CPS TECHNOLOGIES CORP/DE/

PS TECHNOLOGIES CORP.

Balance Sheets (Unaudited)

Statements of Operations and Other Comprehensive Income (Loss)

(Unaudited)

CPS TECHNOLOGIES CORP.

STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 29, 2025 AND MARCH 30, 2024

Statements of Cash Flows (Unaudited)

Notes to Financial Statements

(Unaudited)

(1) Nature of Business

CPS Technologies Corporation (the “Company” or “CPS”) provides advanced material solutions to the electronics, power generation, automotive and other industries. The Company’s primary advanced material solution is metal-matrix composites ("MMC") which are a combination of metal and ceramic.

CPS also assembles housings and packages for hybrid circuits. These housings and packagesmayinclude components made of metal-matrix composites or theymayinclude components made of more traditional materials such as aluminum, copper-tungsten, etc.

Using its proprietary MMC technology, the Company also produces light-weight armor, particularly for extreme environments and heavy threat levels.

The Company also engages in research and development, in some cases government funded and in others internally funded, focused on developing new products in response to customer requirements. These products expand our offerings in existing markets and enable penetration into new markets.

The Company sells into several end markets including the wireless communications infrastructure market, high-performance microprocessor market, motor controller market, and other microelectronic and defense markets.

(2) Summary of Significant Accounting Policies

As permitted by the rules of the Securities and Exchange Commission applicable to quarterly reports on Form10-Q, these notes are condensed and donot contain all disclosures required by generally accepted accounting principles.

The accompanying financial statements are unaudited. In the opinion of management, the unaudited financial statements of CPS reflect all normal recurring adjustments which are necessary to present fairly the financial position and results of operations for such periods.

The Company’s balance sheet atDecember 28, 2024has been derived from the audited financial statements at that date, but doesnot include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

For further information, refer to the financial statements and footnotes thereto included in the Registrant’s Annual Report on Form10-K for the year endedDecember 28, 2024and in CPS’s other SEC reports, which are accessible on the SEC’s website at www.sec.gov and the Company’s website at www.cpstechnologysolutions.com.

The results of operations for interim periods arenot necessarily indicative of the results to be expected for the full year.

(3) Marketable Securities

Investments consist of U.S. Treasury Bills with maturities up to one year. Since it is not currently managements intention to hold these debt securities until the maturity dates, these have been classified as available-for-sale (“AFS”) and are recorded on the balance sheet at fair value, with changes in fair value recorded as a component of other comprehensive income.

(4) Fair value of Marketable Securities

ASC 820, Fair Value Measurements (“ASC 820”) states that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The three-tiered fair value hierarchy, which prioritizes which inputs should be used in measuring fair value, is comprised of: (Level I) observable inputs such as quoted prices in active markets; (Level II) inputs other than quoted prices in active markets that are observable either directly or indirectly and (Level III) unobservable inputs for which there is little or no market data. The fair value hierarchy requires the use of observable market data when available in determining fair value. CPS’ marketable securities consist solely of US Government bonds with a maturity of 12 months or less and which fall under Level II of the fair value hierarchy. The value of these bonds as of March 29, 2025 was $1,039,714 and, as of December 28, 2024, was $1,031,001.

(5) Net Income (Loss) Per Common and Common Equivalent Share

Basic net income (loss) per common share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per common share is calculated by dividing net income (loss) 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 options and stock purchase rights. Had there been a profit inQ1 2024, the dilutive effect would have been 74,285 shares. Common stock equivalents are excluded from the diluted calculations when a net loss is incurred as they would be anti-dilutive.

The following table presents the calculation of both basic and diluted EPS:

(6) Commitments & Contingencies

Commitments

Operating Leases

The Company hasone real estate lease expiring inFebruary 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 (current and noncurrent portions) on the balance sheet. This asset and liability was recognized based on the present value of lease payments over the lease term using the Company’s incremental borrowing rate at commencement date. 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 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 renew the lease starting inMarch 2026throughFebruary 2032.The Company isnot reasonably certain these extensions will be exercised at this time, and therefore arenot included in the lease asset or liability. Annual rental payments range from $152 thousand to $165 thousand through maturity.

The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s capitalized operating leases as ofMarch 29, 2025

Operating Lease Costs and Cash Flows

Operating lease cost and cash paid was $41 thousand during thefirst quarter of2025. This cost is related to its long-term operating lease. All other short-term leases were immaterial.

Finance Leases

The Company doesnot have any finance leases.

(7) 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. Reductions in compensation expense associated with the forfeited options are estimated at the date of grant, 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 the stock options granted.

During the quarters endedMarch 29, 2025andMarch 30, 2024,a total of 115,000 and 135,500 stock options, respectively, were granted to employees under the Company’s2020 Equity Incentive Plan (the “Plan”) and a total of 75,000 and 75,000 stock options, respectively, were granted to outside directors during the quarters endedMarch 29, 2025andMarch 30, 2024.

During the quarters endedMarch 29, 2025and March 30, 2024*,*there were 0 options exercised.

During the quarters endedMarch 29, 2025and March 30, 2024*,*the Company repurchased 0 shares for employees to facilitate their exercise of stock options.

There were also 1,083,300 options outstanding at a weighted average price of $2.45 with a weighted average remaining contractual term of 7.6 years as ofMarch 29, 2025and there were 581,900 shares exercisable at a weighted average price of $2.37 with a weighted average remaining term of 6.7 years. There were 1,097,900 options outstanding at a weighted average price of $2.61 with a weighted average remaining contractual term of 7.1 years as ofMarch 30, 2024and there were 582,800 shares exercisable at a weighted average price of $2.44 with a weighted average remaining term of 5.3 years.* The Plan, as amended, is authorized to issue 1,500,000 shares of common stock. As ofMarch 29, 2025,*there were 466,400 shares available for future grants.

As of*March 29, 2025,*there was $608 thousand of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan; that cost is expected to be recognized over a weighted average period of 2.41 years.

During the quarters endedMarch 29, 2025and*March 30, 2024,*the Company recognized approximately $122 thousand and $161 thousand, respectively, as shared-based compensation expense related to previously granted shares under the Plan.

(8) Inventories

Inventories consist of the following:

(9) Accrued Expenses

Accrued expenses consist of the following:

(10) Revolving Line of Credit

InMay 2023,the Company entered into a line of credit (LOC) in the amount of $3.0 million with Rockland Trust Company. The LOC is secured by the accounts receivable and other assets of the Company and has an interest rate of the National Prime Rate as published by the Wall Street Journal (7.5% atMarch 29, 2025).OnMarch 29, 2025 and March 30, 2024,the Company had $0 of borrowings under this LOC and its borrowing base at the time would have permitted an additional $3.0 million to have been borrowed. The LOC remains in effect until terminated per mutual agreement by both parties. Total interest expense forQ1 2025 was $0 and was $0 forQ1 2024.

(11) Income Taxes

A valuation allowance against deferred tax assets is required to be established or maintained when it is "more likely thannot" that all or a portion of deferred tax assets willnot be realized.

The Company believes that it is “more likely thannot” that the Company will be able to fully utilize the deferred tax asset. For thefirst quarter of2025 the deferred tax asset was decreased $84 for the estimated tax onQ1 net income.

(12)Segment Reporting

The Company views its operations and manages its business as one 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. Our chief operating decision maker (CODM) is Brian Mackey, our President and CEO. The Company's CODM regularly reviews financial information presented and does not evaluate the Company's operating segment using asset or liability information. Instead, the CODM uses revenue, gross margin, and net income or loss to allocate operating and capital resources and assess performance by comparing actual results to historical results and previously forecasted financial information.

The following table presents segment information for the Company's single reporting segment: