UNITED
      STATES SECURITIES AND EXCHANGE COMMISSIONWashington,
      D.C. 20549________________Form
      10-Q(Mark
      One)
 þ
                QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934.For
      the quarterly period ended March 31, 2010o
                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:  1-16525CVD
      EQUIPMENT CORPORATION(Name
      of Registrant  in Its Charter)New
      York
                11-2621692(State
      or Other Jurisdiction of
                  Incorporation
      or Organization)
                (I.R.S.
      Employer Identification No.)1860
      Smithtown
      Avenue                                                                                                        Ronkonkoma, New
      York  11779(Address
      including zip code of registrant’s Principal Executive
      Offices)(631)
      981-7081
                  (Registrant’s
      Telephone Number, Including Area
Code)




Indicate
by check whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes þ  Noo




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).  Yes o  Noo




Indicate
by check mark whether registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company.  See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act).




Large accelerated
fileroAccelerated
filero




Non-accelerated
filer    o                Smaller
reporting company   þ




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




Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date: 4,778,325 shares of Common Stock,
$0.01 par value at May 11, 2010.










CVD
EQUIPMENT CORPORATION AND SUBSIDIARY





Index














Part
      I - Financial InformationItem
      1 - Financial Statements (Unaudited)Consolidated
      Balance Sheets at March 31, 2010 (Unaudited) and December 31,
      2009
            2Consolidated
      Statements of Operations (Unaudited) for the three months ended March 31,
      2010 and 2009
            3Consolidated
      Statements of Cash Flows (Unaudited) for the three months ended March 31,
      2010 and 2009
            4Notes
      to Unaudited Consolidated Financial Statements
            5Item
      2 - Management's Discussion and Analysis of Financial Condition and
      Results of Operations
            13Item
      3 – Quantitative and Qualitative Disclosures About Market
    Risk
            15Item
      4T - Controls and Procedures
            15Part
      II - Other Information
            17Item
      1 - Legal Proceedings
            17Item
      2 – Unregistered Sales of Equity Securities and Use of
      Proceeds
            17Item
      3 – Defaults Upon Senior Securities
            17Item
      4 – (Removed and Reserved)
            17Item
      5 - Other Information
            18Item
      6 - Exhibits and Reports Filed on Form 8-K
            18Signatures
            19Exhibit
      Index
            2031.1   Certification
      of Chief Executive Officer
            2131.2   Certification
      of Chief Financial Officer
            2232.1   Certification
      of Chief Executive Officer pursuant to U.S.C. Section 1350
            2332.2   Certification
      of Chief Financial Officer pursuant to U.S.C. Section 1350
            24








PART 1 –
FINANCIAL INFORMATION


Item 1 –
Financial Statements





CVD
EQUIPMENT CORPORATION AND SUBSIDIARY


Consolidated
Balance Sheets





March
      31, 2010
              (Unaudited)
            
            
            December 31, 2009*ASSETSCurrent
      Assets:Cash
      and cash equivalents
            
            $
            1,925,045
            
            
            $
            3,119,731Accounts
      receivable, net
            
            
            3,125,643
            
            
            
            2,130,196Cost
      and estimated earnings in excess of billings on uncompleted
      contracts
            
            
            2,389,677
            
            
            
            2,708,084Inventories
            
            
            4,693,266
            
            
            
            4,418,138Deferred
      income taxes – current
            
            
            382,347
            
            
            
            378,412Other
      current assets
            
            
            268,891
            
            
            
            213,593Total
      Current Assets
            
            
            12,784,869
            
            
            
            12,968,154Property,
      plant and equipment, net
            
            
            7,614,978
            
            
            
            7,591,363Deferred
      income taxes – non-current
            
            
            730,540
            
            
            
            711,293Other
      assets
            
            
            283,941
            
            
            
            327,968Intangible
      assets, net
            
            
            64,470
            
            
            
            66,213Total
      Assets
            
            $
            21,478,798
            
            
            $
            21,664,991LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      Liabilities:Current
      maturities of long-term debt
            
            $
            371,285
            
            
            $
            368,041Accounts
      payable and accrued expenses
            
            
            1,920,255
            
            
            
            1,820,890Accrued
      professional fees – related party
            
            
            15,000
            
            
            
            64,521Deferred
      revenue
            
            
            52,563
            
            
            
            151,514Total
      Current Liabilities
            
            
            2,359,103
            
            
            
            2,404,966Long-term
      debt, net of current portion
            
            
            3,675,097
            
            
            
            3,768,824Total
      Liabilities
            
            
            6,034,200
            
            
            
            6,173,790Commitments
      and Contingencies
            
            
            -
            
            
            
            -Stockholders’
      EquityCommon
      stock - $0.01 par value – 10,000,000 shares authorized; issued and
              outstanding,
      4,778,325 at  March 31, 2010 and 4,761,825 at December 31,
      2009
            
            
            47,783
            
            
            
            47,618Additional
      paid-in-capital
            
            
            10,137,422
            
            
            
            10,093,761Retained
      earnings
            
            
            5,259,393
            
            
            
            5,349,822Total
      Stockholders’ Equity
            
            
            15,444,598
            
            
            
            15,491,201Total
      Liabilities and Stockholders’ Equity
            
            $
            21,478,798
            
            
            $
            21,664,991


* Derived
from audited financial statements for the year ended December 31, 2009 (see Form
10-K filed on March 31, 2010 with the Securities and Exchange
Commission).


2





CVD
EQUIPMENT CORPORATION AND SUBSIDIARY


Consolidated
Statements of Operations


(Unaudited)





Three
      Months Ended
              March
      312010
            
            
            2009Revenue
            
            $
            3,721,849
            
            
            $
            3,984,741Cost
      of revenue
            
            
            2,615,303
            
            
            
            2,957,713Gross
      profit
            
            
            1,106,546
            
            
            
            1,027,028Operating
      expensesSelling
      and shipping
            
            
            211,655
            
            
            
            166,964General
      and administrative
            
            
            933,183
            
            
            
            944,841Related
      party – professional fees
            
            
            15,000
            
            
            
            25,000Total
      operating expenses
            
            
            1,159,838
            
            
            
            1,136,805Operating
      (loss)
            
            
            (53,292
            )
            
            
            (109,777
            )Other
      income (expense)Interest
      income
            
            
            2,372
            
            
            
            11,670Interest
      expense
            
            
            (58,716
            )
            
            
            (64,755
            )Other
      income (expense)
            
            
            5,725
            
            
            
            (1,700
            )Total
      other (expense)
            
            
            (50,619
            )
            
            
            (54,785
            )(Loss)
      before income taxes
            
            
            (103,911
            )
            
            
            (164,562
            )Income
      tax benefit
            
            
            13,482
            
            
            
            78,214Net
      (loss)
            
            $
            (90,429
            )
            
            $
            (86,348
            )Basic
      and diluted (loss) per common share
            
            $
            (0.02
            )
            
            $
            (0.02
            )Weighted
      average common shares outstanding basic and diluted
            
            
            4,775,575
            
            
            
            4,759,296





3


CVD
EQUIPMENT CORPORATION AND SUBSIDIARY


Consolidated
Statements of Cash Flows


(Unaudited)








Three
      Months Ended
              March
      312010
            
            
            2009Cash
      flows from operating activitiesNet
      (loss)
            
            $
            (90,429
            )
            
            $
            (86,348
            )Adjustments
      to reconcile net income to net cash  provided by (used in)
      operating activities:Stock-based
      compensation expense
            
            
            43,826
            
            
            
            43,344Depreciation
      and amortization
            
            
            152,667
            
            
            
            145,393Deferred
      tax benefit
            
            
            (23,182
            )
            
            
            (73,023
            )Bad
      debt provision
            
            
            1,424
            
            
            
            (7,616
            )Changes
      in operating assets and liabilitiesAccounts
      receivable
            
            
            (996,871
            )
            
            
            439,671Cost
      in excess of billings on uncompleted contracts
            
            
            318,407
            
            
            
            198,439Inventories
            
            
            (275,128
            )
            
            
            119,393Other
      current assets
            
            
            (55,298
            )
            
            
            (65,939
            )Accounts
      payable and accrued expenses
            
            
            49,843
            
            
            
            (654,084
            )Deferred
      revenue
            
            
            (98,951
            )
            
            
            (23,708
            )Net
      cash (used in) provided by operating activities
            
            
            (973,692
            )
            
            
            35,522Cash
      flows from investing activities:Capital
      expenditures
            
            
            (130,510
            )
            
            
            (109,980
            )Net
      cash (used in) investing activities
            
            
            (130,510
            )
            
            
            (109,980
            )Cash
      flows from financing activities:Payments
      of long-term debtNet
      cash (used in) financing activities
            
            
            (90,484
            )
            
            
            (85,454
            )(90,484
            )
            
            
            (85,454
            )Net
      (decrease) in cash and cash equivalents
            
            
            (1,194,686
            )
            
            
            (159,912
            )Cash
      and cash equivalents at beginning of period
            
            
            3,119.731
            
            
            
            5,721,369Cash
      and cash equivalents at end of period
            
            $
            1,925,045
            
            
            $
            5,561,457Supplemental
      disclosure of cash flow information:Income
      taxes paid
            
            $
            13,338
            
            
            $
            5,000Interest
      paid
            
            $
            58,716
            
            
            $
            64,755





4





CVD
EQUIPMENT CORPORATION AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





NOTE
1:                      BASIS
OF PRESENTATION





The
accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information and with the instructions to Form 10-Q and
Article 8 of Regulation S-X. They do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary in order to make the interim financials not misleading have been
included and all such adjustments are of a normal recurring nature. The
operating results for the three months ended March 31, 2010 are not necessarily
indicative of the results that can be expected for the year ending December 31,
2010.





The
balance sheet as of December 31, 2009 has been derived from the audited
financial statements at such date, but does not include all of the information
and footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. For further information,
please refer to the consolidated financial statements and notes thereto included
in the Company’s Annual Report on Form 10-K for the year ended December 31,
2009, including the accounting policies followed by the Company as set forth in
Note 2 to the consolidated financial statements in the December 31, 2009 Form
10-K.





All
material intercompany transactions have been eliminated in consolidation. In
addition, certain reclassifications have been made to prior period financial
statements to conform to the current year presentation.





Subsequent
events have been evaluated through the filing date of this Quarterly Report
on Form 10-Q.





NOTE
2:                      SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES





Revenue and Income
Recognition





The
Company recognizes revenues 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.





The
asset, “Cost and estimated earnings in excess of billings on uncompleted
contracts,” represents revenues recognized in excess of amounts
billed.


5





CVD
EQUIPMENT CORPORATION AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





NOTE
2:                      SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)





Recent Accounting
Pronouncements





In
January 2010, the FASB issued updated accounting guidance related to fair value
measurements and disclosures which amends and clarifies existing disclosure
requirements. This updated accounting guidance requires new disclosures related
to amounts transferred into and out of Level 1 and 2 fair value measurements as
well as separate disclosures of purchases, sales, issuances, and settlements
related to amounts reported as Level 3 fair value measurements. This guidance
also clarifies existing fair value disclosure requirements related to the level
of disaggregation and the valuation techniques and inputs used to measure fair
value for both recurring and nonrecurring fair value measurements. This guidance
is effective for interim and annual periods beginning after December 15, 2009,
except for the separate disclosures of purchases, sales, issuances, and
settlements related to amounts reported as Level 3 fair value measurements,
which is effective for fiscal years beginning after December 15, 2010.
The adoption of this guidance did not have a material impact on our
consolidated financial statements.





In
February 2010, the FASB issued an additional accounting pronouncement that
amended certain requirements for subsequent events (FASB ASC Topic 855), which
requires an SEC filer or a conduit bond obligor to evaluate subsequent events
through the date the financial statements are available to be issued and removes
the previous requirement to disclose the date through which subsequent events
have been evaluated. The amended amendments were effective on issuance of the
final pronouncement. The adoption of this pronouncement had no effect on our
consolidated financial statements.





In
September 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-13,
Multiple-Deliverable Revenue Arrangements, and ASU 2009-14, Certain Revenue
Arrangements That Include Software Elements – a consensus of the FASB Emerging
Issues Task Force, to amend the existing revenue recognition guidance. ASU
2009-13 amends ASC 605, Revenue Recognition, 25, “Multiple-Element Arrangements”
(formerly EITF Issue 00-21, “Revenue Arrangements with Multiple Deliverables”),
as follows: modifies criteria used to separate elements in a multiple-element
arrangement, introduces the concept of “best estimate of selling price” for
determining the selling price of a deliverable, established a hierarchy of
evidence for determining the selling price of a deliverable, requires use of the
relative selling price method and prohibits use of the residual method to
allocate arrangement consideration among units of accounting, and expands the
disclosure requirements for all multiple-element arrangements within the scope
of ASC 605-25.


6




CVD
EQUIPMENT CORPORATION AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




(Unaudited)




ASU
2009-14 amends the scope of ASC 985, Software, 605, “Revenue Recognition”
(formerly AICPA Statement of Position 97-2, Software Revenue Recognition), to
exclude certain tangible products and related deliverables that contain embedded
software from the scope of this guidance. Instead, the excluded products and
related deliverables must be evaluated for separation, measurement, and
allocation under the guidance of ASC 605-25, as amended by ASU 2009-13. The
amended guidance is effective prospectively for revenue arrangements entered
into or materially modified in fiscal years beginning on or after June 15, 2010.
Early adoption is permitted. An entity may elect retrospective application to
all revenue arrangements for all periods presented using the guidance in ASC
250, Accounting Changes and Error Corrections. Entities must adopt the
amendments resulting from both of these ASUs in the same period using the same
transition method, where applicable. Management is reviewing ASU 2009-13 and ASU
2009-14 for applicability to the Company’s revenue recognition policies. The
Company will adopt this standard for our fiscal year beginning January 1,
2011.







NOTE
3:                      CONCENTRATION
OF CREDIT RISK





Financial
instruments that potentially subject the Company to concentrations of credit
risk consist of cash and cash equivalents and accounts receivable. The Company
places its cash equivalents with high credit-quality financial institutions and
invests its excess cash primarily in certificates of deposit, treasury bills and
money market instruments. The Company has established guidelines relative to
credit ratings and maturities that seek to maintain stability and liquidity.
From time to time these temporary cash investments may exceed the Federal
Deposit Insurance Corporation limit. The amount at risk at March 31, 2010 and
December 31, 2009 was approximately $501,000 and $377,000, respectively. The
Company sells products and services to various companies across several
industries in the ordinary course of business. The Company assesses the
financial strength of its customers and maintains allowances for anticipated
losses.





NOTE
4:                      UNCOMPLETED
CONTRACTS





Costs and
estimated earnings in excess of billings on uncompleted contracts are summarized
as follows:





March 31, 2010
              (Unaudited)
            
            
            December 31, 2009Costs
      incurred on uncompleted contracts
            
            $
            1,550,419
            
            
            $
            1,504,137Estimated
      earnings
            
            
            1,861,466
            
            
            
            2,429,7703,411,885
            
            
            
            3,933,907Billings
      to date
            
            
            (1,022,208
            )
            
            
            (1,225,823
            )Cost
      and estimated earnings in excess ofbillings
      on uncompleted contracts
            
            $
            2,389,677
            
            
            $
            2,708,084





7


CVD
EQUIPMENT CORPORATION AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





NOTE
5:                      INVENTORIES





Inventories
consist of:





March 31, 2010
              (Unaudited)
            
            
            December 31, 2009Raw
      materials
            
            $
            1,860,763
            
            
            $
            1,848,620Work-in-process
            
            
            2,612,318
            
            
            
            2,388,115Finished
      goods
            
            
            220,185
            
            
            
            181,403$
            4,693,266
            
            
            $
            4,418,138





NOTE
6:                      FAIR
VALUE MEASUREMENTS





On
January 1, 2009, we implemented new accounting guidance, ASC 820, Fair Value
Measurements and Disclosures, on a prospective basis for our non-financial
assets and liabilities that are not recognized or disclosed at fair value on a
recurring basis. The new guidance requires that we determine the fair value of
financial and non-financial assets and liabilities using the fair value
hierarchy and describes three levels of inputs that may be used to measure fair
value as follows:





Level 1
inputs which include quoted prices in active markets for identical assets or
liabilities.





Level 2
inputs which include observable inputs other than Level 1 inputs, such as quoted
prices for similar assets or liabilities; quoted prices for identical or similar
assets or liabilities in markets that are not active; or other inputs that are
observable or can be corroborated by observable market data for substantially
the full term of the asset or liability, and Level 3 inputs which include
unobservable inputs that are supported by little or no market activity and that
are significant to the fair value of the underlying asset or liability. Level 3
assets and liabilities include those whose fair value measurements are
determined using pricing models, discounted cash flow methodologies or similar
valuation techniques, as well as significant management judgment or
estimation.





The
following table summarizes, for each major category of assets and liabilities,
the respective fair value and the classification by level of input within the
fair value hierarchy:





March 31, 2010
            
            
            December 31, 2009Description
            
            Level (1)
            
            
            Level (2)
            
            
            Level (3)
            
            
            Total
            
            
            Level (1)
            
            
            Level (2)
            
            
            Level (3)
            
            
            TotalAssets:Cash
      equivalents
            
            $
            1,770,965
            
            
            $
            ---
            
            
            $
            ---
            
            
            $
            1,770,965
            
            
            $
            1,795,622
            
            
            $
            ---
            
            
            $
            ---
            
            
            $
            1,795,622Total
      Liabilities
            
            $
            ---
            
            
            $
            ---
            
            
            $
            ---
            
            
            $
            ---
            
            
            $
            ---
            
            
            $
            ---
            
            
            $
            ---
            
            
            $
            ---





8


CVD
EQUIPMENT CORPORATION AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





NOTE
7:                      BAD
DEBTS





Accounts
receivable are presented net of an allowance for doubtful accounts of $58,540
and $57,116 as of March 31, 2010 and December 31, 2009, respectively. The
allowance is based on prior experience and management’s evaluation of the
collectability of accounts receivable. Management believes the allowance is
adequate. However, future estimates may change based on changes in future
economic conditions.





NOTE
8:                      LONG-TERM
DEBT





On April
22, 2008, the Company entered into a three year Modified and Restated Revolving
Credit Agreement with Capital One, N.A. (the “Bank”) as successor to North Fork
Bank, pursuant to which the Bank has agreed to make revolving loans to the
Company of up to $5 million until May 1, 2011,at which time it will be
subject to renewal. Interest on the unpaid principal balance on this facility
accrues at either (i) the LIBOR rate plus 2.00% or (ii) the Bank’s prime rate
minus .25%. This agreement contains certain financial and other covenants.Borrowings are
collateralized by the Company’s assets.





The
amount available under this agreement was $4,674,000 as of March 31, 2010 as the
Company has utilized approximately $326,000 of this facility in the form of
equipment term loans. As of March 31, 2010, the Company is in full compliance
with the terms of the Revolving Credit Agreement.





NOTE
9:                      STOCK-BASED
COMPENSATION EXPENSE





During
the three months ended March 31, 2010 and March 31, 2009, as per ASC 718, Stock
Compensation, the Company recorded as part of selling and general administrative
expense, approximately $44,000 and $43,000 respectively, for the cost of
employee and director services received in exchange for equity instruments based
on the grant-date fair value of those instruments.





9


CVD
EQUIPMENT CORPORATION AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





NOTE
10:                      INCOME
TAXES





The
income tax (benefit) provision for income taxes includes the
following:





Three
      Months Ended March 31,2010
            
            
            2009Current:Federal
            
            $
            1,500
            
            
            $
            -State
            
            
            8,200
            
            
            -Total
      Current Provision
            
            
            9,700
            
            
            -Deferred:Federal
            
            $
            (18,767
            )
            
            $
            (67,212
            )State
            
            
            (4,415
            )
            
            
            (11,002
            )Total
      deferred (benefit)
            
            
            (23,182
            )
            
            
            (78,214
            )Income
      tax (benefit)
            
            $
            (13,482
            )
            
            $
            (78,214
            )








In 2006,
the Company was required to change its accounting method for tax purposes from
the completed contract method to the percentage of completion method. Under the
provisions of the Internal Revenue Code, the Company elected 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, 2009.





NOTE
11:                      EARNINGS
PER SHARE





As per
ASC 260, basic earnings per share are computed by dividing net earnings
available to common shareholders (the numerator) by the weighted average number
of common shares (the denominator) for the period presented. The computation of
diluted earnings per share is similar to basic earnings per share, except that
the denominator is increased to include the number of additional common shares
that would have been outstanding if the potentially dilutive common shares had
been issued.





Stock
options to purchase 442,550 shares of common stock were outstanding and 342,640
were exercisable during the three months ended March 31, 2010. Stock options to
purchase 416,000 shares were outstanding and 279,125 were exercisable during the
three months ended March 31, 2009. During the three months ended March 31, 2010
and the three months ended March 31, 2009, potentially dilutive shares of 63,807
and 36,647 respectively, were not included in the computation of diluted
earnings per share because their effects would have been antidilutive. These
securities may be dilutive to the earnings per share calculation in the
future.





10


CVD
EQUIPMENT CORPORATION AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





NOTE
11:                      EARNINGS
PER SHARE (continued)





The
dilutive potential common shares on warrants and options is calculated in
accordance with the treasury stock method, which assumes that proceeds from the
exercise of all warrants and options are used to repurchase common stock at
market value. The amount of shares remaining after the proceeds are exhausted
represents the potential dilutive effect of the securities.





The
following table sets forth our computation of basic and diluted net income per
share:





Three
      months ended March 31,2010
            
            
            2009Numerator:Net
      (loss) used in calculation of basicand
      diluted earnings per share
            
            $
            (90,429
            )
            
            $
            (86,348
            )Denominator:Weighted-average
      common shares outstandingUsed
      in calculation of basic and diluted earnings per share
            
            
            4,775,575
            
            
            
            4,759,296Net
      (loss) per share:Basic
      and diluted
            
            $
            (0.02
            )
            
            $
            (0.02
            )





Note
12:                      LEGAL
PROCEEDINGS





In June
2008, the Company commenced an action against a third party in the Supreme Court
of the State of New York, Suffolk County. By that action, the Company sought to
recover approximately $154,000 for manufacturing engineering services and system
fabrication; spare parts; and reimbursable expenses. Subsequently, the defendant
removed the action to the United States District court for the Eastern District
of New York. Once in Federal Court, the defendant asserted several
counterclaims. A settlement was agreed to in late 2009 and executed in February
2010.





On
January 26, 2010, the Company commenced an action against Taiwan Glass
Industrial Corp and Mizuho Corporate Bank in the United States District Court
for the Southern District of New York. By that action, the Company seeks
monetary damages ($5,816,000) against Taiwan Glass Industrial Corp. for breach
of contract and against Mizuho Corporate Bank for failing to pay the second
installment on a letter of credit issued by Mizuho Corporate Bank.





11


CVD
EQUIPMENT CORPORATION AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





Note
12:                      LEGAL
PROCEEDINGS (continued)





The
Company believes that Taiwan Glass Industrial Corp. has no legal basis for
unilaterally refusing to accept and pay for equipment specially manufactured for
them and shipped to them by the Company and that Mizuho Corporate Bank was
obligated to make the payment which it has failed and refused to make to the
Company. Taiwan Glass Industrial Corp. and Mizuho Corporate Bank have each
interposed an answer denying these allegations and Taiwan Glass Industrial Corp.
has interposed counterclaims seeking unspecified monetary damages. The Company
is vigorously pursuing its claims against both defendants and defending against
the counterclaims interposed by Taiwan Glass Industrial Corp.











Note
13                      SEGMENT
REPORTING





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 respective 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 income or (loss)
before taxes.





2010
            
            CVD
            
            
            SDC
            
            
            Conceptronic
            
            
            Eliminations *
            
            
            ConsolidatedRevenue
            
            $
            2,451,448
            
            
            $
            1,398,358
            
            
            $
            209,509
            
            
            $
            (337,466
            )
            
            $
            3,721,849Pretax
      (loss)/income
            
            
            (318,735
            )
            
            
            173,927
            
            
            
            40,897
            
            
            
            
            
            
            
            (
      103,911
            )2009Revenue
            
            $
            2,739,570
            
            
            $
            1,115,335
            
            
            $
            195,236
            
            
            $
            (65,400
            )
            
            $
            3,984,742Pretax
      (loss)
            
            
            (33,875
            )
            
            
            (
      2,229
            )
            
            
            (128,458
            )
            
            
            
            
            
            
            (164,562
            )





*All
elimination entries represent intersegment revenues eliminated in consolidation
for external financial reporting.





12


Item
2.                        Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.





Except
for historical information contained herein, this “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” contains
forward-looking statements within the meaning of the U.S. Private Securities
Litigation Reform Act of 1995, as amended. These statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance, or achievements of the Company 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 the
Company’s existing and potential future product lines of business; the Company’s
ability to obtain financing on acceptable terms if and when needed; uncertainty
as to the Company’s future profitability, uncertainty as to the future
profitability of acquired businesses or product lines, uncertainty as to any
future expansion of the Company. Other factors and assumptions not identified
above were also involved in the derivation of these forward-looking statements
and the failure of such assumptions to be realized as well as other factors may
also cause actual results to differ materially from those projected. The Company
assumes no obligation to update these forward looking statements to reflect
actual results, changes in assumptions or changes in other factors affecting
such forward-looking statements.




Results
of Operations




Three
Months Ended March 31, 2010 vs. Three Months Ended March 31, 2009





Revenue





Revenue
for the three month period ended March 31, 2010 was approximately $3,722,000 as
compared to $3,985,000 for the three month period ended March 31, 2009, a
decrease of 6.6%.  We attribute this decrease to delays and reductions
in capital expenditures by potential customers due to unfavorable economic
conditions.





Gross
Profit





We
generated gross profits of approximately $1,107,000, resulting in a gross profit
margin of 29.7%, for the three months ended March 31, 2010 as compared to gross
profits of approximately $1,027,000 and a gross profit margin of 25.8%, for the
three months ended March 31, 2009. The increase in gross profit is primarily
attributable to management’s efforts to streamline our engineering and
production personnel in order to achieve greater efficiencies. We continue to
support the expansion of the Application Laboratory and new product development
in the Nanomaterials, Energy, Solar and Semiconductor fields.





13





Selling, General and
Administrative Expenses





Selling
and shipping expenses for the three months ended March 31, 2010 and 2009 were
approximately $212,000 and $167,000, respectively, representing an increase of
26.9% compared to the prior period. This increase can be primarily attributed to
greater commissions earned as a result of the completion and shipment of several
systems during the current period as well as the allocation of certain costs to
sales.





We
incurred approximately $948,000 of general and administrative expenses during
the three months ended March 31, 2010, compared to approximately $970,000
incurred during the three months ended March 31, 2009 representing a decrease of
2.3%.





Operating
Loss





As a
result of the foregoing factors, we incurred an operating loss of approximately
$53,000 for the three months ended March 31, 2010 compared with an operating
loss of $110,000 for the three month period ended March 31, 2009. Although
revenues for the current three month period were lower than the respective
period one year ago, management’s efforts to reduce costs enabled us to minimize
our operating loss.





Interest Expense,
Net





Interest
income for the three months ended March 31, 2010 was approximately $2,000
compared to approximately $12,000 for the three months ended March 31, 2009.
This decrease is a result of a reduction in available cash as well as investing
cash in more conservative investments such as short-term Treasury Bonds and
Certificates of Deposit, with lower returns than it previously received on Money
Market Funds. Interest expense for the three months ended March 31, 2010 was
approximately $59,000 compared to approximately $65,000 for the three months
ended March 31, 2009. The primary sources of this interest expense are the
mortgages on the three buildings that we own.





Income
Taxes





For the
three months ended March 31, 2010 we recorded current income tax expense of
approximately $10,000 that was offset by the realization of deferred tax
benefits of $23,000. For the three months ended March 31, 2009, we recorded
no current income tax expense and realized deferred tax benefits of
approximately $78,000.





Net
(Loss)





We
reported a net loss of approximately $90,000 for the three month period ended
March 31, 2010 compared to a net loss of $86,000 for the same period in
2009.





14


Liquidity and Capital
Resources





As of
March 31, 2010, we had aggregate working capital of approximately $10,426,000
and cash and cash equivalents of $1,925,000, compared to $10,563,000 and
$3,120,000 at December 31, 2009, a decreaseof $137,000 and
$1,195,000, respectively. The decrease in cash and cash equivalents was
primarily the result of funding the increase in accounts receivable and
inventory.





Accounts
receivable, net, as of March 31, 2010 was $3,126,000 compared to $2,130,000 as
of December 31, 2009. This increase is attributable to the timing of shipments
and customer payments.





As of
March 31, 2010, our backlog was approximately $2,101,000, a decrease of
$448,000, or 17.6%, compared to $2,549,000 at December 31, 2009. However, during
the current period (January 1, 2010 thru March 31, 2010) we received 17.5% more
orders than we received during the same period one year ago.Timing for completion of
the backlog varies depending on the product mix and can be as long as two years.
Included in the backlog are all accepted purchase orders with the exception of
those that are included in 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.





We
believe that based on our historical growth rate, our cash and cash equivalents
position at March 31, 2010 and available credit facilities, our funds at March
31, 2010 will be sufficient to meet our working capital and investment
requirements for the next twelve months.





Off-Balance
Sheet Arrangements.





We have
no off-balance sheet arrangements at this time.





Item
3.                             
    Quantitative and Qualitative Disclosures About Market
Risk





Not
applicable.





Item
4T.                                Controls and
Procedures.





Evaluation
of Disclosure Controls and Procedures





We
maintain a system of disclosure controls and procedures (as defined in Rule
13a-15(e) under the Exchange Act).  As required by Rule 13a-15(b)
under the Exchange Act, management of the Company, under the direction of our
Chief Executive Officer and Chief Financial Officer, reviewed and performed an
evaluation of the effectiveness of design and operation of the Company’s
disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Exchange Act) as of the end of the period covered by this Quarterly Report on
Form 10-Q (the “Report”).





15


Based on
that review and evaluation, the Chief Executive Officer and Chief Financial
Officer, along with our management, have determined that as of the end of the
period covered by the Report on Form 10-Q, the disclosure controls and
procedures were and are effective to provide reasonable assurance that
information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC’s rules and forms and were effective to
provide reasonable assurance that such information is accumulated and
communicated to our management, including our principal executive officer and
principal financial officer, as appropriate to allow timely decisions regarding
disclosures.





Changes
in Internal Controls





There
were no changes in our internal controls over financial reporting as defined in
Rule 13a-15(f) or Rule 15d-15(f) under the Exchange Act that occurred during the
most recent fiscal quarter that have materially affected, or are reasonably
likely to materially affect, the internal controls over financial
reporting.





Limitations
on the Effectiveness of Controls





We
believe that a control system, no matter how well designed and operated, cannot
provide absolute assurance that the objectives of the control systems are met,
and no evaluation of controls can provide absolute assurance that all control
issues and instances of fraud, if any, within a company have been
detected.





16


CVD
EQUIPMENT CORPORATION





PART
II





OTHER
INFORMATION








Item
1.                                Legal
Proceedings.







In June
2008, we commenced an action against a third party in the Supreme Court of the
State of New York, Suffolk County. By that action, we sought to recover $154,161
for manufacturing and engineering services and system fabrication; spare parts;
and reimbursable expenses. Subsequently, the defendant removed the action to the
United States District Court for the Eastern District of New York. Once in
Federal Court, the customer asserted various counterclaims. A settlement of the
actions was agreed to in late 2009 and executed in February 2010.




On
January 26, 2010, the Company commenced an action against Taiwan Glass
Industrial Corp and Mizuho Corporate Bank in the United States District Court
for the Southern District of New York. By that action, the Company seeks
monetary damages ($5,816,000) against Taiwan Glass Industrial Corp. for breach
of contract and against Mizuho Corporate Bank for failing to pay the second
installment on a letter of credit issued by Mizuho Corporate Bank.





The
Company believes that Taiwan Glass Industrial Corp. has no legal basis for
unilaterally refusing to accept and pay for equipment specially manufactured for
them and shipped to them by the Company and that Mizuho Corporate Bank was
obligated to make the payment which it has failed and refused to make to the
Company. Taiwan Glass Industrial Corp. and Mizuho Corporate Bank have each
interposed an answer denying these allegations and Taiwan Glass Industrial Corp.
has interposed counterclaims seeking unspecified monetary damages.
The Company is vigorously pursuing its claims against both defendants and
defending against the counterclaims interposed by Taiwan Glass Industrial
Corp.





Item
2.                                Unregistered
Sales of Equity Securities and Use of Proceeds.





None.





Item
3.                                Defaults
Upon Senior Securities.





None.





Item
4.                                (Removed
and Reserved).




None.


17


Item
5.                                Other
Information.





None.





Item
6.                                Exhibits
and Reports Filed on Form 8-K





(a)
              Exhibits
      filed with this report:31.1
              Certification
      of Chief Executive Officer31.2
              Certification
      of Chief Financial Officer32.1
              Certification
      of Chief Executive Officer pursuant to U.S.C. Section
  135032.2
              Certification
      of Chief Financial Officer pursuant to U.S.C. Section
  1350(b)
              Reports
      on Form 8-KNone








18





SIGNATURE





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized, this 17th day
of May 2010.





CVD
      EQUIPMENT CORPORATIONBy: /s/ Leonard A.
      RosenbaumLeonard
      A. RosenbaumChief
      Executive Officer(Principal
      Executive Officer)By: /s/ Glen R.
      CharlesGlen
      R. CharlesChief
      Financial Officer(Principal
      Financial andAccounting
      Officer)





19


EXHIBIT
INDEX








EXHIBITNUMBER
            DESCRIPTION31.1
            Certification
      of Chief Executive Officer *31.2
            Certification
      of Chief Financial Officer *32.1
            Certification
      of Chief Executive Officer pursuant to U.S.C. Section 1350
    *32.2
            Certification
      of Chief Financial Officer pursuant to U.S.C. Section 1350
    *





* Filed
herewith