CPS TECHNOLOGIES CORP/DE/

Previous wording

This Quarterly Report on Form 10-Q contains forward-looking statements that involve a number of risks and uncertainties. There are a number of factors that could cause the Company’s actual results to differ materially from those forecasted or projected in such forward-looking statements. This includes the impact of the Russian invasion of Ukraine, the ongoing conflict in Gaza and Lebanon and other conflicts and potential conflicts throughout the world. It also includes the impact of a strong dollar on the prices the Company charges to foreign customers, which are discussed in Item 3 of this report. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements which may be made to reflect events or changed circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Current wording

This Quarterly Report on Form 10-Q contains forward-looking statements that involve a number of risks and uncertainties. There are a number of factors that could cause the Company’s actual results to differ materially from those forecasted or projected in such forward-looking statements. This includes the impact of the Russian invasion of Ukraine and other conflicts and potential conflicts, including economic conflicts, throughout the world, which are discussed in Item 3 of this report. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements which may be made to reflect events or changed circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Previous wording

Products we provide include baseplates for motor controllers used in high-speed electric trains, subway cars, wind turbines, and hybrid and electric vehicles. We provide baseplates and housings used in radar, satellite and avionics applications. We provide lids and heat spreaders used with high performance integrated circuits for use in internet switches and routers. We provide baseplates and housings used in modules built with Wide Band Gap Semiconductors like Silicon Carbide (“SiC”) and Gallium Nitride (“GaN”), collectively Metal Matrix Composites (“MMC”). CPS also assembles housings and packages for hybrid circuits. These housings and packages may include MMC components; they may include components made of more traditional materials such as aluminum, cold rolled steel and Kovar. Using its proprietary MMC technology, the Company also produces light-weight vehicle armor, particularly for extreme environments and heavy threat levels. In addition the Company engages in research and development activities with the goal of developing new products that address challenging customer requirements. These activities typically leverage the company’s extensive knowledge base in the development and volume manufacturing of advanced materials.

Current wording

Products we provide include baseplates for motor controllers used in high-speed electric trains, subway cars, wind turbines, and hybrid and electric vehicles. We provide baseplates and housings used in radar, satellite and avionics applications. We provide lids and heat spreaders used with high performance integrated circuits for use in internet switches and routers. We provide baseplates and housings used in modules built with Wide Band Gap Semiconductors like Silicon Carbide (“SiC”) and Gallium Nitride (“GaN”), collectively Metal Matrix Composites (“MMC”). CPS also assembles housings and packages for hybrid circuits. These housings and packages may include MMC components; they may include components made of more traditional materials such as aluminum, cold rolled steel and Kovar. Using its proprietary MMC technology, the Company also produces lightweight armor, particularly for extreme environments and heavy threat levels.

Previous wording

As a manufacturer of highly technical and custom products, the Company incurs fixed costs needed to support the business, but which do not vary significantly with changes in sales volume. These costs include the fixed costs of applications such as engineering, tooling design and fabrication, process engineering, and others. Accordingly, particularly given our current size, changes in sales volume generally result in even greater changes in financial performance on a percentage basis as fixed costs are spread over a larger or smaller base. Sales volume is therefore a key financial metric used by management.

Current wording

As a manufacturer of highly technical and custom products, the Company incurs fixed costs needed to support the business, but which do not vary significantly with changes in sales volume. These costs include the fixed costs of applications such as engineering, tooling design and fabrication, process engineering, and others. Accordingly, particularly given our size, changes in sales volume generally result in even greater changes in financial performance on a percentage basis as fixed costs are spread over a larger or smaller base. Sales volume is therefore a key financial metric used by management.

Previous wording

CPS was incorporated in Massachusetts in 1984 as Ceramics Process Systems Corporation and reincorporated in Delaware in April 1987 through a merger into a wholly-owned Delaware subsidiary organized for purposes of the reincorporation. In July 1987, CPS completed our initial public offering of 1.5 million shares of our Common Stock. In March 2007, we changed our name from Ceramics Process Systems Corporation to CPS Technologies Corp.

Current wording

CPS was incorporated in Massachusetts in 1984 as Ceramics Process Systems Corporation and reincorporated in Delaware in April 1987 through a merger into a wholly-owned Delaware subsidiary organized for purposes of the reincorporation. In July 1987, CPS completed our initial public offering of 1.5 million shares of our Common Stock. In March 2007, we changed our name from Ceramics Process Systems Corporation to CPS Technologies Corporation.

Previous wording

Results of Operations for the Third Fiscal Quarter of 2024 (Q3 2024) Compared to the Third Fiscal Quarter of 2023 (Q3 2023); (all $ in 000’s)

Current wording

Results of Operations for the First Fiscal Quarter of 2025 (Q1 2025) Compared to the First Fiscal Quarter of 2024 (Q1 2024); (all $ in 000’s)

Previous wording

The Company experienced an operating loss of $1,486 in Q3 2024 compared with an operating profit of $131 in Q3 2023. This decrease was a result of the decreased gross margin, partially offset by the decrease in SG&A expenses. The net loss for Q3 2024 was $1,043 compared to a net profit in Q3 2023 of $171.

Current wording

The Company experienced operating income of $130 in Q1 2025 compared with an operating loss of $260 in Q1 2024. This increase was a result of the increased gross margin and by the decrease in SG&A expenses. Net after tax income was $96 in Q1 2025 compared to an after tax loss of $143 in Q1 2024.

Previous wording

CPS does not rely on raw materials from Ukraine, Russia, Israel, Lebanon or Gaza. As a result, we do not believe that the Russian invasion of Ukraine or the conflict surrounding Israel will have a direct impact on our results. Nevertheless, there could be an indirect impact regarding supply chain and inflationary issues as a result of these conflicts.

Current wording

CPS does not rely on raw materials from Ukraine, Russia, Israel or Gaza. As a result, we do not believe that the Russian invasion of Ukraine or the conflict in Israel and Gaza will have a direct impact on our results. Most of our raw materials are sourced domestically. In some cases, our suppliers may be sourcing these materials from a foreign source. To date, we have not seen any cost increases that we believe are attributable to tariffs, however this could change in the future.

Previous wording

Inflation has had an impact on our costs. Thus far, we have been able to pass along these increases to our customers, but there is no guarantee that we will be able to continue this in the future. In addition, there is often a lag between when the costs increase and when we can adjust customer prices. Some of our larger customers will have pricing agreements, typically for one year, and we must wait for those agreements to end before making any pricing adjustments. Further, several of our larger customers buy from our major competitor in Japan. The devaluation of the Japanese yen related to the US dollar has made it more difficult for us to increase our prices in an amount necessary to fully make up for higher costs.

Current wording

Inflation has had an impact on our costs. Thus far, we have largely been able to pass along these increases to our customers, but there is no guarantee that we will be able to continue this in the future. In addition, there is often a lag between when the costs increase and when we can adjust customer prices. Some of our larger customers will have pricing agreements, typically for one year, and we must wait for those agreements to end before making any pricing adjustments. Wages have also been impacted by inflation. We have instituted a combination of wage increases as well as more competitive benefits in order to retain the personnel making up our workforce.

Previous wording

Accounts receivable at September 28, 2024 totaled $4,017 compared with $4,472 at December 30, 2023. Days Sales Outstanding (DSO) increased from 60 days at the end of 2023 to 78 days (calculated based on trade receivables only) at the end of Q3 2024. The increase in DSO was due to several large payments due at the end of Q3 2024 being delayed to the beginning of Q4 2024, as well as significantly higher sales volumes at the end of Q3 2024 as compared to the beginning of Q3 2024. The accounts receivable balances at December 30, 2023, and September 28, 2024 were both net of an allowance for doubtful accounts of $10.

Current wording

Trade accounts receivable at March 29, 2025 totaled $6,303 compared with $4,858 at December 28, 2024. Days Sales Outstanding (DSO) increased from 76 days at the end of 2024 to 78 days at the end of Q1 2025. The reason for this increase is that sales dollars per week grew throughout the quarter, resulting in a higher percentage of Q1 sales remaining in accounts receivable than would be expected, had weekly sales been relatively uniform during the quarter. The accounts receivable balances at December 28, 2024, and March 29, 2025 were both net of an allowance for credit losses of $10.

Previous wording

Inventories totaled $4,433 at September 28, 2024 compared with inventory totaling $4,582 at December 30, 2023. The inventory turnover in the most recent four quarters ending Q3 2024 was 4.6 times (based on a 5 quarter end average) compared with 4.3 times averaged during the four quarters of 2023.

Current wording

Inventories totaled $4,813 at March 29, 2025 compared with inventory totaling $4,331 at December 28, 2024. The inventory turnover in the most recent four quarters ending Q1 2025 was 5.5 times (based on a 5 quarter end average) compared with 5.9 times averaged during the four quarters of 2024.

Previous wording

The Company expects it will continue to be able to fund its operations for the remainder of 2024 and 2025 from operations and existing cash balances.

Current wording

The Company expects it will continue to be able to fund its operations for the remainder of 2025 from operations and existing cash balances.

Previous wording

In*May 2023,the Company terminated its $3.0 million revolving line of credit (LOC) with Massachusetts Business Development Corporation (BDC). A new LOC in the amount of $3.0 million was entered into 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. OnSeptember 28, 2024,*the Company had $0 of borrowings under this LOC and its borrowing base at the time would have permitted an additional $2.9 million to have been borrowed.

Current wording

The Company maintains a $3.0 million revolving line of credit (LOC) 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. On March 29, 2025, the Company had $0 of borrowings under this LOC and its borrowing base at the time would have permitted the full $3.0 million to have been borrowed. The LOC remains in effect until terminated per mutual agreement by both parties.

Previous wording

In March 2020, the company acquired a scanning acoustic microscope for a price of $208 thousand. The full amount was financed through a 5 year note payable with a financing company. The note is collateralized by the microscope and is being paid in monthly installments of $4 thousand, consisting of principal plus interest at a rate of 6.47%

Current wording

In March 2020, the Company acquired a scanning acoustic microscope for a price of $208 thousand. The full amount was financed through a 5 year note payable with a financing company. The note was paid in full during the quarter ended March 29, 2025.