UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                ----------------
                                   Form 10-KSB

(Mark One)
     [X]  ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)OF  THE  SECURITIES
          EXCHANGE ACT OF 1934.

                  For the fiscal year ended December 31, 2007

     [_]  TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
          EXCHANGE ACT OF 1934.

                  For the transition period from ____ to _____

                        Commission file number: 1-16525

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

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

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

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

                       Securities registered under Section
                               12(b) of the Act:

    Title of each class               Name of each exchange on which registered
Common Stock, Par value $0.01                    NASDAQ Capital Markets

              Securities registered under Section 12(g) of the Act:
                                      None

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

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

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [_] No [X]

State issuer's revenues for its most recent fiscal year. $13,577,772.

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was sold,  or the average bid and asked  price of such  common  equity,  as of a
specified  date  within  the past 60 days.  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  persons  may be deemed to be
affiliates. This determination of affiliate status is not necessarily conclusive
determination for other purposes: $ 7,915,873 at March 25, 2008.

State the number of shares outstanding of each of the issuer's classes of common
equity,  as of the latest  practicable  date:  4,733,500 shares of Common Stock,
$0.01 par value at March 25 2008.

                      DOCUMENTS INCORPORATED BY REFERENCE

None.Transitional Small Business Disclosure Format (Check one): Yes [_] No [X]

-------------------------------------------------------------------------------
<PAGE>
                                     PART I

Item 1. Description of Business.

We design and  manufacture  customized  state-of-the-art  equipment  used in the
development, design and manufacture of advanced electronic components, materials
and coatings for research and industrial applications. We offer a broad range of
chemical vapor  deposition,  gas control and other equipment that is used by our
customers  to  research,  design and  manufacture  semiconductors,  solar cells,
carbon nanotubes,  nanowires, LEDs and MEMS, and industrial coatings, as well as
equipment for surface  mounting of components onto printed  circuit boards.  Our
proprietary   products  are  generally   customized   to  meet  the   particular
specifications of individual  customers.  We also offer a number of standardized
products  that are  based on the  expertise  and know how we have  developed  in
designing and manufacturing our customized products.

Based on more than 25 years of experience,  we provide  leading-edge  design and
manufacturing  solutions  to our  customers.  We  use  engineering,  design  and
manufacturing  expertise  to provide  technologically  advanced  equipment  that
enables laboratory and research  scientists to develop the precise processes for
the  manufacture  of  next  generation   semiconductors   and  other  electronic
components.  We also develop and manufacture  production  equipment based on our
designs. We have built a significant  library of design expertise,  know-how and
innovative  solutions to assist our  customers  in  developing  these  intricate
processes.  This  library of  solutions,  along with our  vertically  integrated
manufacturing facilities, allows us to provide superior design and manufacturing
solutions to our customers on a cost effective basis.

In the  fourth  quarter of 2006,  we began  implementing  a  strategy  to target
opportunities  in  the  research  and  development   market,  with  a  focus  on
higher-growth  applications such as carbon nanotubes,  nanowires, MEMS and LEDs.
To expand our  penetration  into this market,  we started  introducing a line of
proprietary   standardized   products  and  systems  targeted  at  this  market.
Historically,  we manufactured these products on a custom one-at-a-time basis to
meet  an  individual   customer's  specific  research   requirements.   Our  new
proprietary systems leverage the technological  expertise that we have developed
through designing these custom systems onto a standardized basic core. This core
is easily adapted through a broad array of available  add-on options to meet the
diverse  product  and  budgetary  requirements  of the  research  community.  By
manufacturing the basic core of these systems in higher volumes,  we are able to
reduce both the cost and delivery time for our systems.  These systems, which we
market and sell under the  "EasyTube"  product line,  are sold to researchers at
universities and laboratories in the United States and throughout the world.

We also  grow the  sales of our  proprietary  standard  and  custom  systems  by
building on the success of our installed  customer base,  which includes several
Fortune 500 companies. Historically, revenues have grown primarily through sales
to existing  customers with additional  capacity needs or new  requirements,  as
well as to new customers. We have generally gained new customers through word of
mouth, the movement of personnel from one company to another,  and limited print
advertising  and trade show  attendance.  We are now increasing the awareness of
our  company  in  the  marketplace  with  results  from  our  internal  research
laboratory,   from  increased   participation   in  trade  shows,  and  internet
advertising.

                                       1
<PAGE>


The core  competencies  we have developed in equipment and software  design,  as
well as in systems  manufacturing,  are used to engineer our finished  products.
Our proprietary Windows-based,  real-time, software application allows for rapid
configuration,  and provides our customers  with powerful  tools to  understand,
optimize and  repeatedly  control their  processes.  Our  vertically  integrated
structure  allows us to control the  manufacturing  process,  from  bringing raw
metal and components into our manufacturing  facilities to shipping out finished
products.  These factors significantly reduce our costs, improve our quality and
reduce the time it takes from customer order to shipment of our products.

We conduct our operations through three divisions:  (1) CVD, including the First
Nano product line ("CVD/First Nano"); (2) Stainless Design Concept ("SDC");  and
(3)   Conceptronic,   including   the   Research   International   product  line
("Conceptronic/Research"). Each division operates on a day-to-day basis with its
own operating manager while product  development,  sales and  administration are
managed at the corporate level.

Operating Divisions

CVD/First  Nano is a supplier  of  state-of-the-art  chemical  vapor  deposition
systems   for  use  in  the   research,   development   and   manufacturing   of
semiconductors,  LEDs, carbon nanotubes,  nanowires, solar cells and a number of
industrial applications.  We utilize our expertise in the design and manufacture
of chemical vapor deposition systems to work with laboratory scientists to bring
state-of-the-art processes from the research laboratory into production, as well
as to provide production equipment based on our designs.

SDC designs and manufactures ultra-high purity gas and chemical delivery control
systems for state-of-the-art  semiconductor fabrication processes,  LEDs, carbon
nanotubes,  nanowires, solar cells and a number of industrial applications.  Our
systems are sold on a stand-alone  basis, as well as together with our CVD/First
Nano systems. In addition, SDC's field service group provides our customers with
ultra-high purity equipment  installations,  contract maintenance and equipement
removal.  SDC operates out of a 22,000 square foot facility fitted with Class 10
and Class 100 clean room manufacturing space located in Saugerties, New York.

Conceptronic/Research  designs and manufactures reflow ovens and rework stations
for the printed circuit board assembly and semi-conductor  packaging industries.
Our  equipment  is  designed  to melt  solder in a  controlled  process  to form
superior  connections  between  components.  This,  in  turn,  creates  complete
electronic circuits for computers and telecommunication  systems, as well as for
the automotive and defense industries.

To address pricing  pressure in what is now a mature  industry for  standardized
reflow ovens, we have begun to offer customized products for complex heating and
drying  applications.  We expect that this will maintain and potentially improve
our future profit margins in this product line.


                                       2
<PAGE>

Principal Products

Chemical  Vapor  Deposition - A process  which passes a gaseous  compound over a
target  material  surface  that is  heated  to such a degree  that the  compound
decomposes and deposits a desired layer onto substrate material.  The process is
accomplished by combining  appropriate gases in a reaction chamber,  of the kind
produced by the Company, at elevated  temperatures  (typically 300-1,800 degrees
Celsius).  Our Chemical  Vapor  Deposition  systems are complete and include all
necessary  instrumentation,  subsystems and components. We provide such standard
systems  and also  specifically  engineered  products  for  particular  customer
applications.   Some  of  the  standard   systems  we  offer  are  for  Silicon,
Silicon-Germanium,  Silicon Dioxide, Silicon Nitride, Polysillicon, Liquid Phase
Epitaxial,   Metalorganic  Chemical  Vapor  Deposition,   Carbon  Nanotubes  and
Nanowires.

Our Chemical Vapor Deposition  systems are available in a variety of models that
can be used in production  and  laboratory  research.  All models can be offered
with total system automation,  a microprocessor control system by which the user
can measure,  predict and regulate gas flow, temperature,  pressure and chemical
reaction rates,  thus controlling the process in order to enhance the quality of
the materials produced. Our standard  microprocessor control system is extremely
versatile  and capable of supporting  the complete  product line and most custom
system  requirements.  These Chemical Vapor Deposition  systems are priced up to
$1,500,000.

Rapid  Thermal  Processing  ("RTP") - Used to heat  semiconductor  materials  to
elevated  temperatures  of 1,000  degrees  Celsius  at rapid  rates of up to 200
degrees Celsius per second. Our RTP systems are offered for implant  activation,
oxidation,  silicide  formation and many other processes.  We offer systems that
can operate both at atmospheric or reduced pressures. Our RTP systems are priced
up to $600,000.

Annealing  and  Diffusion  Furnaces  - Used for  diffusion,  oxidation,  implant
anneal, solder reflow and other processes.  The systems are normally operated at
atmospheric  pressure  with  gaseous  atmospheres  related  to the  process.  An
optional  feature of the system allows for the heating  element to be moved away
from the process  chamber  allowing the wafers to rapidly cool or be heated in a
controlled  environment.  Our cascade  temperature  control  system enables more
precise  control of the  wafers.  The  systems are  equipped  with an  automatic
process controller,  permitting automatic process sequencing and monitoring with
safety alarm provisions.  Our annealing and diffusion furnace systems are priced
up to $900,000.

Ultra-high  Purity  Gas and Liquid  Control  Systems - Our  standard  and custom
designed gas and liquid control systems,  which encompass,  gas cylinder storage
cabinets,  custom  gas and  chemical  delivery  systems,  gas and  liquid  valve
manifold  boxes and gas  isolation  boxes,  provide safe storage and handling of
pressurized  gases and  chemicals.  Our system  design  allows for  automatic or
manual  control from both a local and remote  location.  A customer  order often
includes multiple systems and can total up to $1,000,000.

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


                                       3
<PAGE>

Reflow Furnaces and Rework Stations - We provide standard and custom systems for
the printed circuit board and surface mount technology industries. Our equipment
is designed to melt solder in a controlled process to form superior  connections
between  components,  creating  complete  electronic  circuits for computers and
telecommunication systems, as well as for the automotive and defense industries.

Markets and Marketing

Due to the highly technical  nature of our products,  we believe it is essential
to contact customers  directly through our sales personnel and through a network
of domestic and international  independent sale representatives and distributors
specializing in the type of equipment we sell. Our primary marketing  activities
include  direct sales  contacts,  participation  in trade shows and our internet
websites.  We are  focusing  our  efforts on being in the top  listings  on many
search engines in order to increase the number of "hits" to our websites.

Customers

We are  continuing  to work on expanding  our product  offerings.  Many of these
products  are  used in  research  and in  production  applications.  We sell our
products  primarily to  semiconductor  manufacturers,  institutions  involved in
semiconductor   and  electronic   component   research  (such  as  universities,
government   and   industrial   laboratories)   and   to   electronic   assembly
manufacturers.  We have both an international  and domestic  installed  customer
base of approximately 200 customers to whom we have sold systems within the last
three years. For the twelve months ended December 31, 2007  approximately 21% of
our revenues were generated from foreign exports  compared to 31% for the twelve
months ended December 31, 2006.  Sales to a single  customer in any one year can
exceed 10.0% of our total  sales;  however,  we are not  dependent on any single
customer.  In fiscal years 2007 and 2006, one customer represented 7.1% and 9.0%
of our annual sales each year. No other customer  represented  more than 5.6% or
6.5% of our total sales in fiscal years 2007 or 2006, respectively.

Warranties

We warrant our  equipment  for a period of twelve to twenty  four  months  after
shipment,  depending on the product, and pass along any warranties from original
manufacturers  of  components  used  in our  products.  We  provide  for our own
equipment  servicing  with in-house  field service  personnel.  Warranty  costs,
including   those  incurred  in  fiscal  year  2007,   have  been   historically
insignificant and expensed as incurred.

Competition

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


                                       4
<PAGE>

CVD/First Nano competes primarily with in-house design and engineering personnel
at research and  university  laboratories  with the capacity to design and build
their own equipment internally.  Due to budgetary and funding constraints,  many
of these customers are extremely price  sensitive.  CVD/First Nano also competes
with companies that have substantially  greater  financial,  marketing and other
resources to develop new products and support  customers  worldwide,  as well as
smaller  competitors.  We believe  that our systems are among the most  advanced
available.

SDC  competes  with  companies  that  are  larger  than  our  company  and  have
substantially  greater  financial,  marketing and other resources than we do. We
believe that SDC's gas  management  and chemical  delivery  control  systems are
among the most advanced available. We further believe that SDC is differentiated
from our competitors  through our intimate  understanding  of how the systems in
which our products are incorporated are actually used in field applications.  We
have gained this  understanding as a result of having designed and built complex
process gas systems  for  CVD/First  Nano as well as for a number of the world's
leading semiconductor manufacturers, research laboratories and universities.

Conceptronic/Research's proprietary reflow ovens and rework stations are used by
the printed  circuit  board  assembly and  semiconductor  packaging  industries.
Conceptronic/Research  also offers customized products for complex  applications
within the printed  circuit board and other  industries  that use  conveyor-type
ovens in heating and drying  applications.  Our in-house  design and engineering
personnel  develop  leading  edge  technology  for sale at  competitive  prices.
Conceptronic/Research  competes with  companies that are larger than our company
and have substantially greater financial,  marketing and other resources than we
do. We believe  that our reflow  ovens and  rework  stations  are among the most
advanced  available  having  leveraged our  experience in designing and building
customized products for our customers.

Sources of Supply

We do not manufacture  many  components used in producing our products.  Most of
these  components  are purchased from  unrelated  suppliers.  We do not have any
supply contracts  covering these components,  although we are not dependent on a
principal or major supplier and alternate  suppliers are  available.  Subject to
lead  times,  the  components  and raw  materials  we use in  manufacturing  our
products are readily obtainable.

We have a fully equipped machine shop that we use to fabricate  in-house most of
the  metal  components,  including  the  most  complex  designed  parts  of  our
equipment.  Our  investment in (CNC) machines for our machine shop has increased
our efficiencies while  significantly  reducing costs in production.  Similarly,
our quartz fabrication capability is sufficient to meet our quartzware needs.

Materials  procured from the outside and/or  manufactured  internally  undergo a
rigorous  quality  control  process to ensure  that the parts meet or exceed our
requirements  and those of our  customers.  Upon final  assembly,  all equipment
undergoes  a  final  series  of  complete  testing  to  ensure  maximum  product
performance.


                                       5
<PAGE>

Backlog

As of December 31, 2007 our order backlog was approximately  $5,087,000 compared
to  approximately  $3,565,000  at  December 31 2006,  an increase of 42.7%.  The
increase  can  primarily  be  attributed  to our CVD  Division.  This  division,
inclusive of its expanded  product  line of First Nano  equipment,  continues to
experience a strong demand for new  equipment.  The timing for completion of the
backlog varies depending on the product mix;  however,  there is generally a one
to six month lag in the completion and shipping of backlogged product.  Included
in the backlog are all accepted purchase orders with the exception of those that
are  included  in our  percentage-of-completion.  Order  backlog  is  usually  a
reasonable  management tool to indicate expected revenues and projected profits,
however it does not provide an  assurance  of future  achievement  or profits as
order cancellations or delays are possible.

Intellectual Property

Our success is dependent in part on our technology and other proprietary rights.
We have  historically  protected our proprietary  information  and  intellectual
property  such as design  specifications,  blueprints,  technical  processes and
employee know-how through the use of non-disclosure agreements. We also maintain
and/or assert rights in certain  trademarks  relating to certain of our products
and product  lines,  and claim  copyright  protection  from certain  proprietary
software and documentation.

While patent,  copyright and trademark protection for our intellectual  property
may be important,  we believe our future  success in highly  dynamic  markets is
most  dependent  upon  the  technical  competence  and  creative  skills  of our
personnel.  We  attempt  to  protect  our trade  secrets  and other  proprietary
information through  confidentiality  agreements with our customers,  suppliers,
employees and consultants through other security measures.

Research and Development

The  university  research  community  is  at  the  forefront  of  nanotechnology
research,  and we are  focused  on  providing  state-of-the-art  systems to this
market that will help bridge the gap between pioneering  research and marketable
products.   Our  research   laboratory,   together  with  a  number  of  leading
universities with whom we partner,  conducts cutting-edge research on the growth
of carbon  nanotubes and nanowires.  The results of this research could have far
reaching implications concerning the use and manufacture of carbon nanotubes and
nanowires for many markets.  Our intention is that together we will leverage our
collective  expertise  in this  field,  which  will  allow us to  capitalize  on
commercial  opportunities in the future. This relationship has thus far produced
leading edge results,  including what we believe are the largest carbon nanotube
clusters  yet  developed.  The amount  spent on  research  and  development  was
$715,000  (5.3% of revenue) and  $513,000  (3.8% of revenue) for the years ended
December 31, 2007 and December 31, 2006, respectively.



                                       6
<PAGE>


Government Regulation

We are subject to a variety of federal, state and local government  regulations,
such as  environmental,  labor  and  export  control.  We  believe  that we have
obtained  all  necessary  permits to  operate  our  business  and that we are in
material compliance with all laws and regulations applicable to us.

We are not aware of any government regulations or requirements necessary for the
sale of our  products,  other than  certain  approvals  or permits  which may be
required for us to export certain of our products to certain foreign countries

Insurance

Some of our products are used in connection with explosive, flammable, corrosive
and toxic gases. There are potential exposures to personal injury as well as
property damage, particularly if operated without regard to the design limits of
the systems and components. We believe that our insurance coverage is adequate.
We have the following types of insurance coverage:

     o    Product liability
     o    Property and contents
     o    General liability
     o    Directors and officers
     o    Transportation
     o    Business auto
     o    General Umbrella
     o    Workers compensation
     o    Employee benefits liability

Employees

At  December  31,  2007,  we had 115  employees,  113 of which  were  full  time
personnel and 2 which were part time. We had 64 people in  manufacturing,  27 in
engineering  (including  research and development and efforts related to product
improvement)  6 in field  service,  4 in sales and  marketing  and 14 in general
management and administration.

Item 2. Description of Property.

We maintain our  headquarters at 1860 Smithtown  Avenue,  Ronkonkoma,  New York,
where we own a 50,000 square foot  manufacturing  facility which we purchased in
March, 2002. The purchase price for the Property was $2,161,875.  In addition we
incurred  $1,283,077 of renovations.  We financed  $2,700,000 of the total.  The
financing  consisted of a loan secured by a mortgage  held by GE Capital  Public
Finance Inc.  subject to an  installment  sale  agreement with the Town of Islip
Industrial  Development  Agency.  Payments are based upon a 15 year amortization
schedule.  Interest  is  fixed  at a rate  of  5.67%.  Our  CVD/First  Nano  and
Conceptronic/Research divisions operate out of this facility.

Our SDC division  operates out of a 22,000  square foot  manufacturing  facility
situated  on five  acres of land  which we  purchased  in  December  1998 and is
located at 1117 Kings Highway,  Saugerties, New York. The property was purchased
from Kidco Realty Corp. The purchase price for the Property was  $1,400,000.  We
financed  $900,000 of the  purchase  price.  The  financing  consisted of a loan
secured by a  mortgage  held by Kidco  Realty  Corp.  Payments  are based upon a
30-year amortization  schedule,  with a 10-year balloon.  Interest is fixed at a
rate of 7% for 10 years.


                                       7
<PAGE>

On February 8, 2008 we closed on an acquisition of a 13,300 square foot facility
located at 979 Marconi  Avenue,  Ronkonkoma,  NY 11779 through the Town of Islip
Industrial  Development  Agency. The Property was purchased from HPG Realty Co.,
LLC.  The total  purchase  price for the Property  was  $2,015,000.  We financed
approximately  $1,500,000 of the purchase price.  The financing  consists of two
loans secured by mortgages, both of which are held by Capital One, N.A. Payments
upon each of the mortgages are based upon a 20-year amortization schedule,  with
a 10-year  balloon.  Interest  on the $1 million  mortgage is fixed at a rate of
5.67% for 10 years.  Interest  on the  $500,000  mortgage  is fixed at a rate of
3.67%  for the  first  four  years and will be  adjusted  for the 6 year  period
beginning  March 1, 2012 to 200 basis points above the weekly  average  yield on
U.S.  Treasury  Securities  adjusted to a constant  maturity  of 6 years,  until
maturity on March 1, 2018. The facility is intended to be used for the expansion
of the Company's First Nano laboratory starting in the second quarter of 2008.

Item 3. Legal Proceedings.

In  September  1999,  we  were  named  in  a  lawsuit  filed  by   PrecisionFlow
Technologies,  Inc., in the United States District for the Northern  District of
New York  relating to comments  allegedly  made by CVD's  President,  Leonard A.
Rosenbaum,  concerning  the  intellectual  property  obtained in the purchase of
assets of Stainless  Design  Corporation.  We promptly filed a counterclaim  for
unauthorized  use  of our  intellectual  property.  The  plaintiff  was  seeking
monetary damages and injunctive relief. In our counter-claim, we sought monetary
damages and injunctive relief.

In May 2002, we commenced a new action against Precisionflow Technologies, Inc.,
in the United  States  District  for the  Northern  District of New York seeking
injunctive relief and monetary damages based upon copyright violations.

On  September  18,  2007 a  settlement  was  reached  between  the  Company  and
PrecisionFlow Technologies,  Inc. of the pending litigation.  Under the terms of
the  settlement,  all  claims  and  counterclaims  asserted  by the  parties  in
previously  filed  lawsuits  were  discontinued  in  consideration  of which the
Company  will  receive  payments  totaling  $541,600  to be paid over a specific
timetable as defined.

From  time to  time,  we may  become  a  party  to  litigation  or  other  legal
proceedings  that  we  consider  to be a part  of  the  ordinary  course  of our
business.  We are  not  currently  involved  in  legal  proceedings  that  could
reasonably  be  expected  to have a  material  adverse  effect on our  business,
prospects,  financial condition or results of operations. We may become involved
in material legal proceedings in the future.

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

At our annual meeting of stockholders,  which was held on December 12, 2007, our
stockholders:

     (1)  Elected  five  nominees  for  directors  to serve for a term ending in
          2008;

     (2)  Approved  the  selection  of Moore  Stephens,  P.C.  as the  Company's
          independent  registered  public  accounting  firm for the year  ending
          December 31, 2007.

     (3)  Approved the 2007 Share Incentive Plan

The  following  tables  show the common  stock  votes  cast with  respect to the
proposals identified above:

Election of Directors:
---------------------
                                                        Withheld
                                     For                Authority
                                     ---                ---------

Leonard A. Rosenbaum               4,237,633             16,714
Martin J Teitelbaum                3,909,807            344,540
Alan H. Temple Jr.                 4,237,633             16,714
Conrad J. Gunther                  4,237,323             17,024
Bruce T. Swan                      4,237,623             16,724



Proposal 2: Ratification of Moore Stephens, P.C.

                For          Against        Abstentions
                ---          -------        -----------
             4,084,964       12,200             683


Proposal 3: Approval of 2007 Share Incentive Plan

                For          Against        Broker Non-Vote        Abstentions
                ---          -------        ----------------       -----------
              2,255,994      390,104           1,602,403              5,846


                                       8
<PAGE>


                                    PART II

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

The principal market for our common stock which is traded under the symbol "CVV"
was the American  Stock  Exchange  until  September  20, 2007.  On that date, we
transferred our listing to The NASDAQ Capital  Market.  The following table sets
forth, for the periods indicated,  the high and low closing prices of our common
stock on the American Stock Exchange and The NASDAQ Capital Market.

                                                High            Low
                                                ----            ---
Year Ended December 31, 2007:
1st Quarter................................    $6.21           $4.90
2nd Quarter................................     8.95            5.28
3rd Quarter................................     6.20            4.55
4th Quarter................................     4.91            3.65

                                                High            Low
                                                ----            ---
Year Ended December 31, 2006:
1st Quarter................................    $4.21           $2.80
2nd Quarter................................     4.22            2.80
3rd Quarter................................     3.69            2.25
4th Quarter................................     7.13            3.09

As of March 18,  2008,  there  were  approximately  76  holders  of  record  and
approximately  782 beneficial  owners of our common stock, and the closing sales
price of our common stock as reported on the NASDAQ Capital Market was $3.20.

Dividend Policy

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

Under  applicable  New York law,  we would not be  permitted  to declare and pay
dividends  if we were  insolvent,  or  would  become  insolvent  by  payment  of
dividends,  or if our net assets  remaining  after payment of dividends would be
less than our stated capital.


                                       9
<PAGE>

Equity Compensation Plan Information

The following table provides  information  about shares of our common stock that
may  be  issued  upon  the  exercise  of  options  under  all  of  our  existing
compensation plans as of December 31, 2007.

<TABLE>
<CAPTION>

                                Number of securities to be   Weighted-average exercise
                                issued upon exercise of      price of outstanding         Number of securities
                                outstanding options,         options, warrants and        remaining available for
                                warrants and rights          rights                       future issuance
Plan Category

Equity compensation plans
<S>                         <C>           <C>                          <C>                          <C>
approved by security holders(1)           465,000                      $ 3.09                       865,250

         Total                            465,000                       $3.09                       865,250
-------------------------
</TABLE>

(1)  Reflects  aggregate  options and restricted stock awards  outstanding under
     our Non-Qualified Stock Option Plans and 2007 Share Incentive Plan.

Recent Sales Of Unregistered Securities

None.

Issuer Purchases Of Equity Securities

None.

Item 6. Management's Discussion and Analysis or Plan of Operation.

Except  for  historical   information   contained  herein,   this  "Management's
Discussion  and  Analysis  or  Plan  of  Operation"   contains   forward-looking
statements within the meaning of the U.S. Private  Securities  Litigation Reform
Act of 1995, as amended.  These  statements  involve known and unknown risks and
uncertainties  that may cause our actual  results or outcomes  to be  materially
different  from any future  results,  performance or  achievements  expressed or
implied by such forward-looking  statements.  These  forward-looking  statements
were based on various  factors and were  derived  utilizing  numerous  important
assumptions  and other  important  factors  that could cause  actual  results to
differ  materially  from  those  in the  forward-looking  statements.  Important
assumptions  and  other  factors  that  could  cause  actual  results  to differ
materially from those in the forward-looking  statements,  include,  but are not
limited to:  competition  in our existing and potential  future product lines of
business;  our  ability  to obtain  financing  on  acceptable  terms if and when
needed; uncertainty as to our future profitability, uncertainty as to the future
profitability  of acquired  businesses or product  lines,  uncertainty as to any
future  expansion of the Company.  Other factors and  assumptions not identified
above were also involved in the derivation of these  forward-looking  statements
and the failure of such  assumptions to be realized as well as other factors may
also cause actual results to differ  materially from those projected.  We assume
no  obligation  to update these  forward-looking  statements  to reflect  actual
results,  changes in  assumptions,  or changes in other factors  affecting  such
forward-looking statements.


                                       10
<PAGE>

We design and manufacture standard and custom state-of-the-art equipment used in
the  development,  design and  manufacture  of advanced  electronic  components,
materials  and coatings for research  and  industrial  applications.  We offer a
broad range of chemical vapor  deposition,  gas control and other equipment that
is used by our customers to research,  design and  manufacture  semi-conductors,
solar  cells,  carbon  nanotubes,  nanowires,  LEDs  and  MEMS,  and  industrial
coatings,  as well as equipment for surface  mounting of components onto printed
circuit boards.  Our proprietary  products are generally  customized to meet the
particular  specifications  of individual  customers.  We also offer a number of
standardized  products  that  are  based on the  expertise  and know how we have
developed in designing and manufacturing our customized products.

Based on more than 25 years of  industry  experience,  we  provide  leading-edge
design and  manufacturing  solutions to our customers.  We use our  engineering,
design and manufacturing expertise to provide technologically advanced equipment
that enables laboratory and research scientists to develop the precise processes
for the  manufacture  of next  generation  semiconductors  and other  electronic
components.  We also develop and manufacture  production  equipment based on our
designs. We have built a significant  library of design expertise,  know-how and
innovative  solutions to assist our  customers  in  developing  these  intricate
processes.  This  library of  solutions,  along with our  vertically  integrated
manufacturing facilities, allows us to provide superior design and manufacturing
solutions to our customers on a cost effective basis.

Results of Operations

Revenue

Revenue  for the year ended  December  31,  2007 was  approximately  $13,578,000
compared to  approximately  $13,356,000  for the year ended  December  31, 2006,
representing an increase of 1.7%. Annual revenue from the CVD division increased
by  approximately  $1,218,000 to $8,081,000  which represents 59.5% of our total
revenue  during the year ended  December 31, 2007,  compared to  $6,863,000,  or
51.4% of our total revenue for the prior fiscal year. The increase in demand for
our custom  Chemical  Vapor  Deposition  equipment and our First Nano,  EasyTube
product  line has fueled this  increase.  Annual  revenue  from the SDC division
decreased by approximately  $540,000 to $2,589,000 which represents 19.1% of our
total revenue during the year ended  December 31, 2007,  compared to $3,129,000,
or 23.4% of our total  revenue  for the prior  fiscal  year.  This  decrease  is
primarily a result of certain SDC orders being  delayed  until the first quarter
of  2008.   Annual  revenue  from  the   Conceptronic   division   decreased  by
approximately $456,000 to $2,908,000 which represents 21.4% of our total revenue
during the year ended December 31, 2007, compared to $3,364,000 or 25.2% for the
prior fiscal year. The Conceptronic  division continues to make improvements and
reduce costs in their product  offering at the same time it is focusing  efforts
towards a more solutions oriented approach and customized products.


                                       11
<PAGE>

Gross Profit

As a result of the  increased  revenues for the current  year,  cost of revenues
increased to approximately $8,907,000 from approximately $8,672,000 for the last
fiscal year,  an increase of  approximately  $235,000.  The gross profit for the
current fiscal year decreased  slightly to  approximately  $4,671,000  from last
year's $4,684,000,  a decrease of approximately $13,000 with a decrease in gross
profit margin to 34.4% from the 35.1%  experienced  during the prior year. These
overall  decreases are due to the lower gross profit margins  experienced by the
SDC and  Conceptronic  divisions  as a result of  increased  material  costs and
reduced revenues. The gross profit margin of the CVD division increased to 43.5%
for the year  ended  December  31,  2007  compared  to 42.9% for the year  ended
December 31, 2006 after the  inclusion  of $715,000 of research and  development
costs in the current year, a 39.4%  increase,  compared to $513,000 in the prior
year.  The SDC  division's  gross profit margin  decreased to 18.8% for the year
ended  December  31,  2007 from 25.6% for the year ended  December  31,  2006 as
result of higher  material  intensive sales during 2007 as well as the effect of
fixed costs on reduced revenues. The Conceptronic division's gross profit margin
decreased to 19.8% for the year ended  December 31, 2007 from 23.3% for the year
ended December 31, 2006 as result of the division's fixed costs having a greater
impact on the reduced revenues.

Selling, General and Administrative Expenses

Selling and  shipping  expenses  were  approximately  $755,000 in the year ended
December 31, 2007 compared to $756,000 in the year ended December 31, 2006.

General and  administrative  expenses were  approximately  $3,426,000 during the
year ended December 31, 2007. This was an increase of approximately  $502,000 or
17.2% compared to  approximately  $2,925,000  during the year ended December 31,
2006. This increase can be attributed to a combination of increased  payroll and
benefit  costs,  stock-based  compensation,   Sarbanes  Oxley  costs  and  other
professional fees in addition to increased general insurance.

Operating Income

As a result  of the  foregoing  factors,  operating  income  for the year  ended
December  31,  2007  was   approximately   $489,000  compared  to  approximately
$1,003,000 for the year ended December 31, 2006.

Interest Expense. Net

In October,  2007,  we concluded  the sale of  1,380,000  shares of common stock
under  a  registration   statement   filed  with  the  Securities  and  Exchange
Commission.  As a result,  we earned interest of approximately  $51,000 from the
temporary investment of certain net capital raising proceeds  (approximately 5.0
million)  for the year ending  December  31, 2007  compared to minimal  interest
earned for 2006.


                                       12
<PAGE>

We  incurred  approximately  $217,000  of  interest  expense  in the year  ended
December 31, 2007, which was approximately $7,000 or 3.1% less than the $224,000
incurred  in the year  ended  December  31,  2006.  The  primary  source of this
interest expense,  approximately  $170,000 in the current year and approximately
$179,000 in the year ended  December 31, 2006,  was the interest  expense on the
mortgages  for the two  buildings we own. As a result of the  proceeds  received
from the sale of the  Company's  common  stock  discussed  earlier,  the average
outstanding  debt was  lower in the  current  year  resulting  in less  interest
expense than in the year ended December 31, 2006.

Other Income

Other  income for the current  year  increased  to  approximately  $563,000,  an
increase  of $447,000 or 385%  compared  to $116,000 of other  income  generated
during  the year end  December  31,  2006.  This  increase  was the  result of a
settlement of  litigation  between the Company and  PrecisionFlow  Technologies,
Inc. Under the terms of the settlement, all claims and counterclaims asserted by
the parties were discontinued in consideration of which we will receive payments
totaling $541,600 to be paid over a specific timetable.

Income Tax Provision

For the twelve months ended December 31, 2007, we recorded income tax expense of
approximately  $110,000 which related to various federal, state and local taxes.
The  current  income tax  provision  was reduced by  approximately  $77,000 as a
result of the use of available net operating losses. In 2006, we had a change in
the tax  accounting  method of recognizing  contract  revenue from the completed
contract method to the percentage of completion method. Contracts in progress as
of December 31, 2006 are being recognized ratably over a four year period,  thus
increasing  the current  income tax  provision  and  conversely  decreasing  the
deferred tax provision as we recognize 25% of the tax provision annually.

Net Income

As a result of the foregoing factors,  for the year ended December 31, 2007, our
pre-tax income amounted to approximately  $887,000,  as compared to $897,000 for
the same  period in 2006.  Net income for the year ended  December  31, 2007 was
approximately  $777,000  as  compared  to $604,000 in 2006 or $.21 per basic and
$.20 per diluted  share as compared to $.19 per basic and diluted  share for the
years ended December 31, 2007 and 2006 respectively.

Liquidity and Capital Resources

In October 2007, we completed the sale of 1,380,000  shares of common stock in a
public offering at $4.75 per share.  The net proceeds of the sale after offering
expenses and underwriting fees was approximately $5.7 million.  We intend to use
the net  proceeds  from the  offering  for  working  capital  and other  general
corporate  purposes,  including  possible  product or business  acquisitions  in
connection with the planned expansion of our business.


                                       13
<PAGE>

As of December 31,  2007,  we had  aggregate  working  capital of  approximately
$10,314,000  compared to aggregate working capital of $4,151,000 at December 31,
2006 and had available  cash and cash  equivalents of  approximately  $5,110,000
compared to approximately  $257,000 in cash and cash equivalents at December 31,
2006.  The  increase  in  working  capital  was  primarily  attributable  to the
approximately  $5.7 net cash  proceeds  received  from our equity  raise and the
settlement of the PrecisionFlow litigation.

Accounts  receivable,  net of  allowance  for  doubtful  accounts  decreased  by
approximately  $608,000 or 25.6% at December 31, 2007 to $1,769,000  compared to
$2,377,000 at December 31, 2006.  This decrease is principally due to the timing
of shipments and customer payments.

Inventory as of December 31, 2007 was approximately  $3,016,000  representing an
increase  of  approximately  $311,000  or 11.5%  over the  inventory  balance of
$2,705,000  as of December 31, 2006.  The increase in inventory was comprised of
an increase in raw materials of approximately  $218,000,  an increase in work in
process of  approximately  $218,000 which was partially  offset by a decrease in
finished  goods of  approximately  $125,000.  The build-up in work in process is
primarily  due to an increase in orders that we are  experiencing  in customized
CVD products and our First Nano,  EasyTube  standardized  product line. Accounts
payable and accrued  expenses at December 31, 2007 of  approximately  $1,880,000
was approximately $518,000 higher than it was at December 31, 2006.

As of December 31, 2007, our backlog was approximately  $5,087,000,  an increase
of $1,522,000 or 42.7%  compared to $3,565,000 at December 31, 2006.  Timing for
completion of the backlog varies depending on the product mix, however, there is
generally  a one to six month lag in the  completion  and  shipping  of backlog.
Backlog from quarter to quarter can vary based on the timing of order placements
and  shipments.  Demand for CVD and First Nano  EasyTube  systems  continues  to
remain strong.

On June 1, 2007, we entered into a three year Revolving  Credit Agreement with a
bank permitting us to borrow on a revolving basis amounts up to $2,000,000 until
June 1, 2010,  at which time it will be subject to  renewal.  The loan will bear
interest on any unpaid  principal  balance at a rate to be elected by us,  which
shall be equal to either (1) the LIBOR  Rate plus 2.50% or (2) the bank's  prime
rate  plus 1/4 of 1%.  This  agreement  contains  certain  financial  and  other
covenants, with which we were in compliance at December 31, 2007.

We had an equipment line of credit of $250,000 with that same bank. This line of
credit was  discontinued  as of June 1, 2007 with the inception of the new three
year Revolving Credit Agreement previously discussed.

In March,  2002,  we  received  from  General  Electric  Capital  Corporation  a
$2,700,000  mortgage  loan,  secured  by the  real  property  and  building  and
improvements  to finance and improve our facility in  Ronkonkoma,  New York. The
mortgage  loan,  which has an  outstanding  balance as of  December  31, 2007 of
$1,921,439,  is  payable in equal  monthly  installments  of  $22,285  including
interest at 5.67% per annum; pursuant to an industrial development bond purchase
agreement  with the town of  Islip  Industrial  Development  Agency.  The  final
payment is due March 2017.


                                       14
<PAGE>

In April,  1999 we received from Kidco Realty  Corporation  a $900,000  purchase
money mortgage loan, secured by the real property,  building and improvements in
Saugerties,  New York. The mortgage loan has an outstanding  balance at December
31,  2007 of $794,897  and is payable in equal  monthly  installments  of $5,988
including  interest  at 7% per annum.  The entire  principal  balance is due May
2009.

In the fourth  quarter of 2006, an internal  decision was made to  significantly
broaden the First Nano product line and pursue a  significantly  larger share of
the R & D market with additional  equipment platforms under the First Nano brand
name. In 2007, we began marketing,  manufacturing and selling these products. We
feel  comfortable  we will  continue to be  successful  with these  multiple new
products as well as the additional new products to be offered as their design is
based on building blocks we have used in previous systems over the years.

To support the increase in our existing  product sales and the  development  and
sales  of  the  new  First  Nano  products,   we  have  begun  to  increase  our
manufacturing capacity, hired additional personnel and expanded our advertising,
trade shows and  marketing  capabilities.  Additionally,  on February 8, 2008 we
purchased  a 13,300  square  foot  stand-alone  building to house our First Nano
laboratory.  We are  now in the  process  of  hiring  additional  personnel  and
purchasing additional laboratory test equipment so that we can develop new First
Nano and CVD  products  so we can  continue to stay in the  forefront  of Carbon
Nanotube, Nanowire, Nano Material and other technology related applications.

We  believe  that our  cash  and  cash  equivalent  positions,  cash  flow  from
operations  and ability to expand our credit  facilities as of December 31, 2007
and for the year then ended will be sufficient  to meet our working  capital and
capital expenditure requirements for the next twelve months.

Should we determine to grow our business  more  aggressively,  which may include
making  acquisitions;  we may need to raise additional funding. For this reason,
as well as other reasons that arise from time to time,  we may consider  raising
capital  through  equity or debt  financings.  Any decision to raise  additional
capital,  as well as the determination of the appropriate  vehicle for doing so,
will depend on market conditions,  order levels,  opportunities  presented to us
and other factors.

Critical Accounting Policies

Revenue Recognition

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


                                       15
<PAGE>

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting  period.  Actual results could differ from those estimates.
Estimates  are used when  accounting  for  certain  items  such as  revenues  on
long-term   contracts   recognized  on  the   percentage-of-completion   method,
allowances for doubtful accounts,  depreciation and amortization, tax provisions
and product warranties.

Stock-Based Compensation

On January  1, 2006,  the  Company  adopted  the  provisions  of SFAS No.  123-R
"Share-Based  Payment"  using the modified  prospective  method.  SFAS No. 123-R
requires  companies  to  recognize  the cost of  employee  services  received in
exchange for awards of equity  instruments  based upon the grant date fair value
of those  awards.  Under the modified  prospective  method of adopting  SFAS No.
123-R, the Company  recognized  compensation  cost for all share-based  payments
granted after  January 1, 2006,  plus any awards  granted to employees  prior to
January  1, 2006  that  remain  unvested  at that  time.  Under  this  method of
adoption, no restatement of prior periods is made.

Long-Lived Assets

Long-lived assets consist primarily of property, plant and equipment. Long-lived
assets are reviewed  annually for impairment or whenever events or circumstances
indicate  their  carrying  value may not be  recoverable.  When  such  events or
circumstances  arise, an estimate of the future undiscounted cash flows produced
by the asset, or the appropriate  grouping of assets, is compared to the asset's
carrying value to determine if impairment exists pursuant to the requirements of
Statement of Financial Accounting Standards (SFAS") No. 144, "Accounting for the
Impairment of Disposal of  Long-Lived  Assets." If the asset is determined to be
impaired,  the  impairment  loss is measured on the excess of its carrying value
over its fair value. Assets to be disposed of are reported at the lower of their
carrying value or net realizable  value. The Company had no recorded  impairment
charges in the statement of operations  during each of the years ended  December
31, 2007 and 2006.


Off-Balance Sheet Arrangements

None

Item 7. Financial Statements.

The consolidated  financial  statements and supplementary  data required by this
item are included in this annual report beginning on page F-1.


                                       16
<PAGE>

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

None

Item 8A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. The Company maintains a system
of  disclosure   controls  and  procedures  that  is  designed  to  ensure  that
information  required to be  disclosed  by the Company in this Annual  Report on
Form  10-KSB,  and in other  reports  required to be filed under the  Securities
Exchange Act of 1934, as amended (the "Exchange  Act"), is recorded,  processed,
summarized and reported within the time periods specified in the rules and forms
of the Securities and Exchange  Commission for such filings. As required by Rule
13a-15(b) under the Exchange Act, management of the Company, under the direction
of the Company's Chief Executive Officer and Chief Financial  Officer,  reviewed
and  performed an evaluation of the  effectiveness  of the Company's  disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as
of December 31, 2007.  Based on that review and evaluation,  the Chief Executive
Officer and Chief Financial  Officer,  along with the management of the Company,
have  determined  that as of December  31,  2007,  the  disclosure  controls and
procedures  were and are  effective  as  designed  to  ensure  that  information
relating to the Company and its consolidated subsidiary would be accumulated and
communicated  to them, as  appropriate,  to allow timely  disclosures  regarding
required disclosures.

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


Item 8B.          Other Information.

None



                                       17
<PAGE>



                                    PART III

Item 9. Directors,  Executive Officers, Promoters, Control Persons and Corporate
Governance; Compliance with Section 16(a) of the Exchange Act.

Board of Directors and Executive Officers

Our  Certificate  of  Incorporation  and Bylaws  provide  for our  Company to be
managed  by or  under  the  direction  of the  Board  of  Directors.  Under  our
Certificate of Incorporation  and Bylaws,  the number of directors is fixed from
time to time by the  Board  of  Directors.  The  Board  of  Directors  currently
consists  of five  members.  Directors  are elected for a period of one year and
thereafter serve,  subject to the Bylaws, until the next annual meeting at which
their successors are duly elected by the stockholders.

The following  table sets for the names,  ages and positions with the Company of
each of our directors and executive officers.

Name                       Age     Position(s) with the Company
----                       ---     ----------------------------
Leonard A. Rosenbaum       62      Director, Chief Executive Officer, President
Alan H. Temple Jr.         74      Director, Chairman-Compensation Committee
Martin J. Teitelbaum       58      Director, Assistant Secretary
Conrad Gunther             61      Director, Chairman-Audit Committee
Bruce T. Swan              75      Director, Chairman-Nominating, Governance
                                   and Compliance Committee
Glen R. Charles            54      Chief Financial Officer, Secretary

Leonard A. Rosenbaum
--------------------

Leonard A.  Rosenbaum  founded the  Company in 1982 and has been our  President,
Chief  Executive  Officer and has served as  Chairman of the Board of  Directors
since that time. From 1971 until 1982, Mr. Rosenbaum was President, director and
a principal  stockholder of Nav-Tec Industries,  a manufacturer of semiconductor
processing  equipment  similar to the type of some of the equipment we currently
manufacture.  From 1966 to 1971,  Mr.  Rosenbaum  was  employed by a division of
General Instrument, a manufacturer of semiconductor materials and equipment.

Alan H. Temple Jr.
------------------

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

Martin J. Teitelbaum
--------------------

Martin J.  Teitelbaum  has  served as a member of our Board of  Directors  since
1985.  Mr.  Teitelbaum  is an attorney,  who since 1988,  has  conducted his own
private  practice.  From 1977 to 1987,  Mr.  Teitelbaum was a partner in the law
firm of Guberman and Teitelbaum.  Mr. Teitelbaum currently acts as our Assistant
Secretary.  Mr.  Teitelbaum  earned a B.A. in  Political  Science from the State
University of New York at Buffalo and a Juris Doctor from Brooklyn Law School.


                                       18
<PAGE>

Conrad Gunther
--------------

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

Bruce T. Swan
-------------

Bruce T. Swan has served as a member of our Board of Directors  since  September
2003. Mr. Swan has extensive banking, export and international credit experience
and has been  retired  for more  than five  years.  He  previously  has held the
positions  of Deputy  Manager  at Brown  Brothers  Harriman  and Co.,  Assistant
Treasurer  at Standard  Brands  Incorporated,  Assistant  Treasurer  at Monsanto
Corporation, Vice President and Treasurer at AM International Inc. and President
and Founder of Export Acceptance Company.  Mr. Swan, earned his MBA from Harvard
University and is a former adjunct faculty member of New York University's Stern
School of Business Administration.

Glen R. Charles
---------------

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

Code Of Ethics

The Company  adopted a Corporate  Code of Conduct and Ethics that applies to its
employees,  senior  management  and  Board of  Directors,  including  the  Chief
Executive Officer and Chief Financial Officer. The Corporate Code of Conduct and
Ethics is available on our web site, http://www.cvdequipment.com, by clicking on
"About Us" and then clicking on "Corporate Overview."


                                       19
<PAGE>

Audit Committee

Our Board of Directors has an Audit  Committee that consists of Conrad  Gunther,
Alan H. Temple Jr. and Bruce T. Swan.  During the fiscal year ended December 31,
2007, the Audit  Committee held four meetings.  Pursuant to the Audit  Committee
Charter,  the Audit  Committee  is  directly  responsible  for the  appointment,
compensation,  retention and oversight of the work of any independent registered
public  accounting firm engaged for the purpose of preparing or issuing an audit
report or  performing  other audit,  review or attest  services for us, and each
such  independent  auditor  shall report  directly to the  Committee.  The Audit
Committee also reviews with management and the independent auditors,  our annual
audited  financial  statements,  the scope and results of annual  audits and the
audit and non-audit fees of the independent  registered  public accounting firm.
Furthermore,  the Audit Committee  reviews the adequacy of our internal  control
procedures,  the structure of our financial  organization and the implementation
of our financial and accounting policies.  Messrs.  Gunther, Temple and Swan are
"independent" under the requirements of the NASDAQ Stock Market.

The Board of Directors has determined that Conrad Gunther is an "audit committee
financial  expert" as that term is defined in the rules and  regulations  of the
Securities and Exchange Commission.

Section 16(a) Beneficial Ownership Reporting Compliance

The rules of the Securities and Exchange  Commission require us to disclose late
filings of reports of stock  ownership  and  changes in stock  ownership  by our
directors, officers and ten percent stockholders. To our knowledge, based solely
on our review of (a) the copies of such reports and amendments thereto furnished
to us and (b)  written  representations  that no other  reports  were  required,
during our fiscal  year ended  December  31,  2007,  all of the  filings for our
officers, directors and ten percent stockholders were made on a timely basis.

Item 10. Executive Compensation.

Summary Compensation TableThe following table sets forth the compensation of our
chief  executive  officer  and chief  financial  officer,  our "named  executive
officers,"  for the year ended  December 31, 2007.  The Company has no executive
officers other than the "named executive officers."

<TABLE>
<CAPTION>

                                     Option
Name and                                                      Awards ($)
principal position                    Year       Salary ($)       (1)        Total ($)
------------------                    ----       ----------       ---        ---------
<S>                                   <C>         <C>            <C>          <C>
Leonard A. Rosenbaum                  2007        162,742        42,099       204,041
President and Chief Executive
Officer

Glen R. Charles                       2007        117,500        5,063        122,563
Secretary and Chief Financial
Officer
</TABLE>

                                       20
<PAGE>

For the year ended  December 31, 2007 Mr.  Rosenbaum  and Mr.  Charles were paid
base  salaries of $162,742 and $117,500  respectively.  (1) Amounts shown do not
reflect compensation actually received by the named executive officer.  Instead,
the amounts shown are the  compensation  costs  recognized by CVD in fiscal 2007
for option awards as determined  pursuant to FAS 123R. These  compensation costs
reflect option awards  granted during and prior to fiscal 2007. The  assumptions
used to calculate  the value of option awards are set forth under Note 13 of the
Notes to Consolidated Financial Statements.

Outstanding Equity Awards at December 31, 2007

                                            OPTION AWARDS
               -----------------------------------------------------------------
                  Number of         Number of
                  Securities        Securities
                  Underlying        Underlying
                  Unexercised       Unexercised       Option
                   Options           Options          Exercise       Option
                  Exercisable     Unexercisable       Price        Expiration
                     (#)               (#)             ($)            Date
Name                 ---               ---             ---            ----

Leonard A.          15,000              -               1.40           9/23/2010
Rosenbaum           14,000            7,000             4.10           9/13/2012
                     8,000           16,000             3.65          12/13/2017

Glen R. Charles      7,500            7,500             2.26           6/16/2012


2007 Director Compensation

Name                                  Option Awards (1)             Total
----                                  -----------------             -----
Alan H. Temple Jr.                         $42,099                 $42,099
Martin J. Teitelbaum                        42,099                  42,099
Conrad Gunther                              42,099                  42,099
Bruce T. Swan                               42,099                  42,099

(1) Amounts  shown do not reflect  compensation  actually  received by the named
director.  Instead,  the amounts shown are the compensation  costs recognized by
CVD in fiscal 2007 for option awards as determined  pursuant to FAS 123R.  These
compensation  costs  reflect  option awards  granted  during and prior to fiscal
2007. The assumptions used to calculate the value of option awards are set forth
under Note 13 of the Notes to Consolidated Financial Statements.

Directors of the Company are not regularly compensated for being on the Board of
Directors.  However, the Stock Option Committee which is comprised of all of the
members of the Board of Directors with the exception of Leonard A. Rosenbaum has
the  authority to grant stock options to members from time to time. In December,
2007 the Stock Option Committee granted  non-qualified stock options to purchase
24,000  shares  of the  Company's  common  stock to each  member of the board of
directors.  These options were issued at a grant price equal to the then current
market  price of $3.65.  These  options  became  exercisable  as to 33.3% of the
underlying  shares on December 12, 2007.  The options  become  exercisable  with
respect to the remaining 16,000 underlying shares with options to purchase 2,000
shares becoming  exercisable  every 3 months  beginning  January 12, 2008. These
options expire on December 12, 2017.

                                       21
<PAGE>

Item 11.  Security  Ownership of Certain  Beneficial  Owners and  Management and
Related Stock Holder Matters.

The following table sets forth, as of March 10, 2008,  information regarding the
beneficial  ownership  of our common stock by (a) each person who is known to us
to be the owner of more than five percent of our common  stock,  (b) each of our
directors,  (c) each of the named executive officers,  and (d) all directors and
executive  officers  and  executive  employees  as a group.  For purposes of the
table,  a person or group of persons is deemed to have  beneficial  ownership of
any shares that such person has the right to acquire within 60 days of March 10,
2008.

<TABLE>
<CAPTION>

                                                                 Amounts and Nature of           Percent of Class
Name and Address of Beneficial Owner(1)                         Beneficial Ownership (2)               (%)
---------------------------------------                         ------------------------               ---
<S>                                                                    <C>       <C>                  <C>
Leonard A. Rosenbaum                                                   1,371,350 (3)                  29.0
Alan H. Temple Jr.                                                       192,500 (4)                   4.1
Martin J. Teitelbaum                                                      80,500 (5)                   1.7
Conrad Gunther                                                            54,500 (6)                   1.2
Bruce T. Swan                                                             43,500 (7)                    *
Glen R. Charles                                                            7,500 (8)                    *
Michael A. Roth                                                          400,000 (9)                   8.5
Brian J. Stark                                                           400,000 (9)                   8.5
Robert E. Kern Jr.                                                       250,000 (10)                  5.3
David G. Kern                                                            250,000 (10)                  5.3
All directors and executive officers and executive
employees as a group (six (6) persons)                                 1,749,850                      37.0
----------------------------
*Less than 1% of the outstanding common stock or less than 1% of the voting power
</TABLE>

(1)  The address of  Messrs.Rosenbaum,  Temple,  Teitelbaum,  Gunther,  Swan and
     Charles  is  c/o  CVD  Equipment   Corporation,   1860  Smithtown   Avenue,
     Ronkonkoma,  New York, 11779.
     The  address  of  Messrs.  Roth and Stark is 3600  South  Lake  Drive,  St.
     Francis, Wisconsin 53235.
     The address of Messrs. Kern Jr. and Kern is 114 West 47th Street, New York,
     NY 10036

(2)  All of such  shares are owned  directly  with sole  voting  and  investment
     power, unless otherwise noted below.

(3)  Includes  options to purchase  29,500 shares of our common stock.  Does not
     include options to purchase 15,500 shares of common stock



                                       22
<PAGE>

(4)  Includes  options to purchase  33,000 shares of our common stock.  Does not
     include options to purchase 15,500 shares of common stock.

(5)  Includes 2,000 shares held by Mr.  Teitelbaum's wife as to which beneficial
     ownership  thereof is disclaimed by Mr.  Teitelbaum and options to purchase
     44,500  shares of our common  stock.  Does not include  options to purchase
     15,500 shares of common stock.

(6)  Includes  options to purchase  44,500 shares of our common stock.  Does not
     include options to purchase 15,500 shares of common stock.

(7)  Includes  options to purchase  29,500 shares of our common stock.  Does not
     include options to purchase 15,500 shares of common stock.

(8)  Includes  options to purchase  7,500 shares of our common  stock.  Does not
     include options to purchase 7,500 shares of common stock.

(9)  Mr. Roth and Mr. Stark share voting and investment  power and  beneficially
     own a total of 400,000  shares of common stock.  Mr. Roth and Mr. Stark are
     the  managing  members  of Stark  Offshore  Management  LLC,  which acts as
     investment  manager  and has sole power to direct the  management  of Stark
     Master Fund Ltd. which  directly owns 400,000  shares of common stock.  The
     address of Stark  Master Fund Ltd. Is 3600 South Lake Drive,  St.  Francis,
     Wisconsin 53235.

(10) R. Kern and D.  Kern as  controlling  members  of Kern  Capital  Management
     ("KCM")  may be  deemed  the  beneficial  owners of the  securities  of the
     company  owned by KCM in that  they  might be  deemed to share the power to
     direct the voting or disposition of the securities. R. Kern and D. Kern are
     the Managing Members of Innovation,  which serves as the General Partner of
     Redpoint,  and may be deemed  the  beneficial  owner of  securities  of the
     company owned by Redpoint.


See Item 5,  Market  for  Registrant's  Common  Equity and  Related  Stockholder
Matters,   under  the  heading  "Equity   Compensation   Plan  Information"  for
information  regarding  our  securities  authorized  for  issuance  under equity
compensation plans.

Item  12.  Certain   Relationships  and  Related   Transactions,   and  Director
Independence.

Related Person Transactions

Martin J.  Teitelbaum,  a director of the  Company,  is also our  general  legal
counsel. Fees paid to Mr. Teitelbaum for the three years ended December 31, 2007
were approximately $133,000, $34,000 and $35,000.




                                       23
<PAGE>

Director Independence

The current members of our Board of Directors are Leonard A. Rosenbaum,  Alan H.
Temple Jr.,  Martin J.  Teitelbaum,  Conrad  Gunther and Bruce T. Swan.  Messrs.
Gunther,  Temple,  and Swan are  "independent" as defined under Rule 4200 of the
Nasdaq Stock Market.



Item 13. Exhibits.

3.1  Certificate  of  Incorporation  dated  October 12, 1982 of  Certificate  of
     Corporation incorporated herein by reference to Exhibit 3.1 to our Form S-1
     filed on July 3, 2007.

3.2  Certificate of Amendment dated April 25, 1985 of Certificate of Corporation
     incorporated  herein by  reference  to Exhibit 3.1 to our Form S-1 filed on
     July 3, 2007.

3.3  Certificate   of  Amendment   dated  August  12,  1985  of  Certificate  of
     Corporation incorporated herein by reference to Exhibit 3.1 to our Form S-1
     filed on July 3, 2007.

3.4  Bylaws of CVD Equipment  Corporation,  incorporated  herein by reference to
     Exhibit 3.2 to our Form S-1 filed on July 3, 2007.

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

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

10.3 CVD Equipment  Corporation  2001 Stock Option Plan  incorporated  herein by
     reference to Exhibit 3.1 to our Form S-1 filed on July 3, 2007.*

10.4 Form  of  Non-Qualified  Stock  Option  Agreement  incorporated  herein  by
     reference to Exhibit 3.1 to our Form 10KSB filed on March 26, 2007.*

10.5 Revolving Credit Agreement between CVD Equipment Corporation and North Fork
     Bank dated June 1, 2007  incorporated  herein by  reference to our Form 8-K
     filed on June 6, 2007.

10.6 1989 Key  Employee  Stock Option Plan  incorporated  herein by reference to
     Amendment No. 1 to our Form S-1 filed on August 7, 2007.

10.7 CVD Equipment  Corporation 2007 Share Incentive Plan incorporated herein by
     reference to our Schedule 14A filed November 5, 2007.

10.8 Contract of sale between CVD Equipment  Corporation and HPG Realty Co., LLC
     for the purchase of a 13,300  square foot  facility  located at 979 Marconi
     Avenue, Ronkonkoma, NY 11779.

10.9 Assignment,  Assumption and Amendment  Agreement by and among Town of Islip
     Industrial  Development  Agency,  North Fork Bank,  HPG  Realty  Co.,  LLC,
     Tri-Start  Electronics,  Inc., and CVD Equipment Corporation dated February
     8, 2008.

10.10 Lease Agreement  between Town of Islip Industrial  Development  Agency and
     HPG Realty Co., LLC dated February 1, 2004.


                                       24
<PAGE>

10.11 Payment-In-Lieu-Of-Tax  Agreement  dated  February 1, 2004 between Town of
     Islip  Industrial  Development  Agency,  HPG Realty Co., LLC, and Tri-Start
     Electronics, Inc.

10.12 Mortgage  Note  between  North  Fork Bank  dated  February  8, 2008 in the
     principal amount of $1,000,000.

10.13 Mortgage  Note  between  North  Fork Bank  dated  February  8, 2008 in the
     principal amount of $500,000.

21.1 Subsidiaries.

23.1 Consent of Moore Stephens, P.C. (S-1)

23.2 Consent of Moore Stephens, P.C. (S-8)

31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.

31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.

32.1 Section 1350 Certification of Principal Executive Officer.

32.2 Section 1350 Certification of Principal Financial Officer.
-------------------
* Management contract or compensatory plan or arrangement required.


Item 14. Principal Accountant Fees and Services.

The following  presents fees for professional  audit services  rendered by Moore
Stephens,  P.C. for the audit of our  financial  statements  for the years ended
December 31, 2007 and December 31, 2006.

Audit Fees

The aggregate fees billed by Moore  Stephens,  P.C,. for the annual audit of the
Company,  unaudited  quarterly  reviews of financial  statements  including  the
Company's  reports  on Form  10-Q  and  services  normally  provided  by them in
connection  with  statutory  and  regulatory  filings,  including  the Company's
registration  statement  related to our 2007 public  offering,  for fiscal years
2007 and 2006, were $114,328 and $76,750, respectively.

Audit- Related Fees

We did not incur any audit-related fees in 2007 or 2006.

Tax Fees

Tax fees consisted  primarily of tax preparation of the 2006 and 2005 annual tax
returns. The aggregate fees billed by Moore Stephens P.C. for such services were
$8,575 in 2007 and $8,500 in 2006.


                                       25
<PAGE>

All Other Fees

Other fees consisted of advisory services provided by Moore Stephens relating to
the  Company's  Share  Incentive  Plan  and  Sarbanes  Oxley  requirements.  The
aggregate  fees billed by Moore  Stephens for such  services were $3,835 in 2007
and $0 in 2006.

Audit Committee Approval

The engagement of the Company's independent registered public accounting firm is
pre-approved by the Company's Audit Committee.  The Audit Committee pre-approves
all  fees  billed  and  all  services  rendered  by  the  Company's  independent
registered public accounting firm.









                                       26
<PAGE>


                                   SIGNATURES

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

                            CVD EQUIPMENT CORPORATION

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

In accordance  with the  Securities  Exchange Act of 1934,  this report has been
signed below by the  following  persons on behalf of the  registrant  and in the
capacities and on the dates indicated below.

<TABLE>
<CAPTION>

         NAME                                        POSITION                             DATE
         ----                                        --------                             ----

<S>                                                                                           <C> <C>
/s/  Leonard A Rosenbaum          President, Chief Executive Officer and Director       March 31, 2008
------------------------
Leonard A. Rosenbaum              (Principal Executive Officer)

/s/  Alan H. Temple Jr.           Director                                              March 31, 2008
-----------------------
Alan H. Temple Jr.

/s/  Martin J. Teitelbaum         Director and Assistant Secretary                      March 31, 2008
-------------------------
Martin J. Teitelbaum

/s/  Conrad Gunther               Director                                              March 31, 2008
-------------------
Conrad Gunther

/s/  Bruce T. Swan                Director                                              March 31, 2008
------------------
Bruce T. Swan

/s/  Glen R. Charles              Chief Financial Officer and Secretary                 March 31, 2008
--------------------              (Principal Financial and Accounting Officer)
Glen R. Charles


</TABLE>


                                       27
<PAGE>

                                  EXHIBIT INDEX


3.1  Certificate  of  Incorporation  dated  October 12, 1982 of  Certificate  of
     Corporation incorporated herein by reference to Exhibit 3.1 to our Form S-1
     filed on July 3, 2007.

3.2  Certificate of Amendment dated April 25, 1985 of Certificate of Corporation
     incorporated  herein by  reference  to Exhibit 3.1 to our Form S-1 filed on
     July 3, 2007.

3.3  Certificate   of  Amendment   dated  August  12,  1985  of  Certificate  of
     Corporation incorporated herein by reference to Exhibit 3.1 to our Form S-1
     filed on July 3, 2007.

3.4  Bylaws of CVD Equipment  Corporation,  incorporated  herein by reference to
     Exhibit 3.2 to our Form S-1 filed on July 3, 2007.

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

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

10.3 CVD Equipment  Corporation  2001 Stock Option Plan  incorporated  herein by
     reference to Exhibit 3.1 to our Form S-1 filed on July 3, 2007.*

10.4 Form  of  Non-Qualified  Stock  Option  Agreement  incorporated  herein  by
     reference to Exhibit 3.1 to our Form 10KSB filed on March 26, 2007.*

10.5 Revolving Credit Agreement between CVD Equipment Corporation and North Fork
     Bank dated June 1, 2007  incorporated  herein by  reference to our Form 8-K
     filed on June 6, 2007.

10.6 1989 Key  Employee  Stock Option Plan  incorporated  herein by reference to
     Amendment No. 1 to our Form S-1 filed on August 7, 2007.

10.7 CVD Equipment  Corporation 2007 Share Incentive Plan incorporated herein by
     reference to our Schedule 14A filed November 5, 2007.

10.8 Contract of sale between CVD Equipment  Corporation and HPG Realty Co., LLC
     for the purchase of a 13,300  square foot  facility  located at 979 Marconi
     Avenue, Ronkonkoma, NY 11779.

10.9 Assignment,  Assumption and Amendment  Agreement by and among Town of Islip
     Industrial  Development  Agency,  North Fork Bank,  HPG  Realty  Co.,  LLC,
     Tri-Start  Electronics,  Inc., and CVD Equipment Corporation dated February
     8, 2008.

10.10 Lease Agreement  between Town of Islip Industrial  Development  Agency and
     HPG Realty Co., LLC dated February 1, 2004.


                                       24
<PAGE>

10.11 Payment-In-Lieu-Of-Tax  Agreement  dated  February 1, 2004 between Town of
     Islip  Industrial  Development  Agency,  HPG Realty Co., LLC, and Tri-Start
     Electronics, Inc.

10.12 Mortgage  Note  between  North  Fork Bank  dated  February  8, 2008 in the
     principal amount of $1,000,000.

10.13 Mortgage  Note  between  North  Fork Bank  dated  February  8, 2008 in the
     principal amount of $500,000.

21.1 Subsidiaries.

23.1 Consent of Moore Stephens, P.C. (S-1)

23.2 Consent of Moore Stephens, P.C. (S-8)

31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.

31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.

32.1 Section 1350 Certification of Principal Executive Officer.

32.2 Section 1350 Certification of Principal Financial Officer.
-------------------
* Management contract or compensatory plan or arrangement required.




<PAGE>


                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



<TABLE>
<CAPTION>


                                                                                         Page No.
                                                                                         -------

<S>                                                                                          <C>
Report of Independent Registered Public Accounting Firm                                     F1

Financial Statements:

Consolidated Balance Sheets as of December 31, 2007 and 2006                                F2

Consolidated Statements of Operations for the years ended December 31, 2007 and
2006                                                                                        F3

Consolidated Statements of Stockholders' Equity for the years ended December 31,
2007 and 2006                                                                               F4

Consolidated Statements of Cash Flows for the years ended December 31, 2007 and
2006                                                                                        F5

Notes to Consolidated Financial Statements                                                  F6

</TABLE>







<PAGE>
                                       F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



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

We have audited the  accompanying  consolidated  balance sheets of CVD Equipment
Corporation  and  Subsidiary  as of December 31, 2007 and 2006,  and the related
consolidated statements of operations,  stockholders' equity, and cash flows for
each of the two years in the period ended December 31, 2007. These  consolidated
financial  statements are the  responsibility of the company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial  position of CVD
Equipment  Corporation  and Subsidiary as of December 31, 2007 and 2006, and the
consolidated  results of their  operations  and their cash flows for each of the
two years in the period ended  December 31 2007, in conformity  with  accounting
principles generally accepted in the United States of America.

We are not engaged to examine management's  assertion about the effectiveness of
CVD Equipment  Corporations  internal  controls over  financial  reporting as of
December 31, 2007 and, accordingly, we do not express an opinion thereon.


                                                /s/ Moore Stephens, P.C.
                                                ------------------------------
                                                MOORE STEPHENS, P.C.
                                                Certified Public Accountants.


Cranford, New Jersey
March 24, 2008



<PAGE>

                                       F-2

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

<TABLE>
<CAPTION>

                                                                             2007                               2006
                                                                    ------------------------           -----------------------
ASSETS
Current Assets
<S>                                                                  <C>                                    <C>
     Cash and cash equivalents                                       $            5,110,447                 $         257,341
     Accounts receivable, net                                                     1,769,265                         2,377,069
     Investments                                                                    251,130                           251,130
     Cost and estimated earnings in excess
        of billings on uncompleted contracts                                      1,847,288                           716,663
     Inventories                                                                  3,015,635                         2,704,506

     Deferred income taxes - current                                                 90,774                              -
     Other current assets                                                           379,360                           118,300
                                                                    ------------------------           -----------------------

     Total Current Assets                                                        12,463,899                         6,425,009

Property, plant and equipment, net                                                5,055,727                         4,778,807

Deferred income taxes - non-current                                                 266,077                           232,956

Other assets                                                                      1,114,637                           708,114

Intangible assets, net                                                              106,566                           105,775
                                                                    ------------------------           -----------------------
     Total Assets                                                    $           19,006,906                   $    12,250,661
                                                                    ========================           =======================


LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
     Current maturities of long-term debt                            $              222,193                   $       223,653

     Short-term notes payable                                                          -                              210,000

     Short-term debt                                                                   -                                2,109
     Accounts payable                                                               517,934                           640,771
     Accrued expenses                                                             1,245,819                           686,771
     Accrued professional fees - related party                                      116,165                            35,000
     Deferred revenue                                                                47,444                           212,250

     Deferred tax liability-current                                                    -                              263,396
                                                                    ------------------------           -----------------------

     Total Current Liabilities                                                    2,149,555                         2,273,950
Long-term Debt, net of current portion                                            2,678,421                         2,776,801
                                                                    ------------------------           -----------------------
     Total Liabilities                                                            4,827,976                         5,050,751
                                                                    ------------------------           -----------------------


Commitments and Contingencies                                                          -                                 -

Stockholders' Equity:
     Common stock - $0.01 par value -10,000,000 shares
     authorized; issued &
     outstanding, 4,718,500 shares at December 31, 2007
     and 3,250,500 shares at December 31, 2006                                       47,185                           32,505
     Additional paid-in capital                                                   9,592,728                        3,405,474
     Retained earnings                                                            4,539,017                        3,761,931
                                                                    ------------------------           -----------------------
     Total Stockholders' Equity                                                  14,178,930                        7,199,910
                                                                    ------------------------           -----------------------

     Total Liabilities and Stockholders' Equity                      $           19,006,906                   $    12,250,661
                                                                    ========================           =======================


                        The accompanying notes are an integral part of the consolidated financial statements
</TABLE>

<PAGE>

                                       F-3

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

<TABLE>
<CAPTION>

                                                                       2007                              2006
                                                              -----------------------           ------------------------

<S>                                                            <C>                                     <C>
Revenue                                                        $          13,577,772                   $     13,355,778

Costs of revenue                                                           8,906,785                          8,671,839
                                                              -----------------------           ------------------------

Gross profit                                                               4,670,987                          4,683,939
                                                              -----------------------           ------------------------

Operating expenses
     Selling and shipping                                                    755,324                            756,122
     General and administrative                                            3,370,914                          2,899,702
     Related party - professional fees                                        55,489                             25,000
                                                              -----------------------           ------------------------

Total operating expenses                                                   4,181,727                          3,680,824

Operating income                                                             489,260                          1,003,115
                                                              -----------------------           ------------------------

Other income (expense):

     Interest income                                                          51,166                                866
     Interest expense                                                       (216,655)                         (223,509)
     Other income                                                            562,974                            116,441
                                                              -----------------------           ------------------------
Total other (expense), net                                                   397,485                          (106,202)
                                                              -----------------------           ------------------------

Income before income tax                                                     886,745                            896,913
Income tax (expense)                                                        (109,659)                         (292,587)
                                                              -----------------------           ------------------------

Net income                                                     $             777,086                    $       604,326
                                                              =======================           ========================




Basic earnings per common share                                              $  0.21                           $   0.19
Diluted earnings per common share                                            $  0.20                           $   0.19

Weighted average common shares outstanding
basic earnings per share                                                   3,667,833                          3,169,177

Weighted average common shares outstanding
diluted earnings per share                                                 3,825,271                          3,263,533






                The  accompanying  notes  are an  integral  part of the  consolidated  financial statements
</TABLE>


<PAGE>

                                       F-4

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

<TABLE>
<CAPTION>

                                                                      Additional                                      Total
                                       Common          Stock          Paid -In              Retained             Stockholders'
                                       Shares          Amount          Capital               Earnings                Equity
                                       ------          ------          -------               --------                ------

<S>                <C> <C>          <C>              <C>               <C>                   <C>                  <C>
Balance - December 31, 2005         3,127,800        $ 31,278          $3,049,362            $ 3,157,605          $   6,238,245

Exercise of stock options             122,700           1,227             186,848                                       188,075

Stock based compensation                                                  169,264                                       169,264

Net Income                                                                                       604,326                604,326
                             ---------------------------------    -------------------   --------------------   --------------------

Balance - December 31, 2006         3,250,500        $ 32,505          $3,405,474            $ 3,761,931          $   7,199,910

Exercise of stock options              88,000             880             163,595                                       164,475

Stock based compensation                                                  254,157                                       254,157

Issuance of common stock
under public offering               1,380,000          13,800           5,769,502                                     5,783,302

Net Income                                                                                       777,086                777,086
                             ---------------------------------    -------------------   --------------------   --------------------

Balance - December 31, 2007         4,718,500     $    47,185          $9,592,728            $ 4,539,017            $ 14,178,930
                             ================     ============    ===================   ====================   ====================






                        The accompanying notes are an integral part of the consolidated financial statements

</TABLE>

<PAGE>


                                       F-5

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

<TABLE>
<CAPTION>


                                                                             2007                              2006
                                                                    -----------------------           ------------------------
Cash flows from operating activities:
<S>                                                                  <C>                                   <C>
     Net income                                                      $             777,086                 $          604,326
     Adjustments to reconcile net income
     to net cash provided by operating activities:
     Depreciation and amortization                                                 436,171                            358,050
     Stock - based compensation                                                    254,157                            169,264
     Deferred taxes                                                              (296,517)                            272,428
     Bad debt provision                                                              5,371                            (1,380)
     Changes in operating assets and liabilities
     Accounts receivable                                                           602,433                          (482,024)
     Investments                                                                     -                              (251,130)
     Cost in excess of billings on uncompleted contracts                       (1,130,625)                          (121,596)
     Inventories                                                                 (311,129)                          (552,354)
     Other current assets                                                        (351,834)                           (68,703)

     Other assets                                                                (133,300)                               -
      Accounts payable                                                           (122,837)                             11,152
      Accrued expenses                                                             640,213                            132,508

      Deferred revenue                                                           (164,806)                               -
                                                                    -----------------------           ------------------------
     Net cash provided by operating activities                                     204,383                             70,541
                                                                    -----------------------           ------------------------

Cash flows from investing activities:
     Capital expenditures                                                        (575,558)                          (224,903)
     Deposits                                                                    (411,546)                           (13,762)
                                                                    -----------------------           ------------------------
Net cash used in investing activities                                            (987,104)                          (238,665)
                                                                    -----------------------           ------------------------

Cash flows from financing activities
     Repayments on bank line of credit - net                                     (210,000)                            112,110
     Proceeds from long-term debt                                                  139,510                             90,000
     Payments of long-term debt                                                  (241,460)                          (230,174)

     Net proceeds from issuance of common stock                                  5,783,302                              -
     Net proceeds from stock options exercised                                     164,475                            188,075
                                                                    -----------------------           ------------------------
Net cash provided by financing activities                                        5,635,827                            160,011
                                                                    -----------------------           ------------------------

Net increase (decrease) in cash and cash equivalents                             4,853,106                            (8,113)

Cash and cash equivalents at beginning of year                                     257,341                            265,454
                                                                    -----------------------           ------------------------

Cash and cash equivalents at end of year                             $           5,110,447                  $         257,341
                                                                    =======================           ========================



                The accompanying notes are an integral part of the consolidated financial statements
</TABLE>

<PAGE>

                                       F-6

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

Note 1 - Business Description

CVD  Equipment   Corporation  and  Subsidiary  (the   "Company"),   a  New  York
corporation,  was  organized  and  commenced  operations  in October  1982.  Its
principal  business  activities  include the  manufacturing  of  chemical  vapor
deposition  equipment,  customized gas control  systems,  the  manufacturing  of
process  equipment  suitable for the  synthesis of a variety of  one-dimensional
nanostructures  and  nanomaterials  and a line of furnaces all of which are used
primarily to produce semiconductors and other electronic components. The Company
engages in business throughout the United States and internationally.

Note 2 - Summary of Significant Accounting Policies

Principles of Consolidation
---------------------------

The  consolidated  financial  statements  include the accounts of CVD  Equipment
Corporation  and its wholly owned  subsidiary.  In December 1998 , a subsidiary,
Stainless Design Concepts, Ltd., was formed as a New York Corporation.  In April
1999, this subsidiary was merged into CVD Equipment Corporation. The Company has
one inactive subsidiary,  CVD Materials  Corporation as of December 31, 2007 and
2006.  All  significant   intercompany   accounts  and  transactions  have  been
eliminated in consolidation.

Use of Estimates
----------------

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting  period.  Actual results could differ from those estimates.
Estimates  are used when  accounting  for  certain  items  such as  revenues  on
long-term   contracts   recognized  on  the   percentage-of-completion   method,
allowances for doubtful accounts,  depreciation and amortization, tax provisions
and product warranties.

Revenue and Income Recognition
------------------------------

The Company  recognizes  revenues and income using the  percentage-of-completion
method for custom  production-type  contracts while revenues from other products
are recorded  when such  products  are  accepted and shipped.  Profits on custom
production-type  contracts are recorded on the basis of the Company's  estimates
of  the  percentage-of-completion  of  individual  contracts,   commencing  when
progress  reaches a point where  experience  is  sufficient  to  estimate  final
results with  reasonable  accuracy.  Under this method,  revenues are recognized
based on costs incurred to date compared with total estimated costs. F-7
<PAGE>
                                      F-7


                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

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

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

Investments
-----------

Investments  in  unconsolidated  companies in which the Company owns less then a
20% interest or otherwise does not exercise a significant  influence are carried
at cost.

Inventories
-----------

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

Reclassifications
-----------------

Certain items have been reclassified in the 2006 financial statements to conform
to the 2007  presentation.  These  reclassifications  have no  effect on the net
income previously reported.

Income Taxes
------------

Deferred tax assets and liabilities are determined based on the estimated future
tax effects of temporary  differences  between the financial  statements and tax
bases of assets and  liabilities,  as measured by the current enacted tax rates.
Deferred  tax expense  (benefit)  is the result of changes in the  deferred  tax
assets and  liabilities.  A valuation  allowance is not considered  necessary by
management  since it is more likely than not that the deferred tax asset will be
realized.  An  allowance  may be  necessary  in the  future  based on changes in
economic conditions.

Long-Lived Assets
-----------------

Long-lived assets consist primarily of property, plant and equipment. Long-lived
assets are reviewed  annually for impairment or whenever events or circumstances
indicate  their  carrying  value may not be  recoverable.  When  such  events or
circumstances  arise, an estimate of the future undiscounted cash flows produced
by the asset, or the appropriate  grouping of assets, is compared to the asset's
carrying value to determine if impairment exists pursuant to the requirements of
Statement of Financial Accounting Standards (SFAS") No. 144, "Accounting for the
Impairment of Disposal of  Long-Lived  Assets." If the asset is determined to be


<PAGE>

                                       F-8

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

impaired,  the  impairment  loss is measured on the excess of its carrying value
over its fair value. Assets to be disposed of are reported at the lower of their
carrying value or net realizable  value. The Company had no recorded  impairment
charges in the statement of operations  during each of the years ended  December
31, 2007 and 2006.

Computer Software
----------------

The Company follows Statement of Position 98-1, Accounting for Costs of Computer
Software  Developed or Obtained for Internal Use. This standard requires certain
direct development costs associated with internal-use software to be capitalized
including  external  direct costs of material and services and payroll costs for
employees devoting time to the software projects. These costs totaled $6,668 and
$123,115  for the years ended  December 31, 2007 and 2006  respectively  and are
included  in  Other  Assets.  All  computer  software  is  amortized  using  the
straight-line  method over its useful life of three years.  Amortization expense
related to computer  software  totaled  $148,049 and $37,194 for the years ended
December 31, 2007 and 2006, respectively.

Intangible Assets
-----------------

The cost of intangible assets is being amortized on a straight-line basis over
their useful lives ranging from 5 to 20 years. Amortization expense recorded by
the Company in 2007 and 2006 totaled $27,322 and $18,027 respectively.

Research & Development
----------------------

Research and development costs are expensed as incurred.

Bad Debts
---------

Accounts  receivables are presented net of an allowance for doubtful accounts of
$12,588 and $7,217 as of December 31, 2007 and 2006, respectively. The allowance
is  based  on  historical   experience  and   management's   evaluation  of  the
collectibility  of accounts  receivable.  Management  believes the  allowance is
adequate.  However, future estimates may change based on changes in economic and
customer conditions.

Product Warranty
----------------

The Company records warranty costs as incurred and does not provide for possible
future costs. Management estimates such costs are immaterial based on historical
experience. However, it is reasonably possible that this estimate may change in
the future.
<PAGE>

                                       F-9

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

Advertising Costs
-----------------

The Company expenses  advertising and trade show costs which are not expected to
benefit  future  periods.  These  expenses  which are  included  in selling  and
shipping expenses were $144,059 and $57,508 in 2007 and 2006, respectively.

Earnings Per Share
------------------

Basic net  earnings  per common  share is computed by dividing the net income by
the weighted  average number of shares of common stock  outstanding  during each
period.  Diluted  earnings per share reflects the dilutive effect of the assumed
exercise of options.

Cash and Cash Equivalents
-------------------------

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

Concentration of Credit Risk
----------------------------

Financial  instruments that potentially subject the Company to concentrations of
credit  risk  consist  primarily  of  cash,  cash   equivalents,   and  accounts
receivable.  The Company places its cash  equivalents  with high  credit-quality
financial  institutions  and invests its excess cash  primarily  in money market
instruments.  The Company has established  guidelines relative to credit ratings
and maturities that seek to maintain stability and liquidity.  The Company sells
products and services to various  companies  across  several  industries  in the
ordinary  course of  business.  The Company  routinely  assesses  the  financial
strength of its customers  and  maintains  allowances  for  anticipated  losses.
Generally,  the Company does not require collateral or other security to support
trade receivables.


Fair value of Financial Instruments
-----------------------------------

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




<PAGE>

                                      F-10

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

Stock-Based Compensation
------------------------

On January  1, 2006,  the  Company  adopted  the  provisions  of SFAS No.  123-R
"Share-Based  Payment"  using the modified  prospective  method.  SFAS No. 123-R
requires  companies  to  recognize  the cost of  employee  services  received in
exchange for awards of equity  instruments  based upon the grant date fair value
of those  awards.  Under the modified  prospective  method of adopting  SFAS No.
123-R, the Company  recognized  compensation  cost for all share-based  payments
granted after  January 1, 2006,  plus any awards  granted to employees  prior to
January  1, 2006  that  remain  unvested  at that  time.  Under  this  method of
adoption, no restatement of prior periods is made.

Prior to January 1, 2006 the Company  recognized  the cost of employee  services
received  in exchange  for equity  instruments  in  accordance  with  Accounting
Principles  Board Opinion No. 25 "Accounting  for Stock Issued  Employees"  (APB
25). APB 25 required  the use of the  intrinsic  value  method,  which  measures
compensation cost as the excess, if any, of the quoted market price of the stock
over the amount the employee  must pay for the stock.  Compensation  expense was
measured  under APB 25 on the date the  shares  were  granted.  Under APB 25, no
compensation expense was recognized for stock options.

Shipping and Handling
---------------------

It is the  Company's  policy to  include  freight  in total  sales.  The  amount
included in sales was $31,162 and $34,214 for the years ended  December 31, 2007
and 2006, respectively. Included in selling and shipping is $116,062 and $98,138
for shipping and handling costs for 2007 and 2006, respectively.


Recently Issued Accounting Standards
------------------------------------

In February  2007,  the FASB issued  SFAS No.  159,  "The Fair Value  Option for
Financial  Assets and  Financial  Liabilities  - Including  an amendment of FASB
Statement No. 115," which is effective for fiscal years beginning after November
15, 2007.  This statement  permits  entities to choose to measure many financial
instruments  and  certain  other  items  at  fair  value.  This  statement  also
establishes  presentation  and  disclosure  requirements  designed to facilitate
comparisons  between entities that choose different  measurement  attributes for
similar types of assets and  liabilities.  Unrealized  gains and losses on items
for which the fair value  option is elected  would be reported in  earnings.  We
have  evaluated the new statement  and have  determined  that it will not have a
significant impact on the determination or reporting of our financial results.



<PAGE>

                                     F-11

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

In  December  2007,  the FASB  issued  SFAS No. 141  (revised  2007),  "Business
Combinations"   (SFAS   141(R)),   which   replaces  SFAS  No.  141,   "Business
Combinations."  SFAS 141(R) retains the underlying  concepts of SFAS 141 in that
all business  combinations  are still required to be accounted for at fair value
under the acquisition method of accounting but SFAS 141(R) changed the method of
applying the acquisition method in a number of significant aspects.  Acquisition
costs will generally be expensed as incurred;  noncontrolling  interests will be
valued  at  fair  value  at  the  acquisition  date;   in-process  research  and
development  will be  recorded at fair value as an  indefinite-lived  intangible
asset at the acquisition  date;  restructuring  costs associated with a business
combination will generally be expensed  subsequent to the acquisition  date; and
changes in deferred tax asset valuation  allowances and income tax uncertainties
after the acquisition date generally will affect income tax expense. SFAS 141(R)
is effective on a prospective basis for all business  combinations for which the
acquisition  date is on or  after  the  beginning  of the  first  annual  period
subsequent  to December  15, 2008,  with the  exception  of the  accounting  for
valuation  allowances  on deferred  taxes and acquired tax  contingencies.  SFAS
141(R)  amends SFAS 109 such that  adjustments  made to valuation  allowances on
deferred taxes and acquired tax contingencies  associated with acquisitions that
closed  prior  to the  effective  date of  SFAS  141(R)  would  also  apply  the
provisions of SFAS 141(R).  Early  adoption is not  permitted.  We are currently
evaluating  the  effects,  if any,  that SFAS  141(R) may have on our  financial
statements  and  believe  it  could  have  a  significant   impact  if  business
combinations are consummated.  However, the effect of which is indeterminable as
of December 31, 2007.

In  December  2007,  the FASB issued  Financial  Accounting  Standards  No. 160,
"Noncontrolling  Interests in Consolidated Financial Statements--an amendment of
ARB No. 51." This statement is effective for fiscal years,  and interim  periods
within those fiscal years, beginning on or after December 15, 2008, with earlier
adoption prohibited. This statement requires the recognition of a noncontrolling
interest (minority interest) as equity in the consolidated  financial statements
and separate from the parent's equity. The amount of net income  attributable to
the  noncontrolling  interest will be included in consolidated net income on the
face  of  the  income  statement.  It  also  amends  certain  of  ARB  No.  51's
consolidation  procedures for consistency  with the requirements of SFAS 141(R).
This  statement also includes  expanded  disclosure  requirements  regarding the
interests  of the  parent  and its  noncontrolling  interest.  We are  currently
evaluating  this new statement and anticipate that the statement will not have a
significant impact on the reporting of our results of operations.





<PAGE>


                                      F-12


                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006


In March 2008,  the  Financial  Accounting  Standards  Board (FASB)  issued FASB
Statement  No.  161,  Disclosures  about  Derivative   Instruments  and  Hedging
Activities.  The new standard is intended to improve  financial  reporting about
derivative  instruments and hedging activities by requiring enhanced disclosures
to enable investors to better understand their effects on an entity's  financial
position,  financial performance,  and cash flows. It is effective for financial
statements  issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. The company is currently evaluating
the impact of adopting SFAS. No. 161 on its financial statements.

Note 3 - Supplemental Cash Flow Information

During 2007,  options to purchase  206,000  common shares were issued to certain
employees  and members of the board of  directors.  The  exercise  price for all
options  granted in 2007 was equal to or greater  than the fair market value per
share  on the  date  the  option  was  granted  and  no  compensation  cost  was
recognized.  New equipment  costing  $180,196 was purchased  during the year for
$156,481 in cash and traded in equipment with a carrying value of $23,715.

During 2006,  certain assets in property,  plant and equipment,  with a net book
value of $84,897 were  reclassified  into inventory.  Options to purchase 10,000
common  shares  were  issued to an  employee.  The option  price for all options
granted was equal to or greater than the fair market value per share on the date
the option was granted and no compensation cost was recognized.



                                                2007           2006
                                                ----           ----

Cash paid during the year for:
    Income taxes, net of refunds             $   39,446        $  10,047
    Interest                                    217,570          222,861

Note 4 - Investments

In 2006,  the  Company  sold  equipment  at the  selling  price of $251,130 to a
Customer for a purchase price of one hundred four thousand,  four hundred eighty
two (104,482) shares of a non-public company's common stock, par value $.001 per
share.  Between July 19, 2007 and July 31,  2007,  the Company has the option to



<PAGE>

                                      F-13

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

demand that the Customer make cash payment i.e.: two hundred fifty-one thousand,
one hundred thirty 00/100 U.S. dollars ($251,130) for the equipment,  the amount
that  would  have been  required  had the  Customer  made cash  payment  for the
equipment  on  July  19,  2006 in  exchange  for the  return  of said  stock.The
Customer's  obligation to make such payment  pursuant to the terms of the option
is secured by a perfected  lien upon the  subject  equipment  and the  Company's
right to execute upon the aforesaid common stock. In the event the Customer does
not make full  payment,  the  Company  has also  reserved  the right to maintain
plenary proceedings against the Customer for the purpose of recovering such sums
as may be due as well as the right to obtain a deficiency  judgment in the event
that the collateral in the equipment and stock is insufficient to discharge said
obligation.

The  Company  agreed to extend the option to demand  cash  payment to the period
between  December  1, 2007 and March 12,  2008 in  exchange  for fifty  thousand
(50,000) shares of the customer's common stock.

On February 19, 2008, the Company  exercised its cash payment  option  demanding
the cash payment of $251,130.

Note 5 - Uncompleted Contracts

Costs,  estimated earnings, and billings on uncompleted contracts are summarized
as follows:
<TABLE>
<CAPTION>

                                                                  2007                    2006
                                                                  ----                    ----

<S>                                                  <C>                  <C>
Costs incurred on uncompleted contracts              $         1,887,022  $            1,509,672
             Estimated earnings                                2,158,386               2,015,836
                                                               ---------               ---------
                                                               4,045,408               3,525,508
             Billings to date                                 (2,198,120)             (2,808,845)
                                                             -----------             -----------
                                                     $         1,847,288  $              716,663
                                                               =========                 =======

                                                                  2007                    2006
                                                                  ----                    ----

Included in accompanying balance sheets Under the following caption:

Costs and estimated earnings in excess
   of billings on uncompleted contracts              $         1,847,288  $              716,663
                                                               =========                 =======
</TABLE>


<PAGE>


                                      F-14

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006
<TABLE>
<CAPTION>

Note 6 - Inventories
Inventories consist of:
                                                                                2007               2006
                                                                                ----               ----

<S>                                                                 <C>                     <C>
Raw materials                                                       $       1,077,756       $       860,085
Work-in-process                                                             1,733,738             1,515,460
Finished goods                                                                204,141               328,961
                                                                              -------               -------

                                                                    $       3,015,635       $     2,704,506
                                                                            =========             =========

Note 7 - Property, Plant and Equipment, Net

Major classes of property, plant and equipment, net consist of the following:

                                                                                2007                2006
                                                                                ----                ----
Land                                                              $          760,000      $         760,000
Buildings                                                                  2,815,839              2,815,839
Building improvements                                                      1,407,308              1,398,054
Machinery and equipment                                                    1,765,606              1,379,656
Capitalized labor and overhead                                               216,602                216,602
Furniture and fixtures                                                       289,741                236,419
Computer equipment                                                           267,765                250,419
Transportation equipment                                                      74,709                 74,709
Lab equipment                                                                 42,445                   -
      Totals at cost                                                       7,640,015              7,131,698
                                                                           ---------              ---------
Accumulated depreciation and amortization                                (2,584,288)            (2,352,891)
                                                                         -----------            -----------
                                                                  $        5,055,727      $       4,778,787
                                                                           ---------              ---------

Depreciation and amortization expense (1)                         $          436,171      $         358,050
                                                                             =======                =======
</TABLE>

(1)  Includes  amortization expense of $179,714 and $57,126 for the years ending
     December 31, 2007 and 2006 respectively.  Such amortization expense relates
     to other capitalized and intangible assets

During 2007,  certain  assets in property,  plant and  equipment  were traded in
exchange for new assets with no resulting gain or loss.

During 2006,  certain assets in property,  plant and equipment,  with a net book
value of $84,897 were reclassified into inventory.

<PAGE>

                                      F-15

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

Note 8 - Intangible Assets, Net

Intangible assets, net are summarized as follows:



December 31, 2007
------------------


                          Weighted Average                              Net of
                          Amortization            Accumulated       Accumulated
Intangible Assets         Period         Cost     Amortization      Amortization
--------------------      ------------------------------------------------------

Licensing Agreement          5          $ 10,000   $ 10,000             $0
Patents & Copyrights        14            32,019     19,376           12,643
Intellectual Property       15           100,000     43,336           56,664
Certifications               3            55,775     18,516           37,259
Other                        5            21,492     21,492              0
                                     -------------------------------------------
          Totals                        $219,286   $112,720           $106,566
                                        ========   ========           ========

December 31, 2006
-----------------

                          Weighted Average                              Net of
                          Amortization            Accumulated       Accumulated
Intangible Assets         Period         Cost     Amortization      Amortization
--------------------      ------------------------------------------------------

Licensing Agreement          5         $ 10,000     $ 10,000            $0
Patents & Copyrights        14           32,019       16,924          15,095
Intellectual Property       15          100,000       36,669          63,331
Certifications               3           27,661        4,610          23,051
Other                        5           21,492       17,194           4,298


          Totals                       $191,172      $85,397        $105,775
                                       ========      =======        ========

<PAGE>


                                      F-16

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

The estimated  amortization expense related to intangible assets for each of the
five  succeeding  fiscal  years and  thereafter  as of  December  31, 2007 is as
follows:

Year Ended
December 31,

2008                                          $  27,710
2009                                             21,600
2010                                             12,304
2011                                              7,619
2012                                              7,619
Thereafter                                       29,714
                                            -----------

 Total                                         $106,566
                                               ========



Note 9 - Financing Arrangements

The Company has a $2 million  three-year  revolving  credit facility with a bank
permitting it to borrow on a revolving basis until June 1, 2010. Interest on the
unpaid  principal  balance on this facility accrues at either (i) the LIBOR rate
plus 2.50% or (ii) the bank's Prime Rate plus .25%.  The amounts  outstanding on
the  facility  as  of  December  31,  2007  and  2006  were  $0  and   $210,000,
respectively.  The prime rate was 7.25% and 8.25% at December  31, 2007 and 2006
respectively.  The weighted  average  interest rate on the Company's  short-term
borrowings for 2007 and 2006 was 8.77% and 8.71% respectively.

Note 10 - Long-term Debt

Long-term debt consists of the following:
<TABLE>
<CAPTION>

                                                                           2007                        2006
                                                                           ----                        ----
KIDCO REALTY CORP.
        $900,000 purchase money mortgage secured by
        real property, building and improvements in
        Saugerties, New York; payable in equal monthly
        installments of $5,988 including interest at
        7% per annum; entire principal comes due in
<S>      <C>                                                          <C>                             <C>
     May 2009.                                                        $   794,897                     $   810,508

</TABLE>

<PAGE>


                                      F-17

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

<TABLE>
<CAPTION>
                                                                           2007                        2006
                                                                           ----                        ----


GENERAL ELECTRIC CAPITAL CORPORATION
        $2,700,000 mortgage payable secured by real
        monthly installments of $22,285, including
        interest at 5.67% per annum; pursuant to an
        installment sale agreement with the Town of
        Islip Industrial Development Agency; final
<S>      <C>                                                          <C>                             <C>
        payment due March 2017.                                         1,921,439                        2,075,148

CAPITAL ONE BANK
        Sixty month installment note; payable in
        monthly installments of $4,922, including
        interest at 7.74% per annum; final payment
        due August 2007; collateralized by certain
        equipment                                                            0                              37,768

CAPITAL ONE BANK
        Sixty month installment note, payable
        in monthly installments of $1,776,
        including interest at 6.75% per annum;
        final payment due January 2011,
        collateralized by certain
        equipment.                                                         60,487                           77,030

CAPITAL ONE BANK
        Sixty month installment note, payable
        in monthly installments of $2,770, including
        interest at 7.01 per annum; final payment due
        April 2012, collateralized by certain
        equipment.                                                        123,791                              ---
                                                                     ------------                         ---------

                                                                        2,900,614                        3,000,454
        Less: Current maturities                                          222,193                          223,653
                                                                       ----------                        ---------
                                                                   $    2,678,421                  $     2,776,801
                                                                   ===============                 ===============
</TABLE>



<PAGE>


                                      F-18

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

Future maturities of long-term debt are as follows:
         Year ended December 31, 2008             $    222,193
         Year ended December 31, 2009                  996,756
         Year ended December 31, 2010                  231,621
         Year ended December 31, 2011                  227,500
         Year ended December 31, 2012                  214,703
                           Thereafter                1,007,841
                                                     ---------
                                                  $  2,900,614
                                                  ============
Note 11 - Earnings per Share

The calculation of basic and diluted weighted average common shares  outstanding
is as follows:
<TABLE>
<CAPTION>

                                                                       2007                      2006
                                                                       ----                      ----
Weighted average common shares outstanding
<S>                                                                 <C>                         <C>
basic earnings per share                                            3,667,833                   3,169,177

Effect of potential common share issuance:
         Stock options                                                157,438                      94,356
                                                                    ---------                  ----------

Weighted average common shares outstanding
Diluted earnings per share                                          3,825,271                  3,263,533
                                                               ==============                  =========

Outstanding  options to purchase  10,000 and 117,500 shares at December 31, 2007
and December 31, 2006,  respectively,  were not included in the diluted earnings
per share  calculation,  because the  exercise  price was higher than the market
price. These options may dilute the earnings per share calculation in the future
periods.

Note 12 - Income Taxes
The provision (benefit) for income taxes includes the following:
                                                                       2007                      2006
                                                                       ----                      ----
         Current:
             Federal                                          $      402,888            $         18,437
             State                                                    94,029                       1,722
                                                                    ---------                  ----------
                  Total Current Provision                            496,917                      20,159
         Deferred:
             Federal                                                (326,125)                    223,888
             State                                                  ( 61,133)                     48,540
                                                               ----------------          ----------------
               Total Deferred Provision                             (387,258)                    272,428
                                                              ----------------          ----------------
                                                              $      109,659            $        292,587
                                                              ===============           =================
</TABLE>

<PAGE>

                                      F-19

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

In 2007,  the  Company  was  required  to change its  accounting  method for tax
purposes from the completed  contract to  percentage  of  completion.  Under the
provisions  of the tax law,  the company  elected  under  Internal  Revenue Code
Section  481(a) to report the  additional  deferred  revenue  for tax  reporting
purposes  of  approximately  $2,000,000,  or  approximately  $500,000  per year,
ratably over the four year period ended December 31, 2010.

The  Company  has  New  York  State  investment  tax  credit   carryforwards  of
approximately  $263,000 that may be offset against future state tax  liabilities
through  the year  2019 and  other  state  tax  credits  totaling  approximately
$323,000 which may be carried  forward  indefinitely.  The Company  accounts for
investment tax credits primarily by the flow-through method.

As of December 31,  2007,  the Company had utilized all of its federal and state
net operating loss (NOL's) carryforwards.  Federal and state income tax expenses
for the year ended December 31,

2007  are  net of tax  benefits  from  net  operating  loss  carry  forwards  of
approximately $270,000 and $55,000 respectively.

The difference between the provision for income taxes at the Company's effective
federal and state income tax rate and the statutory rate of approximately 41% is
as follows:


                                                      2007              2006

Statutory rate-federal                                 34%              34%
State taxes, net of federal benefits                   7%                7%
Net operating loss carryforwards utilized             (15%)             (2%)
Statutory change in tax accounting method
from completed contract to percentage
of completion                                         (22%)              -
Other                                                  8%               (6%)
                                                       ---              ---
                          Totals                       12%              33%
                                                       ===              ===









<PAGE>


                                      F-20

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

The tax effects of temporary  differences giving rise to significant portions of
deferred taxes are as follows:

                                                    2007                 2006
                                                    ----                 ----

         Allowance for doubtful accounts        $     4,945         $    2,834
         Inventory capitalization                   115,321            103,435
         Deferred revenue                          (593,865)          (791,821)
         Net operating loss carryforwards               131             34,600
         Depreciation and amortization            (  64,140)          (173,123)
         Investment and other tax credits           586,302            589,768
            Compensation costs                      166,320             66,487
            Vacation Accrual                        141,837            129,720
            Other                                      -                 7,660
                                               -------------          ---------
          Net deferred tax asset (liability)   $    356,851          $ (30,440)
                                               =============         ==========

Management  believes  the  deferred  tax  asset  will  more  likely  than not be
realized.  In assessing the  likelihood  of  realization,  management  considers
estimates of future taxable income.  However, it is at least reasonably possible
that management's estimate of future realization may change in future periods.


Effective  January 1, 2007, the Company adopted Financial  Accounting  Standards
Board ("FASB")  Interpretation  Number 48, "Accounting for Uncertainty in Income
Taxes,  an  interpretation  of FASB  Statement  No. 109," ("FIN" No. 48),  which
prescribes a single,  comprehensive  model for how a company  should  recognize,
measure,  present  and  disclose  in  its  financial  statements  uncertain  tax
positions  that the  company  has taken or expects  to take on its tax  returns.
There was no affect on the  financial  position of the Company upon the adoption
of FIN No. 48.  The  Company  files  income  tax  returns  in the United  States
(federal) and in various state  jurisdictions.  The Company is no longer subject
to federal and state income tax  examinations by tax authorities for years prior
to 2003.



<PAGE>





                                      F-21

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

NOTE 13 - Stock Option Plans

1989 Non-Qualified Stock Option Plan
------------------------------------

On June 15,  1989 the  Company  instituted  a  non-qualified  stock  option plan
(the"Plan").  In connection  therewith,  700,000 shares of the Company's  common
stock were  reserved for issuance  pursuant to options that may be granted under
the Plan through June 30, 2009. all options granted vest over a four-year period
and expire between five to seven years after the date of grant.

On June 22, 2006 10,000 options which vest equally over a four-year  period were
granted  to an  employee  under the plan  which  expires  on June 21,  2013.  On
February 22, 2007 10,000 options which vest equally over a four-year period were
granted to an employee  under the plan which  expire on February  21,  2014.  On
October 10, 2007, 35,250 options which vest as to 12,500 options each of October
10, 2008 and 2009 and 10,250 options which vest on October 10, 2010 were granted
to an employee under the plan which expire on October 10, 2022.

2001 Non-Qualified Stock Option Plan
------------------------------------

In November 2006, the Company registered a non-qualified  stock option plan that
the  shareholders had approved in July 2001,  covering key employees,  officers,
directors and other  persons that may be considered as service  providers to the
Company.  Options  will be awarded by the Board of  Directors  or by a committee
appointed  by the board.  Under the plan,  an  aggregate  of  300,000  shares of
Company common stock, $.01 par value, are reserved for issuance or transfer upon
the exercise of options  which are  granted.  Unless  otherwise  provided in the
option  agreement,  options  granted  under the plan shall vest over a four year
period  commencing one year from the  anniversary  date of the grant. On October
10, 2007,  64,750  options  were  granted to an employee  which vest as to 2,250
options on October  10, 2010 and as to 12,500  options on each  October 10, 2012
through  2016.  On December 12, 2007 120,000  options were granted to directors.
These options vest as to 40,000  immediately and as to 80,000 options which vest
equally over two years and expire on December  12,  2017.  The stock option plan
shall terminate on July 22, 2011.

2007 Share Incentive Plan
-------------------------

On December 12, 2007  shareholders  approved the Company's 2007 Share  Incentive
Plan  ("Incentive  Plan"),  in  connection  therewith,  750,000  shares  of  the
Company's  common  stock are  reserved  for  issuance  pursuant  to  options  or
restricted  stock that may be granted under the Incentive Plan through  December
12, 2017. No options or restricted  stock have been granted under the 2007 Share
Incentive Plan.


<PAGE>

                                      F-22

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

The  purchase  price  of the  common  stock  under  each  option  plan  shall be
determined by the Committee,  provided,  however, that such purchase price shall
not be less than the Fair Market  Value of the Shares on the date such option is
granted. The stock options generally expire seven to ten years after the date of
grant.

A summary of the stock option activity related to the 1989 and 2001 Stock Option
Plans for the  period  from  January 1, 2006  through  December  31,  2007 is as
follows:

1989 Non-Qualified Stock Option Plan
------------------------------------
<TABLE>
<CAPTION>

                                      Beginning      Granted      Exercised     Canceled    Ending
                                       Balance       During       During        During      Balance
                                     Outstanding     Period       Period        Period      Outstanding    Exercisable
                                     -----------     ------       ------        ------      -----------    -----------

Year ended December 31, 2006
<S>                                     <C>          <C>          <C>             <C>           <C>            <C>
Number of shares                        443,200      10,000       122,700         7,500         323,000        196,875
Weighted average exercise price
 per share                             $   2.39     $  3.00      $   1.53      $   2.26       $    2.73       $   2.30
Year ended December 31, 2007
Number of shares                        323,000      45,250        88,000           -0-         280,250        161,750
Weighted average exercise price
per share                              $   2.73     $  4.90      $   1.87      $    -0-       $    3.36       $   2.95


2001 Non-Qualified Stock Option Plan
------------------------------------

                                      Beginning      Granted      Exercised     Canceled    Ending
                                       Balance       During       During        During      Balance
                                     Outstanding     Period       Period        Period      Outstanding    Exercisable
                                     -----------     ------       ------        ------      -----------    -----------

Year ended December 31, 2006
Number of shares                          -0-           -0-          -0-            -0-             -0-            -0-
Weighted average exercise price
 per share                           $     0         $   0        $   0        $     0        $      0        $     0
Year ended December 31, 2007
Number of shares                          -0-         184,750        -0-            -0-        184,750          40,000
Weighted average exercise price
per share                            $     0         $   3.99     $   0        $     0        $   3.99        $   3.99


</TABLE>

The number of stock  options that were in excess of the market value at December
31, 2007 was  215,000.  The number of stock  options  that were below the market
value at December 31, 2007 was 250,000.




<PAGE>

                                      F-23

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

The following  table  summarizes  information  about the options at December 31,
2007.
<TABLE>
<CAPTION>

                                 Otions Outstanding                                Options Exercisable
                                 ------------------                                -------------------
                                   Weighted
                                     Average      Weighted                                 Weighted
                                   Remaining       Average                                 Average
   Exercise           Number       Contractual     Exercise    Intrinsic      Number       Exercise  Intrinsic
Price Range        Outstanding           Life         Price     Value       Exercisable       Price   Value
-----------        -----------     ----------     ---------    ------       -----------    --------  ------

<C>   <C>          <C>             <C>            <C>          <C>          <C>            <C>       <C>
$1.25-$1.99        48,500          2.73 years     $1.40        $123,675     48,500         $1.40     $123,675
$2.00-$2.99        46,500          4.46 years     $2.26        $78,585      23,250         $2.26     $39,293
$3.00-$3.50        25,000          4.94 years     $3.05        $22,500      10,000         $3.06     $8,900
$3.51-$3.75        120,000         9.95 years     $3.65        $36,000      40,000         $3.65     $12,000
$3.76-$4.00        10,000          0.25 years     $3.88        $700         10,000         $3.88     $700
$4.01-$4.50        105,000         4.70 years     $4.10        $0           70,000         $4.10     $0
$4.51-$5.00        100,000         9.78 years     $4.62        $0              -0-         $4.62     $0
$5.01-$6.00        10,000          6.08 years     $5.90        $0              -0-         $5.90     $0
</TABLE>

On January  1, 2006,  the  Company  adopted  the  provisions  of SFAS No.  123-R
"Share-Based  Payment"  using the modified  prospective  method.  SFAS No. 123-R
requires  companies  to  recognize  the cost of  employee  services  received in
exchange for awards of equity  instruments  based upon the grant date fair value
of those  awards.  Under the modified  prospective  method of adopting  SFAS No.
123-R, the Company  recognized  compensation  cost for all share-based  payments
granted after  January 1, 2006,  plus any awards  granted to employees  prior to
January  1, 2006  that  remain  unvested  at that  time.  Under  this  method of
adoption, no restatement of prior periods is made.

Prior to January 1, 2006 the Company  recognized  the cost of employee  services
received  in exchange  for equity  instruments  in  accordance  with  Accounting
Principles  Board Opinion No. 25 "Accounting  for Stock Issued  Employees"  (APB
25). APB 25 required  the use of the  intrinsic  value  method,  which  measures
compensation cost as the excess, if any, of the quoted market price of the stock
over the amount the employee  must pay for the stock.  Compensation  expense was
measured  under APB 25 on the date the  shares  were  granted.  Under APB 25, no
compensation expense was recognized for stock options.

The intrinsic value of the 88,000 and 122,700 options exercised during the years
ended December 31, 2007 and 2006, was $304,240 and $229,635 respectively.

During the years ended  December 31, 2007 and 2006,  the Company  recorded  into
selling and general  administrative expense approximately $254,000 and $169,000,
for the cost of employee  services  received in exchange for equity  instruments
based on the grant-date  fair value of those  instruments in accordance with the
provisions of SFAS No. 123-R.


<PAGE>

                                      F-24

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

The fair value was  estimated by using the  Black-Scholes  option-pricing  model
which  took  into  account  as of the grant  date,  the  exercise  price and the
expected life of the option,  the current price of the underlying  stock and its
expected volatility,  expected dividends on the stock and the risk-free interest
rate for the expected  term of the option.  The  following is the average of the
data used for the following items.

                       Risk-Free                         Expected      Expected
Year Ended            Interest Rate     Expected Life    Volatility    Dividends
----------            -------------     -------------    ----------    ---------

December 31, 2007        3.9%             4.9 Years        56.49%         None
December 31, 2006        2.5%            3.9 Years        126.54%         None

Note 14 - Defined Contribution Plan

On August 1, 1998,  the  Company  adopted a 401(k)  Plan for the  benefit of all
eligible  employees.  All employees as of the effective  date of the 401(k) Plan
became  eligible.  An employee who became  employed after August 1, 1998,  would
become a participant after three months of continuous service.

Participants  may elect to contribute from their  compensation  any amount up to
the  maximum   deferral   allowed  by  the  Internal   Revenue  Code.   Employer
contributions  are optional.  During the years ended  December 31, 2007 and 2006
the  Company   incurred   administrative   costs  totaling   $2,025  and  $2,394
respectively. No employer contribution has been made for 2007 and 2006.

Note 15 - Concentration of Credit Risk

Cash and Cash Equivalents
-------------------------

The  Company  places  most of its  temporary  cash  investments  with  financial
institutions,  which from time to time may exceed the Federal Deposit  Insurance
Corporation  limit.  The amount at risk at December 31, 2007 and at December 31,
2006 was approximately $4,613,000 and $257,000 respectively.


<PAGE>

                                      F-25

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

Export Sales
------------

Export sales to unaffiliated customers represented  approximately 21% and 31% of
sales for the years ended December 31, 2007 and 2006, respectively, Export sales
in both 2007 and 2006 were  primarily  to  customers  in  Europe  and Asia.  All
contracts are denominated in U.S.  dollars.  The Company does not enter into any
foreign exchange contracts.


Note 16 - Related Party Transactions

The general  counsel for the  Company is also a director.  The Company  incurred
legal fees for his professional  services of approximately  $133,000 and $34,000
for the years ended December 31, 2007 and 2006, respectively. As of December 31,
2007 and 2006, the Company owed the general counsel  approximately  $116,000 and
$35,000 respectively.

Note 17 - Other Income

Other income for the year ended December 31, 2007 was approximately $562,000. As
a result of a settlement  of  litigation  between the Company and  PrecisionFlow
Technologies,  Inc., the Company will receive payments  totaling  $541,600 to be
paid over a specific timetable as defined under the settlement agreement.  Other
income  in  2006  was  approximately   $116,000  primarily  as  a  result  of  a
distribution  from a liquidating  trust of a former customer of the Company that
filed a voluntary petition for relief under Chapter 11 of Title 11 of the United
States  Bankruptcy Code, in the United States  Bankruptcy Court for the District
of  Delaware.  The Company had  previously  written  off this  customer  account
balance.  In 2006, the  liquidating  trust  distributed  $92,400 to the Company,
which represented 33% of the claim.

Note 18 - Segment Reporting

The Company adopted SFAS 131,  "Disclosures  about Segments of an Enterprise and
Related  Information."  The Company operates through (3) segments,  CVD, SDC and
Conceptronic.  The CVD  division is utilized  for  silicon,  silicon  germanium,
silicon carbide and gallium arsenide processes.  SDC is the Company's ultra-high
purity  manufacturing  division  in  Saugerties,  New  York.  Conceptronic  is a
manufacturer of Surface Mount Technology  equipment.  The accounting policies of
CVD,  SDC and  Conceptronic  are the same as those  described  in the summary of
significant  accounting policies (see Note 2). The Company evaluates performance
based on several  factors,  of which the primary  financial  measure is earnings
before taxes.


<PAGE>

                                      F-26

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

The  following  table  presents  certain  information  regarding  the  Company's
segments as of December 31, 2007 and for the year then ended:

<TABLE>
<CAPTION>

                                      CVD                  SDC              Conceptronic          Eliminations       Consolidated
                                ----------------    ------------------    ------------------    ------------------ -----------------

Assets                           $ 19,155,538        $   2,238,349         $     2,207,647       $    (4,594,628)   $   19,006,906
                                ================    ==================    ==================    ==================  ================


<S>                              <C>                 <C>                   <C>                   <C>                <C>
Revenue                          $ 8,114,700         $   3,007,235         $     2,907,747       $    (451,910)     $   13,577,772
Interest Income                       50,978                   188                   -0-                                    51,166
Interest Expense                      69,433                67,536                  79,686                                 216,655
Depreciation and
amortization                         354,342                59,797                  22,032                                 436,171
Capital
   expenditures                      547,539                50,829                     905                                 599,273

Pretax (loss) earnings             1,816,735              (422,825)               (507,165)                                886,745

The  following  table  presents  certain  information  regarding  the  Company's
segments as of December 31, 2006 and for the year then ended:

                                      CVD                  SDC              Conceptronic          Eliminations       Consolidated
                                ----------------    ------------------    ------------------    ------------------ -----------------

Assets                          $ 11,946,392         $   2,400,732         $     2,757,989       $    (4,187,504)   $   12,917,609
                                ================    ==================    ==================    ==================  ================


Revenue                         $  6,902,521         $   3,650,190         $     3,386,998       $    (583,931)     $   13,355,778
Interest Income                          231                   635                   -0-                                       866
Interest Expense                      77,934                68,002                  77,573                                 223,509
Depreciation and
amortization                         214,254               119,574                   24,222                                358,050
Capital
   expenditures                      205,294                19,609                    -0-                                  224,903

Pretax (loss) earnings             1,233,982               148,627                 (485,696)                               896,913
</TABLE>

Note 19 - Commitments and Contingencies

Legal Proceedings
-----------------

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


<PAGE>

                                      F-27

                    CVD EQUIPMENT CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

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

On  September  18,  2007 a  settlement  was  reached  between  the  Company  and
PrecisionFlow Technologies,  Inc. of the pending litigation.  Under the terms of
the  settlement,  all  claims  and  counterclaims  asserted  by the  parties  in
previously  filed  lawsuits  were  discontinued  in  consideration  of which the
Company  will  receive  payments  totaling  $541,600  to be paid over a specific
timetable as defined.

Note 20 - Subsequent Event

On February 8, 2008,  the Company  closed on its  acquisition of a 13,300 square
foot  facility  located  at  979  Marconi  Avenue,  Ronkonkoma,  NY  11779  (the
"Property") through the Town of Islip Industrial  Development Agency (the "Islip
IDA").  The property was purchased from HPG Realty Co., LLC (the "Seller").  The
total  purchase  price for the Property  was  $2,015,000.  The Company  financed
approximately $1,500,000 of the purchase price and the financing consists of two
loans  secured by  mortgages,  both of which are held by Capital One,  N.A. (the
"Lender").  Payments  upon  each  of the  mortgages  are  based  upon a  20-year
amortization  schedule,  with a  10-year  balloon.  Interest  on the $1  million
mortgage  is fixed at a rate of 5.67% for 10  years.  Interest  on the  $500,000
mortgage  is fixed at a rate of  3.67%  for the  first  four  years  and will be
adjusted for the 6 year period beginning March 1, 2012 to 200 basis points above
the weekly  average  yield on U.S.  Treasury  Securities  adjusted to a constant
maturity of 6 years,  until  maturity on March 1, 2018. The facility is intended
to be used for the expansion of the Company's First Nano laboratory  starting in
the second quarter of 2008.