CPS TECHNOLOGIES CORPDE

(a) Documents filed as part of this Form 10-K.

1. Financial Statements

The financial statements filed as part of this Form 10-K are listed on the Index to Financial Statements of this Form 10-K.

2. Exhibits

The exhibits to this Form 10-K are listed on the Exhibit Index of this Form 10-K.

EXHIBIT INDEX

• Incorporated herein by reference.

(1) Management Contract or compensatory plan or arrangement filed as an exhibit to this Form pursuant to Items 14(a) and 14(c) of Form 10-K.

SIGNATURES

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

Pursuant to the Requirements of the Securities Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

INDEX TO FINANCIAL STATEMENTS

OF

Report of Independent Registered Public Accounting Firm

Balance Sheets as of December 30, 2023 and December 31, 2022

Statements of Operations for the years ended December 30, 2023 and December 31, 2022

Statements of Stockholders’ Equity for the years ended December 30, 2023 and December 31, 2022

Statements of Cash Flows for the years ended December 30, 2023 and December 31, 2022

Notes to Financial Statements

To the Board of Directors and Stockholders of CPS Technologies Corporation

Opinion on the Financial Statements

We have audited the accompanying balance sheets of CPS Technologies Corporation (the Company) as of December 30, 2023 and December 31, 2022, the related statements of operations, stockholders’ equity and cash flows for the years then ended, 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 30, 2023 and December 31, 2022, and the results of its operations and its cash flows for the years then ended, 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 audit 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 Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter 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 matter below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which it relates.

Reserves for product sales returns

Description of the Matter

As described in Notes 2 and 6 to the financial statements, reserves for product sales returns are recorded based on returns history and specific circumstances in which the Company anticipates returns to occur. During 2023, the Company became aware of a quality matter with products sold to a major customer that resulted in product returns and the issuance of credits to the customer.

How We Addressed the Matter in Our Audit

Our audit procedures relating to the Company’s product returns liability included, but were not limited to, the following:

We obtained management’s calculation supporting the product returns liability and performed procedures to address the completeness and accuracy of data applied as well as the reasonableness of assumptions and judgments made by management. Specifically, we performed testing to identify the scope of product sales subject to quality concerns including analysis of the sales of the particular part sold, testing to identify the remaining inventory on hand with potential quality concerns, testing the mathematical accuracy of the calculation as well as performing sensitivity analysis to assess the effect of changes in assumptions.

We also reviewed correspondence between the Company’s management and the customer which the specific quality concern was identified and confirmed accounts receivable balances for a sample of invoices outstanding with the customer.

We have served as the Company's auditor since 2005.

/s/Wolf & Company, P.C.

Boston, Massachusetts

March 13, 2024

BALANCE SHEETS

(continued)

BALANCE SHEETS

STATEMENTS OF OPERATIONS

STATEMENTS OF STOCKHOLDERS’ EQUITY

STATEMENTS OF CASH FLOWS

CPS Technologies Corp.

Years Ended December 30, 2023 and December 31, 2022

Notes to Financial Statements

(1) Nature of Business

CPS Technologies Corp. (the ‘Company’ or ‘CPS’) provides advanced material solutions to the transportation, automotive, energy, computing/internet, telecommunications, aerospace, defense and oil and gas end markets.

Our primary material solution is metal matrix composites. We design, manufacture and sell custom metal matrix composite components which improve the performance and reliability of systems in these end markets.

(2) Summary of Significant Accounting Policies

(2)(a) Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity ofthree months or less at the date of purchase to be cash equivalents.

(2)(b) Accounts Receivable

The Company reports its accounts receivable at the invoiced amount less an allowance for credit losses. The Company’s management provides appropriate provisions for uncollectible accounts based upon factors surrounding the credit risk and activity of specific customers, historical trends, economic conditions and other information to estimate future expected losses. Adjustments to the allowance are charged to operations in the period in which information becomes available that** mayaffect the allowance. The Company maintains an allowance for credit losses of $10,000 as of December 30, 2023and December 31, 2022.**

(2)(b)(1) Accounts Receivable-Other

As of** December 30, 2023** this amount was primarily VAT paid by CPS, but due to be repaid by its European customers with future shipments. In2022 the Company filed for the Employee Retention Tax Credit (ERTC) in the amount of $641,086. This credit was still due from the Internal Revenue Service (“IRS”) on** December 31, 2022** however was collected in2023.

(2)(c) Inventories

Inventories are stated at the lower of cost (cost is based on standard costs which approximate actual costs), as determined under thefirst-in,first-out method (FIFO), or net realizable value. A reserve for obsolete inventories is based on factors regarding the sales and usage of such inventories, including inventories manufactured for specific customers. The Company’s general obsolescence policy is to reserve against obsolete inventory when there has beenno activity on a particular part for atwelve month period and there areno expected customer orders.

(2)(d) Property and Equipment

Property and equipment are stated at cost. Depreciation of equipment is calculated on a straight-line basis over the estimated useful life, generally five years for production equipment andthree tofive years for furniture and office equipment. Leasehold improvements are depreciated over the shorter of the lease term or their useful life. Maintenance and repairs are charged to expense as incurred. Upon retirement or sale, the cost and related accumulated depreciation or amortization are removed from their respective accounts. Any gains or losses on the disposition of property and equipment are included in the results of operations in the period in which they occur.

(2)(e) Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts** maynot be recovered. Recoverability is assessed based on estimated undiscounted future cash flows. As of** December 30, 2023and December 31, 2022,**the Company believes that there has beenno impairment of its long-lived assets.

(2)(f) Revenue Recognition

Revenue is recognized in accordance with thefive-step method under Accounting Standards Codification (ASC)606, “Revenue from Contracts with Customers.”

Identifying the Contract with the Customer

The Company identifies contracts with customers as agreements that create enforceable rights and obligations. In the case of a few large customers the Company has executed long-term Master Sales Agreements (“MSA”). These are umbrella agreements which typically define the terms and conditions under which a customer can order goods from CPS. These in themselves donot constitute a contract asno products are committed to be transferred and the customer hasno obligation to make payments. In the case of SBIRs an enforceable contract is signed by both the customer and CPS.

The Company contract is only enforceable once both parties have approved it and is usually in the form of a written purchase order from a customer combined with acknowledgement from the Company.

In cases without an MSA, the customer submits a blueprint for a product, the Company provides a quote and the customer responds with a purchase order. In these cases the Company’s acceptance of the purchase order constitutes an enforceable contract.

Identifying the Performance Obligations in the Contract

For each contract, the Company considers the promise to transfer products, each of which are distinct, to be the identified performance obligations. For SBIRs the Company is obligated to provide certain services over the life of the agreement and the customer is obligated to pay for those services, generally monthly, as they are performed.

Shipping and handling activities for which the Company is responsible arenot a separate promised service but instead are activities to fulfill the entity’s promise to transfer goods. Shipping and handling fees will be recognized at the same time as the related performance obligations are satisfied.

The Company provides an assurance-type warranty. This guarantees that the product functions as promised and meets specifications. Under its terms and conditions the Company offers a30 day warranty and replaces defective or non-conforming products. The expense of replacement is recorded at the time the Company agrees to replace a defective or non-conforming product. This assurance type warranty isnot considered to be a distinct performance obligation.

Determining the Transaction Price

The Company determines the transaction price as the amount of consideration specified in the contract that it expects to receive in exchange for transferring promised goods or services to the customer. Amounts collected from customers for sales value added and other taxes are excluded from the transaction prices. Product sales are recorded net of trade discounts and sales returns. The Company will establish a reserve for product returns when necessary based on returns history and specific circumstances in which the Company anticipates returns to occur. Such product return reserves are recorded as a reduction to revenue.

If a contract includes a variable amount, such as a rebate, then the Company estimates the transaction price using either the expected value or the most likely amount of consideration to be received, depending upon the specific facts and circumstances. The Company includes estimated variable consideration in the transaction price only to the extent it is probable that a significant reversal of revenue willnot occur when the uncertainty is resolved. The Company updates its estimate of variable consideration at the end of each reporting period to reflect changes in facts and circumstances. As of** December 30, 2023**there areno contracts with variable consideration.

When credit is granted to customers, payment is typically due30 to90 days from billing and accordingly our contracts with customers donot include a significant financing component.

Allocating the Transaction Price to the Performance Obligations

In virtually all cases the transaction price is tied to a specific product or service in the contract obviating the need for any allocation.

Recognizing Revenue When (or as) the Performance Obligations are Satisfied

The Company recognizes revenue at the point in time when it transfers control of the promised goods or services to the customer, which typically occurs once the product has shipped or has been delivered to the customer or the service has been performed. Occasionally, for the purpose of ensuring a steady flow of product, the Company ships products on consignment. In these instances, delivery is deemed to have occurred when the customer pulls inventory out of the warehouse for use in their production, or upon a specified period of time as agreed upon by both parties. As of** December 30, 2023**there areno products on consignment.

The Company generally expenses sales commissions when incurred because the amortization period would have beenone year or less. The costs are recorded within, selling, general and administrative expenses.

The Company doesnot disclose the value of unsatisfied performance obligations for contracts with an original expected length ofone year or less.

(2)(g) Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recorded for the expected future tax consequences of temporary differences between the financial reporting and income tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in affect when the differences reverse. A valuation allowance is established to reduce net deferred tax assets to the amount expected to be realized.

The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. As of** December 30, 2023and December 31, 2022,the Company hasno accruals for interest or penalties related to income tax matters. The Company doesnot have any uncertain tax positions at December 30, 2023or December 31, 2022**which required accrual or disclosure.

(2)(h) Net Income Per Common Share

Basic net income per common share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per common share is calculated by dividing net income by the sum of the weighted average number of common shares plus additional common shares that would have been outstanding if potential dilutive common shares had been issued for granted stock option and stock purchase rights. Common stock equivalents are excluded from the diluted calculations when a net loss is incurred as they would be anti-dilutive.

(2)(i) Reclassification

Certain amounts in prior year’s financial statements have been reclassified to conform to the current year’s presentation.

(2)(j) Recent Accounting Pronouncements

In the normal course of business, management evaluates all the new accounting pronouncements issued by the Financial Accounting Standard Board (“FASB”). Effective* January 1, 2023,*the Company adopted FASB Accounting Standards Update (“ASU”)2016-13, Measurement of Credit Losses on Financial Instruments, which changed the way entities recognize credit losses of most financial assets. Short-term and long-term financial assets, as defined by the standard, are impacted by immediate recognition of estimated credit losses in the financial statements, reflecting the net amount expected to be collected. The adoption of this standard had an immaterial impact on our financial statements. Management doesnot expect any of the recently issued accounting pronouncements, which havenot already been adopted, to have a material impact on the Company’s financial statements.

(2)(k) Use of Estimates in the Preparation of Financial Statements

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 amounts of revenues and expenses recorded during the reporting period. Such estimates are adjusted by management periodically as a result of existing or anticipated economic changes which effect, or** may**effect, the Company’s financial statements. Actual results could differ from these estimates.

(2)(l) Fiscal Year-End

The Company’s fiscal year end is the last Saturday in** Decemberwhich could result in a52** or53 week year. Fiscal year2023 consisted of52 weeks and2022 consisted of53 weeks.

(2)(m) Share-Based Payments

The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. That cost is recognized over the period during which an employee is required to provide services in exchange for the award, the requisite service period (usually the vesting period). The Company provides an estimate of forfeitures at initial grant date, and this estimated forfeiture rate is adjusted periodically based on actual forfeiture experience. The Company uses the Black-Scholes option pricing model to determine the fair value of stock options granted.

(2)(n) Segment Reporting

The Company views its operations and manages its business asone segment. The Company produces and sells advanced material solutions, primarily metal matrix composites, to assemblers of high density electronics and other specialty components and subassemblies. The Company also assembles housings and packages for hybrid circuits, selling to the same customers mentioned above. These customers represent a single market or segment with similar stringent and well-defined requirements. The Company’s customers, in turn, sell the components and subassemblies which incorporate the products into many different end markets, however, these end markets aretwo tothree levels removed from the Company. The Company also sells armor strike faces to armor manufacturers, using the same manufacturing process used in its other product solutions. The Company makes operating decisions and assesses financial performance only for the Company as a whole and doesnot make operating decisions or assess financial performance by the end markets which ultimately use the products.

(3) Inventories

As of** December 30, 2023and December 31, 2022**inventories consisted of the following:

(4) Leases

The Company hadone real estate lease in2023 expiring in** February 2026.CPS also has a few other leases for equipment which are minor in nature and are generally short-term in duration.None of these equipment leases have been capitalized as the Company elected an accounting policy for short-term leases, which allows lessees to avoid recognizing right-of-use assets and liabilities for leases with terms of12** months or fewer.

The real estate lease expiring in2026 (the “Norton facility lease’) is included as a right-of-use lease asset and corresponding lease liability on the balance sheet. This asset and liability are based on the present value of remaining lease payments over the remaining lease term using the Company’s incremental borrowing rate at the commencement date of the lease. The Company doesnot separate lease components from non-lease components. The Company’s lease agreements donot contain any material residual value guarantees or material restrictive covenants.

The Norton facility lease comprises approximately 38 thousand square feet. The lease is a triple net lease wherein the Company is responsible for payment of all real estate taxes, operating costs and utilities. The Company also has an option to buy the property and afirst right of refusal during the term of the lease. Annual rental payments are through maturity are reflected in the table below.

The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s capitalized operating lease as of** December 30, 2023:**