which the preferred  shares may be converted.  The Series C
Preferred Stock will be  automatically  converted to 1,016,260  shares of common
stock as well as 100,000 shares of Series D Redeemable
<PAGE>
                                      F-19




                                    CVC, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10-STOCKHOLDERS' EQUITY (CONTINUED)

Preferred  Stock upon the closing of an initial public offering with a price per
share in excess of $12.50 and aggregate gross proceeds of $10,000,000.

     In connection with the issuance of Series C Preferred Stock, the holder was
granted a  seven-year  warrant to purchase  an  aggregate  of 133,333  shares of
common stock at $15 per share.  The warrant  cannot be exercised  until December
10,  2001.  Additionally,  the  warrant  will no longer be  exercisable  upon an
initial public offering. A fair value of $14,000 was assigned to this warrant at
the time of purchase.

     On October 14, 1997,  the Company filed a  Certificate  of Amendment to the
Certificate of Incorporation  which increased total  authorized  common stock to
50,000,000  shares,  $.01 par value,  and total  authorized  preferred  stock to
502,500 shares, $.01 par value.

     The Company  grants  options to key employees to purchase its common stock,
generally  at fair market value as of the date of grant,  based upon  valuations
obtained  contemporaneously from an independent appraiser.  Such valuations have
been  obtained by the Company,  primarily on a quarterly  basis,  since June 30,
1995. Options generally vest over a 3 to 5 year period and expire after 10 years
from the date of grant.

     In October  1997,  the Board of Directors and  stockholders  approved a new
stock option plan, the 1997 Stock Option Plan (the "Plan"),  under which options
may be granted to employees of the Company.  The Plan permits the grant of stock
options  that  qualify as  incentive  stock  options  under  Section  422 of the
Internal Revenue Code, and nonqualified stock options,  which do not so qualify.
In 1999, the Board of Directors  amended the plan, which increased the amount of
shares authorized under the plan by 1,000,000 shares. Additionally, the Board of
Directors has authorized the Company to increase the number of shares  available
for  issuance  under the plan by an amount  equal to five  percent  of the total
number of shares of common  stock  issued by the  Company  during the  preceding
fiscal year. As of September 30, 1998 and 1999,  the Company has  authorized and
reserved  833,333  and  1,833,333  shares,  respectively,  of  common  stock for
issuance under the Plan;  and,  options  available for grant under the Plan were
523,333 and 1,283,065 shares, respectively.

     During fiscal 1997 and 1998, approximately 203,333 and 160,000 options,
respectively,  were  granted to  employees  at an amount which was less than the
fair  market  value as of the grant  date.  Accordingly,  the  Company  recorded
unamortized  deferred  compensation expense for such options which vest over a 3
to 5 year  period.  Compensation  expense is being  amortized  over the  vesting
period and unamortized  compensation expense has been recorded as a reduction in
stockholders'  equity.  During fiscal 1997, 1998 and 1999,  compensation expense
recognized in the  statements of operations  approximated  $7,000,  $111,000 and
$105,000, respectively.

     Under  the  provisions  of  SFAS  No.  123,   "Accounting  for  Stock-Based
Compensation,"  the Company has elected to continue to account for its  employee
stock  plans in  accordance  with the  provisions  of APB  Opinion  No. 25 which
requires  compensation  costs to be recognized  based on the intrinsic  value of
options at the grant date. Had compensation  cost for the Company's stock option
plan been  determined  based on the fair  value at the grant  date for awards in
fiscal years 1997, 1998 and 1999
<PAGE>
                                      F-20




                                    CVC, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10-STOCKHOLDERS' EQUITY (CONTINUED)

consistent  with the  provisions of SFAS No. 123, the Company's net earnings and
earnings per share would have been the following (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
                                                    1997       1998       1999
                                                    ----       ----       ----
<S>                                                  <C>         <C>       <C>
Net income (loss):
          As reported.........................     $2,045      $264       $1,571
          Pro forma...........................     $1,954      $(12)      $1,276
Basic earnings per share:
          As reported.........................      $2.67      $0.26       $1.01
          Pro forma...........................      $2.55    $(0.01)       $0.82
Diluted earnings per share:
          As reported.........................      $0.29     $0.04        $0.18
          Pro forma...........................      $0.28     $0.00        $0.15
</TABLE>

     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes  option pricing model (minimum value method) with the weighted
average  assumptions of risk free interest rates (based on anticipated length of
time until  exercise)  ranging from 4.24% to 5.65% and expected  lives of 3 to 5
years.

     A summary of the status of the  Company's  stock  option plan for the three
years ended September 30, 1999 is as follows:
<TABLE>
<CAPTION>
                                                   Number of    Weighted-average
                                                    Shares       Exerise Price
                                                    ------       -------------
<S>                                                   <C>             <C>
Outstanding at October 1, 1996........             1,585,040         $1.32
      Granted ........................               406,600         $4.76
      Canceled .......................              (118,000)        $1.86
      Exercised ......................              (120,200)        $0.74
Outstanding at September 30, 1997.....             1,753,440         $2.12
      Granted ........................               427,667         $7.80
      Canceled .......................              (205,995)        $9.08
      Exercised ......................              (199,338)        $0.84
Outstanding at September 30, 1998.....             1,775,774         $2.82
      Assumed in acquisition..........               286,228         $6.00
      Granted.........................               311,669         $7.12
      Cancelled.......................              (116,257)        $6.28
      Exercised.......................               (23,374)        $3.15
Outstanding at September 30, 1999.....             2,234,040         $3.62
</TABLE>

     The weighted  average fair value of options  granted during fiscal 1997 and
1998 was $1.94. The weighted-average fair value of options granted during fiscal
1999 was $1.58.

     The weighted-average  exercise price of options granted to employees during
1997 and 1998 at an amount  which was less than fair market  value was $5.30 and
$5.73, respectively.  The weighted-average fair value of such options granted in
1997 and 1998 was $2.67 and $2.37, respectively.

     During  1999,  57,333  options were issued at a weighted  average  exercise
price of $6.00 which was higher than fair market value at the date of grant.
<PAGE>
                                      F-21




                                    CVC, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10-STOCKHOLDERS' EQUITY (CONTINUED)

     A summary of the options  outstanding  and  exercisable as of September 30,
1999 is as follows:
<TABLE>
<CAPTION>
                     Options Outstanding                    Options Exercisable
--------------------------------------------------------   ---------------------
                                   Weighted      Weighted               Weighted
                                    Average      Average                Average
                    Number of      Remaining     Exercise  Number of    Exercise
Range of Exercise    Options      Contractual   Price Per   Options    Price Per
Prices Per Share   Outstanding   Life in Years    Share   Outstanding    Share
----------------   -----------   -------------    -----   -----------    -----
<S>                 <C>            <C>            <C>       <C>            <C>
$0.63-$ 1.25          840,507        2.3          $0.66     840,507     $0.66
$3.00-$ 4.17          488,624        5.8          $3.59     387,291     $3.57
$4.85-$12.00          904,909        7.5          $6.39     255,671     $6.05
$0.63- 12.00        2,234,040        5.2          $3.62   1,483,469     $2.35
</TABLE>
NOTE 11-EARNINGS PER SHARE

     Basic earnings per share (EPS) is computed by dividing income available
to common  shareholders by the weighted average number of common shares actually
outstanding  for the period.  Diluted EPS reflects the  potential  dilution that
could  occur  if  securities  or other  contracts  to issue  common  stock  were
exercised or  converted  into common stock or resulted in the issuance of common
stock that then shared in the earnings of the Company.

     The following  table  illustrates the calculation of both basic and diluted
EPS for the years ended September 30, 1997, 1998 and 1999 (in thousands):
<TABLE>
<CAPTION>
                                                                    1997       1998     1999
                                                                    ----       ----     ----
<S>                                                                  <C>        <C>     <C>
BASIC EARNINGS PER SHARE
Net income available to common shareholders .....................   $2,045   $  264   $1,571
Weighted average number of common shares ........................      765    1,021    1,561
                                                                       ---    -----    -----
Basic earnings per share ........................................   $ 2.67   $ 0.26   $ 1.01
                                                                    ======   ======   ======

DILUTED EARNINGS PER SHARE
Net income available to common shareholders .....................   $2,045   $  264   $1,571
                                                                    ======   ======   ======

Weighted average number of common shares                               765    1,021    1,561
Common equivalent shares related to stock options and convertible
     preferred stock.............................................    6,227    6,049    7,028
                                                                     -----    -----    -----
Weighted average common and common equivalent shares ............    6,992    7,070    8,589
                                                                     =====    =====    =====
Diluted earnings per share ......................................   $ 0.29   $ 0.04   $ 0.18
                                                                    ======   ======   ======
</TABLE>

     Certain  antidilutive  outstanding  options and warrants were excluded from
the  computation of diluted EPS since their  exercise  prices exceed the average
market price of the common  shares  during the period.  The  antidilutive  stock
options and warrants so excluded at the end of September 30, 1997, 1998 and 1999
and their  associated  exercise  prices are  summarized  below.  The options and
warrants expire at various times between 2002 and 2008.
<TABLE>
<CAPTION>
                                           1997          1998          1999
                                           ----          ----          ----
<S>                                       <C>            <C>            <C>
Number of options and warrants .....      815,333        836,000        396,070
Exercise price .....................  $5.58-$5.73   $5.58-$12.00   $6.45-$18.00
</TABLE>
<PAGE>
                                      F-22




                                    CVC, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 12-TRANSACTIONS WITH RELATED PARTIES

     At September 30, 1998,  the Company had  borrowings  of  $1,500,000  from a
company whose president is a director and shareholder of the Company (Note 6).

     Seagate  Technology   (Seagate),   which  provides  products  for  storage,
retrieval,  and management of data on computer and data communications  systems,
is the Company's largest customer and a significant stockholder.  Revenues, cost
of  goods  sold,  accounts  receivable  and  unearned  revenue  associated  with
transactions  between the Company and Seagate are  reported as related  party in
the  consolidated  statements  of  operations  and  balance  sheets.  Management
believes  the  selling  prices  and  sales  terms  of  such   transactions   are
substantially consistent with those for unrelated third parties.

     During 1999, the Company's  President and Chief Executive  Officer,  who is
also a  shareholder,  was  elected to the Board of  Directors  of the  Company's
principal lender, M&T Bank.

NOTE 13-SEGMENT DATA, SIGNIFICANT CUSTOMERS AND GEOGRAPHIC INFORMATION

     The Company  adopted the  provisions  of SFAS No. 131,  "Disclosures  About
Segments and Related Information," effective October 1, 1998. In connection with
the  adoption  of SFAS 131,  the  Company  determined  that it  operates  in one
business segment.

     For the year ended  September 30, 1997,  sales to the Company's two largest
customers  comprised 47% and 11% of revenues,  respectively.  For the year ended
September 30, 1998,  sales to the Company's  three largest  customers  comprised
31%, 16% and 11% of revenues,  respectively.  For the year ended  September  30,
1999, sales to the Company's three largest customers  comprised 34%, 18% and 14%
of revenues, respectively.

     Export  sales to customers  (including  related  party  sales)  outside the
United  States  represents  31%, 38% and 53% of the  Company's  revenues for the
fiscal years ended September 30, 1997, 1998 and 1999, respectively.  Total sales
were made to the following geographic regions:
<TABLE>
<CAPTION>
                                                Nothern
                                  Usa           Ireland          Japan            Other            Total
                                  ---           --------          -----            -----            -----
<S>                            <C>               <C>              <C>             <C>             <C>
1997...................        $43,126,000       5,409,000        9,767,000       4,286,000       $62,588,000
1998...................         42,284,000      13,194,000        9,075,000       3,620,000       $68,173,000
1999...................         39,130,000      11,672,000       20,505,000      11,608,000       $82,915,000
</TABLE>


NOTE 14-COMMITMENTS

     The Company leases various equipment and facilities under operating
lease   agreements.   Rental  expense  under  operating  lease   agreements  was
approximately  $289,000,  $774,000 and $1,318,000 in fiscal years 1997, 1998 and
1999, respectively. The future minimum lease payments under non-cancelable lease
agreements  are  $1,430,000 in 2000,  $1,028,000  in 2001,  $201,000 in 2002 and
$25,000 in 2003 and $4,000 in 2004.

NOTE 15-WRITE-OFF OF DEFERRED CHARGES

     During  fiscal  1998,  the Company  incurred  costs  related to a potential
initial public offering. These costs were accounted for as a deferred asset with
the intent of deducting such amounts from contributed equity upon receipt of the
proceeds from the initial public  offering.  During the fourth quarter of fiscal
1998, the Company  determined to suspend efforts to complete the public offering
and, accordingly, these costs were charged against current period earnings.

NOTE 16-SUBSEQUENT EVENT

     In October 1999, the Company's Series C Preferred Stock, Series B
Preferred  Stock,  Series A  Preferred  Stock,  and  Common  Stock  shareholders
approved an amendment to the Amended and Restated  Certificate of  Incorporation
which  provides  for a  2-for-3  reverse  stock  split  (Note  1) as well as the
elimination  of the  $12.50  price  per  share  requirement  for  the  automatic
conversion of Series C Preferred  Stock,  Series B Preferred Stock, and Series A
Preferred  Stock  into  common  stock  upon the  closing  of an  initial  public
offering.
<PAGE>
                                      F-23




                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and the Board of Directors of
Commonwealth Scientific Corporation:

     We have audited the accompanying balance sheets of Commonwealth
Scientific Corporation (the "Company," a Virginia  corporation),  a wholly owned
subsidiary of CVC, Inc. (the "Parent," a Delaware corporation),  as of March 31,
1998 and 1999, and the related statements of operations,  stockholders'  equity,
and cash flows for each of the three years in the period  ended March 31,  1999.
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 audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 audits provide a reasonable basis for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all material  respects,  the financial  position of  Commonwealth  Scientific
Corporation as of March 31, 1998 and 1999, and the results of its operations and
its cash flows for each of the three years in the period  ended March 31,  1999,
in conformity with generally accepted accounting principles.

                                                             ARTHUR ANDERSEN LLP

Vienna, Virginia
May 17, 1999


<PAGE>
                                      F-24


<TABLE>
<CAPTION>

                                             COMMONWEALTH SCIENTIFIC CORPORATION

                                                         BALANCE SHEETS


                                                                                                                  MARCH 31,
                                                                                                                  ---------
                                                                                                            1998             1999
                                                                                                            ----             ----
<S>                                                                                                        <C>               <C>
                                             Assets
Current assets:
Cash and cash equivalents......................................................................           $378,920          $326,623
Accounts receivable, net of allowance for doubtful accounts of $233,000 and $300,000 at                  5,556,183         3,160,366
     March 31, 1998 and 1999, respectively
Inventories....................................................................................         15,601,983        13,837,715
Prepaid expenses and other current assets......................................................            206,630           134,410
Income taxes receivable........................................................................                  -           732,905
Deferred income taxes..........................................................................            456,188           539,070
                                                                                                           -------           -------
        Total current assets...................................................................         22,199,904        18,731,089
                                                                                                        ----------        ----------
Property and equipment, at cost:
Land...........................................................................................            703,900           703,900
Building and improvements......................................................................            839,153           882,025
Leasehold improvements.........................................................................            476,489           623,896
Manufacturing and test equipment...............................................................          5,191,647         6,332,468
Office furniture and fixtures..................................................................            480,691           496,417
                                                                                                           -------           -------
                                                                                                         7,691,880         9,038,706
Less-Accumulated depreciation and amortization.................................................        (3,503,079)       (4,147,289)
                                                                                                       ----------        ----------
        Net property and equipment.............................................................          4,188,801         4,891,417
                                                                                                         ---------         ---------
Other assets...................................................................................             67,497            55,631
                                                                                                            ------            ------
        Total assets...........................................................................        $26,456,202       $23,678,137
                                                                                                       ===========       ===========

                              The accompanying notes are an integral part of these balance sheets.
</TABLE>
<PAGE>
                                      F-25



<TABLE>
<CAPTION>
                                                  COMMONWEALTH SCIENTIFIC CORPORATION

                                                            BALANCE SHEETS
                                                                                                                   MARCH 31,
                                                                                                                   ---------
                                                                                                            1998             1999
                                                                                                            ----             ----
                              Liabilities and Stockholders' Equity
<S>                                                                                                        <C>               <C>
Current liabilities:
     Accounts payable..........................................................................         $4,387,666        $4,197,963
     Accrued expenses..........................................................................          2,209,071         3,632,967
     Lines of credit...........................................................................          2,584,574         3,393,173
     Current portion of long-term obligations..................................................            308,788           551,540
     Deposits on sales contracts...............................................................          6,109,603         2,796,684
                                                                                                         ---------         ---------
        Total current liabilities..............................................................         15,599,702        14,572,327
Long-term obligationS, net of current portion..................................................          1,677,718         2,067,830
Deferred income tax liability..................................................................            202,620           221,117
                                                                                                           -------           -------
        Total liabilities......................................................................         17,480,040        16,861,274
                                                                                                        ----------        ----------
Commitments and contingencies (Note 8)
Stockholders' equity:
     Common stock, $1 par value; 10,000,000 shares authorized, 333,180 and 336,680 shares
          issued at March 31, 1998 and 1999, respectively......................................            333,180           336,680
     Additional paid-in capital................................................................            751,320           782,820
     Retained earnings.........................................................................          7,902,662         5,708,363
     Treasury stock; 6,900 shares at cost......................................................           (11,000)          (11,000)
                     -----                                                                                -------           -------
        Total stockholders' equity.............................................................          8,976,162         6,816,863
                                                                                                         ---------         ---------
        Total liabilities and stockholders' equity.............................................        $26,456,202       $23,678,137
                                                                                                       ===========       ===========

                                    The accompanying notes are an integral part of these balance sheets.

</TABLE>
<PAGE>
                                      F-26



<TABLE>
<CAPTION>
                                                  COMMONWEALTH SCIENTIFIC CORPORATION

                                                       STATEMENTS OF OPERATIONS


                                                                         YEARS ENDED MARCH 31,
                                                                         ---------------------
                                                      1997                      1998                        1999
                                                      ----                      ----                        ----
<S>                                             <C>                         <C>                         <C>
Net sales .......................               $ 35,366,323                $ 33,982,554                $ 43,597,852
Cost of sales ...................                (23,445,963)                (23,344,034)                (34,473,248)
                                                 -----------                 -----------                 -----------
        Gross profit ............                 11,920,360                  10,638,520                   9,124,604
                                                  ----------                  ----------                   ---------
Operating expenses:
   Research and development .....                  3,645,520                   3,746,433                   4,005,021
   Selling and marketing ........                  2,376,572                   3,013,517                   3,408,480
   General and administrative ...                  1,447,319                   1,635,329                   2,072,667
   Commissions ..................                  1,558,193                   1,509,848                   1,992,786
                                                   ---------                   ---------                   ---------
        Total operating expenses                   9,027,604                   9,905,127                  11,478,954
                                                   ---------                   ---------                  ----------
Income (loss) from operations ...                  2,892,756                     733,393                  (2,354,350)
Interest expense, net ...........                   (163,470)                   (239,036)                   (425,949)
                                                    --------                    --------                    --------
Income (loss) before income taxes                  2,729,286                     494,357                  (2,780,299)
Income tax (provision) benefit ..                   (911,000)                   (151,000)                    586,000
                                                    --------                    --------                     -------
Net income (loss) ...............               $  1,818,286                $    343,357                $ (2,194,299)
                                                ============                ============                ============


                              The accompanying notes are an integral part of these statements.
</TABLE>

<PAGE>
                                      F-27


<TABLE>
<CAPTION>
                                                  COMMONWEALTH SCIENTIFIC CORPORATION

                                                  STATEMENTS OF STOCKHOLDERS' EQUITY

                                                                      Additional
                                                                       Paid-In          Retained         Treasury
                                                   Common Stock        Capital          Earnings          Stock              Total
                                                   ------------      ----------         --------         --------            -----
<S>                                                     <C>             <C>              <C>             <C>               <C>
Balance, March 31, 1996...................             $318,880        $614,900         $5,741,019      $(10,600)         $6,664,199
     Exercise of stock options............                4,000          43,720                  -              -             47,720
     Net income...........................                    -               -          1,818,286              -          1,818,286
                                                                                         ---------                         ---------
Balance, March 31, 1997...................              322,880         658,620          7,559,305       (10,600)          8,530,205
     Exercise of stock options............               10,300          92,700                  -              -            103,000
     Purchase of treasury stock...........                    -               -                  -          (400)              (400)
     Net income...........................                    -               -            343,357              -            343,357
                                                                                           -------                           -------
Balance, March 31, 1998...................              333,180         751,320          7,902,662       (11,000)          8,976,162
     Exercise of stock options............                3,500          31,500                  -              -             35,000
     Net loss.............................                    -               -        (2,194,299)              -        (2,194,299)
                                                                                       ----------                        ----------
Balance, March 31, 1999...................             $336,680        $782,820         $5,708,363      $(11,000)         $6,816,863
                                                       ========        ========         ==========      ========          ==========

                                    The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
                                      F-28


<TABLE>
<CAPTION>
                                                  COMMONWEALTH SCIENTIFIC CORPORATION

                                                       STATEMENTS OF CASH FLOWS


                                                                                               Years Emded March 31,
                                                                                               ---------------------
                                                                                        1997             1998               1999
                                                                                        ----             ----               ----
<S>                                                                                     <C>               <C>                <C>
Cash flows from operating activities:
     Net (loss) income.......................................................        $1,818,286          $343,357       $(2,194,299)
     Adjustments to reconcile net income to net cash (used in) provided by
      operating activities-
      Depreciation and amortization..........................................           620,589           930,211          1,249,908
      (Gain) loss on disposal of equipment...................................             8,912             7,179          (148,229)
      Changes in assets and liabilities:
        Accounts receivable..................................................       (1,215,469)         (672,405)          2,395,817
        Inventories..........................................................           538,938       (5,417,308)          1,764,268
        Prepaid expenses and other current assets............................            38,564          (83,214)             72,220
        Income taxes receivable/payable......................................                 -         (217,443)          (732,905)
        Deferred income taxes................................................          (81,337)          (30,506)           (64,385)
        Other assets.........................................................                 -                 -             11,866
        Accounts payable and accrued expenses................................           761,920           870,127          1,234,193
        Income tax payable...................................................         (225,416)                 -                  -
        Deposits on sales contracts..........................................         (450,043)         2,988,206        (3,312,919)
                                                                                      --------          ---------        ----------
           Net cash provided by (used in) operating activities...............         1,814,944       (1,281,796)            275,535
                                                                                      ---------       ----------             -------
Cash flows from investing activities:
     Purchases of property and equipment.....................................       (2,004,735)       (1,147,768)        (1,952,524)
     Proceeds from disposal of equipment.....................................                 -                 -            148,229
                                                                                                                             -------
           Net cash used in investing activities.............................       (2,004,735)       (1,147,768)        (1,804,295)
                                                                                    ----------        ----------         ----------
Cash flows from financing activities:
     Borrowings on line of credit............................................         4,256,574         6,854,568         13,878,298
     Payments on lines of credit.............................................       (4,080,865)       (5,122,408)       (13,069,699)
     Borrowings on long-term obligations.....................................            20,000         1,012,000          1,082,140
     Payments on long-term obligations.......................................         (248,512)         (290,237)          (449,276)
     Exercise of stock options...............................................            47,720           103,000             35,000
     Purchase of treasury stock..............................................                 -             (400)                  -
                                                                                                            ----
           Net cash (used in) provided by financing activities...............           (5,083)         2,556,523          1,476,463
                                                                                        ------          ---------          ---------

Net (decrease) increase in cash and cash equivalents.........................         (194,874)           126,959           (52,297)
Cash and cash equivalents, beginning of year.................................           446,835           251,961            378,920
                                                                                        -------           -------            -------
Cash and cash equivalents, end of year.......................................          $251,961          $378,920           $326,623
                                                                                       ========          ========           ========
Supplemental disclosures of cash flow information:
Cash paid during the year for-
      Interest...............................................................          $136,650          $186,245           $355,654
                                                                                       ========          ========           ========
      Income taxes...........................................................        $1,217,747          $406,360           $205,875
                                                                                     ==========          ========           ========

                                 The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
                                      F-29




                       COMMONWEALTH SCIENTIFIC CORPORATION

               NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 1999

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BUSINESS

     Commonwealth  Scientific  Corporation  (the  "Company"),   a  wholly  owned
subsidiary  of  CVC,  Inc.  (the  "Parent"),  is  engaged  in  the  development,
production,  sale, service, and repair of precision equipment for the purpose of
etching or deposition at submicron levels by means of ion beam  technology.  The
Company was acquired by CVC,  Inc., on May 10, 1999 (see Note 13). The Parent is
committed to the necessary support of the operations and capital requirements of
the Company.

USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted  accounting  principles  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.  Significant estimates made by management include the adequacy
of reserves for doubtful accounts, obsolete and excess inventories, and customer
warranty obligations. Actual results could differ from those estimates.

REVENUE RECOGNITION

     Revenue  is  recognized  when  all  significant   risks  of  ownership  are
transferred and all significant related acts of performance are completed, which
is generally upon shipment of products.

SIGNIFICANT CUSTOMER

     During  fiscal year 1997,  28, 14, and 11 percent of net sales were derived
from three  customers.  In fiscal year 1999,  the Company had one  customer  who
accounted for 32 percent of net sales. No other customer accounted for more than
10 percent of net sales.

DEPRECIATION AND AMORTIZATION

     Depreciation and amortization are provided using the straight-line
method for financial  reporting  purposes over the  following  estimated  useful
lives:
<TABLE>
<CAPTION>
<S>                                                                      <C>
Building and improvements .............................          5 to 31.5 years
Manufacturing and test equipment ......................          5 years
Office furniture and fixtures .........................          5 to 7 years
</TABLE>

     Repair and maintenance costs are charged to expense when incurred. Renewals
and betterments that significantly increase the useful life of the related asset
are capitalized.  Leasehold  improvements are amortized over the expected useful
life or the lease term, whichever is shorter.

     The Company implemented Statement of Financial Accounting Standards
("SFAS") No. 121,  "Accounting  for the Impairment of Long-Lived  Assets and for
Long-Lived  Assets to Be  Disposed  Of,  "during  1996.  As of March  31,  1999,
management  determined  there had been no  impairment  of  long-lived  assets as
defined by SFAS No. 121.
<PAGE>
                                      F-30


                       COMMONWEALTH SCIENTIFIC CORPORATION

               NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 1999 (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)

     The Company's anticipated gross revenues,  the remaining estimated lives of
tangible assets, or both could be reduced  significantly in the near term due to
changes in technology,  available financing,  or competitive pressures in any of
the Company's individual markets. As a result, the carrying amount of long-lived
assets could be reduced materially in the near term.

RESEARCH AND DEVELOPMENT COSTS

     Research and  development  costs are  recognized  as expenses in the period
incurred.

WARRANTY SERVICES

     The Company recognizes the estimated cost of warranty obligations at
the time the related  products  are sold. A one-year  warranty on materials  and
workmanship is offered on products sold.

DEPOSITS ON SALES CONTRACTS

     The  Company   negotiates   progress  payments  on  projects  that  require
significant engineering development and/or several months to complete.

CASH AND CASH EQUIVALENTS

     For financial reporting purposes, the Company considers demand deposits and
all highly liquid investments with a maturity of three months or less to be cash
and cash equivalents.  As of March 31, 1998 and 1999, cash equivalents consisted
principally  of  investments  in overnight  reverse  repurchase  agreements  and
commercial  paper.  The Company  maintains bank accounts with federally  insured
financial institutions. At times, balances may exceed insured limits.

2. INVENTORIES:

     Inventories  are  stated at the lower of cost  (determined  on a  first-in,
first-out  basis)  or  market.  Work in  progress  and  finished  goods  include
provisions  for  direct  labor  and  manufacturing  overhead.  Inventories  were
composed of the following as of March 31, 1998 and 1999:
<TABLE>
<CAPTION>

                                                    1998                1999
<S>                                                 <C>                  <C>
Raw materials ........................        $  7,006,170         $  7,247,963
Work in progress .....................           8,062,980            6,666,877
Finished goods .......................           1,035,053              852,875
                                                 ---------              -------
                                                16,104,203           14,767,715
Less-Inventory reserve ...............            (502,220)            (930,000)
                                                  --------             --------
                                              $ 15,601,983         $ 13,837,715
                                              ============         ============
</TABLE>

     The Company's  products are subject to technological  change and changes in
the Company's  competitive  market.  Management has provided reserves for excess
and obsolete inventories.  It is possible that new product launches could result
in unforeseen  changes in inventory  requirements  for which no reserve has been
provided.
<PAGE>
                                      F-31




                       COMMONWEALTH SCIENTIFIC CORPORATION

         NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 1999 (CONTINUED)

3. ACCRUED LIABILITIES:

     Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
                                                         1998             1999
                                                         ----             ----
<S>                                                  <C>              <C>
Commissions payable ..........................       $  540,162       $  914,872
Vacation accrual .............................          406,674          420,683
Installation and warranty accrual ............          280,000          895,019
Accrued payroll ..............................          462,416          373,397
Other ........................................          519,819        1,028,996
                                                        -------        ---------
      Total ..................................       $2,209,071       $3,632,967
                                                     ==========       ==========
</TABLE>

4. LINES OF CREDIT:

     The Company has a bank line of credit, subject to annual approval,
which  provides for borrowings up to the lesser of $1,800,000 or an amount equal
to 70 percent of eligible  accounts  receivable  that have been  outstanding not
more than 90 days.  Amounts  borrowed  under  the line are  payable  on  demand.
Interest  accrues at the bank's  prime rate plus 0.5  percent  (8.25  percent at
March 31,  1999) and is  payable  monthly.  The amount  borrowed  on the line of
credit was  approximately  $1,385,000  and  $693,000 at March 31, 1998 and 1999,
respectively.

     The Company has two bank lines of credit for inventory that provide for
borrowings up to  $3,500,000.  Amounts  borrowed under these lines of credit are
payable on due dates between June 2001 and January 2002. Interest accrues at the
bank's  prime rate plus 1.0  percent  (8.75  percent  at March 31,  1999) and is
payable  monthly.  The amount  borrowed on the line of credit was $1,200,000 and
$2,700,000 at March 31, 1998 and 1999, respectively.

     All lines of credit discussed above are  collateralized  by the same assets
as the notes payable to a bank  discussed in Note 5. One of the inventory  lines
of credit is personally  guaranteed by the president of the Company in an amount
up to $2,000,000.  The remaining amounts  outstanding under the lines of credit,
together with the long-term  obligations  described below, are guaranteed by the
president of the Company in an amount up to $1,000,000.  As further described in
Note 13, all amounts  outstanding  under these lines of credit were paid in full
subsequent to March 31, 1999.
<PAGE>
                                      F-32




                       COMMONWEALTH SCIENTIFIC CORPORATION

         NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 1999 (CONTINUED)

5. LONG-TERM OBLIGATIONS:

     Long-term  obligations  as of March 31, 1998 and 1999,  are  summarized  as
follows:
<TABLE>
<CAPTION>
                                                                                                            1998            1999
                                                                                                            ----            ----
<S>                                                                                                           <C>            <C>
Equipment loan payable to a bank, bearing interest at the bank's prime rate plus 0.5% (8.25% at
     March 31, 1999). Principal payments of $24,764 plus interest are payable monthly. The note
     matures in October 2004......................................................................        $1,956,369      $1,659,199
Equipment loan payable to a bank, bearing interest at the bank's prime rate plus 0.5% (8.25% at
     March 31, 1999). Principal payments of $11,917 plus interest are payable monthly. The note
     matures in November 2003.....................................................................                 -         638,333
Automobile loan payable to a bank, bearing interest at the bank's prime rate plus 0.5% (8.25% at
     March 31, 1999). Principal payments of $417 plus interest are payable monthly. The note
     matures in December 2000.....................................................................            13,750           8,751
Future minimum payments under capital leases, payable through March 2002..........................            18,535         355,105
                                                                    -----                                     ------         -------
                                                                                                           1,988,654       2,661,388
Less-Interest included in capital lease payments..................................................           (2,148)        (42,018)
                                                                                                             ------         -------
      Total.......................................................................................         1,986,506       2,619,370
Less-Current portion..............................................................................         (308,788)       (551,540)
                                                                                                           --------        --------
                                                                                                          $1,677,718      $2,067,830
                                                                                                          ==========      ==========
</TABLE>

     The bank notes and lines of credit are secured by all the Company's present
and future fixtures, equipment,  supplies, inventory, work in progress, accounts
receivable and contract rights,  and a first lien deed of trust on the Company's
real property and  improvements.  These borrowings are personally  guaranteed by
the  president  of the  Company in an amount up to  $1,000,000  pursuant  to the
guarantee on the lines of credit  described in Note 4. According to the terms of
the loan  agreements,  the Company must satisfy various  covenants,  including a
debt to equity  ratio of less than 2 to 1, a current  ratio of greater than 1 to
1, a net worth of at least $7,500,000, and debt service coverage of greater than
1 to 1 among other  restrictions.  The Company  was not in  compliance  with the
tangible  net worth and debt service  coverage  ratios,  consignments,  sale and
transfer of assets, and capital expenditure and lease obligation covenants as of
March 31, 1999.  The Company  received a waiver from the bank for these covenant
violations in April 1999.

     Future  minimum  principal  payments  under  long-term  obligations  are as
follows:
<TABLE>
<CAPTION>
                                                                     Year Ending
                                                                      March 31,
                                                                      ---------
<S>                                                                       <C>
2000 ................................................                 $  551,540
2001 ................................................                    553,422
2002 ................................................                    537,386
2003 ................................................                    440,170
2004 ................................................                    363,503
Thereafter ..........................................                    173,349
                                                                         -------
                                                                      $2,619,370
                                                                      ==========
</TABLE>
<PAGE>
                                      F-33




                       COMMONWEALTH SCIENTIFIC CORPORATION

         NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 1999 (CONTINUED)

5. LONG-TERM OBLIGATIONS: (CONTINUED)

     As further  described  in Note 13, all  amounts  due under these bank loans
were paid in full subsequent to March 31, 1999.

6. STOCK AND STOCK OPTIONS:

     During fiscal year 1985, the Company's stockholders approved a stock
option plan (the "Stock Option Plan") for key employees, officers, and directors
of the Company for 100,000 shares of stock,  of which 76,150 shares were granted
as of March 31,  1999.  The  Company's  stock option plan expired in fiscal year
1994. The options  outstanding  under the Stock Option Plan are fully vested two
years after the grant date and are exercisable for three years.

     Options  issued  after fiscal year 1994 but prior to March 1999 were issued
after the expiration of the Stock Option Plan and are classified as nonqualified
for tax  purposes.  The terms and  conditions  of these options are identical to
those options issued under the Stock Option Plan described above.

     The options  issued in March 1999 were also issued after the  expiration of
the Stock Option Plan and are also classified as nonqualified  for tax purposes.
These options vest immediately and are exercisable for five years.

     The following table summarizes the Company's stock option activity for each
of the three years in the period ended March 31, 1999:
<TABLE>
<CAPTION>
                                                 Number of            Weighted-average                 Price
                                                  Shares              Exercise Price                 Per Share
                                                  ------              --------------                 ---------
<S>                                                <C>                        <C>                       <C>
Options outstanding at March 31, 1996......     54,250                       $12.13                  $10.00-$15.00
 Granted ..................                       --                             --                       --
 Canceled/expired/forfeited                     (8,000)                       10.85                      10.85
 Exercised ................                     (4,000)                       11.93                      11.93
                                                ------                        -----                      -----
Options outstanding at March 31, 1997......     42,250                        12.40                  10.00- 15.00
 Granted ..................                       --                             --                       --
 Canceled/expired/forfeited                     (9,700)                       10.77                 10.00- 15.00
 Exercised ................                    (10,300)                       10.00                      10.00
                                               -------                        -----                      -----
Options outstanding at March 31, 1998......     22,250                        14.21                 10.00- 15.00
 Granted ..................                     59,254                        27.28                 26.00- 28.00
 Canceled/expired/forfeited                     (7,050)                       25.79                 15.00- 28.00
 Exercised ................                     (3,500)                       10.00                      10.00
                                                ------                        -----                      -----
Options outstanding at March 31, 1999......     70,954                       $24.18                 $10.00-$28.00
                                                ======                       ======                  ============

</TABLE>

     As of March 31, 1998 and 1999, 22,250 and 42,354 options, respectively,
are exercisable.  The weighted-average remaining life for options outstanding at
March 31, 1999, was approximately four years.

     The Financial Accounting Standards Board ("FASB") Statement of
Financial  Accounting  Standards  ("SFAS") No. 123,  "Accounting for Stock-Based
Compensation,"  defines a fair value based method of accounting  for an employee
stock option or similar  equity  instrument.  Under the fair value based method,
compensation  cost is measured at the grant date based on the value of the award
and is recognized over the service period.
<PAGE>
                                      F-34


                       COMMONWEALTH SCIENTIFIC CORPORATION

         NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 1999 (CONTINUED)

6. STOCK AND STOCK OPTIONS:  (CONTINUED)

     SFAS No. 123 allows an entity to continue to use the intrinsic value method
as defined by Accounting  Principles  Board ("APB") Opinion No. 25,  "Accounting
for Stock Issued to  Employees,"  and management has elected to do so. Under the
intrinsic value method,  compensation  cost is the excess, if any, of the quoted
market  price of the  stock at grant  date or other  measurement  date  over the
amount an  employee  must pay to acquire  the stock.  The Company has elected to
continue to apply APB Opinion No. 25 to its stock-based  compensation  awards to
employees. Entities electing to remain with the accounting in APB Opinion No. 25
must make pro forma  disclosures  of net income and earnings per share as if the
fair value based method of accounting had been applied.  Accordingly, net (loss)
income would be as follows for each of the three years in the period ended March
31, 1999:
<TABLE>
<CAPTION>

Year                                      As Reported               Pro Forma
Ended                                   Net (Loss) Income      Net (Loss) Income
-----                                   -----------------      -----------------
<S>                                          <C>                       <C>
1997 .........................             $ 1,818,286                1,811,114
1998 .........................                 343,357                  340,489
1999 .........................              (2,194,299)             $(2,439,258)
</TABLE>

     The fair value of each option is estimated  using the Black Scholes  option
pricing model with the following  assumption used for grants: no dividend yield,
no volatility,  risk-free  interest rate of 5.5 percent,  and expected life of 5
years.

7. INCOME TAXES:

     The Company  accounts  for income  taxes in  accordance  with SFAS No. 109,
"Accounting for Income Taxes." SFAS 109 requires the  determination  of deferred
tax  liabilities  and assets  based on the  differences  between  the  financial
statement and income tax basis of assets and liabilities using enacted tax rates
in effect for the year in which the  differences  are  expected to reverse.  The
measurement  of a deferred  tax asset is adjusted by a valuation  allowance,  if
necessary,  to recognize tax benefits only to the extent that based on available
evidence it is more likely than not that they will be realized.

     The (benefit) provision for income taxes consists of the following:
<TABLE>
<CAPTION>
                                                                        1997          1998           1999
                                                                        ----          ----           ----
<S>                                                                     <C>          <C>            <C>
   CURRENT:
      Federal..................................................       $933,000      $190,000      $(500,000)
      State....................................................        148,000        30,000        (57,000)
                                                                       -------        ------        -------
                                                                     1,081,000       220,000       (557,000)
   LESS-GENERAL BUSINESS INCOME TAX CREDITS....................      (116,000)      (58,000)               -
                                                                      --------       -------
                                                                       965,000       162,000       (557,000)
                                                                       -------       -------       --------
   DEFERRED:
      Federal..................................................       (46,000)       (9,000)        (26,000)
      State....................................................        (8,000)       (2,000)         (3,000)
                                                                       ------        ------          ------
                                                                      (54,000)      (11,000)        (29,000)
                                                                      -------       -------         -------
   (BENEFIT) PROVISION FOR INCOME TAXES........................       $911,000      $151,000      $(586,000)
                                                                      ========      ========      =========
</TABLE>
<PAGE>
                                      F-35




                       COMMONWEALTH SCIENTIFIC CORPORATION

         NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 1999 (CONTINUED)

7. INCOME TAXES: (CONTINUED)

     The components of the net deferred tax assets are as follows:
<TABLE>
<CAPTION>
                                                        1998            1999
                                                        ----            ----
<S>                                                       <C>             <C>
Deferred tax assets:
   Warranty reserves .........................       $ 104,000        $ 305,000
   Obsolescence reserves .....................         186,000          344,000
   Bad-debt reserves .........................          86,000          111,000
   Commission accrual ........................            --            162,000
   Vacation accrual ..........................         125,000          104,000
   Other .....................................          55,000           31,000
   Valuation allowance .......................        (100,000)        (518,000)
                                                      --------         --------
Gross deferred tax assets ....................         456,000          539,000
Deferred tax liabilities:
   Depreciation and amortization .............         202,000          221,000
                                                       -------          -------
Net deferred tax assets ......................       $ 254,000        $ 318,000
                                                     =========        =========
</TABLE>

     A reconciliation of the statutory income tax rate to the effective tax rate
included in the statements of operations is as follows:
<TABLE>
<CAPTION>
                                                                      YEAR ENDED MARCH 31,
                                                                     -----------------------
                                                             1997           1998            1999
                                                             ----           ----            ----

<S>                                                        <C>             <C>           <C>
Income (Loss) before income tax ........................   $ 2,729,286     $ 494,357     $(2,780,299)
Tax rate ...............................................            34%           34%             34%
                                                                    --            --              --
Income tax expense (benefit) at statutory rate .........       927,957       168,081        (945,302)
Increases (decreases) in tax resulting from:
   State income taxes, net of Federal income tax benefit        97,514        19,920         (37,620)
   Other ...............................................      (114,471)      (37,001)        (21,078)
   Change in valuation allowance                                    --            --         418,000
                                                                                             -------
Actual tax expense (benefit) ...........................   $   911,000     $ 151,000     $  (586,000)
                                                           ===========     =========     ===========
Effective tax rate                                                33.4%         30.5%           21.1%
                                                                  ====          ====            ====
</TABLE>

8. COMMITMENTS AND CONTINGENCIES:

LEASES

     In addition to the equipment under capital leases  discussed in Note 5, the
Company has rental  agreements  for certain  other real  property and  equipment
expiring at various  dates through  January 2002.
<PAGE>
                                      F-36




                       COMMONWEALTH SCIENTIFIC CORPORATION

         NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 1999 (CONTINUED)

8. COMMITMENTS AND CONTINGENCIES: (CONTINUED)

The Company has the option to purchase the equipment at termination of the lease
for$1. The Company incurred  approximately $398,000 and $624,697 in rent expense
in fiscal years 1998 and 1999,  respectively.  Future  minimum  lease and rental
commitments are as follows:
<TABLE>
<CAPTION>
<S>                                                                        <C>
2000 ................................................                   $537,310
2001 ................................................                    242,154
2002 ................................................                    153,762
----                                                                     -------
                                                                        $933,226
</TABLE>
                                                                        ========

PURCHASE COMMITMENTS

     At March 31,  1999,  the Company had  contractual  commitments  to purchase
approximately  $780,000 of inventory to be delivered within six months of fiscal
year end.

9. GEOGRAPHIC INFORMATION:

     The information below summarizes the Company's product sales,  service, and
other income for each of the fiscal years in the period ended March 31, 1999:
<TABLE>
<CAPTION>

                                      1997             1998              1999
                                      ----             ----              ----
<S>                              <C>               <C>               <C>
Domestic .................       $13,913,015       $15,624,769       $27,058,936
International ............        21,453,308        18,357,785        16,538,916
                                  ----------        ----------        ----------
                                 $35,366,323       $33,982,554       $43,597,852
                                 ===========       ===========       ===========
</TABLE>


10. RELATED PARTY:

     During 1998 and 1999,  a company  owned by a former  officer of the Company
performed  research and  development  activities  on the  Company's  behalf.  In
addition,  the officer  received  royalties on sales of certain of the Company's
products.  During  fiscal years 1998 and 1999,  the Company  paid  approximately
$656,000 and $894,000, respectively, under that arrangement.

11. EMPLOYEE BENEFIT PLAN:

     The Company established an employee contribution plan (the "Benefit Plan"),
effective  January 1, 1987,  under Section 401(k) of the Internal  Revenue Code.
Any employee who has attained age 21 and has  completed one year of service with
the Company is eligible to participate.  Each participant may contribute amounts
to the Benefit  Plan,  subject to limits by the  Internal  Revenue  Service,  in
pretax  contributions  ranging from 1 to 15 percent of base salary.  The Company
will match 50 percent of each participant's contribution up to $500 per year. At
the end of each fiscal year,  the Company may  contribute  a  percentage  of its
profits to the Benefit Plan.  The Company made  discretionary  contributions  of
$50,000 and $0 to the Benefit  Plan for the years ended March 31, 1998 and 1999,
respectively.
<PAGE>
                                      F-37




                       COMMONWEALTH SCIENTIFIC CORPORATION

         NOTES TO FINANCIAL STATEMENTS AS OF MARCH 31, 1999 (CONTINUED)

12. THE YEAR 2000 ISSUE:

     The Year 2000 Issue arises because many computerized systems use two digits
rather than four to  identify a year.  The effects of the Year 2000 Issue may be
experienced  before,  on, or after January 1, 2000,  and if not  addressed,  the
impact on  operations  and  financial  reporting  may range from minor errors to
significant  systems failure,  which could affect an entity's ability to conduct
normal business operations. It is not possible to be certain that all aspects of
the Year 2000 Issue affecting an entity,  including those related to the efforts
of customers, suppliers, or other third parties, will be fully resolved.

13. SUBSEQUENT EVENTS:

     On May 10, 1999, CVC, Inc., acquired all the outstanding common stock
of the Company.  As  consideration,  CVC,  Inc.,  gave to each holder of Company
stock 6.03601  shares of its common stock for each share of Company common stock
held,  subject to certain  adjustments  described  below.  The merger  agreement
between CVC, Inc., CVC Acquisition Corp.,  Commonwealth  Scientific Corporation,
and Certain  Stockholders  Thereof,  dated April 1, 1999,  provides  for 975,000
shares to be held in escrow pending  determination  of the final purchase price.
As of May 10, the Company  adopted CVC,  Inc.'s  year-end of September 30, 1999.
The final  purchase  price is  dependent  upon a number of  representations  and
warranties,  including minimum net worth  requirements and tax and environmental
liability considerations.

     In May 1999, CVC, Inc., repaid the entire balance (approximately $5,700,000
of principal and accrued  interest) due under the Company's lines of credit,  as
well as the long-term  equipment and  automobile  loans payable to the Company's
bank. No further obligations exist under these debt instruments.

     On April 1, 1999,  the  Company  converted  approximately  $1.2  million in
accounts  payable  due to a  creditor  to an  unsecured  note  payable,  bearing
interest at 8 percent per annum.  Beginning May 15, 1999, principal and interest
payments of $71,790 are payable  monthly.  Interest  will accrue at a rate of 10
percent per annum in the event of the  Company's  failure to pay the amounts due
within ten days of the due date.  Monthly  installments shall continue until the
entire  indebtedness  is repaid;  however,  any remaining  indebtedness,  if not
sooner paid, shall be due and payable on October 15, 2000.