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 UNITED
STATES

 SECURITIES
AND EXCHANGE COMMISSION

 Washington,
D.C. 20549

 Form

 (Mark One)

 ANNUAL
 REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 For
the fiscal year ended December 31, 2023

 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

 (Exact
name of registrant as specified in its charter)

 New
 York

 11-2621692

 (State
 or Other Jurisdiction of

 Incorporation
 or Organization)

 (I.R.S.
 Employer

 Identification
 No.)

South Technology Drive Central Islip, New York 11722

 (Address
including zip code of registrant's Principal Executive Offices)

 (631) 981-7081

 (Registrant's
Telephone Number, Including Area Code)

 Securities
registered pursuant to Section 12(b) of the Act:

 Title
 of each class

 Trading
 Symbol(s)

 Name
 of each exchange on which registered

 Common
 Stock, Par value $0.01

 CVV

 NASDAQ
 Capital Market

 Securities
registered pursuant to Section 12(g) of the Act:

 None

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No

by check mark whether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes No

by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes No

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

 Large
accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging Growth Company

 If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.

 If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.

by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).

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

 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 last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's
most recently completed second fiscal quarter: $ 48,002,094 at June 30, 2023.

the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: 6,824,511
shares of Common Stock, $0.01 par value at March 25, 2024.

 DOCUMENTS
INCORPORATED BY REFERENCE: None.

 INFORMATION
CONCERNING FORWARD-LOOKING STATEMENTS

 Except
for historical information contained herein, this Annual Report on Form 10-K contains forward–looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Readers
are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations
upon which they are based will occur. 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 are based on various factors and are 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, including our PVT150 / PVT 200 systems;

 our
 ability to attract and retain key personnel and employees;

 our
 ability to obtain financing on acceptable terms if and when needed;

 uncertainty
 as to our ability to develop new products for the high power electronics market including our plan to commercialize and market a
 PVT200 to grow silicon carbide crystals for 200 mm wafers;

 uncertainty
 as to our future growth and profitability; and

 uncertainty
 as to our ability to adequately obtain raw materials and on commercially reasonable terms.

 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. Past performance is no guaranty of future results.

 You
should not place undue reliance on any forward-looking statements, which speak only as of the dates they are made. When used with this
Report, the words "believes", "anticipates", "expects", "estimates", "plans",
"intends", "will" and similar expressions are intended to identify forward-looking statements.

 Item 1.

 Description of Business.

 Definitions

 The
use of the words "CVD," "we," "us," or "our," refers to CVD Equipment Corporation, a
New York corporation incorporated on October 13, 1982, and its wholly owned subsidiaries, CVD Materials Corporation (including its wholly
owned subsidiaries, and CVD MesoScribe Technologies Corporation and Tantaline CVD Holding ApS, collectively "CVD Materials"),
and FAE Holdings 411519R LLC except where the context otherwise requires.

 Overview

 CVD
has served the advanced materials markets with chemical vapor deposition, physical vapor transport and thermal process equipment for
over 40 years. We are headquartered in Central Islip, New York with one other location in Saugerties, New York.

 We
design, develop, and manufacture a broad range of equipment used to develop and manufacture materials and coatings for the compound semiconductor,
semiconductor, aerospace, battery energy storage markets as well as advanced industrial applications, and research.

 We
conduct our business through three reportable operating segments: i) CVD Equipment that supplies chemical vapor deposition, physical
vapor transport and thermal process equipment; ii) SDC that designs and manufactures ultra-high purity gas and chemical delivery control
systems; and iii) CVD Materials that provide products related to advanced materials and coatings.

 Developments

 On
May 26, 2023, we sold our Tantaline subsidiary located in Nordborg, Denmark in exchange for a nominal amount at closing and an earn-out
provision based on any net income that Tantaline may earn during the five-year period ending December 31, 2027. The decision to sell
Tantaline was based on our ongoing strategy to focus on the equipment business consisting of the CVD Equipment and SDC segments and reduce
its focus on the non-core CVD Materials business.

 On
August 8, 2023, we entered into an agreement with a third party to sell certain assets and license certain propriety information of MesoScribe.
We will continue to fulfill remaining orders for MesoScribe products through the end of 2024 at which time we plan to cease the remaining
operations of MesoScribe and dispose of any remaining equipment.

 The
decisions to sell our Tantaline subsidiary and wind down the operations of MesoScribe were based on our ongoing strategy to focus on
the equipment business consisting of the CVD Equipment and SDC segments.

 Key
Company Strengths

 Based
on more than 40 years of equipment experience, we use our capabilities in process development, engineering, and vertical manufacturing
to transform emerging applications into mainstream manufacturing solutions.

 We
have built a library of design expertise, know-how and innovative solutions to assist our customers in developing these intricate processes
and to accelerate their production and commercialization. This library of equipment design solutions, along with our manufacturing and
systems integration facilities, allows us to provide application-specific design, process, and manufacturing solutions to our customers.

 Our
core competencies in equipment and software design, manufacturing and process development are used to engineer our finished products
and to accelerate the commercialization path of our customer base. Our proprietary real-time software allows for rapid configuration,
and provides our customers with enabling tools to understand, optimize and repeatedly control their processes. These factors reduce cost,
improve quality, and reduce the time it takes between customers' orders and the shipment of our products. Our Application Laboratory
allows customers the option to bring their process tools to our laboratory and to work collaboratively with our scientists and engineers
to optimize process performance.

 To
expand our presence into our major target markets, we are developing a line of proprietary standard use products to complement our customized
legacy systems. Historically, we manufactured products for research and development on an application-specific basis to meet an individual
customer's specific research and production requirements. Our proprietary systems leverage the technological expertise that we
have developed through designing these custom systems into a broader standardized product line. The standard product line can be configured
from a wide range of available options to meet diverse product and budgetary requirements. Manufacturing these standardized systems in
higher volumes may provide us the flexibility to reduce both the cost and delivery time of our systems. These systems, which we market
and sell under the CVD, FirstNano and EasyTube product names, are sold to commercial companies, universities and research laboratories
in the United States and throughout the world.

 Sales
of our proprietary standard systems, custom systems and process solutions have been driven by our installed customer base, which includes
Fortune 500 companies. The performance and success of our products has historically driven repeat orders from existing customers as well
as generated business from new customers. Furthermore, with our proprietary solutions and expanded focus on " enabling tomorrow's
technologies " TM we have been developing a new customer base in addition to growing with our existing customers.

 Key
Growth Strategies

 Our
core strategy is to focus on growth market applications in end markets related to the "electrification of everything," aerospace
and industrial applications. The phrase "electrification of everything" refers to the shift from fossil fuels to the use
of electricity to power devices, buildings, electric vehicles ("EVs"), and many other applications. With respect to aerospace,
our systems are being used by our customers to produce ceramic matrix composite materials ("CMCs") that will be used in next
generation gas turbine jet engines with the objective of reducing jet fuel consumption and contributing to the decarbonization of that
industry.

 Our
current strategy yielded multisystem orders of PVT150 equipment that was delivered to one company that manufactures silicon carbide wafers.

 In
February 2024, we received an order from an additional customer for our new PVT200 system used to grow silicon carbide crystals for the
manufacture of 200 mm wafers. This represents our second customer for our PVT equipment. This customer plans to evaluate our equipment
for potential additional purchases of PVT equipment. We have also received orders from OneD Battery Materials in 2023, a company that
is engaged in providing battery nanomaterials.

 Both
technologies are essential for the support of the EV market. These systems should provide us with standard product offering to continue
to support the EV focused market as well as energy storage, power conversion and power transmission. We plan to expand our product offerings
in the power electronics market to build off the introduction of the PVT150 and PVT200 systems. We are also evaluating our ability to
provide other equipment used in the manufacturing process of silicon carbide wafers.

2022, we also received an order from an aerospace company for a production chemical vapor infiltration (CVI) system that will be used
to manufacture CMCs for gas turbine jet engines. In 2023, we received an order from the same aerospace company for an additional three
CVI systems.

 In
February 2024, we received a multisystem order from an industrial customer for approximately $10 million that will be used for depositing
a silicon carbide protective coating on OEM components.

 We
have generally gained new customers through our industry reputation, as well as limited print advertising and trade show attendance.
We have increased the number of trade shows and industry conferences in 2023. In addition, we added to our sales and marketing team in
2022 and expanded our sales team in early 2023.

 Major
Target Markets

 Our
major target markets are high power electronics, EV battery materials / energy storage and aerospace, defense and industrial applications
– all of which have the objective of improving energy efficiency.

 High
Power Electronics

 Demand
for silicon carbide wafers to support high power electronics for energy storage and transmission/charging resulted in a multi-system
order from a US-based, silicon carbide wafer manufacturer. Through December 31, 2023, we have received and delivered orders for 30 of
our PVT150 physical vapor transport systems from one customer, which uses our systems to grow silicon carbide crystals that are made
into 150 mm silicon carbide wafers for use in power electronics. In late 2023, we launched our PVT200 system designed to manufacture
silicon carbide crystals for 200 mm wafer and received our first order from a second customer. We plan to expand our marketing and future
product development for the PVT product line as well as expand our product offerings to manufacturers of silicon carbide wafers.

 EV
Battery Materials / Energy Storage

 We
have experienced increased interest and demand for nanotechnology materials including carbon nanotubes (CNTs), graphene and silicon nanowires
(Si-NWs) to support the development and manufacturing for battery materials used in electric vehicles. We received two system orders
in 2021 to deposit coatings onto powders used in silicon-graphite anodes, including a production system and a second for research and
material development. We received additional system orders from this customer in 2023 that were completed during 2023.

 Aerospace
& Defense

 CVD
is a leading manufacturer of CVI and tow-coating systems to manufacture CMCs for aerospace gas turbine jet engine applications. Our customers
include two of the leaders in aerospace gas turbine engines.

 We
continue to engage customers in the aerospace market regarding CMCs. During 2022, we received an order for a production CVI system valued
at approximately $3.7 million. We received an additional order for three CVI systems during 2023 from the same customer. These systems
will be used to manufacture CMCs for aerospace gas turbine jet engines.

 We
believe our future growth will be derived from production applications in our major target markets. Our legacy product line continues
to provide advanced equipment and subsystems to enable development of emerging technology and research applications.

 Our
major targeted markets are further described as follows (the term "legacy product" refers to products and systems within
our product offerings that we have produced in our history):

 Major
 Target Markets:

 Description
 and Growth Drivers:

 CVD
 Equipment Products and Services:

 High
 Power Electronics

 The
 shift to electrification has the objectives of reducing emissions and reducing dependency on fossil fuels. This has driven the demand
 for electric vehicle and associated high power electronics used in charging and motor power conversion.

 Production
 Applications:

 -
 PVT150 SiC crystal growth system launched in 2022.

 -
 PVT200 SiC crystal growth system launched in 2023.

 -
 HVPE400: polycrystalline GaN (legacy product).

 EV
 Battery Materials / Energy Storage

 The
 shift to electrification also requires improvements in energy storage, specifically with the use of novel anode materials.

 Production
 Applications:

 -
 PowderCoat-1100 production system launched in 2021 grows Si nanowires on carbon nanoparticles.

 -
 Carbon-150: Single substrate system for CNT growth. Versatile substrate format, on wafer or foil.

 -
 Carbon-300: Multiple substrate batch tube system for CNT growth. Versatile substrate format, on wafer or foil.

 R&D
 Applications:

 -
 ET-3000: Versatile CNT growth system for research and development.

 Aerospace,
 Defense and Industrial

 Next
 generation gas turbine jet engines are incorporating CMC material for the hot section or
 exhaust of the engine to improve fuel efficiency.

 Silicon
 carbide coating is use as a protective barrier in many OEM components used in LED and other applications.

 Production
 and R&D Applications:

 -
 Fiber tow coat system. Mass production system for multi-layer coating for CMCs.

 -
 Silicon bond coat environmental barrier depositing system. Deposits Si on machined gas turbine jet engine CMC components and other
 OEM components.

 -
 Chemical Vapor Deposition/ Chemical Vapor Infiltration production coating system for multi-layer CMC coatings on SiC fiber preforms.

 Other
 Markets

 CVD
 Equipment Products:

 -
 Universal liquid and gas storage cabinets, management, and delivery systems (SDC segment).

 -
 Production MOCVD Super Conducting Tape system.

 -
 ET-3000: MOCVD for compound semiconductor R&D.

 -
 ET-3000 for graphene.

 -
 ET-6000: Multi-Tube Chemical Vapor Deposition Tube furnace (metals, oxides and nitrides).

 -
 PowderCoat-300 for powder material R&D (including battery anode).

 -
 TMD: cluster tool for advanced material development.

 Our
wholly owned subsidiary, CVD Materials Corporation, includes our MesoScribe product lines. Our MesoScribe product line supports the aerospace
and defense markets with novel robust direct write instrumentation. We plan to wind down the operations of MesoScribe in 2024 after satisfaction
of customer purchase orders.

 Bookings

2023, bookings of new orders from customers was approximately $25.8 million, representing a decrease of approximately 22.1% compared
to 2022 bookings of $33.1 million. The decline in bookings was related to $8.8 million of orders of PVT150 systems that were received
in 2022 as compared to no such orders in 2023.

 Segments

 CVD
Equipment - supplies state-of-the-art chemical vapor deposition and thermal process equipment targeting growth production markets
as well as systems for use in research and development. This includes systems marketed under the FirstNano product brand. Utilizing our
over 40 years of expertise in the design and manufacture of chemical vapor deposition and thermal process equipment, we provide material
processing capability and control at a competitive cost of ownership.

 The
targeted growth production markets include high power electronics (both silicon carbide (SiC) and gallium nitride (GaN)), aerospace advanced
materials primarily for gas turbine jet engines, and nanomaterials used in batteries. The product group also consists of legacy products
serving the production and R&D applications such as semiconductors, LEDs, carbon nanotubes, nanowires, solar cells and a number of
other industrial & research applications.

 Our
developments and opportunities for the carbon composite business come from achievements in our Applications Laboratory. The Applications
Laboratory, along with the sales and marketing team continue to explore carbon-based products and applications that can be made from
our CNT, infiltrated carbon/CVI and carbon nano fiber technology (CNF). Some applications include CNT and infiltrated carbon/CVI based
battery material and CNF capacitors for 5G technology.

 To
support new emerging applications, we provide equipment to and collaborate with laboratory scientists to bring state-of-the-art processes
from the research laboratory into production. CVD Equipment group provides process development value through our Application Laboratory
where our personnel interact directly with the scientists and engineers of our customer base to develop solutions to tomorrow's
challenges today. CVD Equipment segment operates from our 135,000 sq. ft. facility in Central Islip, New York.

 SDC
 - designs and manufactures ultra-high purity gas and chemical delivery control systems for state-of-the-art semiconductor fabrication
processes, aerospace, solar cells, LEDs, carbon nanotubes, nanowires, and a number of industrial applications. Our SDC products are sold
on a stand-alone basis and are also integrated into certain CVD equipment. This internal supply of chemical and gas delivery systems
and components provide a competitive advantage for our CVD Equipment group over its competition. SDC operates from a 22,000 square foot
facility fitted with a clean room manufacturing space located in Saugerties, New York.

 CVD
Materials - consist of MesoScribe's direct write printed electronics business. MesoScribe provides MesoPlasma printing
services and products (heaters, antennas, and sensors) to aerospace, satellite, power generation, defense, and other markets requiring
high performance. MesoScribe operations are located at our main facility in Central Islip, New York.

 On
August 8, 2023, we entered into an agreement with a third party to sell certain assets and license certain proprietary information of
MesoScribe. We will continue to fulfill remaining orders for MesoScribe products through the end of 2024 at which time we plan to cease
the remaining operations of MesoScribe and dispose of any remaining equipment.

 Intellectual
Property

 Our
success is dependent, in part upon the development and protection of our proprietary technology and other proprietary rights. We have
historically and continue to protect our proprietary information and intellectual property such as design specifications, blueprints,
technical processes, and employee know-how through the use of patents and non-disclosure agreements. In the area of patents, we believe
there is value in having protected intellectual property and will continue to file for patent protection of our proprietary technology
that we believe has the potential to be incorporated into our products and sold to multiple customers. We also maintain certain trademarks
relating to certain of our products and product lines and claim copyright protection for certain proprietary software and documentation.

 While
patent, copyright and trademark protections for our intellectual property are important to different degrees for our various products
and solutions, we believe our future success in highly dynamic markets is most dependent upon the technical competence and creative skills
of our personnel and our ability to accelerate the commercialization of next generation intellectual properties. We attempt to protect
our trade secrets and other proprietary information through non-disclosure agreements with our customers, suppliers, employees and consultants
and other security measures.

and Development

 We
develop new products based on market analysis or by customer request. The technology included in our product development includes mechanical
hardware, software and controls systems and overall configuration. We have conducted research and development over the last 40 years
and have a wealth of technology from which systems and solutions can be derived from and productized. Together with a number of leading
universities and startup companies with whom we partner from time to time, we conduct research on SiC growth, the growth and infiltration
of carbon nanotubes, graphene and nanowires as well as on selected aerospace manufacturing processes. Our intention is that together
with customers and universities, we will leverage our collective expertise in this field, which we believe will allow us to capitalize
on commercial opportunities in the future.

 Products
and Technology

 Chemical
Vapor Deposition/Infiltration – Chemical vapor deposition is a method of coating or growing material through a chemical recombination
at elevated temperatures onto or within pores of a substrate material. A single or collection of gases or vapor introduced on to the
surface or into pores of a substrate material that is heated to such a degree that the gases decompose and deposits a desired layer onto
and or into a substrate material. Chemical vapor infiltration (CVI) is a variant of a chemical vapor deposition process that is performed
at low pressures to allow for coating the internal surfaces of a porous material. Using heat and low pressure, precursor vapors penetrate
the pores/fiber of the material and deposit to form a conformal coating on the internal surfaces. Both processes are accomplished by
combining appropriate gases in a reaction chamber, of the kind we manufacture, at elevated temperatures (typically 500 to 2,500
Celsius). Our chemical vapor deposition and CVI systems are complete and include all necessary heating techniques, precise control instrumentation,
gas delivery and abatement subsystems and components and include state-of-the-art proprietary process control software. We provide both
standard and emerging applications specified products. Some of the standard systems we offer are for SiC, GaN, Aluminum Nitride (AlN),
CMCs, silicon (Si), CNT, graphene, silicon nanowires. The systems are sold under the CVD and FirstNano product brands.

 Physical
Vapor Transport (PVT) – While the PVT150 was officially launched for production in 2022, we have sold PVT systems in prior
years and have pioneered both resistive heating and more effectively inductively heated PVT systems. The PVT150 system was specifically
designed to address the SiC crystal growth market for 150 mm substrates or wafers. Designed to provide enhanced process parameter control
it allows existing and future customers the ability to tightly control and monitor the crystal growth process for 150mm substrates. A
200 mm version called the PVT200 was developed during 2023 and the first order was received in February 2024. The crystal growth technique
utilized a high temperature furnace to vaporize from seed granular material of SiC and further deposit out in an ordered crystal structure
onto substrate wafer. The process takes days to over a week to complete and yield a SiC crystal ready for further processing into wafers.

 Rapid
Thermal Processing (RTP) – Used to heat semiconductor materials to elevated temperatures of up to 1,200 Celsius
at rapid rates of up to 200 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 and reduced pressures.

 Annealing,
Diffusion and Low-Pressure Chemical Vapor Deposition (LPCVD) Furnaces – These furnaces are used for dislocation removal in
crystals, dopant diffusion, oxidation, for SiC, Si, SiOx and other applications. The systems are normally operated at atmospheric and/or
reduced 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 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.

 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. These subsystems and components are provided to the general market as well as support the CVD Equipment segment.

 Quartzware
 – The majority of our process equipment solutions, utilize quartz components which we partially manufacturer internally. In
addition, the equipment typically requires routine maintenance, consumable and spare parts. One such spare part and consumable which
is core to our technology offering is quartz hardware. We provide standard and custom fabricated quartzware used in our equipment and
to a lesser extent for other customer tools.

 MesoPlasma
Direct Write Printing – A materials deposition process that provides robust direct write high-definition instrumentation, fine
feature patterns, and coatings onto conformal components. The technique involves powder material that is injected into a thermal plasma
where it is rapidly heated and deposited onto the substrate or component. The versatility of the process enables a wide range of materials
to be deposited including ceramic dielectrics, nickel-based sensor alloys, metallic conductors, precious metals, and protective coatings.
Products include temperature sensors, heaters, antennas and patterns per customer specifications.

 Markets
and Marketing

 We
serve multiple emerging and mature global markets including compound semiconductor high power electronics, aerospace, defense, battery
energy storage, silicon and other microelectronic and micromechanical devices, semiconductor, universities, and research centers. Due
to the highly technical nature of our products, we believe it is essential to engage with customers directly through our sales personnel,
our network of domestic and international independent sales representatives, and distributors specializing in the type of equipment,
products, and services that we sell. Our primary marketing activities include direct sales engagement, participation in trade associations
and trade shows and our internet websites. We expanded our marketing activities in 2023 through attendance at key tradeshows and online
marketing.

 Customers

 Our
systems and products are used in both production applications and advanced materials research. We market and sell primarily to companies
that are the engaged in producing compound semiconductor wafers, aerospace gas turbine jet engine component material, defense, battery
energy storage, silicon and other microelectronic and micromechanical devices, semiconductor, universities and research centers. We have
both a domestic and international customer base.

 Given
the complexity and magnitude of the systems we sell, revenue from a single customer in any one year can exceed 10% of our total sales.
During the year ended December 31, 2023, three customers represented 14.3%, 13.5% and 10.9% of our revenues, while in 2022 one customer
represented 29.2% of our revenues. While we believe that our relationships with these customers are generally positive, the loss of a
large customer would have to be replaced by others, and our inability to do so could have a material adverse effect on our business and
financial condition.

 For
the year ended December 31, 2023, approximately $4.1 million or 17% of our revenues were generated by sales to customers outside the
U.S., compared to approximately $4.4 million or 17% for the year ended December 31, 2022.

 Competition

 We
can experience intense direct competition from both domestic and international competitors in all our product segments. Our CVD Equipment
product lines including FirstNano, target multiple markets and both production and research customers. Competition is substantial in
both the production applications and research. In production application, competition comes from larger companies offering enhanced services.
In research applications, the competition comes from small companies that compete with us mostly on price. We are aware of other competitors
that offer a substantial number of products and services 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 our own. To date, we believe that
each of our product and service segments has been able to compete favorably in markets that include these competitors, primarily based
on know-how, technical performance, quality, delivery, price and aftermarket support. We continue to focus on products, which serve markets
that are growing and where we have a technical and commercially competitive advantage.

 CVD
Equipment competes with companies located in Asia, Europe, and the US in both the production and research market. In the production
and research markets, some of our potential customers built their own equipment. Additionally, there are large established companies
who compete with us and pose a competitive risk in the market. Due to budgetary and funding constraints, many customers are price sensitive.
We believe that our systems are among the most advanced available for the targeted market and coupled with our vertical integration in
engineering and manufacturing, we believe that we can compete effectively.

 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 deep understanding of how the systems in which our products are incorporated are used in field applications.
We have gained this understanding as a result of having designed and built complex process gas systems for our CVD Equipment group as
well as for a number of the world's leading semiconductor, aerospace, medical, solar manufacturers, research laboratories and universities.

 CVD
Materials consists of our MesoScribe subsidiary. There is no viable direct competitor for the MesoScribe services. There are
technology competitors in the direct write applications and other additive manufacturing technologies competing for the same contracts
and business opportunity.

 Sources
of Supply

 Many
of the components used in producing our products are purchased from unrelated suppliers. We have OEM status with our suppliers, but we
are not obligated to purchase a pre-determined quantity. We are not dependent on a principal or major supplier and alternate suppliers
are available. Historically, subject to lead times, the components and raw materials we used in manufacturing our products were readily
obtainable.

 We
maintain a fully equipped machine shop that we use to fabricate a significant portion of our metal components in-house, including the
most intricately designed parts of our equipment. We expanded our machine shop in 2022 to allow us to expand our ability to fabricate
parts. Our quartz fabrication capability is currently sufficient to meet our quartzware needs. We believe our vertical manufacturing
integration is a competitive advantage.

 Materials
procured from suppliers 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.

 Backlog

 As
of December 31, 2023, our backlog was approximately $18.4 million, compared to $17.8 million as of December 31, 2022, an increase of
$0.6 million. Our backlog at December 31, 2023 consists of approximately $16.3 million remaining performance obligations for contracts
in progress and the balance of approximately $2.1 million represents orders received from customers. We continue to work at diversifying
our customer base away from any one customer as we focus on new opportunities with new and existing customers within our existing marketplaces
and in new applications. The timing for completion of backlog varies depending on the product mix and can be as long as two years or
as short as 30-60 days.

 There
can be no assurance that our backlog will result in actual revenue in any particular period, or at all, or that any contract included
in backlog will be profitable. The actual amount and timing of any revenue is subject to various contingencies, many of which are beyond
our control, such as cancellations and delays. As a result of these contingencies, we may adjust our backlog if we determine that such
orders are no longer firm. In addition to adjustments from these types of contingencies, variations in backlog from time to time are
attributable, in part, to changes in sales mix, the timing of contract proposals, the timing of contract awards, delivery schedules on
specific contracts. As a result, we believe our backlog and orders, at any point in time, are not necessarily indicative of the total
sales anticipated for any future period.

 Government
Regulations

 We
are subject to a variety of federal, state and local government regulations, such as environmental, labor and export control regulations.
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. These regulations are subject to change and the effect of these changes could materially impact our business
in certain technology areas and regions.

 Utilizing
our in-house safety team, engineering expertise and consultants as required, we continue to monitor and comply with applicable Environmental
Health and Safety regulations at our facilities as well as the installation of equipment at our customer facilities.

 With
respect to our sales to customers located in China or elsewhere outside the United States, products which (i) are manufactured in the
United States, (ii) incorporate controlled U.S. origin parts, technology, or software, or (iii) are based on U.S. technology, are subject
to the U.S. Export Administration Regulations ("EAR"). We continue to monitor, review, and maintain ongoing compliance with
the EAR with respect to our export sales.

 Product
Liability

 Our
products are used in our customers' manufacturing processes, which in some cases contain 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. Additionally, the end products of some of our customers are used in areas such as aerospace and
high-tech devices where safety is of great concern. Management reviews its insurance coverage on an annual basis or more frequently,
if appropriate, and we believe we have the types and amounts of insurance coverage that are sufficient for our business.

 Human
Capital

 We
consider our employees a vital asset to our business and strive to ensure we foster a work environment of respect, communication, objective
orientation, and personal life balance. We believe this results in a higher level of employee satisfaction and hence improved performance
and employment longevity. On December 31, 2023, we had 128 employees. We had 70 employees in manufacturing, 30 in engineering (including
research and development and efforts related to product improvement), 5 in field service, 9 in sales and marketing and 14 in general
management, maintenance and administration, compared to 136 employees as of December 31, 2022. None of our employees were subject to
a collective bargaining agreement.

 The
implementation of our business strategy depends on our ability to hire, train, and retain qualified and diverse professionals, and we
must emphasize employee development and training in order to do so. We are committed to identifying and developing the talents of our
next generation of managers and intend to establish a strong succession-planning program for our critical positions, including internships
for technical and engineering resources from local universities. Moreover, a key strategic focus of our management team is to foster
and maintain a strong and healthy culture, where collaboration to achieve results and focus on the success of our customers and shareholders
is paramount.

 Employee
Safety

 The
health and safety of our employees and partners is our highest priority, and this is consistent with our operating philosophy. We maintain
strong environmental, health and safety protocols that focus on implementing policies and training programs, as well as performing self-audits
to ensure our colleagues and partners leave the workplace safely on a daily basis.

 Employee
Compensation

 Management
continues to review our employee compensation programs to better align the compensation of our employees with our objectives, performance,
and personal performance, and to provide the proper short-term and long-term incentives to attract, retain and motivate them to achieve
superior results. We believe we must offer wages that are competitive and consistent with employee positions, skill levels, experience,
and knowledge, and in order to do so we may work with a nationally recognized outside compensation and benefits consulting firm to independently
evaluate the effectiveness of our executive and non-executive compensation and benefit programs and to provide benchmarking against our
peers within our industry.

 Equal
Opportunity

 We
are committed to building and sustaining a culture of equal opportunity that encourages all of our employees to reach their full potential.
Our CVD team, like the technologies we enable, is a rich combination of diverse individuals coming together to make a material difference
for our people, our customers, and the world. As a company that enables tomorrow's technologies, we recognize that a diverse employee
population makes CVD a stronger, more innovative, and a more engaging place to work. We are always striving to attract talented individuals
from a diverse candidate pool.

 Available
Information

 Our
website address is www.cvdequipment.com and the contents of our website, including our investor relations website, is not incorporated
by reference into this filing or any other report we file with or furnish to the SEC. We have no duty to update or revise any forward-looking
statements in this Annual Report on Form 10-K or in other reports filed with the SEC, whether as a result of new information, future
events or otherwise, unless we are required to do so by law. The SEC maintains a website (www.sec.gov) that contains reports, proxy and
information statements and other information regarding issuers that file electronically with the SEC.

 Item
1A.
 Risk
 Factors

 In
addition to the other information set forth in this Annual Report on Form 10-K, our shareholders should carefully consider the risk factors
described below. The risks set forth below may not be the only risk factors relating to the Company. Any of these factors, many of which
are beyond our control, could materially adversely affect our business, financial condition, operating results, cash flow and stock price.

 Risk
categories:

 Risks
 related to sales and product development

 Risks
 related to manufacturing and supply chain

 Risks
 related to cybersecurity, intellectual property and regulatory compliance

 Risks
 related to financial and accounting matters

 Risks
 related to product liability

 Risks
 related to our stock

 risk factors

 Risks
related to sales and product development

 Historically,
we have maintained a highly concentrated customer base so that changes in ordering patterns, delays or order cancellations could have
a material adverse effect on our business and results of operations.

2023, three customers represented 14.3%, 13.5% and 10.9% of our total revenues. The loss of a major customer would have to be replaced
by others, and our inability to do so may have a material adverse effect on our business and financial condition. We expect that contracts
or orders from a relatively limited number of customers will, at times, continue to account for a substantial portion of our business.
The mix and type of customers, and sales to any single customer, may vary significantly from quarter to quarter and from year to year.
If any major customer did not place orders, or if they substantially reduced, delayed, or cancelled orders, we may not be able to replace
the business in a timely manner or at all, which can and has had a material adverse effect on our results of operations and financial
condition.

 Our
lengthy and variable sales cycle makes it difficult to predict our financial results.

 The
marketing, sale and manufacture of our products, often requires a lengthy sales cycle ranging from several months to over one year before
we can complete production and delivery. The lengthy sales cycle makes forecasting the volume and timing of sales difficult and raises
additional risks that customers may cancel or decide not to enter into contracts. The length of the sales cycle depends on the size and
complexity of the project, the customer's in-depth evaluation of our products, and, in some cases, the protracted nature of a bidding
process.

 Because
a significant portion of our operating expenses are fixed, we have and may continue to incur substantial expense before we earn associated
revenue. If customer cancellations occur, they could result in the loss of anticipated sales without allowing us sufficient time to reduce
our operating expenses.

 If
any of our customers cancel or fail to accept a large system order, our financial position and results of operations could be materially
and adversely affected.

 Our
backlog includes orders for customized systems including our chemical vapor deposition equipment and furnaces which are built to client
specifications. These customized systems can have prices up to several million dollars, depending on the configuration, specific options
included and any specific requirements of the customer. Because our orders are subject to cancellation or delay by the customer, our
backlog at any point in time is not necessarily representative of actual sales for succeeding periods, nor does our backlog provide any
assurance of achievement of revenues or that we will realize a profit from completing these orders. Our financial position and results
of operations could be materially and adversely affected should any large system order be cancelled prior to shipment, or not be accepted
by the customer due to alleged non-conformity with product specifications or otherwise. Likewise, a significant change in the liquidity
or financial position of any of our customers that purchase large systems, could have a material impact on the collectability of our
accounts receivable and our future operating results. Our backlog does not provide any assurance that we will realize a profit from those
orders or indicate in which period revenue will be recognized.

 If
demand declines for chemical vapor deposition/infiltration, physical vapor transport, gas control and related equipment, or for carbon
nanotube and nanowire deposition systems, our financial position and results of operations could be materially adversely affected.

 Our
products are utilized to develop and manufacture materials and coatings for industrial and research applications that are used in numerous
markets including but not limited to power electronics, battery materials, aerospace, nano and advanced electronic components. A significant
part of our growth strategy involves continued expansion of the sales of our products for industrial as well as research and development
purposes by companies, universities, and government-funded research laboratories. The availability of funds for these purposes may be
subject to budgetary and political restrictions, as well as cost-cutting measures by manufacturers in the markets in which we operate.

 If
the availability of funds or the demand for capital equipment in the markets in which we operate declines, the demand for our products
would also decline and our financial position and results of operations could be harmed.

 The
demand for our products and the profitability of our products can change significantly from period to period because of numerous factors.

 The
industries in which we operate are characterized by ongoing factors, including:

 global
 and regional economic developments and conditions including in Europe and Asia;

 governmental
 budgetary and political constraints;

 changes
 in the capacity utilization and production volume for research and industrial applications in the markets in which we operate;

 the
 profitability and capital resources of manufacturers in the markets in which we operate;

 changes
 in technology;

 the
 availability of funds for research and development; and

 the
 effects of supply chain disruptions.

 For
these and other reasons, our results of operations for past periods may not necessarily be indicative of future operating results.

 Our
business might be adversely affected by our dependence on foreign business.

 Because
a material portion of our revenues are traditionally derived from international customers, our operating results could be negatively
affected by a decline in the economies of any of the countries or regions in which we do business. Each region can exhibit unique characteristics,
which can cause capital equipment investment patterns to vary significantly from period to period. Periodic local or international economic
downturns, trade balance issues and political instability, as well as fluctuations in interest and currency exchange rates, could negatively
affect our business and results of operations.

 The
majority of our sales to date have been primarily priced in U.S. dollars. While our business has not been materially affected in the
past by currency fluctuations, there is a risk that it may be materially adversely affected in the future. Such risks include possible
losses due to both currency exchange rate fluctuations and from possible social and political instability.

 Our
reputation and operating performance may be negatively affected if our products are not timely delivered.

 We
provide complex products that often require substantial lead-time for design, ordering parts and materials, and for assembly and installation.
The time required to design, order parts and materials and to manufacture, assemble and install our products, may in turn lead to delays
or shortages in the availability of some products. If a product is delayed or is the subject of shortage because of problems with our
ability to design, manufacture or assemble the product on a timely basis, obtain necessary materials and components, or if a product
or software otherwise fails to meet performance criteria, we may lose revenue opportunities entirely, or experience delays in revenue
recognition associated with a product or service. In addition, we may incur higher operating expenses during the period required to correct
the problem.

 We
may not be able to keep pace with the rapid change in the technology we use in our products.

 We
believe that our continued success in the markets in which we operate depends, in part, on our ability to continually improve existing
technologies and to develop and manufacture new products and product enhancements on a timely and cost-effective basis. We must be able
to introduce these products and product enhancements into the market in a timely manner, in response to customer's demands for
higher-performance research and assembly equipment, customized to address rapid technological advances in capital equipment designs.

 Technological
innovations are inherently complex and require long development cycles and appropriate professional staffing. Our future business success
depends on our ability to develop and introduce new products, or new uses for existing products, that successfully address changing customer
needs. Our success also depends on our ability to achieve market acceptance of our new products. To maintain our success in the marketplace,
we may have to substantially increase our expenditures on research and development. If we do not develop and introduce new products,
technologies or uses for existing products in a timely manner and continually find ways to reduce the cost of developing and producing
them in response to changing market conditions or customer requirements, our business could be seriously harmed.

 We
face significant competition, and we are relatively small in size and have fewer resources in comparison with many of our competitors.

 We
face significant competition throughout the world, which may increase as certain markets in which we operate continue to evolve. Our
future performance depends, in part, upon our ability to continue to compete successfully worldwide. Some of our competitors are diversified
companies that have substantially greater financial resources and more extensive research, engineering, manufacturing, marketing and
customer service and support capabilities than we can provide. We face competition from companies whose strategy is to provide a broad
array of products, some of which compete with the products and services that we offer, as well as companies, universities and research
laboratories that have the capacity to design and build their own equipment internally. These competitors may bundle their products and
services in a manner that may discourage customers from purchasing our products. In addition, we face competition from smaller emerging
processing equipment companies, whose strategy is to provide a portion of the products and services that we offer at often lower prices
than ours, using innovative technology to sell products into specialized markets. Loss of competitive position could impair our prices,
customer orders, revenue, gross margin, and market share, any of which would negatively affect our financial position and results of
operations. Our failure to compete successfully with these other companies would seriously harm our business. There is a risk that larger,
better financed competitors will develop and market more advanced products than those we currently offer, or that competitors with greater
financial resources may decrease prices, thereby putting us under financial pressure.

 Risks
related to manufacturing and our supply chain

 Manufacturing
interruptions or delays could affect our ability to meet customer demand and lead to higher costs, while the failure to estimate customer
demand accurately could result in excess or obsolete inventory.

 Our
business depends on timely supply of equipment, services and related products that meet the rapidly changing technical and volume requirements
of our customers. Some key parts to our products are subject to long lead-times and/or obtainable only from a single supplier or limited
group of suppliers. Cyclical industry conditions and the volatility of demand for manufacturing equipment increase capital, technical,
operational and other risks for us and for companies throughout our supply chain. Further, these conditions may cause some suppliers
to scale back operations, exit businesses, merge with other companies, or file for bankruptcy protection and possibly cease operations.
We have also experienced and continue to experience significant disruptions in our supply chain, resulting in delays and higher costs
to procure certain components and materials that we utilize in our business.

 We
may also experience significant interruptions of our manufacturing operations, delays in our ability to deliver products or services,
increased costs or customer order cancellations as a result of:

 The
 failure or inability of suppliers to timely deliver sufficient quantities of quality parts on a cost-effective basis;

 Volatility
 in the availability and cost of materials, including rare earth elements;

 Difficulties
 or delays in obtaining required import or export approvals;

 Information
 technology or infrastructure failures; and

 Natural
 disasters or other events beyond our control (such as earthquakes, floods or storms, regional economic downturns, pandemics, social
 unrest, political instability, terrorism, or acts of war).

 If
a supplier fails to meet our requirements concerning quality, cost, or other performance factors, we may transfer our business to alternative
sources, which could entail manufacturing delays, additional costs, or other difficulties. In addition, if we need to rapidly increase
our business and manufacturing capacity to meet increases in demand or expedited shipment schedules, this may exacerbate any interruptions
in our manufacturing operations and supply chain and the associated effect on our working capital.

 We
are presently experiencing supply chain delays and cost increases that may adversely affect our business.

 Geopolitical
developments across Europe and Asia have and may continue to restrict our ability to procure raw materials and components such as nickel
and integrated circuits. Since 2021, we have experienced increased costs on certain components as well as delays in supply chain delivery,
which may also impact our ability to recognize revenue and reduce our gross profit margins, as well as extend our manufacturing lead
times and reduce our manufacturing efficiencies. We have begun placing orders with more lead time to help mitigate the manufacturing
delays, as well as assessing other suppliers or components to attempt to mitigate the potential cost impacts. In addition, we are utilizing
our in-house flexible manufacturing to attempt to further mitigate both potential schedule delivery delays and material cost increase,
as well as increasing sales prices. While we have taken actions to mitigate the potential negative impacts to our revenue and profitability,
there can be no assurance of the ultimate impact and the length of time that the supply chain factors may impact our revenues and profitability.

 Inflation
has and may continue to adversely affect our business, financial condition, and results of operations.

 Recent
global inflation has adversely affected our costs, including the cost of materials, production, and labor. As such, we have had to implement
measures to mitigate the negative impacts of inflation on our costs. As the selling prices in our customer contracts are fixed, any increase
in the cost of materials, labor and other costs as we manufacture any system would negatively impact our gross margins and results of
operations. Longstanding or increased periods of inflation could perpetuate these material adverse effects on our business, financial
condition and results of operations.

 If
our critical suppliers fail to deliver enough quality materials and components in a timely and cost-effective manner, it could negatively
affect our business.

 We
use numerous unrelated suppliers of materials and components. Due to geopolitical developments across Europe and Asia, we are experiencing
reduced availability of raw materials and components. In turn, any reduction in the availability of these materials and components may
reduce our ability to obtain sufficient amounts in a cost-effective manner. We generally do not have guaranteed supply arrangements with
our suppliers. Because of the variability and uniqueness of our customer's orders, we try to avoid maintaining an extensive inventory
of materials and components for manufacturing. While we are not dependent on any principal or major supplier for most of our material
and component needs, switching to an alternative supplier may take significant amounts of time and added expense, which could result
in a disruption of our operations and adversely affect our business. It is not always practical or even possible to ensure that component
parts are available from multiple suppliers; accordingly, we procure some key parts from a single supplier or a limited group of suppliers.
At certain times, increases in demand for capital equipment can result in longer lead-times for many important system components, which
may cause delays in meeting shipments to our customers. The delay in the shipment of even a few systems could cause significant variations
in our quarterly revenue, operating results and the market value of our common stock.

 Our
manufacturing facilities are in Central Islip, New York and Saugerties, New York could be affected due to multiple weather risks, including
risks to our Central Islip facility from hurricanes and similar phenomena.

 Our
manufacturing facilities are located in Central Islip, New York and Saugerties, New York could be affected by multiple weather risks,
most notably hurricanes for our Central Islip facility which is located on Long Island, New York. Although we carry property and casualty
insurance and business interruption insurance, future possible disruptions of operations or damage to property, plant and equipment due
to hurricanes or other weather risks could result in impaired production and affect our ability to meet our commitments to our customers
and impair important business relationships, the loss of which could adversely affect our operations and profitability. We do, however,
maintain a backup power source at our Central Islip facility, are working to establish deeper redundancies between our New York facilities
to help mitigate this risk.

 Risks
related to cybersecurity, intellectual property and regulatory compliance

 If
we are subject to cyberattacks, we could incur substantial costs and, if such attacks are successful, we could incur significant liabilities,
reputational harm, and disruption to our operations.

 We
manage, store, and transmit proprietary information and sensitive data relating to our operations. We may be subject to breaches of the
information technology systems we use for these purposes. Experienced computer programmers and hackers may be able to penetrate our network
security and misappropriate and/or compromise our confidential information (and or third-party confidential information), create system
disruptions, or cause shutdowns. Computer programmers and hackers also may be able to develop and deploy viruses, worms, and other malicious
software programs that attack our systems or our products, or that otherwise exploit any security vulnerabilities.

 While
we have an active security training program for all employees during the year, utilize intrusion prevention and detection systems, as
well as hardware firewall and virus security, the costs to address the foregoing security problems and security vulnerabilities before
or after a cyber-incident could be significant. Our remediation efforts may not be successful and could result in interruptions, delays,
or cessation of service, and loss of existing or potential customers, impeding our sales, manufacturing, distribution, or other critical
functions. In addition, breaches of our security measures and the unapproved dissemination of proprietary information or sensitive data
about us, our customer, or other third parties, could expose us, our customers, or other third parties to a risk of loss or misuse of
this information, result in litigation and potential liability for us, damage our reputation, or otherwise harm our business.

 Our
financial position and results of operations may be materially harmed if we are unable to recoup our investment in research and development.

 The
rapid change in technology in our industry requires that we continue to make substantial investments in research and development and
selective acquisitions of technologies and products, to enhance the performance and functionality of our product line, to keep pace with
competitive products and to satisfy customer demands for improved performance, features and functionality. There can be no assurance
that revenue from future products or enhancements will be sufficient to recover the development costs associated with such products,
enhancements, or acquisitions, or that we will be able to secure the financial resources necessary to fund future research and development
or acquisitions. Research and development costs are typically incurred before we confirm the technical feasibility and commercial viability
of a product, and not all development activities result in commercially viable products. In addition, we cannot ensure that products
or enhancements will receive market acceptance, or that we will be able to sell these products at prices that are favorable to us. Our
business could be seriously harmed if we are unable to sell our products at favorable prices, or if our products are not accepted by
the markets in which we operate.

 We
have made investments in our proprietary technologies. If third parties violate our proprietary rights, or accuse us of infringing upon
their proprietary rights, such events could result in a loss of value of some of our intellectual property or costly litigation.

 We
attempt to protect certain of our intellectual property rights by obtaining patent and trademark protection where we believe it is appropriate
to do so. 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 may also attempt to
protect our trade secrets and other proprietary information through confidentiality agreements with our customers, suppliers, employees,
and consultants, and through other internal security measures. However, these employees, consultants and third parties may breach these
agreements, and we may not have adequate remedies for wrongdoing. In addition, the laws of certain territories in which we sell our products
may not protect our intellectual property rights to the same extent as do the laws of the United States.

 Occasionally,
we may receive communications from other parties asserting the existence of patent rights or other intellectual property rights that
they believe cover certain of our products, processes, technologies, or information. In addition, it is possible we could have a dispute
with a customer concerning the use of intellectual property utilized in their equipment. If such cases arise, we will evaluate our position
and consider the available alternatives, which may include seeking licenses to use the technology in question on commercially reasonable
terms, developing new alternative technology or defending our position. Nevertheless, we cannot ensure that we will be able to obtain
licenses, or, if we are able to obtain licenses, which related terms will be acceptable, or that litigation or other administrative proceedings
will not occur. Defending our intellectual property rights through litigation could be very costly. If we are not able to negotiate the
necessary licenses on commercially reasonable terms or successfully defend our position, our ability to utilize such intellectual property
could substantially inhibit our access to certain markets and our ability to compete in these markets which could have a material adverse
effect on our financial position and results of operations.

 We
may be unable to obtain required export licenses for the sale of our products.

 Whether
with respect to sales to customers located in China or otherwise, products which (i) are manufactured in the United States, (ii) incorporate
controlled U.S. origin parts, technology, or software, or (iii) are based on U.S. technology, are subject to the U.S. Export Administration
Regulations ("EAR") when exported to and re-exported from international jurisdictions, in addition to the local jurisdiction's
export regulations applicable to individual shipments. Licenses or proper license exceptions may be required for the shipment of our
products to certain customers or countries. Obtaining an export license or determining whether an export license exception exists often
requires considerable effort by us and cooperation from the customer, which can add time to the order fulfillment process. We may be
unable to obtain required export licenses or qualify for export license exceptions and, as a result, we may be unable to export products
to our customers and/or meet their servicing needs. Non-compliance with the EAR or other applicable export regulations could result in
a wide range of penalties including the denial of export privileges, fines, criminal penalties, and the seizure of commodities. If an
export regulatory body determines that any of our shipments violate applicable export regulations, we could be fined significant sums
and our export capabilities could be restricted, which could have a material adverse impact on our business.

 Failure
to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.

 We
are subject to the United States Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in bribery
or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. We have agreements with third parties
and make sales in countries known to experience corruption, extortion, bribery, pay-offs, theft, and other fraudulent practices. We can
make no assurance, however, that our employees or other agents will not engage in such conduct for which we might be held responsible.
If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences
that may have a material adverse effect on our business, financial condition, and results of operations.

 We
are subject to environmental regulations, and our inability or failure to comply with these regulations could adversely affect our business.

 We
are subject to environmental regulations in connection with our business operations, including regulations related to the development
and manufacture of our products and our customers' use of our products. Our failure or inability to comply with existing or future
environmental regulations could result in significant remediation liabilities, the imposition of fines or the suspension or termination
of development, manufacturing, or use of certain of our products, or affect the operation of our facilities, use or value of our real
property, each of which could damage our financial position and results of operations.

 Regulations
related to conflict minerals will force us to incur additional expenses, may make our supply chains more complex, and may result in damage
to our relationships with customers.

 Under
the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, the SEC adopted requirements for companies
that manufacture products that contain certain minerals and metals known as "conflict minerals". These rules require public
companies to perform diligence and to report annually to the SEC whether such minerals originate from the Democratic Republic of Congo
and adjoining countries. The implementation of these requirements could adversely affect the sourcing, availability, and pricing of minerals
we use in the manufacture of our products. In addition, we have incurred and will continue to incur additional costs to comply with the
disclosure requirements, including costs related to determining the source of any of the relevant minerals used in our products. Given
the complexity of our supply chain, we may not be able to ascertain the origins of these minerals used in our products through the due
diligence procedures that we implement, which may harm our reputation. We may also face difficulties in satisfying customers who may
require that our products be certified as conflict mineral free, which could harm our relationships with these customers and lead to
a loss of revenue. These requirements could limit the pool of suppliers that can provide conflict-free minerals, and we may be unable
to obtain conflict-free minerals at competitive prices, which could increase our costs and adversely affect our manufacturing operations
and our profitability.

 Risks
related to financial and accounting matters

 Cyclical
demand for our products may make it difficult for us to accurately budget our expense levels, which are based in part on our projections
of future revenues.

 Historically,
demand for our equipment and related consumable products have been volatile because of changes in supply and demand, and other factors
in the manufacturing process. Our orders tend to be more volatile than our revenue, as any change in demand is reflected immediately
in orders booked, which are net of cancellations, while revenue, tends to be recognized over multiple quarters because of procurement
and production lead times, and the deferral of certain revenue under our revenue recognition policies. The fiscal period in which we
can recognize revenue is also at times subject to the length of time that our customers require to evaluate the performance of our equipment.
This could cause our quarterly operating results to fluctuate.

 When
cyclical fluctuations result in lower-than-expected revenue levels, operating results have been and may continue to be materially adversely
affected and cost reduction measures have been and may continue to be necessary for us to remain competitive and financially sound. During
a down cycle, we must be able to make timely adjustments to our cost and expense structure to correspond to the prevailing market conditions.
In addition, during periods of rapid growth, we must be able to increase manufacturing capacity and the number of our personnel to meet
customer demand, which may require additional liquidity. We can provide no assurance, that these objectives can be met in a timely manner
in response to changes within the industry cycles in which we operate. If we fail to respond to these cyclical changes, our business
could be seriously harmed.

 We
do not have long-term volume production contracts with our customers, and we do not control the timing or volume of orders placed by
our customers. Whether and to what extent our customers place orders for any specific products, and the mix and quantities of products
included in those orders are factors beyond our control. Insufficient orders would result in under-utilization of our manufacturing facilities
and infrastructure and will negatively affect our financial position and results of operations.

 We
might require additional financing.

 Our
continuing operating losses may make it difficult for us to obtain financing on commercially reasonable terms, if at all. If adequate
financing is not available when required on commercially reasonable terms, if at all, our business and operations may be materially and
adversely affected. In addition, we could issue additional common stock, to fund our growth initiatives and operations which could materially
dilute the ownership interests of the then existing shareholders.

 We
may, in the future, identify deficiencies in controls over financial reporting.

 While
we have concluded that, as of December 31, 2023, our disclosure and reporting controls were effective as included in Part II, Item 9A,
there can be no assurance that material weaknesses will not be identified in the future. If we do identify material weaknesses in our
internal controls over financial reporting in the future, our ability to analyze, record and report financial information free of material
misstatements, and to prepare our financial statements within the time periods specified by the rules and forms of the SEC, may likely
be adversely affected.

 We
have and may continue to be required to take impairment charges on assets.

 We
are required to assess our long-lived assets, including acquired intangible assets and property, plant and equipment, for recoverability
and impairment whenever there are indicators or impairment, such as an adverse change in business climate.

 As
part of our long-term strategy, we have pursued acquisitions of other companies or assets, and may pursue future acquisitions of other
companies or assets which could potentially increase our assets. Adverse changes in business conditions could materially impact our estimates
of future operations and result in impairment charges to these assets. If our assets were impaired, our financial condition and results
of operations could be materially and adversely affected.

 Acquisitions
can result in an increase in our operating costs, divert management's attention away from other operational matters and expose
us to other associated risks.

 We
evaluate potential acquisitions of businesses and technologies, and we consider targeted acquisitions that expand our core competencies
to be an important part of our future growth strategy. In the past, we have made acquisitions of other businesses with synergistic products,
services and technologies, and plan to continue to do so in the future.

 Acquisitions
involve numerous risks, which include but are not limited to:

 difficulties
 and increased costs in connection with the integration of the personnel, operations, technologies, services and products of the acquired
 companies into our existing facilities and operations;

 diversion
 of management's attention from other operational matters;

 failure
 to commercialize the acquired technology;

 the
 potential loss of key employees of the acquired companies;

 lack
 of synergy, or inability to realize expected synergies, resulting from the acquisitions;

 the
 risk that the issuance of our common stock, if any, in an acquisition or merger could be dilutive to our shareholders;

 the
 inability to obtain and protect intellectual property rights in key technologies; and

 the
 acquired assets becoming impaired as a result of technological advancements or worse-than-expected performance of the acquired assets.

 Risks
related to product liability

 We
face the risk of product liability claims.

 The
manufacture and sale of our products, which in operation sometimes involve the use of toxic materials and extreme temperatures and could
result in product liability claims. For example, our rapid thermal processing systems used to heat semiconductor materials to temperatures
more than 1000 Celsius have certain inherent risks. A failure of our products at a customer site could also result in losses due
to interruption of the business operations of our customer. While we regularly evaluate the nature and limits of our insurance coverages,
there can be no assurance that our existing policies of insurance will be adequate to protect us from all liabilities that we might incur
in connection with the manufacture and sale of our products in the event of a successful product liability claim or series of successful
claims against us.

 The
health and environmental effects of nanotechnology are unknown, and this uncertainty could adversely affect the expansion of our business.

 The
health and environmental effects of nanotechnology are unknown. There is no scientific agreement on the health effects of nanomaterials
in general and carbon nanotubes but some scientists believe that in some cases, nanomaterials may be hazardous to an individual's
health or to the environment.

 The
science of nanotechnology is based on arranging atoms in such a way as to modify or build materials not made in nature; therefore, the
effects are unknown. Future research into the effects of nanomaterials in general, and carbon nanotubes, on health and environmental
issues, may have an adverse effect on products incorporating nanotechnology. Since part of our growth strategy is based on sales of research
equipment to produce carbon nanotubes and the sale of such materials, the determination that these materials are harmful could adversely
affect the expansion of our business.

 Risk
related to our stock

 The
price of our common shares is volatile and could decline significantly.

 The
stock market in general and the market for technology stocks has experienced volatility. If those industry-based market fluctuations
continue, the trading price of our common shares could decline significantly independent of the overall market, and shareholders could
lose all or a substantial part of their investment. The market price of our common shares could fluctuate significantly in response to
several factors, including, among others:

 difficult
 macroeconomic conditions, unfavorable geopolitical events, and general stock market uncertainties, such as those occasioned by a
 global liquidity crisis and a failure of large financial institutions;

 an
 offering of our common shares to raise capital;

 receipt
 of large orders or cancellations of orders for our products;

 issues
 associated with the performance and reliability of our products;

 actual
 or anticipated variations in our results of operations;

 announcements
 of financial developments or technological innovations;

 changes
 in recommendations and/or financial estimates by investment research analysis;

 strategic
 transactions, such as acquisitions, divestitures, or spin-offs;

 offerings
 of our securities;

 the
 occurrence of major catastrophic events; and

 volatile
 trading volumes.

 Significant
price and value fluctuations have occurred with respect to our publicly traded securities and those of technology companies generally.
The price of our common shares is likely to be volatile in the future. In the past, securities class action litigation often has been
brought against a company following periods of volatility in the market price of its securities. If similar litigation were pursued against
us, it could result in substantial costs and a diversion of management's attention and resources, which could materially and adversely
affect our financial condition, results of operations, and liquidity.

risks

 Our
success is highly dependent on the technical, sales, marketing and managerial contributions of key individuals, including our Chief Executive
Officer and President, and we may be unable to retain these individuals or recruit others.

 We
depend on our senior executives including our Chief Executive Officer and President, and certain key managers as well as, engineering,
research and development, sales, marketing and manufacturing personnel, who are critical to our business. Except for our Chief Executive
Officer and President, we do not have employment agreements with our key employees. Furthermore, the current labor market remains very
competitive and challenging for the acquisition and retention of key employees. Larger competitors may be able to offer more generous
compensation packages to our executives and key employees, and therefore we risk losing key personnel to those competitors. If we were
to lose the services of any of our key personnel, our engineering, product development, manufacturing and sales efforts could be slowed.
We may also incur increased operating expenses and be required to divert the attention of our senior executives to search for their replacements.
The integration of any new personnel could disrupt our ongoing operations.

 We
may not be able to hire or retain the number of qualified personnel, particularly engineering personnel, required for our business, which
would harm the development and sales of our products and limit our ability to grow.

 Competition
in our industry for senior management, technical, sales, marketing and other key personnel is intense and has been made even more challenging
in the current labor market. If we are unable to retain our existing personnel, or attract and train additional qualified personnel,
our growth may be limited due to a lack of capacity to develop and market our products.

 We
have, from time to time, had trouble in hiring and retaining skilled engineers with appropriate qualifications to support our growth
strategy. Our success depends on our ability to identify, hire, train and retain qualified engineering personnel with experience in equipment
design. Specifically, we need to continue to attract and retain mechanical, electrical, software and field service engineers to work
with our direct sales force to technically qualify and perform on new sales opportunities and orders, and to demonstrate our products.

 Item
1B.
 Unresolved
 Staff Comments

 None.

 Item
1C.
 Cybersecurity

 We
have implemented a risk-based approach to identify and assess the cybersecurity threats that could affect our business and information
systems. We use recognized commercially reasonable measures, tools, and methodologies to manage cybersecurity risk, which are tested
regularly. We also monitor and evaluate our cybersecurity posture on an ongoing basis through regular malware scans, penetration tests,
and third-party reviews. Specific controls that are used to some extent include endpoint threat detection, identity and access management
(IAM), privileged access management (PAM), logging and monitoring, multi-factor authentication (MFA), firewalls and intrusion detection
and prevention, and vulnerability and patch management.

 To
manage our material risks from cybersecurity threats and to protect against, detect, and prepare to respond to cybersecurity incidents,
we undertake the below listed activities:

 Monitor
 emerging data protection laws and implement changes to our compliance processes;

 Conduct
 annual cybersecurity assessments for employees who use our system to evaluate training needs;

 Conduct
 onboarding and cyber security training for all employees on an ongoing basis;

 Conduct
 regular phishing email simulations for all employees; and

 Carry
 cybersecurity risk insurance that protects against the potential losses from a cybersecurity incident.

 Our
incident response plan coordinates the activities that we and our third-party cybersecurity provider take to prepare to respond to and
recover from cybersecurity incidents. These include processes to triage, assess severity, investigate, escalate, contain, and remediate
an incident, as well as to comply with potentially applicable legal obligations and mitigate brand and reputational damage. We have an
IT continuity plan that we continuously review and update in line with our evolving applications architecture.

 Our
Board of Directors and Audit Committee oversee our cybersecurity efforts to ensure effective governance in managing risks associated
with cybersecurity threats. Our Director of Information Technology provides periodic updates to the Board of Directors and Audit Committee
regarding our cybersecurity program, including status updates on various projects to enhance our overall cybersecurity posture.

 We
describe whether and how risks from cybersecurity threats have or are reasonably likely to affect our financial position, results of
operations, and cash flows under the heading "Risk related to cybersecurity, intellectual property and regulatory compliance,"
which is included as part of Item 1A. Risk Factors of this Annual Report on Form 10-K, which disclosures are incorporated by reference
herein.

 Item
 2.

 Properties

 Our
corporate headquarters, research and development, manufacturing and process coating facilities as of December 31, 2023 are as follows:

 Owned
 Locations

 Size
 (sf)

 Segment

 Mortgage/Loan

 Principal
 use

 Central
 Islip, NY

 128,000

 CVD
 Equipment / CVD Materials

 No

 Corporate
 headquarters; R Manufacturing

 Saugerties,
 NY

 22,000

 SDC

 No

 Manufacturing;
 Administration

 Item
 3.

 Legal
 Proceedings.

 Not

 Item
 4.

 Mine
 Safety Disclosures.

 Not

 PART
II

 Item
5.
 Market
 for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 As
of March 25, 2024, there were approximately 55 holders of record and approximately 3,544 beneficial owners of our common stock, and the
closing sales price of our common stock as reported on the NASDAQ Capital Market was $4.93.

 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.

 Recent
Sales of Unregistered Securities

 None.

 Issuer
Purchases of Equity Securities

 None.

 Item
 6.

 Reserved.

 Item
7.
 Management's
 Discussion and Analysis of Financial Condition and Results of Operations.

 You
should read the following discussion and analysis in conjunction with our consolidated financial statements and related notes contained
elsewhere in this report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our
actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors discussed
in this report and those discussed in other documents we file with the SEC. In light of these risks, uncertainties and assumptions, readers
are cautioned not to place undue reliance on such forward-looking statements. These forward-looking statements represent beliefs and
assumptions as of the date of this report. While we may elect to update forward-looking statements at some point in the future, we specifically
disclaim any obligation to do so, even if our estimates change. Past performance does not guarantee future results.

 Executive
Summary

 We
have served the advanced materials markets with chemical vapor and thermal process equipment for over 40 years. CVD designs, develops,
and manufactures a broad range of chemical vapor deposition, gas control, and other state-of-the-art equipment and process solutions
used to develop and manufacture materials and coatings for industrial applications and research. To learn more about CVD's systems
and offerings, visit www.cvdequipement.com.

2023:

 declined by $1.7 million or 6.6% as the prior year benefited from a large number of PVT150 orders.

 Gross
 margin declined by $1.6 million or 23.5% due to cost overruns experienced on one large contract.

 Total
 bookings for 2023 were approximately $25.8 million, a decrease of $7.3 million or 22.1% as compared to 2022. Bookings for 2022 included
 orders for PVT equipment as compared to none in 2023.

 Received
 $8.7 million in orders from a major aerospace company for the production of CVI systems. The systems will be used by our customer
 to manufacture CMCs for their gas turbine jet engines.

 Increased
 our backlog from $17.8 million to $18.4 million.

 Cash
 balance at December 31, 2023 was $14.0 million.

 Business
Update

 Our
core strategy is to focus on growth market applications in end-user markets related to the "electrification of everything,"
aerospace and industrial applications. The phrase "electrification of everything" refers to the shift from fossil fuels to
the use of electricity to power devices, buildings, electric vehicles or EVs, and many other applications. With respect to aerospace,
our systems are being used by our customers to produce ceramic matrix composite materials or CMCs that will be used in next generation
jet engines with the objective of reducing jet fuel consumption and contributing to the decarbonization of that industry.

2021, we received the first six (6) orders for our PVT150 system that is used by our customer to grow silicon carbide crystals and received
an additional 24 orders from the same customer in 2022. The crystals would be further processed into 150 mm silicon carbide wafers and
later processed into integrated circuits and other devices. Devices based on silicon carbide have been shown to reduce energy consumption
in EVs and reduce the need for additional cooling elements. While we did not receive any additional orders from this customer, we remain
in continuing discussions regarding potential additional orders.

 We
launched our marketing campaign for the PVT150 in the latter part of 2022 as we seek orders from other potential customers. We also developed
and launched our new PVT200 system used to grow silicon carbide crystals for the manufacture of 200 mm wafers in 2023.

 In
February 2024, we received our first order for a PVT200. This is our second customer for PVT equipment. This customer plans to evaluate
our equipment with the objective to select a vendor for potential additional purchases of PVT equipment.

2022, we completed the production of a system for a customer that deposits coatings onto powders used in silicon-graphite anodes that
has the objective of increasing EV battery performance while lowering cost. We received two additional orders from this customer in 2023
that were completed during the year.

2023, we also received a total $10.6 million of aerospace orders from multiple customers, reflecting continuing strong interest in the
application of CMCs in gas turbine jet engines.

 In
February 2024, we received a multisystem order for approximately $10 million that will be used for depositing a silicon carbide protective
coating on OEM components.

 Results
of Operations

 Years
Ended December 31, 2023 and 2022

 The
following table presents revenue and expense line items reported in our Consolidated Statements of Operations for the years ended December
31, 2023 and 2022 and the period-over-period dollar and percentage changes for those line items (in thousands, except percentages).

 31, 2023

 31, 2022

 Change

 Percent

 $

 $

 $
 (1,704
)

 (7
 %)

 Cost of revenue

 19,038

 19,186

 (148
)

 (1
 %)

 Gross profit

 5,071

 6,627

 (1,556
)

 (24
 %)

 Operating expenses

 Research and development

 2,596

 1,906

 %

 1,632

 1,216

 %

 General and administrative

 5,451

 5,328

 %

 Loss on disposition of
 Tantaline

 -

 *

 Impairment
 charge

 -

 *

 Total operating expenses

 9,952

 8,450

 1,502

 %

 Operating loss

 (4,881
)

 (1,823
)

 (3,058
)

 (168
 %)

 Other income (expense):

 Interest income

 %

 Interest expense

 (23
)

 (8
)

 (15
)

 %

 Employee retention credits

 -

 1,529

 (1,529
)

 (100
 %)

 Foreign exchange loss

 (95
)

 *

 Other
 income

 *

 Total other income,
 net

 1,603

 (916
)

 (57
 %)

 Loss before income tax

 (4,194
)

 (220
)

 (3,974
)

 *

 Income tax (benefit)

 (14
)

 (18
)

 *

 $
 (4,180
)

 $
 (224
)

 $
 (3,956
)

 *

 *
Not meaningful

 31, 2023

 31, 2022

 Change

 Percent

 CVD Equipment

 $
 16,334

 $
 16,674

 $
 (340
)

 (2
 %)

 SDC

 7,139

 6,541

 %

 CVD Materials

 1,184

 3,171

 (1,987
)

 (63
 %)

 Intersegment sales
 elimination

 (548
)

 (573
)

 *

 Total

 $

 $

 $
 (1,704
)

 (7
 %)

 *
Not meaningful

 Our
revenue for the year ended December 31, 2023 was $24.1 million compared to $25.8 million for the year ended December 31, 2022, a decrease
of $1.7 million or 7%.

 The
decrease in revenue versus the prior year period was primarily attributable to decreased revenue of $0.3 million from the CVD Equipment
segment related to lower equipment sales and spare parts, $2.0 million decrease from our CVD Materials segment due to the disposition
of Tantaline and wind down of MesoScribe's operations, offset by a $0.6 million increase in revenue from our SDC segment due to
higher demand.

from one aerospace customer in 2023 represented 13.5% of our total revenues and 20.1% of CVD Equipment segment revenues. Sales of PVT150
systems made to one customer in 2023 and 2022 represented 14.3% and 29.2%, respectively, of our total revenues and 21.2% and 45.2%, respectively,
of CVD Equipment segment revenues.

 The
revenue contributed by the CVD Equipment segment for the year ended December 31, 2023 represented 67% of overall revenue as compared
to 65% of overall revenue for the year ended December 31, 2022. The decrease in revenues of $0.3 million or 2% resulted from lower PVT150
revenues offset by an increase in aerospace revenue.

 The
revenue contributed by the SDC segment for the year ended December 31, 2023 represented 28% of overall revenue as compared to 25% of
overall revenue for the year ended December 31, 2022. Revenue for our SDC segment increased $0.6 million or 9% due to increased orders
and demand for the SDC's products during 2023 as compared to the prior year.

 The
revenue contributed by the CVD Materials segment for the year ended December 31, 2023 represented 5% of our overall revenue as compared
to 12% of overall revenue for the year ended December 31, 2022 The decrease of $2.0 million was principally due to the disposition of
Tantaline in May 2023 and the wind down of MesoScribe's operations.

 Our
order backlog at December 31, 2023 was approximately $18.4 million as compared to December 31, 2022 of $17.8 million. Our order backlog
at December 31, 2023 consists of approximately $16.3 million related to remaining performance obligations of contracts in progress and
the balance of approximately $2.1 million represents other orders received from customers. One aerospace customer represented 49.2% of
our backlog as of December 31, 2023. Historically, our revenues and orders have fluctuated based on changes in order rate as well as
other factors in our manufacturing process that impacts the timing of revenue recognition. Accordingly, orders received from customers
and revenue recognized may fluctuate from quarter to quarter.

 Gross
Profit

 Gross
profit for the year ended December 31, 2023 amounted to $5.1 million, with a gross profit margin of 21%, compared to a gross profit of
$6.6 million and a gross profit margin of 26% for the year ended December 31, 2022. The decrease in gross profit of $1.6 million was
primarily due to significant cost overruns on one contract and lower PVT150 and CVD Materials revenues as compared to 2022.

and Development

 For
the year ended December 31, 2023, research and development expenses were $2.6 million, or 10.8% of revenue as compared to $1.9 million,
or 7.4% for the year ended December 31, 2022. The increase in 2023 was the result of increased personnel and employee-related costs to
develop new products for key growth markets.

engineering support and expenses related to the development of more standard products and value-added development of existing products
are reflected as part of research and development expense. General engineering support and expenses are charged to costs of goods sold
when work is performed directly on a customer order.

expenses were $1.6 million or 6.8% of the revenue for the year ended December 31, 2023 as compared to $1.2 million or 4.7% for the year
ended December 31, 2022. The increase in 2023 was primarily the result of increased personnel and employee-related costs during to support
increased marketing efforts.

and Administrative

and administrative expenses for the year ended December 31, 2023 were $5.5 million or 22.6% of revenue compared to $5.3 million or 20.6%
of revenue for the year ended December 31, 2022, an increase of $0.1 million. The increase in expenses was principally due to increases
in stock-based compensation of $0.2 million, higher professional fees of $0.3 million, and increase in 401(k) match of $0.2 million,
offset by lower bonus expense of $0.4 million and lower expenses for CVD Materials of $0.1 million due to the disposition of Tantaline.

 Loss
on Disposition of Tantaline

 This
expense represents the net loss on the sale of our Tantaline subsidiary including professional fees.

 Impairment
Charge

 This
expense represents the loss on the impairment of certain assets of MesoScribe based on the decision to wind down its operations.

 Other
Income, Net

 Other
income, net was $0.7 million for the year ended December 31, 2023 as compared to other income, net of $1.6 million for the year ended
December 31, 2022.

 The
increase in interest income of $0.4 million was due to higher interest rates and increased amounts invested in U.S. treasury bills. During
2022, we conducted an analysis to determine if we were entitled to an employee retention credit ("ERC") under the Coronavirus
Aid, Relief, and Economic Security Act as amended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Plan
Act of 2021. Based on our analysis, we determined that we were entitled to an ERC of approximately $1.5 million related to payroll paid
in the first and third quarters of 2021 under the applicable Internal Revenue Service regulations and. we recognized other income of
this amount during the year ended December 31, 2022. This amount was collected in July 2023.

 Income
Taxes

 Income
tax (benefit) expense for the years ended December 31, 2023 and 2022, was ($14,000) and $4,000, respectively. We continue to evaluate
for potential utilization of our deferred tax asset, which has been fully reserved for, on a quarterly basis, by reviewing our economic
models, including projections of future operating results.

 Inflation
and Supply Chain Matters

 We
experienced increased costs on certain materials and components as well as delays in supply chain delivery, which may also impact our
ability to recognize revenue and reduce our gross profit margins, as well as extend our manufacturing lead times and reduce our manufacturing
efficiencies. We have commenced placing orders with more lead time to help mitigate the manufacturing delays, as well as assessing other
suppliers or components to attempt to mitigate the potential cost impacts. In addition, we are utilizing our in-house flexible manufacturing
to attempt to further mitigate both potential schedule delivery delays and material cost increase. While we have initiated actions to
mitigate the potential negative impacts to our revenue and profitability, there can be no assurance of the ultimate impact and the length
of time that the supply chain factors may impact our revenues and profitability.

 Inflation
has also had an impact on salaries and compensation. To remain competitive in the acquisition and retention of our employees, we have
reviewed and adjusted salaries and implemented bonus incentives to mitigate the potential negative impacts of inflation on our employees.

 Liquidity
and Capital Resources

 As
of December 31, 2023, we had aggregate working capital of $14.3 million compared to aggregate working capital of $15.5 million at December
31, 2022. Our cash and cash equivalents at December 31, 2023 and 2022 were $14.0 million and $14.4 million, respectively.

 Net
cash used in operating activities during 2023 was $0.2 million and was principally due to the net loss of $4.2 million, decrease in contract
assets of $0.6 million, increase in inventories of $1.9 million, decrease in accrued expenses of $0.7 million (primarily due to payment
of 2022 bonus) offset by a decrease in accounts receivable of $1.8 million, collection of employee retention credit receivable of $1.5
million, an increase in contract liabilities of $0.9 million and non-cash items of $2.0 million. The increase in inventory was related
to the production of PVT150 systems in anticipation of potential future orders and increases related to new system orders.

 Net
cash used in investing activities during 2023 was $0.1 million. Capital expenditures of $0.4 million related to purchases of manufacturing
equipment and building improvements. The disposition of Tantaline resulted in a cash outflow of $0.3 million based on the terms of the
agreement. We received $0.6 million of deposits from the purchaser of certain MesoScribe equipment as described below.

Cash flows from financing activities during 2023 was not significant and included $0.1 million of proceeds from the exercise of employee
stock options and $0.1 million of repayment of an equipment loan.

 On
August 4, 2023, we entered into a Purchase and License Agreement with a third-party. Pursuant to the Purchase and License Agreement,
we will sell certain proprietary assets relating to its plasma spray technology and material deposition system and grant a non-exclusive
license to use certain of our related intellectual property as more fully described in the Purchase and License Agreement, for an aggregate
purchase price of $0.9 million. The purchase price is payable in several installments and contingent upon certain performance metrics
and other milestones.

the year ended December 31, 2023, we received payments under the Purchase and License Agreement in the amount of $0.6 million which is
reflected as deposits from purchaser in the accompanying consolidated balance sheet as of December 31, 2023. We expect the transaction
to be completed during 2024.

 We
expect to continue to fulfill remaining customer orders for MesoScribe products through the end of 2024 at which time it plans to cease
the remaining operations of MesoScribe and dispose of any remaining equipment.

 We
believe that our cash and cash equivalent positions and our projected cash flow from operations will be sufficient to meet our working
capital and capital expenditure requirements for the next twelve months from the filing of this Form 10-K. We will continue to assess
our operations and take actions anticipated to maintain our operating cash to support the working capital needs.

 Critical
Accounting Policies and Estimates

 Use
of Estimates

 This
discussion and analysis of the Company's financial condition and results of operations is based on the Company's consolidated
financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America,
or U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the reported periods. In accordance with U.S. GAAP, the Company bases its estimates on historical experience
and on various other assumptions the Company believes are reasonable under the circumstances. Actual results may differ from these estimates
under different assumptions or conditions.

 We
consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that were
highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from
period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact
on our financial condition or results of operations.

 We
believe that of our significant accounting policies, which are described in the notes to the consolidated financial statements, the following
accounting policies involve a greater degree of judgments, estimates and assumptions. Accordingly, these are the policies that we believe
are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. For
information on the Company's significant accounting policies and estimates refer to Note 2 "Summary of Significant Accounting
Policies" including the "Use of Estimates" section, in the consolidated financial statements.

Recognition

 We
design, manufacture, and sell custom chemical vapor deposition equipment through contractual agreements. These system sales require us
to deliver functioning equipment that is generally completed within two to eighteen months from commencement of order acceptance. We
recognize revenue over time by using an input method based on costs incurred as it depicts our progress toward satisfaction of the performance
obligation. Under this method, revenue arising from fixed price contracts is recognized as work is performed based on the ratio of costs
incurred to date to the total estimated costs at completion of the performance obligations.

 Incurred
costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies,
tools, repairs and depreciation costs. Contract material costs are included in incurred costs when the project materials have been purchased
or moved to work-in-process as required by the project's engineering design. Cost based input methods of revenue recognition require
us to make estimates of costs to complete the projects. In making such estimates, significant judgment is required to evaluate assumptions
related to the costs to complete the projects, including materials, labor, and other system costs. If the estimated total costs on any
contract are greater than the net contract revenues, we recognize the entire estimated loss in the period the loss becomes known and
can be reasonably estimated.

 We
have been engaged in the production and delivery of goods on a continual basis under contractual arrangements for many years. Historically,
we have demonstrated an ability to accurately estimate total revenues and total expenses relating to our long-term contracts. However,
there exist many inherent risks and uncertainties in estimating revenues, expenses and progress toward completion, particularly on larger
or longer-term contracts. If we do not estimate the total sales, related costs, and progress toward completion on such contracts, the
estimated gross margins may be significantly impacted, or losses may need to be recognized in future periods. Any such resulting changes
in margins or contract losses could be material to our results of operations and financial condition.

 Long-Lived
Assets

 Long-lived
assets consist primarily of property, plant and equipment. Long-lived assets are reviewed for impairment whenever events or circumstances
indicate their carrying value may not be recoverable. When such events or circumstances arise, an estimate of the future undiscounted
cash flows produced by the asset, or the appropriate grouping of assets, is compared to the asset's carrying value to determine
if impairment exists pursuant to the requirements of ASC 360-10-35, "Impairment or Disposal of Long-Lived Assets." If the
asset is determined to be impaired, the impairment loss is measured on the excess of it carrying value over its fair value. Assets to
be disposed of are reported at the lower of their carrying value or net realizable value. It is not possible for us to predict the likelihood
of any possible future impairments or, if such an impairment were to occur, the magnitude of any impairment.

 Item
7A.
 Quantitative
 and Qualitative Disclosures About Market Risk.

 Not

 Item
 8.

 Financial
 Statements and Supplementary Data.

 The
consolidated financial statements and supplementary data required by this item are included in this Annual Report on Form 10-K beginning
on page F-1.

 Item
9.
 Changes
 in and Disagreements with Accountants on Accounting and Financial Disclosure.

 None.

 Item
9A.
 Controls
 and Procedures.

 Disclosure
Controls and Procedures. We maintain a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 13d-15(e) under
the Exchange Act of 1934, as amended, (the "Exchange Act")). As required by Rule 13a-15(b) under the Exchange Act, management
of the Company, under the direction of our Chief Executive Officer and Chief Financial Officer, reviewed and performed an evaluation
of the effectiveness of design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange
Act) as of December 31, 2023.

 Based
on that review and evaluation, our Chief Executive Officer and Chief Financial Officer, along with others in our management, have determined
that as of the end of the period covered by this Report on Form 10-K, the disclosure controls and procedures were effective to provide
reasonable assurance that such information is accumulated and communicated to our management, including our principal executive and financial
officers, as appropriate to allow timely decisions regarding disclosures.

 Changes
in Internal Controls

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

 Limitations
on the Effectiveness of Controls

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

 Management's
Annual Report on Internal Control Over Financial Reporting. Our management is responsible for establishing and maintaining effective
internal control over financial reporting (as defined in Rule 13a – 15(f) of the Exchange Act). There are inherent limitations
to the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls.
Accordingly, even effective internal controls can provide only reasonable assurance with respect to financial statement preparation.
Further, because of changes in conditions, the effectiveness of internal control may vary over time. We have assessed the effectiveness
of our internal controls over financial reporting (as defined in Rule 13a -15(f) of the Exchange Act) as of December 31, 2023. In making
this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in "Internal
Control – Integrated Framework (2013)". Management concluded that, as of December 31, 2023, our internal control over financial
reporting was effective based on the criteria established by the COSO Internal Control Framework.

 This
Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control
over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant
to the rules of the Securities and Exchange Commission that permit us to provide only management's report in this Annual Report
on Form 10-K.

 Item
9B.
 Other
 Information.

 Not

 Item
9C.
 Disclosure
 Regarding Foreign Jurisdictions That Prevent Inspections.

 Not

 PART
III

 Item
10.
 Directors,
 Executive Officers, and Corporate Governance.

 Background
and Experience of Directors

 When
considering whether directors and nominees have the experience, qualifications, attributes or skills, taken as a whole, to enable the
Board of Directors to satisfy its oversight responsibilities effectively in light of our business and structure, the Nominating, Governance
and Compliance Committee focused primarily on each person's background and experience as reflected in the information discussed
in each of the directors' individual biographies set forth immediately below. We believe that our directors provide an appropriate
mix of experience and skills relevant to the size and nature of our business. As more specifically described in such person's individual
biographies set forth below, our directors possess relevant and industry-specific experience and knowledge in the engineering financial
and business fields, as the case may be, which we believe enhances the Board's ability to oversee, evaluate and direct our overall
corporate strategy. The Nominating, Governance and Compliance Committee annually reviews and makes recommendations to the Board regarding
the composition and size of the Board so that the Board consists of members with the proper expertise, skills, attributes, and personal
and professional backgrounds needed by the Board, consistent with applicable regulatory requirements.

 The
Nominating, Governance and Compliance Committee believes that all directors, including nominees, should possess the highest personal
and professional ethics, integrity, and values, and be committed to representing the long-term interests of our shareholders. The Nominating,
Governance and Compliance Committee will consider criteria including the nominee's current or recent experience as a senior executive
officer, whether the nominee is independent, as that term is defined in existing independence requirements of the NASDAQ Capital Market
and the Securities and Exchange Commission, the business, scientific or engineering experience currently desired on the Board, geography,
the nominee's industry experience, and the nominee's general ability to enhance the overall composition of the Board.

 The
Nominating, Governance and Compliance Committee does not have a formal policy on diversity; however, in recommending directors, the Board
and the Committee consider the specific background and experience of the Board members and other personal attributes in an effort to
provide a diverse mix of capabilities, contributions and viewpoints which the Board believes enables it to function effectively as the
Board of Directors of a company with our size and the nature of our business.

 Legal
Proceedings Involving Directors

 None.

 Board
Leadership

 Our
Corporate Governance practices contain several features which we believe will ensure that the Board maintains effective and independent
oversight of management, including the following:

 Executive
 sessions without management and non-independent directors present are a standing Board agenda item. Executive sessions of the independent
 directors are held at any time requested by an independent director and, in any event, are held in connection with at least 100%
 of regularly scheduled Board meetings.

 The
 Board regularly meets in executive session with the CEO without other members of management present.

 All
 Board committee members are independent directors. The committee chairs have authority to hold executive sessions with management
 and non-independent directors present.

 While
our Board has no formal policy with respect to separation of the positions of Chairman and CEO or with respect to whether the Chairman
should be a member of management or an independent director, we believe that the appointment of Mr. Waldman as Chairman properly facilitates
better communication between the Independent Directors on the one hand and the non-Independent Director and members of management on
the other hand and leads to improved oversight and discussions by the Board as a whole. The Chief Executive Officer of the Company, Emmanuel
Lakios, is tasked with the responsibility of implementing our corporate strategy, we believe he is best suited for leading discussions
with input from the Chairman, at the Board level, regarding performance relative to our corporate strategy and this discussion accounts
for a significant portion of the time devoted at the Board meetings.

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

 The
following table sets forth the names, ages and positions with the Company of each of our directors and executive officers, as of March
25, 2024.

 Name

 Age

 Position(s)
 with the Company

 Lakios

 Chief
 Executive Officer, President, Director

 Lawrence
 J. Waldman

 Chairman
 of the Board of Directors, Chairman-Audit Committee

 Raymond
 A. Nielsen

 Director,
 Chairman - Nominating, Governance and Compliance Committee

 Robert
 M. Brill

 Director,
 Chairman - Strategic Planning Committee

 Debra
 Wasser

 Ashraf
 Lotfi

 Richard
 A. Catalano

 Chief
 Financial Officer, Vice President, Secretary and Treasurer

 Kevin
 R. Collins

 Vice
 President and General Manager of SDC

 Jeffrey
 A. Brogan

 Vice
 President of Sales and Marketing

 Maxim
 S. Shatalov

 Vice
 President of Engineering and Technology

 Warren
 D. Cheesman

 Vice
 President of Manufacturing Operations

Lakios

Lakios was appointed to serve as President and Chief Executive Officer of the Company on January 22, 2021, and on July 15, 2021 was elected
by the shareholders as a member of the Board of Directors. Mr. Lakios joined the Company as Vice President Sales and Marketing in February
2017. Mr. Lakios has over 30 years of experience serving the aerospace, semiconductor, data storage and optical device industries and
is the holder of several patents in the field of process equipment and device structure. From January 2015 through February 2017, Mr.
Lakios was the President and Chief Executive Officer at Sensor Electronic Technology, Inc., overseeing that company's transition
from R&D to a leading global commercial UV LED supplier. From 2003 to 2011 he was the Executive Vice President of Field Operations
and President and Chief Operating Officer at Imago Scientific, bringing it from pre-revenue to a commercial leadership position in the
3D atomic scale tomography field. Mr. Lakios was previously employed at Veeco Instruments Inc. from 1984 until 2003, where he held several
positions, including President of the Process Equipment Group and Executive Vice President of Field Operations. He has been involved
in several acquisitions and numerous product line launches. He received his BE in Mechanical Engineering with focus in Material Science
from SUNY Stony Brook in 1984.

 Lawrence
J. Waldman

 Lawrence
J. Waldman was appointed a member of the Board of Directors on October 5, 2016 and currently serves as Chairman of the Board and Chairman
of the Audit Committee. Mr. Waldman has over 40 years of experience in public accounting.

 Mr.
Waldman is a member of the board of directors of Comtech Telecommunications Corporation since August 2015 and Lead Independent Director
since December 2021. He serves as the chairperson of Comtech's Audit Committee. Mr. Waldman is a member of the board of directors
and Lead Independent Director and Audit Committee Chairperson at APYX Medical Corporation, a Nasdaq-listed advanced energy medical technology
company. Mr. Waldman serves as a Senior Advisor at First Long Island Investors, LLC since 2016 and was previously an Advisor to the accounting
firm of EisnerAmper LLP following his role as Partner-in-Charge of Commercial Audit Practice Development for Long Island. Mr. Waldman
served as the Managing Partner of the Long Island office of KPMG LLP from 1994 through 2006, the accounting firm where he began his career
in 1972. During his tenure at KPMG, Mr. Waldman served as audit partner to a number of public and privately held technology companies.

 Mr.
Waldman is currently Chairman of the Board of Directors of the Long Island Association and a member of the boards of directors of the
Long Island Angel Network and the Advanced Energy Research Center at Stony Brook University. Through October 21, 2018, Mr. Waldman was
a member of the board of directors of Northstar/RXR Metro Income, Inc., an SEC registered non-traded real estate investment trust.

 Mr.
Waldman is the current Chairman of the Supervisory Committee of Bethpage Federal Credit Union and previously served as the Chairman of
the Audit Committee of the State University of New York's ("SUNY") Board of Trustees, the largest state university
system in the United States. Mr. Waldman previously served as Chairman of the Audit and Finance Committee Board of Trustees of the Long
Island Power Authority ("LIPA"), the second largest government utility in the United States, and as the Chairman of the Board.
Mr. Waldman also served as an adjunct professor at Hofstra University, teaching graduate courses in advanced accounting theory and advanced
auditing. Mr. Waldman is a certified public accountant in New York State. He is a member of the American Institute of Certified Public
Accountants and the New York State Society of CPAs. Mr. Waldman holds a Bachelor of Science and a Master of Business Administration from
Hofstra University in Hempstead, New York.

 Mr.
Waldman qualifies to serve as a director, Audit Committee Chairman and Lead Independent Director because of his significant experience
leading public company boards, his extensive relevant industry and financial and accounting expertise.

 Ashraf
Lotfi

 Dr.
Ashraf Lotfi is currently a venture partner with Deep Sciences Ventures and serves on the board of Lotus Microsystems, ApS, Xonia Ltd.,
HyperCIM Ltd. Dr. Lotfi previously served as Vice President and a Fellow at Intel Corporation. Prior to Intel, he was Power Chief Technology
Officer for Altera Corporation serving its Enpirion Power Business as well as the broader Field Programmable Gate Array community. Altera
was acquired by Intel in 2015. Prior to Altera, he served as President and Chief Executive Officer of Enpirion, Inc., which he founded
in 2002.

 From
Enpirion's inception, Dr. Lotfi led its strategic direction with a unique industry-first vision to create the ultimate power converter-on-chip
creating ubiquitous DC-DC conversion at the silicon level. In 2013, he led Enpirion's merger into Altera to realize his vision
of highly integrated power management closely coupled to leading-edge digital silicon loads. Prior to founding Enpirion, he was Director
of Advanced Power Research at Bell Laboratories.

 Dr.
Lotfi has a B.S. in Electrical Engineering from Cairo University and an M.S. and PhD. in Electrical Engineering from Virginia Tech.

 Dr.
Lotfi currently serves on the boards of Lotus Microsystems ApS, Xonai Ltd., HyperCIM Ltd. and his extensive experience in high power
electronics provide a valuable resource to the Board of Directors and Executive Management.

 Debra
Wasser

 Ms.
Wasser currently serves as Vice President of Investor Relations and ESG Engagement for Etsy, Inc. (Nasdaq: ETSY), the global marketplace
for unique and creative goods. She is responsible for Etsy's external shareholder relationships, with a focus on corporate and
financial reporting, driving increased analyst coverage and investor connectivity, effective corporate messaging, strategic investor
targeting, and elevating the company's ESG messaging with the financial community. Ms. Wasser has led investor and broad internal
and external communications strategies on multiple financial transactions and offerings, and a host of product and technology launches
and marketing initiatives.

 Prior
to joining Etsy in April 2018, Ms. Wasser led Edelman's Investor Relations practice in the U.S., and advised boards of directors
and senior managements of public companies on strategic communications including investor relations, financial and corporate public relations,
transaction communications, crisis communications and leadership positioning.

 Prior
to joining Edelman in 2015, Ms. Wasser was Senior Vice President, Investor Relations & Corporate Communications for Veeco Instruments,
Inc. (Nasdaq: VECO) for over 15 years. While at Veeco, Ms. Wasser created and implemented a global investor relations program to raise
visibility and deepen ownership to reflect business trends. She led effective communications strategy through positive periods of growth,
over a dozen merger and acquisition transactions, a highly successful secondary equity offering, and new market opportunities.

 Prior
to joining Veeco, Ms. Wasser was Vice President of Dewe Rogerson Inc. where she ran the firm's U.S. investor relations client base,
focused on healthcare/biotech, high-tech, consumer products, financial services, publishing, and general industry. During her tenure
at the firm, Ms. Wasser serviced clients across the globe and helped grow the firm from four to 80 employees. Debra has a B.S. in Communications
and Business from The State University of New York at Albany.

 Ms.
Wasser has provided business and communications advice to Boards of Directors of publicly traded and privately held companies for over
three decades. She has served on the Board of Directors of NIRI, the Association of Investor Relations Professionals, including the maximum
service of four years on the National Chapter Board, as well as earlier as a Board member of the organizations New York Chapter.

 Raymond
A. Nielsen

 Raymond
A. Nielsen was appointed a member of the Board of Directors on October 5, 2016. Mr. Nielsen was the Director of Finance for The
Beechwood Organization until January 2019 and had been responsible for Project and Corporate Finance including Strategic Planning
Initiatives since 2014. He has been a member of the Board of Directors of Dime Community Bank since its merger on February 1, 2021
with Bridge Bancorp Inc. In addition, he is Chairman of the Credit Risk Committee and a member of the Audit and Compliance
Committees. Prior to the merger, he was a member of the Board of Directors of Bridgehampton National Bank and Bridge Bancorp Inc.,
its Parent holding company since 2013, and served on the Audit Committee, Compensation Committee, Corporate Governance &
Nominating Committee, as well as on the ALCO and Loan Committees and the Compliance BSA & CRA Committee. Mr. Nielsen also served
as a Director of North Fork Bancorporation and its subsidiary North Fork Bank from 2000 to 2006 where he chaired both the
Compensation Committee and Audit Committee as well as having served as Lead Independent Director. Mr. Nielsen is the former CEO of
Reliance Federal Savings Bank and Herald National Bank, and a 45-year veteran of the banking industry. Mr. Nielsen's extensive
public company, banking and real estate development experience provides a valuable resource to the Board of Directors and Executive
Management.

 Dr.
Robert M. Brill

 Dr.
Brill was appointed a Director of the Company on March 5, 2021. Dr. Brill was co-founder and managing partner of Newlight Management
from 1997 to 2019, which managed venture capital funds that focused on early-stage technology companies. Prior to co-founding Newlight,
Dr. Brill was a general partner of Poly Ventures, a Long Island based venture capital fund. Dr. Brill is a member of the Board of Directors
of the Long Island Angel Network and one private company. Dr. Brill has also previously served
on the Board of Directors of multiple public and private companies. Dr. Brill has been the CEO of both public and private companies.
 Dr. Brill served as General Manager of Harris Corporation's
CMOS Semiconductor Division. He also held various technical and management positions at IBM's semiconductor operation. Dr. Brill
holds a Ph. D. in nuclear physics from Brown University and a B.A. and a B.S. in Engineering Physics from Lehigh University. Dr. Brill
had previously served on the Company's Board from April 2018 until October 2019.

 Richard
A. Catalano

 Richard
Catalano was appointed as the Company's Vice President and Chief Financial Officer effective as of August 30, 2022. Mr. Catalano
began his career at KPMG LLP and became an audit partner in 1993. Throughout his over 35 years as an audit professional at KPMG LLP,
Mr. Catalano advised a diverse array of clients through private equity financed transactions, merger-related accounting, and filings
with the U.S. Securities and Exchange Commission. Towards the later part of his tenure, Mr. Catalano served as the leader of KPMG LLP's
Metro New York Healthcare and Life Sciences Practice and then co-led KPMG's Global Audit Methodology Group. Mr. Catalano is a Certified
Public Accountant in New York State and received a Bachelor of Business Administration in accounting from Hofstra University.

 Kevin
R. Collins

 Prior
to his appointment as Vice President and General Manager of SDC, Mr. Collins served as the General Manager of SDC since 1999. From 1990
to 1999 he was employed by Stainless Design Corp. as Manager of Field Operations and Product Development Advisor. Mr. Collins attended
Columbia University School of Engineering and Applied Science.

 Jeffrey
A. Brogan

 Dr.
Jeffrey Brogan was appointed as Vice President Sales and Marketing for the Company on March 23, 2021. Previously he was Director of Sales
and Marketing for CVD Materials Corporation since November 2017 with General Management responsibilities of CVD MesoScribe Technologies
Corporation. Dr. Brogan served as the President and CEO of MesoScribe Technologies, Inc., spearheading its sale to CVD in 2017. He has
over 20 years of experience in strategic sales and marketing, technology management, and advanced research & development. Dr. Brogan
has led the development of innovative sensor products, transitioning high performance products to manufacturing using the Company's
Direct Write MesoPlasma printing technology. He received his PhD in Materials Science and Engineering from Stony Brook University
in 1996.

 Maxim
S. Shatalov

 Dr.
Shatalov was appointed Vice President of Engineering and Technology in April 2018. Prior to CVD, Mr. Shatalov was employed by Sensor
Electronic Technology Inc. (SETi) a LED company where he held multiple technical and management positions from 2006 thru 2018. In 2017,
Dr. Shatalov became Vice President of Technology responsible for UV LED technology and LED application development at SETi. Dr. Shatalov
has over twenty years of experience in semiconductor research and devices and holds more than 12 U.S. patents.

 Warren
D. Cheesman

 Warren
Cheesman was appointed Vice President of Manufacturing Operations in October 2022. He has over 25 years of management experience in the
semiconductor, medical device and defense equipment sectors. Mr. Cheesman has held roles of increasing responsibility in engineering,
operations, quality and strategic sourcing, at equipment manufacturers including Veeco Instruments, Air Techniques, and Kongsberg Defense
& Aerospace. Mr. Cheesman provides strategic leadership across all divisions related to manufacturing, quality, and continuous improvement
initiatives, with emphasis on process improvement, lean manufacturing, risk management, and collaboration. He holds two master of science
degrees from Stony Brook University in Technology Management and Materials Science & Engineering, and a Bachelor of Science degree
in Mechanical Engineering from Virginia Tech. His academic and professional experience is also complemented by a Six Sigma Black Belt
certification.

 Code
of Ethics

 We
have adopted a Corporate Code of Conduct and Ethics that applies to our employees, senior management and Board of Directors, including
the Chief Executive Officer and Chief Financial Officer. The Corporate Code of Conduct and Ethics is available on our website, www.cvdequipment.com,
by clicking on "About Us" and then clicking on "Governance."

 Audit
Committee

 Our
Board of Directors has an Audit Committee that currently consists of Lawrence J. Waldman, Chairman, Raymond A. Nielsen, Robert M. Brill,
Debra Wasser (effective July 13, 2023), Ashraf Lotfi (effective August 18, 2023) and Conrad J. Gunther (until July 13, 2023). During
the fiscal year ended December 31, 2023, 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 (including the disclosures under "Management's Discussion and Analysis
of Financial Condition and Results of Operations"), the scope and results of annual audits and the audit and non-audit fees of
the independent registered public accounting firm. Messrs. Waldman, Gunther, Nielsen and Brill and Ms. Wasser are "independent"
under the requirements of the NASDAQ Stock Market.

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

 Section
16(a) Beneficial Ownership Reporting Compliance

 The
rules of the Securities and Exchange Commission require us to disclose late filings of reports of stock ownership and changes in stock
ownership by our directors, officers and ten percent shareholders. To our knowledge, based solely on our review of (a) the copies of
such reports and amendments thereto furnished to us and (b) written representations that no other reports were required, during our fiscal
year ended December 31, 2023, all of the filings for our officers, directors and ten percent shareholders were made on a timely basis,
with the exception of: (i) a delinquent Form 4 disclosing a single transaction for each of Mr. Lakios, Mr. Catalano, Dr. Brogan, Dr.
Shatalov, Mr. Collins, and Mr. Cheesman; and (ii) a delinquent Form 4 disclosing one transaction for Mr. Africk.

 Item
11.
 Executive
 Compensation.

 Summary
Compensation Table

 The
following table sets forth the compensation of our chief executive officer and chief financial officer, and our "named executive
officers," for the years ended December 31, 2023 and 2022.

 Name and
 principal position

 Year

 Salary
 ($)

 Bonus
 ($) (1)

 Option
 Awards ($) (2)

 Stock
 Awards ($) (2)

 All
 Other Compensation ($) (3)

 Total
 ($)

 President and Chief Executive

 2023

 388,600

 -

 699,990

 -

 19,522

 1,108,112

 Officer

 2022

 316,800

 191,600

 236,704

 -

 13,830

 758,934

 Richard Catalano (4)

 Secretary, Chief Financial

 2023

 274,700

 -

 233,330

 -

 27,201

 533,231

 Officer and Executive Vice President

 2022

 80,769

 31,250

 68,151

 -

 180,458

 Thomas McNeill (5)

 Secretary, Chief Financial Officer

 2023

 -

 -

 -

 -

 -

 and Executive Vice President

 2022

 187,425

 29,988

 -

 -

 137,689

 355,102

 Jeffrey A. Brogan Vice

 2023

 203,300

 -

 139,998

 -

 7,863

 351,161

 President Sales & Marketing

 2022

 196,000

 58,800

 47,341

 -

 3,053

 305,194

 (1)
 Reflects
 cash bonuses under the Company's Management Bonus Plan. Bonuses listed for a particular
 year represents amounts earned with respect to such year even though all or part of such
 amounts have been paid during the following year.

 (2)
 These
 columns represent the grant date fair value of the stock awards as calculated in accordance
 with FASB ASC 718 (Stock Compensation). The stock options granted in 2022 and 2023 vest 25%
 per year over four years and have a ten-year life.

 (3)
 All
 other compensation consists of 1) 401(k) match in 2023 and 2022 of $9,900 and $8,895 for
 Emmanuel Lakios, $9,179 and $288 for Richard Catalano, $0 and $4,094 for Thomas McNeill and
 $7,863 and $3,053 for Jeffrey Brogan, respectively; 2) severance in 2022 of $104,125 and
 accrued and used vacation time in 2022 of $29,470 for Thomas McNeill; and 3) health insurance
 premiums in 2023 and 2022 of 9,622 and $8,895 for Emmanuel Lakios and $18,022 and $0 for
 Richard Catalano.

 (4)
 Effective
 August 30, 2022, Richard Catalano was appointed Vice President and Chief Financial Officer.

 (5)
 Effective
 August 30, 2022, Thomas McNeill resigned as Executive Vice President and Chief Financial
 Officer.

 Employment
Agreements and Potential Payments Upon Termination or Change in Control

Lakios Employment Agreement

 On
June 1, 2021, the Company entered into an Employment Agreement with Emmanuel Lakios, the Company's President and Chief Executive
Officer (the "Lakios Agreement"). The term of Mr. Lakios's employment under the Lakios Agreement commenced as of the
effective date thereof and shall continue until terminated in accordance with the terms of the Lakios Agreement. Under the Lakios Agreement,
Mr. Lakios will receive an initial annual base salary of $288,000, which shall be reviewed from time to time and may be increased, but
not decreased, by the Compensation Committee of the Board of Directors (the "Committee") in its sole and exclusive discretion.
Mr. Lakios shall be entitled to participate in any bonus or incentive plan available to the Company's senior executives generally,
on such terms as the Committee may determine in its discretion.

 In
the event of the termination of the Lakios Agreement and Mr. Lakios's employment thereunder, Mr. Lakios or his estate (in the event
of his death) shall be entitled to (A) receive any unpaid base salary earned and accrued under the Lakios Agreement prior to the date
of termination (and reimbursement for expenses incurred prior to the date of termination), (B) indemnification in accordance with any
applicable indemnification plan, program, corporate governance document or other arrangement, and any vested rights pursuant to any insurance
plan, benefit plan or retirement plan, and, except in the event of Mr. Lakios's termination by the Company for Cause (as defined
in the Lakios Agreement, (C) treatment of his stock option grants in accordance with the terms of the applicable plan and award agreement.

 In
the event Mr. Lakios's employment is terminated as a result of death or disability, Mr. Lakios shall also be entitled to receive
a pro rata bonus payment under the Company's bonus Plan for the year of termination, if applicable.

 In
the event Mr. Lakios's employment is terminated by the Company for Cause, Mr. Lakios's stock option grants, whether vested
or unvested, shall immediately terminate and be null and void.

 In
the event Mr. Lakios's employment is terminated by the Company without Cause, or by Mr. Lakios for Good Reason (as defined in the
Lakios Agreement), Mr. Lakios shall also be entitled to (A) a pro rata bonus for the year of termination, and (B) continued payment of
his base salary and the Company's portion of Mr. Lakios's then existing medical benefits for the nine (9) month period following
the date of termination.

 The
Lakios Agreement contains customary non-competition, non-solicitation, and confidentiality provisions in favor of the Company.

 Other
then as set forth above, there are no arrangements for compensation of directors or Named Executive Officers and there are no employment
contracts between the Company and its directors or any change in control arrangements.

 Outstanding
Equity Awards at December 31, 2023

 The
following table sets forth the outstanding equity awards held by our named executive officers as of December 31, 2023.

 OPTION
 AWARDS

 STOCK
 AWARDS

 Name

 of Securities Underlying Options Exercisable

 of Securities Options Unexercisable

 Price

 Option
 Expiration Date

 of shares or units of stock that have not vested

 Market
 value of shares or units of stock that have not vested

 Equity
 Incentive Plan Awards: Number of unearned shares or units that not vested

 Equity
 Incentive Plan Awards: Market or payout value of unearned shares or units that have not vested

 -

 100,000

 $
 14.11

 3/23/2033

 -

 -

 -

 $
 -

 18,750

 56,250

 $
 5.02

 8/17/2032

 50,000

 50,000

 $
 4.26

 6/1/2023

 100,000

 -

 $
 10.30

 2/6/2027

 -

 -

 Richard Catalano

 -

 25,000

 $
 14.11

 3/23/2033

 -

 -

 -

 $
 -

 5,000

 15,000

 $
 5.42

 8/30/2032

 Jeffrey A. Brogan

 -

 15,000

 $
 14.11

 3/23/2033

 -

 -

 -

 $
 -

 3,750

 11,250

 $
 5.02

 8/17/2032

 10,000

 10,000

 $
 4.01

 7/15/2021

 20,000

 -

 $
 11.61

 10/31/2027

 2023
Director Compensation

 The
following table sets forth a summary of the compensation we paid to our non-employee directors in 2023.

 Name

 Fees
 Earned or
 Paid
 in Cash

 Option
 Awards

 Restricted
 Stock Awards

 Total

 Lawrence J. Waldman

 $
 113,000

 -

 $
 40,000

 $
 153,000

 Raymond A. Nielsen

 50,000

 -

 40,000

 90,000

 Robert M. Brill

 50,000

 -

 40,000

 90,000

 Debra Wasser

 18,696

 -

 40,000

 38,696

 Ashraf Lotfi

 14,783

 -

 14,783

 29,566

 Conrad J. Gunther

 26,766

 -

 20,000

 46,766

 On
October 11, 2021, the Board of Directors, following the unanimous recommendation of the Board's Compensation Committee, unanimously
approved a director compensation plan, effective October 1, 2021 (the "Plan"). The Plan is based on the recommendations of
an independent compensation consultant engaged by the Board's Compensation Committee. Pursuant to the Plan, each director is entitled
to Director Compensation, divided into the following pay components: (i) Annual Board Cash Compensation in the amount of $40,000 and
(ii) an Annual Equity Retainer in the amount of $40,000, to be automatically granted on the date of the Company's annual meeting
of shareholders. Additionally, a director serving as a chairman for the Board's Compensation Committee, Nominating & Governance
Committee, or Strategic Planning Committee is entitled to Chair Compensation in the amount of $10,000. The director serving as the chairman
for the Board's Audit Committee is entitled to Chair Compensation in the amount of $25,000. Furthermore, the director serving as
the Non-Executive Chairman is entitled to Board Leadership Compensation in the amount of $48,000.

 Item
 12.

 Security
 Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 The
following table sets forth, as of March 25, 2024, information regarding the beneficial ownership of our common stock by (a) each person
who is known to us to be the owner of more than five percent (5%) of our common stock, (b) each of our directors, (c) each of the named
executive officers, and (d) all directors and executive officers and executive employees as a group. For purposes of the table, a person
or group of persons is deemed to have beneficial ownership of any shares that such person has the right to acquire within 60 days of
March 25, 2024.

 Name and Address of Beneficial
 Owner (1)

 Amounts
 and Nature of Beneficial Ownership (2)

 Percent
 of Class (%)

 Andrew Africk / ADA Partners LP
Leviticus
 Partners, L.P.

 1,076,834
 660,000

 15.9
 9.7

 200,108
 (3)

 3.0

 Kevin R. Collins

 92,437
 (3)

 1.4

 Lawrence J. Waldman

 70,288
 (4)

 1.0

 Raymond A. Nielsen

 61,588
 (4)

 *

 Jeffrey A. Brogan

 42,019
 (3)

 *

 Robert M. Brill

 23,073
 (4)

 *

 Maxim Shatalov

 17,500
 (3)

 *

 Richard Catalano

 11,250
 (3)

 *

 Warren Cheesman

 7,500
 (3)

 *

 Ashraf Lotfi

 4,514
 (4)

 *

 Debra Wasser

 4,373
 (4)

 *

 All directors
 and executive officers and executive employees as a group (nine persons)

 534,650

 7.9

 *
Less than 1% of the outstanding common stock or less than 1% of the voting power

 (1)
 The
 address of Messrs. Lakios, Waldman, Nielsen, Brogan, Brill, Shatalov, Catalano, Cheesman.
 Lotfi and Ms. Wasser is c/o CVD Equipment Corporation, 355 South Technology Drive, Central
 Islip, New York 11722. The address of Mr. Collins is c/o Stainless Design Concepts, 1117
 Old Kings Highway, Saugerties, NY 12477. The address of Andrew Africk / ADA Partners is c/o
 Searay Capital, 111 West 67 th Street, New York, NY 10023. The address of Leviticus
 Partners, L.P. is 200 Park Avenue, Suite 1700, New York, NY 10166.

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

 (3)
 Does
 not include unvested options to purchase the following shares of our common stock: Lakios
 – 181,250; Collins – 27,500; Brogan – 32,500; Shatalov – 32,500;
 Catalano – 33,750; and Cheesman – 22,500

 (4)
 Does
 not include unvested restricted shares of our common stock: Waldman – 1,458; Nielsen
 – 1,458; Brill – 1,458; Lotfi – 1,822 and Wasser – 1,438

 Does
not include shares to be issued per Director compensation agreement related to the Annual Equity Retainer in the amount of $40,000, to
be determined at the 2024 Annual Meeting of Shareholders.

 Equity
Compensation Plan Information Table

 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, 2023.

 of securities to be issued upon exercise of outstanding options, warrants and rights (1)

 Weighted-average
 exercise price of outstanding options, warrants and rights (2)

 of securities remaining available for future issuance

 Plan
 Category

 Equity compensation plans approved
 by security holders

 846,875

 $
 8.20

 335,375

 Equity compensation plans not approved by security
 holders

 —

 N/A

 —

 Total

 846,875

 $
 8.20

 335,375

 (1)

 Reflects aggregate options outstanding under
 our 2007 Share Incentive Plan, 2016 Equity Incentive Plan and 2022 Equity Incentive Plan.

 (2)

 Calculation is exclusive of the value of any
 unvested restricted stock awards.

 Item
13.
 Certain
 Relationships and Related Transactions, and Director Independence.

 Transactions
with related persons, promoters and certain control persons.

 None.

Independence

 The
current members of our Board of Directors are Lawrence J. Waldman, Emmanuel Lakios, Raymond A. Nielsen, Robert M. Brill, Debra Wasser
and Ashraf Lotfi. Messrs. Waldman, Nielsen, Brill and Lotfi and Ms. Wasser have been determined to be "independent" as defined
under Rule 4200 of the Nasdaq Stock Market.

 Item
14.
 Principal
 Accountant Fees and Services.

 The
following presents fees for professional audit services rendered by Marcum, LLP, Certified Public Accountants, the Company's independent
registered public accounting firm for the years ended December 31, 2023 and 2022.

 2023

 2022

 Audit fees

 $
 198,275

 $
 181,500

 Audit-related fees

 55,002

 20,500

 All other fees

 -

 -

 Total
 fees

 $
 253,277

 $
 202,000

 Audit
Fees

 Audit
fees consisted of the review of the first three quarters and audit of the year-end.

 Audit-related
Fees

 Consisted
of the audit of the Company's defined contribution 401(k) plan and fees associated with registration statements and comfort letter.

 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.

 PART
IV

 Item
 15.

 Exhibits,
 Financial Statement Schedules

 3.1

 Certificate of Incorporation dated October 12, 1982 (Incorporated herein by reference to the Company's Form S-1 filed on July 3, 2007).

 3.2

 Certificate of Amendment of Certificate of Corporation, dated April 25, 1985 (Incorporated herein by reference to the Company's Form S-1 filed on July 3, 2007).

 3.3

 Certificate of Amendment of Certificate of Corporation, dated August 12, 1985 (Incorporated herein by reference to the Company's Form S-1 filed on July 3, 2007).

 3.4

 Certificate of Amendment of the Certificate of Incorporation, dated December 9, 2016 (Incorporated herein by reference the Company's Current Report on Form 8-K filed on December 14, 2016).

 3.5

 Amended and restated By-laws of CVD Equipment Corporation, dated as of October 5, 2016 (Incorporated herein by reference to the Company's Current Report on Form 8-K filed on October 11, 2016).

 4.1

 Description of the Company's Securities (Incorporated herein by reference to the Company's Annual Report on Form 10-K filed on March 30, 2020).

 10.1

 Lease Agreement, dated February 9, 2012, by and between FAE Holdings 411519R, LLC and the Company (Incorporated by reference from the Company's Report on Form 10-Q filed with the Commission on May 15, 2012).

 10.2

 Assignment Agreement, dated February 9, 2012, by and between FAE Holdings 411519R, LLC and the Company (Incorporated by reference from the Company's Report on Form 10-Q filed with the Commission on May 15, 2012).

 10.3

 Joint and Several Hazardous Material Guaranty and Indemnification Agreement, dated March 15, 2012, by and between FAE Holdings 411519R, LLC and the Company (Incorporated by reference from the Company's Report on Form 10-Q filed with the Commission on May 15, 2012).

 10.4

 Guaranty of Payment, dated March 15, 2012, by the Company (Incorporated by reference from the Company's Report on Form 10-Q filed with the Commission on May 15, 2012).

 10.5

 Agreement to Purchase and Sale, the building and real estate property located at 555 N Research Place, Central Islip, NY, dated March 29, 2021, by and between 555 N Research Corporation, a wholly-owned subsidiary of the Company, and Steel K, LLC. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q filed with the Commission on May 13, 2021).

 10.6

 Employment Agreement, dated June 1, 2021, by and between Emmanuel Lakios, the Company's President and Chief Executive Officer, and the Company. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q filed with the Commission on August 16, 2021).

 10.7

 Employment Agreement, dated June 1, 2021, by and between Thomas McNeill, the Company's Executive Vice President and Chief Financial Officer, and the Company. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q filed with the Commission on August 16, 2021).

 10.8

 Assignment, Assumption and Amendment Agreement dated as of July 26, 2021, by and between Town of Islip Industrial Development Agency, 555N Research Corporation and Steel 555 NRP, LLC. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q/A filed with the Commission on March 1, 2022).

 10.9

 Second Amended and Restated Lease and Project Agreement, dated as of July 1, 2021, by and between Town of Islip Industrial Development Agency and FAE HOLDINGS 411519R, LLC. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q/A filed with the Commission on March 1, 2022).

 10.10

 Agency Compliance Agreement, dated as of July 1, 2021, by and between Town of Islip Industrial Development Agency, CVD Equipment Corporation and CVD Materials Corporation. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q/A filed with the Commission on March 1, 2022).

 10.11

 Amended and Restated Sublease Agreement, dated as of July 26, 2021, by and between FAE HOLDINGS 411519R, LLC, CVD Equipment Corporation and CVD Materials Corporation. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q/A filed with the Commission on March 1, 2022).

 21.1

 List
 of Subsidiaries

 23.1**

 Consent
 of MARCUM, Certified Public Accountants and Advisors, A Professional Corporation (S-8).

 31.1**

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

 31.2**

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

 32.1**

 Section
 1350 Certification of Principal Executive Officer.

 32.2**

 Section
 1350 Certification of Principal Financial Officer.

 **

 CVD
 Equipment Corporation Executive Compensation Clawback Policy

 101.INS***

 Instance

 101.SCH***

 Taxonomy Extension Schema

 101.CAL***

 Taxonomy Extension Calculation

 101.DEF***

 Taxonomy Extension Definition

 101.LAB***

 Taxonomy Extension Labels

 101.PRE***

 Taxonomy Extension Presentation

 *
Management contract or compensatory plan or arrangement required

 **
Filed herewith

 ***
the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended,
and otherwise is not subject to liability under these sections.

 SIGNATURES

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

 DATE:

 March
 28, 2024

 CVD
 EQUIPMENT CORPORATION

 By:

 /s/

 Name:

 Lakios

 Title:

 President
 and Chief Executive Officer

 By:

 /s/
 Richard Catalano

 Name:

 Richard
 Catalano

 Title:

 Vice
 President, Chief Financial Officer and Secretary

 Principal
 Financial and Accounting Officer

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

 NAME

 POSITION

 DATE

 /s/

 President,
 Chief Executive Officer

 Lakios

 (Principal
 Executive Officer)

 /s/
 Lawrence J. Waldman

 Director,
 Chairman of the Board

 Lawrence
 J. Waldman

 /s/
 Raymond A. Nielsen

 Raymond
 A. Nielsen

 /s/
 Robert M. Brill

 Robert
 M. Brill

 /s/
 Debra Wasser

 Debra
 Wasser

 /s/
 Ashraf Lotfi

 Ashraf
 Lotfi

 CVD
EQUIPMENT CORPORATION AND SUBSIDIARies

 Page
 No.

 Report
 of Independent Registered Public Accounting Firm (PCAOB ID Number 688)

 Financial
 Statements:

 Balance Sheets as of December 31, 2023 and 2022

 Statements of Operations for the years ended December 31, 2023 and 2022

 Statements of Changes in Stockholders' Equity for the years ended December 31, 2023 and 2022

 Statements of Cash Flows for the years ended December 31, 2023 and 2022

 Notes
 to Consolidated Financial Statements

 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 To
the Shareholders and Board of Directors of

 CVD
Equipment Corporation and Subsidiaries

 Opinion
on the Financial Statements

 We
have audited the accompanying consolidated balance sheets of CVD Equipment Corporation and Subsidiaries (the "Company") as
of December 31, 2023 and 2022, the related consolidated statements of operations, changes in stockholders' equity and cash flows for each
of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements").
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December
31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023,
in conformity with accounting principles generally accepted in the United States of America.

 Basis
for Opinion

 These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

 Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.

 Critical
Audit Matters

 The
critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated
or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Recognition – Estimated Total Contract Costs

 Description
of the Matter

 As
discussed in Notes 2 and 3 to the consolidated financial statements, the Company recognizes revenue from the sale of systems ("System
Projects") over time by using an input method based on costs incurred as it best depicts the Company's progress toward satisfaction
of the performance obligation. Under this method, revenue arising from such contracts is recognized as work is performed based on the
ratio of costs incurred to date to the total estimated costs at completion of the performance obligations. The estimation of these costs
requires judgment by the Company given the unique product specifications and requirements for contracts related to the design, development,
and manufacture of the system. During the year ended December 31, 2023, the Company recognized approximately $18.2 million of revenue
recognized over time.

 Subjective
judgment is required by management in determining the assumptions in estimating the estimated costs to complete on contracts for which
revenue is recognized over time using a cost-to-cost model. Complex auditor judgment was required in evaluating initial cost estimates
and expected costs to complete.

 How
We Addressed the Matter in Our Audit

 The
primary procedures we performed to address this critical audit matter included the following:

 Obtaining
 an understanding of management's process in developing the cost estimates;

 Obtain
 and review contracts to ensure that the recognition of revenue over time was appropriate;

 Evaluating
 management's ability to reasonably estimate costs by performing a comparison of the actual costs to prior period estimates,
 including evaluating the timely identification of circumstances that may warrant a modification to the estimated costs;

 Evaluate
 management's methodologies and the consistency of management's methodologies over the life of the contracts;

 Tested
 the original estimated costs and profit margins on System Projects by obtaining the original estimates, comparing the actual costs
 and profit margins to the original estimates and investigating significant changes; and

 Tested
 the estimated costs to complete Systems Projects that were not completed during the year ended December 31, 2023 by comparing the
 estimated cost to complete at December 31, 2023 to actual cost incurred subsequent to December 31, 2023.

 /s/
Marcum llp

 Marcum LLP

 We
have served as the Company's auditor since 2019.

 Melville,
NY
March 28, 2024

 F- 1

 CVD

Balance Sheets

 As
of December 31, 2023 and 2022

 (in
thousands, except share amounts)

 2023

 2022

 ASSETS

 Current assets:

 Cash and cash
 equivalents

 $
 14,025

 $
 14,365

 Accounts receivable, net

 1,906

 3,788

 Contract assets

 1,604

 2,170

 Inventories, net

 4,454

 2,538

 Other
 current assets

 Total current assets

 22,841

 23,658

 Employee retention credit receivable

 -

 1,529

 Property, plant and equipment, net

 12,166

 12,596

 Intangible assets, net

 Other assets

 Total
 assets

 $
 35,025

 $
 37,912

 LIABILITIES AND STOCKHOLDERS'
 EQUITY

 Current liabilities:

 Accounts payable

 $
 1,203

 $
 1,454

 Accrued expenses

 1,765

 2,591

 Current maturities of long-term
 debt

 Deposits from purchasers
 of MesoScribe assets – note 15

 -

 liabilities

 4,908

 4,042

 Total current liabilities

 8,554

 8,164

 Long-term debt, net
 of current portion

 Total
 liabilities

 8,822

 8,513

 Commitments and contingencies (see note 13)

 -

 -

 Stockholders' equity:

 Common stock - $ 0.01 par
 value – 20,000,000 shares
authorized; issued and outstanding 6,824,511 at December 31,
2023 and 6,760,938 at December
 31, 2022

 Additional paid-in capital

 28,695

 27,712

 (Accumulated deficit) retained
 earnings

 ( 2,560
)

 1,620

 Total stockholders'
 equity

 26,203

 29,399

 Total liabilities and
 stockholders' equity

 $
 35,025

 $
 37,912

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

 F- 2

 CVD

Statements of Operations

 Years
ended December 31, 2023 and 2022

 (in
thousands, except per share amounts)

 2023

 2022

 $

 $

 Cost of revenue

 19,038

 19,186

 Gross profit

 5,071

 6,627

 Operating expenses:

 Research and development

 2,596

 1,906

 1,632

 1,216

 General and administrative

 5,451

 5,328

 Loss on disposition of
 Tantaline

 -

 Impairment
 charge

 -

 Total operating expenses

 9,952

 8,450

 Operating loss

 ( 4,881
)

 ( 1,823
)

 Other income (expense):

 Interest income

 Interest expenses

 ( 23
)

 ( 8
)

 Employee retention credits

 -

 1,529

 Foreign exchange income
 (loss)

 ( 95
)

 Other
 income

 Total other income,
 net

 1,603

 Loss before income tax

 ( 4,194
)

 ( 220
)

 Income tax (benefit)

 ( 14
)

 $
 ( 4,180
)

 $
 ( 224
)

 Loss per common share:

 Basic

 $
 ( 0.62
)

 $
 ( 0.03
)

 Diluted

 $
 ( 0.62
)

 $
 ( 0.03
)

 Weighted average number of shares:

 Basic

 6,788

 6,734

 Diluted

 6,788

 6,734

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

 F- 3

 CVD

Statements of Changes in Stockholders' Equity

 Years
ended December 31, 2023 and 2022

 (in
thousands, except share amounts)

 Common
 stock

 Additional
 paid-in

 (Accumulated Deficit) / Retained

 Shares

 Par
 Value

 Capital

 Earnings

 Total

 Balance at January 1, 2022

 6,723,438

 $

 $
 27,277

 $
 1,844

 $
 29,188

 -

 -

 -

 ( 224
)

 ( 224
)

 Stock-based compensation

 37,500

 -

 -

 Balance at December 31, 2022

 6,760,938

 $

 $
 27,712

 $
 1,620

 $
 29,399

 Balance

 6,760,938

 $

 $
 27,712

 $
 1,620

 $
 29,399

 -

 -

 -

 ( 4,180
)

 ( 4,180
)

 Stock-based compensation

 41,320

 -

 Exercise of stock options and
issuance
 of shares

 22,253

 -

 -

 Balance at December 31, 2023

 6,824,511

 $

 $
 28,695

 $
 ( 2,560
)

 $
 26,203

 Balance

 6,824,511

 $

 $
 28,695

 $
 ( 2,560
)

 $
 26,203

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

 F- 4

 C VD

Statements of Cash Flows

 Years
ended December 31, 2023 and 2022

 (in
thousands)

 2023

 2022

 Cash flows from operating activities:

 $
 ( 4,180
)

 $
 ( 224
)

 Adjustments to reconcile
 net loss to net cash (used in) provided by operating activities:

 Loss on disposition of
 Tantaline

 -

 Impairment charge

 -

 Stock-based compensation

 Depreciation and amortization

 Changes in operating assets
 and liabilities, net of effects of disposition of Tantaline:

 Accounts receivable

 1,841

 ( 2,342
)

 Contract assets

 Inventories

 ( 1,921
)

 ( 1,313
)

 Income tax receivable

 -

 Employee retention credit
 receivable

 1,529

 ( 1,529
)

 Other current assets

 ( 47
)

 ( 301
)

 Accounts payable

 ( 154
)

 Accrued expenses

 ( 679
)

 liabilities

 2,392

 Net cash (used in) provided
 by operating activities

 ( 206
)

 Cash flows from investing activities:

 Net cash used in disposition
 of Tantaline

 ( 312
)

 -

 Deposits from purchaser
 of MesoScribe assets

 -

 Purchases of property and
 equipment

 ( 418
)

 ( 665
)

 Capitalized patent costs

 -

 ( 53
)

 Net proceeds from sale
 of assets

 -

 Net cash used in investing
 activities

 ( 133
)

 ( 708
)

 Cash flows from financing activities:

 Proceeds from exercise
 of stock options

 -

 Payments
 of long-term debt

 ( 77
)

 ( 1,772
)

 Net cash used in financing
 activities

 ( 1
)

 ( 1,772
)

 Net decrease in cash and cash equivalents

 ( 340
)

 ( 2,286
)

 Cash and cash equivalents at beginning of year

 14,365

 16,651

 Cash and cash equivalents
 at end of year

 $
 14,025

 $
 14,365

 Supplemental disclosure of cash flow information:

 Income taxes paid

 $

 $

 Interest paid

 $

 $

 Non-cash investing and financing activities:

 Loan
 obtained for new equipment

 $
 -

 $

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

 F- 5

 CVD

 NOTES

 Note
1 – Business Description

 CVD
Equipment Corporation and its subsidiaries (the "Company") is a New York corporation. Its principal business activities include
 designing, developing, and manufacturing a broad range of chemical vapor deposition, physical vapor
transport, gas control, and other equipment and process solutions used to develop and manufacture materials and coatings for industrial
applications and research. Its products are used in production environments as well as research and development centers, both academic
and corporate.

 We
conduct our business through three reportable operating segments: i) CVD Equipment that supplies chemical vapor deposition, physical
vapor transport and thermal process equipment; ii) SDC that designs and manufactures ultra-high purity gas and chemical delivery control
systems; and iii) CVD Materials that provide products related to advanced materials and coatings.

 Note
2 - Summary of Significant Accounting Policies

 Basis
of Presentation

 The
accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America ("GAAP").

 Liquidity

 At
December 31, 2023, the Company had $ 14.0 million in cash and cash equivalents. The Company anticipates that the existing cash and cash
equivalents balance together with potential future income from operations, collections of existing accounts receivable, revenue from
its existing backlog of products as of this filing date, the sale of inventory on hand, deposits and down payments against significant
orders will be adequate to meet its working capital and capital equipment requirements, and its anticipated cash needs over the next
12 months from the date of issuance of the accompanying Form 10-K.

 Reclassifications

 In
addition, certain reclassifications have been made to the prior period consolidated financial statements to conform to the current period
presentation. These reclassifications had no effect on net (loss).

 Principles
of Consolidation

 The
consolidated financial statements include the accounts of CVD Equipment Corporation and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.

 F- 6

 CVD

 NOTES

 Note

 Use
of Estimates

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

 The
Company's significant estimates are the accounting for certain items such as revenues on long-term contracts recognized on the
input method, valuation of inventories at the lower of cost or net realizable value; allowance for credit losses; valuation allowances
for deferred tax assets, estimated lives and impairment considerations of long-lived assets and valuation of stock-based compensation.

Recognition

 In
accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 606 -
Revenue from Contracts with Customers ("ASC 606 "), the Company records revenue in an amount that reflects the consideration
to which the Company expects to be entitled in exchange for goods or services promised to its customers. Under ASC 606, the Company
follows a five-step model to: (1) identify the contract with the customer; (2) identify the performance obligations in the contract;
(3) determine the transaction price for the contract; (4) allocate the transaction price to the performance obligations; and (5) recognize
revenue using one of the following two methods:

 Over
time

 The
Company designs, manufactures and sells custom chemical vapor deposition, thermal process equipment and other equipment through contractual
agreements. These system sales require the Company to deliver functioning equipment that is generally completed within two to eighteen
months from commencement of order acceptance. For systems sales that meet the criteria to recognize revenue over time, the Company recognizes
revenue over time by using an input method based on costs incurred as it depicts the Company's progress toward satisfaction of
the performance obligation. For system sales that do not meet the criteria to recognize revenue over time based on the contract provisions,
the Company recognizes revenue based on point in time.

 Under
the over time method, revenue arising from fixed price contracts is recognized as work is performed based on the ratio of costs incurred
to date to the total estimated costs at completion of the performance obligations. Incurred costs include all direct material and labor
costs and those indirect costs related to contract performance, such as supplies, tools, repairs and depreciation costs. Contract material
costs are included in incurred costs when the project materials have been purchased or moved to work-in-process, and installed, as required
by the project's engineering design. Cost based input methods of revenue recognition require the Company to make estimates of costs
to complete the projects. In making such estimates, significant judgment is required to

 F- 7

 CVD

 NOTES

 Note

 evaluate
assumptions related to the costs to complete the projects, including materials, labor and other system costs. If the estimated total
costs on any contract are greater than the net contract revenues, the Company recognizes the entire estimated loss in the period the
loss becomes known and can be reasonably estimated. There were no material impairment losses recognized
on contract assets during the year ended December 31, 2023 and 2022.

 The
timing of revenue recognition, billings and collections results in accounts receivables, unbilled receivables or contract assets and
contract liabilities on our consolidated balance sheet. Under typical payment terms for our contracts accounted for over time, amounts
are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual
milestones.

 Under
ASC 606, payments received from customers in excess of revenue recognized to-date results in a contract liability. These contract liabilities
are not considered to represent a significant financing component of the contract because we believe these cash advances and deposits
are generally used to meet working capital demands which can be higher in the earlier stages of a contract. Also, advanced payments and
deposits provide us with some measure of assurance that the customer will perform on its obligations under the contract.

assets include unbilled amounts typically resulting from system sales under contracts and represents revenue recognized that exceeds
the amount billed to the customer.

liabilities include advance payments and billings in excess of revenue recognized. The Company typically receives down payments upon
receipt of order and progress payments as the system is manufactured.

assets and contract liabilities are classified as current as these contracts in progress are expected to be substantially completed within
the next twelve months.

 Point

 For
non-system sales of products and services, revenue is recognized at the point in time when control of the promised products or services
is transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in
exchange for those products or services (the transaction price). A performance obligation is a promise in a contract to transfer a distinct
product or service to a customer and is the unit of account under ASC 606, "Revenue from Contracts with Customers."

 For
any system equipment sales where the equipment would have an alternative use or where the contract provisions of the contract preclude
the use of over time revenue recognition, revenue is recognized at the point in time when control of the equipment is transferred to
the customer. For the year ended December 31, 2023 and 2022, all system equipment sales were recorded over time by using an input method.

 F- 8

 CVD

 NOTES

 Note

 Inventories

 Inventories
(raw materials, work-in-process and finished goods) are valued at the lower of cost (determined on the first-in, first-out method) or
net realizable value. Work-in-process and finished goods inventory reflect all accumulated production
costs, which are comprised of direct production costs and overhead, and is reduced by amounts recorded in cost of sales as the related
revenue is recognized. Indirect costs relating to long-term contracts, which include expenses such as general and administrative, are
charged to expense as incurred and are not included in our cost of sales or work-in-process and finished goods inventory.

 Obsolete
inventory or inventory in excess of management's estimated usage requirement is written down to its estimated net realizable value
if less than cost. The Company evaluates usage requirements by analyzing historical usage, anticipated demand, alternative uses of materials,
and other qualitative factors. Unanticipated changes in demand for the Company's products may require a write down of inventory,
which would be reflected in cost of sales in the period the revision is made.

 Product
Warranty

 The
Company typically provides standard warranty coverage on its systems for one year from the date of final acceptance or fifteen months
from the date of shipment by providing labor and parts necessary to repair the systems during the warranty period. The Company records
the estimated warranty cost when revenue is recognized on the related system. Warranty cost is included in "Cost of revenue"
in the consolidated statements of operations. The estimated warranty cost is based on the Company's historical cost. The Company
updates its warranty estimates based on actual costs incurred.

 Income
Taxes

 Deferred
tax assets and liabilities are determined based on the estimated future tax effects of temporary differences between the financial statements
and tax bases of assets and liabilities, as measured by using the future enacted tax rates. Deferred tax expense (benefit) is the result
of changes in the deferred tax assets and liabilities. The Company records a valuation allowance against deferred tax assets when it
is more likely than not that future tax benefits will not be utilized based on a lack of sufficient positive evidence.

 The
Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether
it is more likely than not the tax position will be sustained on examination by taxing authorities based on the technical merits of the
position and (2) for those positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax
benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.

 F- 9

 CVD

 NOTES

 Note

 The
Company's policy for global intangible low taxed income ("GILTI") is to treat such amounts as a period cost when incurred.

 Impairment
of Long-Lived Assets and Intangibles

 Long-lived
assets consist primarily of property, plant, and equipment. Intangibles consist of patents, copyrights and intellectual property, licensing
agreements and certifications. Long-lived assets are reviewed for impairment whenever events or circumstances indicate their carrying
value may not be recoverable. When such events or circumstances arise, an estimate of the future undiscounted cash flows produced by the
asset, or the appropriate grouping of assets, is compared to the asset's carrying value to determine if impairment exists. 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.

 Property,
Plant and Equipment

 Property,
plant and equipment are recorded at cost. Depreciation is determined on a straight-line basis for buildings and building improvements
over 5 to 39 years and for machinery and equipment over 5 to 8 years. Depreciation and amortization of assets used in manufacturing are
recorded in cost of revenue. Depreciation and amortization of all other assets are recorded as operating expenses.

 Intangible
Assets

 The
cost of intangible assets is being amortized on a straight-line basis over their estimated initial useful lives which ranged from 5 to
 20 years.

and Development

and development costs are expensed as incurred and include charges for the development of new technology and transition of existing technology
into new products.

 Earnings
Per Share

 Basic
earnings per common share is computed by dividing the net income by the weighted average number of shares of common stock outstanding
during each period. When applicable, diluted earnings per common share is determined using the weighted-average number of common shares
outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be adjusted
upon exercise of common stock options, unvested restricted shares, and warrants.

 F- 10

 CVD

 NOTES

 Note

 Potential
common shares issued are calculated using the treasury stock method, which recognizes the use of proceeds that could be obtained upon
the exercise of options and warrants in computing diluted earnings per share. It assumes that any proceeds would be used to purchase
common stock at the average market price of the common stock during the period.

 Cash
and Cash Equivalents

 The
Company had cash and cash equivalents of $ 14.0 million and $ 14.4 million at December 31, 2023 and 2022, respectively. The Company invests
excess cash in treasury bills, certificates of deposit or deposit accounts, all with original maturities of less than three months. Cash
equivalents were $ 12.1 million and $ 11.7 million at December 31, 2023 and 2022, respectively.

 The
Company places most of its temporary cash investments with financial institutions, which from time to time may exceed the Federal Deposit
Insurance Corporation limit. The amount in excess of the limit at both December 31, 2023 and 2022 was $ 1.5 million. The Company's
cash in our Denmark subsidiary exceeded the government guarantee limit by approximately $ 0.5 million at December 31, 2022.

 Concentration
of Credit Risk

 Financial
instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, and accounts
receivable. The Company places its cash equivalents with financial institutions and invests its excess cash primarily in treasury bills,
certificates of deposit or deposit accounts. The Company has established guidelines relative to credit ratings and maturities that seek
to maintain stability and liquidity.

 The
Company routinely assesses the financial strength of its customers. In accordance with the "expected credit loss"
model, the carrying amount of accounts receivable is reduced by a valuation allowance that reflects the best estimate of the amounts
the Company does not expect to collect. In addition to reviewing delinquent accounts receivable, the Company consider many factors in
estimating our reserve, including types of customers and their credit worthiness, experience and historical data adjusted for current
conditions and reasonable supportable forecasts. The Company records an allowance for credit losses based upon a specific review
of all significant outstanding invoices. For those invoices not specifically reviewed, provisions are provided based upon the collection
history, current economic trends and reasonable supportable forecasts.

 The
Company has accounts receivables from certain customers that exceed 10 %.
As of December 31, 2023, the accounts receivable balance includes amounts from three customers that represented 37.6 %, 13.0 %
and 12.8 % of total accounts receivable, and as of December 31, 2022, two customers that represented 35.7 %
and 30.3 %
of total accounts receivable.

 F- 11

 CVD

 NOTES

 Note

 Accounts
receivable is presented net of an allowance for credit losses of $ 36,000 as of both December 31, 2023 and 2022. The
allowance is based on prior experience and management's evaluation of future economic conditions. Measurement of credit losses
requires consideration of historical loss experience, including the need to adjust for changing business conditions, and judgments about
the probable effects of relevant observable data, including present economic conditions such as delinquency rates and the financial health
of specific customers. Future changes to the estimated allowance for doubtful accounts could be material to our results of operations
and financial condition.

 Sales
Concentrations

to a single customer in any one year can exceed 10 % of our total sales. There were three customers in the year ended December 31, 2023
that represented 14.3 %, 13.5 % and 10.9 % of our revenues, while there was one customer in the year ended December 31, 2022 that represented
 29.2 % of our revenues. The loss of a large customer could have a material adverse effect on the Company's business and financial
condition.

 Export
sales to customers represented approximately 17 % of sales for both years ended December 31, 2023 and 2022. Export sales in both 2023
and 2022 were primarily to customers in Europe and Asia. All contracts except those entered into by the Company's subsidiary in
Denmark are denominated in U.S. dollars. The Company has not entered into any foreign exchange contracts.

 Supplier
Risk

 The
Company relies on suppliers to manufacture many of the components and subassemblies used in its products. Quality or performance failures
of the Company's products or changes in its manufacturers' financial or business condition could disrupt the Company's
ability to supply quality products to its customers and thereby have a material and adverse effect on its business and operating results.
Some of the components and technologies used in the Company's products are purchased and licensed from a single source or a limited
number of sources. The loss of any of these suppliers may cause the Company to incur additional transition costs, result in delays in
the manufacturing and delivery of its products or cause it to carry excess or obsolete inventory and could cause it to redesign its products.

 Fair
Value of Financial Instruments

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

 F- 12

 CVD

 NOTES

 Note

 Stock-Based
Compensation

 The
Company records stock-based compensation in accordance with the provisions set forth in ASC 718, "Stock Compensation". ASC
718 requires companies to recognize the cost of employee services received in exchange for awards of equity instruments based upon the
grant date fair value of those awards over the vesting period. The Company uses the Black-Scholes option-pricing model to compute the
estimated fair value of option awards and includes assumptions regarding expected volatility, expected option term, dividend yields and
risk-free interest rates.

 Shipping
and Handling

 It
is the Company's policy to include freight charges billed to customers in total revenue. The amount included in revenue was $ 55,000
and $ 87,000 for the years ended December 31, 2023 and 2022, respectively.

 Recently
Adopted Accounting Standards

 In
June 2016, the FASB issued Accounting Standard Update ("ASU") 2016-13, Financial Instruments – Credit Losses (Topic
326), which require that financial assets measured at amortized cost be presented at the net amount expected to be collected. The
allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset to present the
net carrying value at the amount expected to be collected. The income statement reflects the measurement of credit losses for newly recognized
financial assets, as well as the increase or decreases of expected credit losses that have taken place during the period. The measurement
of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect
the collectability of the reported amount. The adoption of the ASU 2016-3 as of January 1, 2023 did not have a material impact on the
Company's financial position.

 Recently
Issued Accounting Standards

 In
December 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-09, " Income Taxes (Topic 740):
Improvements to Income Tax Disclosures," which requires public business entities to disclose additional information in specified
categories with respect to the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income
taxes. It also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those
items exceeds a specified threshold. In addition to new disclosures associated with the rate reconciliation, the ASU requires information
pertaining to taxes paid (net of refunds received) to be disaggregated for federal, state, and foreign taxes and further disaggregated
for specific jurisdictions to the extent the related amounts exceed a quantitative threshold. The ASU also describes items that need
to be disaggregated based on their nature, which is determined by reference to the item's fundamental or essential characteristics,
such as the transaction or event that triggered the establishment of the reconciling item and the activity with which the reconciling
item is associated. The ASU eliminates the historic requirement that entities disclose information concerning unrecognized tax benefits
having a reasonable possibility of

 F- 13

 CVD

 NOTES

 Note

 significantly
increasing or decreasing in the 12 months following the reporting date. This ASU is effective for annual periods beginning after December
15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. This
ASU should be applied on a prospective basis; however, retrospective application is permitted. We are currently evaluating the impact
that ASU 2023 – 09 will have on our consolidated financial statements.

 In
November 2023, the FASB issued ASU 2023-07, " Segment Reporting (Topic 280): Improvements to Reportable Segments,"
which aims to improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for
all public entities to enable investors to develop more decision-useful financial analyses. Currently, Topic280 requires that a public
entity disclose certain information about its reportable segments. For example, a public entity is required to report a measure of segment
profit or loss that the CODM uses to assess segment performance and make decisions about allocating resources. Topic 280 also requires
other specified segment items and amounts, such as depreciation, amortization, and depletion expense, to be disclosed under certain circumstances.
The amendments in this ASU do not change or remove those disclosure requirements and do not change how a public entity identifies its
operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments.
This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December
15, 2024. Early adoption is permitted. We are currently evaluating the impact that ASU 2023 – 07 will have on our consolidated
financial statements.

 The
Company believes there is no additional new accounting guidance adopted, but not yet effective that is relevant to the readers of our
financial statements. However, there are numerous new proposals under development which, if and when enacted, may have a significant
impact on our financial reporting.

 F- 14

 CVD

 NOTES

 Note
3 – Revenue

 The
following table represents a disaggregation of revenue from contracts by end markets for the years ended December 31, 2023 and 2022 (in
thousands):

of Disaggregation of Revenue

 Over
 time

 Point

 Total

 Year
 Ended December 31, 2023

 Over
 time

 Point

 Total

 Energy

 $
 4,901

 $

 $
 5,090

 Aerospace

 3,427

 1,469

 4,896

 Industrial

 6,123

 2,821

 8,944

 3,700

 1,479

 5,179

 Total

 $
 18,151

 $
 5,958

 $

 Over
 time

 Point

 Total

 Year
 Ended December 31, 2022

 Over
 time

 Point

 Total

 Energy

 $
 9,094

 $

 $
 9,152

 Aerospace

 1,527

 1,622

 Industrial

 5,961

 4,856

 10,817

 2,807

 1,415

 4,222

 Total

 $
 17,957

 $
 7,856

 $

 The
energy market includes customers involved in the manufacture of silicon carbide wafers and batteries. Aerospace market includes customers
that manufacture aircraft engines. Industrial end market consists of various end customers in diverse industries. Research market principally
represents customers that are universities and other research institutions.

 The
Company has unrecognized contract revenue of approximately $ 16.3 million at December 31, 2023, which it expects to recognize as revenue
within the next twelve months.

 Judgment
is required to evaluate assumptions including the amount of net contract revenues and the total estimated costs to determine our progress
towards contract completion and to calculate the corresponding amount of revenue to recognize.

 Changes
in estimates for sales of systems occur for a variety of reasons, including but not limited to (i) build accelerations or delays, (ii)
product cost forecast changes, (iii) cost related change orders or add-ons, or (iv) changes in other information used to estimate costs.
Changes in estimates may have a material effect on the Company's consolidated financial position and results of operations.

 F- 15

 CVD

 NOTES

 Note
3 – Revenue (continued)

assets and contract liabilities on input method type contracts in progress are summarized at December 31 as follows (in thousands):

of Cost and Estimated Earnings in Excess of Billings

 2023

 2022

 Costs incurred
 on contracts in progress

 $
 9,500

 $
 14,390

 Estimated
 earnings

 5,083

 10,926

 Costs and estimated earnings
 on uncompleted contracts

 14,583

 25,316

 Billings
 to date

 ( 17,553
)

 ( 26,925
)

 Net cost in excess of billings

 ( 2,970
)

 ( 1,609
)

 Deferred
 revenue related to non-systems contracts

 ( 334
)

 ( 263
)

 liability in excess of contract assets

 $
 ( 3,304
)

 $
 ( 1,872
)

 Included
 in accompanying consolidated balance sheets under the following captions (in thousands):

 assets

 $
 1,604

 $
 2,170

 liabilities

 $
 4,908

 $
 4,042

 Of
the contract liability balances at December 31, 2022 and December 31, 2021, $ 3.7
million and $ 1.7
million was recognized as revenue during the years ended December 31, 2023 and 2022, respectively. Contract assets at December 31,
2021 were $ 2.5
million.

 Note
4 - Inventories

 Inventories
as of December 31 consist of (in thousands):

of Inventories, net

 2023

 2022

 Raw materials

 $
 2,351

 $
 2,165

 Work-in-process

 1,248

 Finished goods

 -

 Total

 $
 4,454

 $
 2,538

 F- 16

 CVD

 NOTES

 Note
5 – Property, Plant and Equipment

 Major
classes of property, plant and equipment consist of the following as of December 31 (in thousands):

of Property, Plant and Equipment

 2023

 2022

 Land

 $
 2,220

 $
 2,220

 Buildings and improvements

 12,798

 12,530

 Machinery and equipment

 7,536

 7,810

 Construction in progress

 Totals
 at cost

 22,721

 22,572

 Less: accumulated depreciation

 ( 10,555
)

 ( 9,976
)

 Property, plant and equipment, net

 $
 12,166

 $
 12,596

 Machinery
and equipment also include furniture and fixtures and software.

 Depreciation
expense was $ 0.7 million and $ 0.8 million for the years ended December 31, 2023 and 2022, respectively.

 The
Company entered into an agreement with the Town of Islip Industrial Development Agency (Islip IDA) in July 2021 under which the Company
was granted tax incentives whereby the Company agreed to make payments in lieu of all real estate taxes and assessments (PILOT payments).
The agreement requires the Company to maintain certain employment levels at its Central Islip, New York facility. The agreement provides
for the Islip IDA to recapture tax incentives provided to the Company in certain circumstances. Any recapture of such tax benefits could
have a material adverse effect on the Company's financial position and future results of operations and cash flows.

 F- 17

 CVD

 NOTES

 Note
6 – Intangible Assets

 Intangible
assets consisted of the following (in thousands):

of Finite Lived Intangible Assets

31, 2023

 Cost

 Accumulated
 Amortization

 Net

 Patents

 $

 $

 $

31, 2022

 Cost

 Accumulated
 Amortization

 Net

 Patents

 $

 $

 $

 Amortization
expense was $ 0.1 million and $ 0.1 million in years ended December 31, 2023 and 2022, respectively, including costs of abandoned patent
applications.

 The
estimated amortization expense related to intangible assets for each of the five succeeding fiscal years and thereafter as of December
31, 2023 is approximately $ 1,000 per year.

 Note
7 – Accrued Expenses

 Accrued
expenses consist of the following as of December 31 (in thousands):

of Accrued Expenses

 2023

 2022

 Accrued wages and benefits

 $

 $

 Accrued vacation

 Other

 Total
 accrued expenses

 $
 1,765

 $
 2,591

 F- 18

 CVD

 NOTES

 Note
8 – Long-term Debt

 Long-term
debt as of December 31 consist of the following (in thousands, except percentages and amounts in notes):

of Long Term Debt

 2023

 2022

 Equipment loan payable in
 monthly repayments of $ 8 including interest at 6 % per annum

 $

 $

 Less: current maturities

 Long-term debt,
 net of current maturities

 $

 $

 In
September 2022, the Company entered into a loan agreement to fund the acquisition of machinery equipment in the amount of $ 0.4
million.

 Future
maturities of long-term debt as of December 31, 2023 are as follows (in thousands):

of Maturities of Long Term Debt

 2024

 $

 2025

 2026

 2027

 Total

 $

 Note
9 – Earnings per Share

 The
calculation of basic and diluted weighted average common shares outstanding as of December 31 is as follows (in thousands):

of Basic and Diluted Weighted Average Common Shares Outstanding

 2023

 2022

 Basic weighted average shares outstanding

 6,788

 6,734

 Effect of potentially
 dilutive share-based awards

 -

 -

 Diluted weighted average shares outstanding

 6,788

 6,734

 At
December 31, 2023, stock options to purchase 846,875 shares of common stock were outstanding and 335,375 were exercisable. At December
31, 2022, stock options to purchase 673,000 shares of common stock were outstanding and 265,000 were exercisable.

 At
December 31, 2023 and 2022, 846,875 and 673,000 stock options, respectively, were not included in the computation of diluted earnings
per share because their effect was antidilutive.

 F- 19

 CVD

 NOTES

 Note
10 – Income Taxes

 Loss
before income taxes are as follows:

of Loss Before Income Taxes

 2023

 2022

 Domestic

 $
 ( 4,073
)

 ( 596
)

 Foreign

 ( 121
)

 Total

 $
 ( 4,194
)

 $
 ( 220
)

 The
expense/(benefit) for income taxes for the years ended December 31 includes the following (in thousands):

of Components of Income Tax Expense (Benefit)

 2023

 2022

 Current:

 Federal

 $
 ( 16
)

 $

 State

 Total current tax provision

 ( 14
)

 Deferred:

 Federal

 -

 -

 State

 -

 -

 Total
 deferred tax provision

 -

 -

 Income tax (benefit)

 $
 ( 14
)

 $

 The
reconciliation of the federal statutory income tax rate to our effective tax rate for the years ended December 31 is as follows (in thousands):

of Effective Income Tax Rate Reconciliation

 2023

 2022

 Expected provision at federal statutory
 tax rate at 21 %

 $
 ( 881
)

 $
 ( 46
)

 Increase (decrease) in valuation allowance

 ( 33
)

 State and local taxes

 Foreign tax rate differential

 ( 1
)

 US taxation of foreign operations

 -

 Federal research and development credits

 ( 75
)

 ( 55
)

 Change in tax rates

 -

 Non-deductible expenses

 Disposition of Tantaline

 -

 Other

 ( 102
)

 Income tax (benefit)

 $
 ( 14
)

 $

 F- 20

 CVD

 NOTES

 Note
10 – Income Taxes (continued)

 The
tax effects of temporary differences giving rise to significant portions of the net deferred taxes as of December 31 are as follows (in
thousands):

of Deferred Tax Assets and Liabilities

 2023

 2022

 Deferred income tax assets:

 Net operating
 loss carryforwards

 $

 $

 R&D tax credit carryforwards

 1,863

 1,723

 Compensation costs

 Vacation accrual

 Intangible assets

 Capitalized research and
 development

 Other
 items

 Deferred income tax assets

 4,078

 3,035

 Less:
 valuation allowance

 ( 3,646
)

 ( 2,957
)

 Deferred
 income tax assets, net of valuation allowance

 Deferred incomes tax liability:

 Property, plant and equipment

 ( 365
)

 ( 11
)

 Prepaid
 expenses

 ( 67
)

 ( 67
)

 Deferred
 income tax asset, net

 $
 -

 $
 -

 In
assessing the realizability of deferred tax assets, management considers whether it is more likely than not that the deferred tax assets
will be realized. The ultimate realization of deferred tax assets is based on the assessment of available positive and negative evidence
to estimate whether sufficient future taxable income will be generated to permit the utilization of existing deferred tax assets. The
Company considered all positive and negative evidence when determining the amount of the net deferred tax assets that are more likely
than not to be realized. This evidence includes, but is not limited to, historical earnings, scheduled reversal of taxable temporary
differences, tax planning strategies and projected future taxable income A significant piece of objective negative evidence evaluated
was the cumulative loss incurred over the prior three-year period ended December 31, 2023. Such objective evidence limits the ability
to consider subjective evidence such as our projections for future growth. Based on this assessment, we maintained a full valuation allowance
against our net deferred tax assets as of December 31, 2023, and 2022. If these estimates and assumptions change in the future, we may
be required to reduce our existing valuation allowance resulting in less income tax expense.

 For
the year ended December 31, 2023, the valuation allowance increased by approximately $ 0.7 million from the prior year primarily from
current year operating losses for which no tax benefit was provided.

 F- 21

 CVD

 NOTES

 Note
10 – Income Taxes (continued)

 At
December 31, 2023, the Company had $ 4.0 million of U.S. federal net operating loss carryforwards. These net operating losses have an
indefinite carryforward period but are only available to offset 80% of future taxable income. The Company also has $ 1.9 million of federal
research and development tax credits which expire in varying amounts in tax years 2028 through 2042.

 The
Company applies the applicable authoritative guidance which prescribes a comprehensive model for the manner in which a company should
recognize, measure, present and disclose in its financial statements all material uncertain tax positions that the Company has taken
or expects to take on a tax return. As of December 31, 2023 and 2022, the Company had no uncertain tax positions. The Company does not
expect that its unrecognized tax benefits will significantly increase or decrease within twelve months.

 The
Company files federal income tax returns and income tax returns in various state and local tax jurisdictions and in Denmark. The federal
tax years open to examination are 2020 to 2023. The Company's state and local tax years that are open to tax examination are generally
2019 to 2023.

 The
Inflation Reduction Act ("IRA") and Chips and Science Act ("CHIPS Act") were both enacted in August 2022. The
IRA introduced new provisions including a 15% corporate alternative minimum tax for certain large corporations that have at least an
average of $1 billion adjusted financial statement income over a consecutive three-tax-year period and a 1% excise tax surcharge on stock
repurchases. The CHIPS Act provides a variety of incentives associated with investments in domestic semiconductor manufacturing and related
activities. Both the IRA and CHIPS Act are applicable for tax years beginning after December 31, 2022 and had no impact to the Company's
consolidated financial statements for the years ended December 31, 2023 and 2022.

 Note
11 – Employee Retention Credit

2022, the Company conducted an analysis as to whether it was entitled to employee retention credits ("ERC") under the CARES
Act as amended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Plan Act of 2021. Based on the analysis,
the Company determined that it was entitled to an ERC of approximately $ 1.5 million related to payroll paid in the first and third quarters
of 2021 under the applicable Internal Revenue Service regulations related to ERCs.

 As
ERCs are not within the scope of ASC 740, Income Taxes, the Company has chosen to account for the ERCs by analogizing to the International
Standard IAS 20, Accounting for Government Grants and Disclosure of Government Assistance. In accordance with IAS 20, an entity
recognizes government grants only when there is reasonable assurance that the entity will comply with the conditions attached to them
and the grants will be received. Accordingly, the Company recognized a non-current receivable of $ 1.5 million as of December 31, 2022
and other income of $ 1.5 million for the year ended December 31, 2022. The Company received the ERC credit in July 2023.

 F- 22

 CVD

 NOTES

 Note
12 – Stock-Based Compensation

 A
summary of the Company's Share Incentive Plans are as follows:

 2007
Share Incentive Plan

 On
December 12, 2007, shareholders approved the Company's 2007 Share Incentive Plan ("2017 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 2017 Incentive Plan through December 12, 2017. The Plan expired in December 2017. As of December 31, 2023, there
were 120,000 options outstanding under this plan.

 2016
Share Incentive Plan

 On
December 9, 2016, shareholders approved the Company's 2016 Share Incentive Plan ("2016 Incentive Plan"), in connection
therewith, 750,000 shares of the Company's common stock are reserved for issuance pursuant to options or restricted stock that
may be granted under the 2016 Incentive Plan through December 9, 2026. As of December 31, 2023, there were 442,125 options outstanding
under this plan.

 2022
Share Incentive Plan

 On
July 14, 2022, shareholders approved the Company's 2022 Share Incentive Plan ("2022 Incentive Plan"), in connection
therewith, 515,000 shares of the Company's common stock are reserved for issuance pursuant to options or restricted stock that
may be granted under the 2022 Incentive Plan through July 14, 2032. As of December 31, 2023, there were 284,750 options outstanding under
this plan.

 Under
the 2016 and 2022 Share Incentive Plans, 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.

 As
of December 31, 2023, there were 26,948 shares available for grant under the 2016 Equity Incentive Plan and 188,930 shares available
for grant under the 2022 Equity Incentive Plan.

 F- 23

 CVD

 NOTES

 Note
12 – Stock-Based Compensation (continued)

 The
Company recorded stock-based compensation of $ 0.9 million and $ 0.4 million for the years ended December 31, 2023 and 2022, respectively,
that were included in the following line items in our Consolidated Statements of Operations (in thousands):

of Stock Based Compensation

 2023

 2022

 Cost of revenue

 $

 $

 Research and development

 General and administrative

 Total stock-based compensation

 $

 $

 Stock-based
compensation expense in both years included approximately $ 0.2 million related to restricted stock awards pursuant to a Director Compensation
plan discussed below. The Company recognizes forfeitures of stock awards as they occur.

 For
the year ended December 31, 2023, the Company granted 254,000 stock options, vesting 25 % per year over four years, with a ten-year life.
The Company determined the fair value of stock options granted during the year ended December 31, 2023 is based upon weighted average
assumptions as provided below.

of Weighted Average Assumptions

 Stock price

 $
 14.02

 Exercise price

 $
 14.02

 Dividend yield

 %

 Expected volatility

 %

 Risk-free interest rate

 3.39
 %

 Expected life (in years)

 6.00

 The
expected life is the number of years the Company estimates that the awards will be outstanding based on the simplified method that considers
the vesting period and contractual period of the option. The Company has 846,875 of outstanding stock options under the three plans at
December 31, 2023.

 F- 24

 CVD

 NOTES

 Note
12 – Stock-Based Compensation (continued)

 The
following table summarizes stock options awards for the years ended December 31, 2023 and 2022:

of Stock Options Awards

 Awards

(in Shares)

Average

 Price

 Outstanding at December 31, 2021

 618,500

 $
 11.26

 Granted

 198,500

 5.04

 Expired / cancelled

 ( 144,000
)

 11.72

 Exercised

 -

 -

 Outstanding at December 31, 2022

 673,000

 5.70

 Granted

 254,000

 14.02

 Expired / cancelled

 ( 44,500
)

 6.57

 Exercised

 ( 35,625
)

 4.53

 Outstanding at December 31, 2023

 846,875

 8.20

 The
following table summarizes information about the outstanding and exercisable options at December 31, 2023:

of Outstanding and Exercisable Options Ranges of Exercise Prices

 Options Outstanding

 Options Exercisable

 Average

 Average

 Average

 Remaining

 Intrinsic

 Intrinsic

 Price Range

 Outstanding

 Contractual

 Price

 Value

 Exercisable

 Price

 Value

 $ 4.00 - 7.00

 463,375

 7.9

 $
 4.55

 $
 76,655

 195,375

 $
 4.47

 $
 37,064

 $ 7.01 - 10.00

 20,000

 4.3

 $
 8.07

 $
 -

 20,000

 $
 8.07

 $
 -

 $ 10.01 - 13.00

 130,000

 4.0

 $
 11.51

 $
 -

 120,000

 $
 10.52

 $
 -

 $ 13.01 - 16.00

 233,500

 9.2

 $
 14.11

 $
 -

 -

 $
 -

 $
 -

 As
of December 31, 2023, there was $ 2.4 million of unrecognized compensation costs related to stock options expected to be recognized over
a weighted average period of 2.6 years.

 Restricted
Stock Awards

 Pursuant
to the Director Compensation plan approved on October 11, 2021, each of the five independent directors is entitled to compensation
for an annual equity retainer in the amount of $ 40,000 per director, to be automatically granted on the date of the Company's annual
meeting of shareholders.

 F- 25

 CVD

 NOTES

 Note
12 – Stock-Based Compensation (continued)

 The
following table summarizes restricted stock awards for the years ended December 31, 2023 and 2022:

of Restricted Stock Awards

 Average Grant

 Shares of

 Date Fair

 Restricted
 Stock

 Value

 Unvested outstanding at January 1, 2022

 -

 $
 -

 Granted

 32,000

 5.02

 Vested

 ( 32,000
)

 5.02

 Forfeited or cancelled

 -

 -

 Unvested outstanding at December 31, 2022

 -

 -

 Granted

 41,320

 6.65

 Vested

 ( 24,187
)

 6.81

 Forfeited or cancelled

 -

 -

 Unvested outstanding
 at December 31, 2023

 17,133

 $
 6.53

 The
fair value of the restricted stock awards is recorded as stock-based compensation expense over the one-year vesting period and totaled
$ 0.17 million $ 0.16 million for the years ending December 31, 2023 and 2022, respectively.

 Restricted
Stock Units

 In
prior years, the Company issued restricted stock units or RSUs. During the year ended December 31, 2022, 5,500 RSUs vested which had
an intrinsic value of $ 22,745. No restricted stock units vested during the year ended December 31, 2023 and there were no RSUs outstanding
as of December 31, 2023 and 2022.

 Note
13 – Defined Contribution Plan

 The
Company maintains a 401(k) Plan for the benefit of all eligible employees. All employees as of the effective date of the 401(k) Plan
became eligible. An employee is eligible to become a participant after three months of continuous service.

 Participants
may elect to contribute from their compensation any amount up to the maximum deferral allowed by the Internal Revenue Code. Employer
contributions are optional.

 Effective
July 1, 2022, the Company implemented a matching contribution of 50 % of an employee's contributions up to 6 % of their compensation.
The Company recorded compensation expense of $ 243,000 and $ 90,000 during the years ended December 31, 2023 and 2022, respectively, for
matching contributions to the 401(k) plan.

 No
discretionary employer contribution has been made for 2023 and 2022.

 F- 26

 CVD

 NOTES

 Note
14 – Segment Reporting

 The
Company operates through three segments: CVD Equipment, Stainless Design Concepts ("SDC") and CVD Materials. The CVD Equipment
segment manufactures and sells chemical vapor deposition, physical vapor transport and similar equipment. SDC manufactures ultra-high
purity gas control systems. The CVD Materials segment provides material coatings for aerospace, medical, electronic and other applications.
The Company evaluates performance based on several factors, of which the primary financial measure is income (loss) before taxes.

 The
Company's corporate administration activities are reported in the "Corporate" column. These activities primarily include
expenses related to certain corporate officers and support staff, expenses related to the Company's Board of Directors, stock option
expense for shares granted to corporate administration employees, certain consulting expenses, investor and shareholder relations activities,
and all of the Company's legal, auditing and professional fees, and interest expense.

 Elimination
entries included in the "Eliminations" column represent intersegment revenues and cost of revenues that are eliminated in
consolidation. Intersegment sales for the year ended December 31, 2023 and 2022 by the SDC segment to the CVD Equipment segment were
$ 439,000 and $ 573,000, respectively. Intersegment sales by the CVD Equipment segment to the SDC
segment for the year ended December 31, 2023 were $ 109,000. There were no intersegment sales by the CVD Equipment segment to the SDC
segment during the year ended December 31, 2022.

 The
following table presents certain information regarding the Company's segments as of and for the years ended December 31, 2023 and
December 31, 2022 (in thousands, including amount in notes):

of Segments

 2023

 CVD
 Equipment

 SDC

 CVD
 Materials

 Corporate

 Eliminations

 Assets

 $
 31,401

 $
 3,468

 $

 $
 -

 $
 ( 55
)

 $
 35,025

 $
 16,334

 $
 7,139

 $
 1,184

 $
 -

 $
 ( 548
)

 $

 Operating (loss)
income (1)

 ( 2,129
)

 1,677

 ( 193
)

 ( 4,118
)

 ( 118
)

 ( 4,881
)

 Pretax (loss) income (1)

 ( 2,070
)

 1,677

 ( 141
)

 ( 3,542
)

 ( 118
)

 ( 4,194
)

 Depreciation and amortization

 $

 $

 $

 $
 -

 $
 -

 $

 Purchases of property,
plant & equipment

 $

 $

 $
 -

 $
 -

 $
 -

 $

 2022

 CVD
 Equipment

 SDC

 CVD
 Materials

 Corporate

 Eliminations

 Assets

 $
 31,622

 $
 4,149

 $
 2,099

 $
 -

 $

 $
 37,912

 $
 16,674

 $
 6,541

 $
 3,171

 $
 -

 $
 ( 573
)

 $

 Operating (loss) income

 ( 1,430
)

 1,546

 1,050

 ( 2,989
)

 -

 ( 1,823
)

 Pretax (loss) income (2)

 ( 156
)

 1,849

 1,076

 ( 2,989
)

 -

 ( 220
)

 Depreciation and amortization

 $

 $

 $

 $
 -

 $
 -

 $

 Purchases of property, plant & equipment (3)

 $

 $

 $

 $
 -

 $
 -

 $
 -

 (1)

 CVD
 Materials segment includes loss on sale of Tantaline of $ 0.2 million and an impairment charge related to MesoScribe fixed assets
 of $ 0.1 million.

 (2)

 Includes
 other income related to ERCs of $ 1,103, $ 303 and $ 123 for the CVD, SDC and Materials segments, respectively.

 (3)

 Include
 $ 0.4 million of purchased equipment financed with a loan

 F- 27

 CVD

 NOTES

 Note
15 – CVD Materials – Tantaline and MesoScribe Subsidiaries

 Tantaline
Subsidiary

 On
May 26, 2023, the Company sold its Tantaline subsidiary located in Nordborg, Denmark in exchange for a nominal amount at closing and
an earn-out provision based on any net income that Tantaline may earn during the five-year period ending December 31, 2027. The Company
recorded a loss of $ 0.2 million upon the sale. Any earn-out amounts will be recognized when and if any such amounts become probable of
receipt.

 The
decision to sell Tantaline was based on the Company's ongoing strategy to focus on the equipment business consisting of the CVD
Equipment and SDC segments and reduce its focus on the non-core CVD Materials business.

 Including
the loss on disposition of $ 0.2 million, the revenues and net income of Tantaline were $ 0.5 million and $ 0.1 million, respectively, for
the year ended December 31, 2023. The total assets and total liabilities of the Tantaline subsidiary were $ 1.1 million and $ 0.4 million
as of December 31, 2022.

 MesoScribe
Subsidiary

 On
August 8, 2023, the Company entered into a Purchase and License Agreement (the "Agreement") with a third-party. Pursuant
to the Agreement, the Company will sell certain proprietary assets relating to its plasma spray technology and material deposition system
and grant a non-exclusive license to use certain of the Company's related intellectual property as more fully described in the
Agreement, for an aggregate purchase price of $ 0.9 million. The purchase price is payable in several installments and contingent upon
certain performance metrics and other milestones.

 The
Company will continue to fulfill remaining orders for MesoScribe products through the end of 2024 at which time it plans to cease the
remaining operations of MesoScribe and dispose of any remaining equipment. During the year ended December 31, 2023, the Company recorded
an impairment charge of $ 0.1 million for certain equipment of MesoScribe based on its decision to cease the operations of MesoScribe
upon fulfillment of remaining orders. There were no impairment charges recorded in 2022.

 The
Company received payments under the Agreement in the amount of $ 0.6 million which has been reflected as "deposits from purchaser"
in the accompanying consolidated balance sheet as of December 31, 2023. The Company expects the transaction to be completed in 2024 with
the shipment of the equipment to the purchaser.

 The
revenues and net income of MesoScribe were $ 0.7 million and $ 33,000 for the year ended December 31, 2023, including the impairment charge
of $ 0.1 million.

 The
total assets and total liabilities of the MesoScribe subsidiary were $ 0.2 million and $ 0.7 million, respectively, as of December 31,
2023 and $ 0.9 million and $ 0.1 million, respectively, as of December 31, 2022.

 F- 28

 CVD

 NOTES

 Note
16 – Risks and Uncertainties

 The
Company currently operates in a challenging economic environment as the global economy continues to confront the remaining impacts from
the pandemic, geopolitical conflicts, inflationary pressures, and adverse supply chain disruptions. The specific impacts on the Company
have included:

 Significant
 geopolitical developments across Europe and Asia (including the war in Ukraine) have and may continue to restrict the Company's
 ability to procure raw materials and components such as nickel and integrated circuits, as well as impact the Company's ability
 to sell its products into China, Russia and other Eastern European and Asian regions.

 Supply
 chain disruptions have led to much longer lead times to acquire raw materials for production and has led to inflationary pressures
 in both materials and labor. These supply chain disruptions have impacted the Company's ability to recognize revenue timelier
 as it delays the Company's manufacturing processes.

 While
management has initiated actions to mitigate the potential negative impacts to its revenue and profitability, the Company is unable to
predict the impact that the above uncertainties may have on its future results of operations and cash flows.

 F- 29