CPS TECHNOLOGIES CORP/DE/

Condensed Balance Sheets (Unaudited)

Condensed Statements of Operations and Other Comprehensive Income (Unaudited)

CPS TECHNOLOGIES CORP.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 26, 2026 AND SEPTEMBER 27, 2025

Condensed 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, defense 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, and other microelectronics 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 and should be read in conjunction with the audited financial statements and related notes included in the 2025 Annual Report.

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 at* December 27, 2025has 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 (“US GAAP”) 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 27, 2025and 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) Future Application of Accounting Standards

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) ("ASU 2024-03"). The standard requires certain details for expenses presented on the face of the Statements of Operations and Comprehensive Income (Loss) as well as selling expenses to be presented in the notes to the financial statements on an interim and annual basis. The provisions of the standard are effective for public companies for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The amendment can be applied either prospectively or retrospectively, with early adoption permitted. The Company is currently assessing the impact of this standard.

(4) Use of Estimates

The preparation of the Condensed Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

(5) Restricted Cash

In connection with the lease for its new manufacturing and office facility, the Company maintains $510,000 of restricted cash at Rockland Trust Bank as collateral for a standby letter of credit securing its obligations under the lease. The restricted cash is classified as a noncurrent asset in the accompanying condensed balance sheet.

(6) Marketable Securities

Investments consist of U.S. Treasury Bills and US Government Bonds 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 (loss).

(7) 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’s marketable securities consist solely of US Treasury Bills and 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 US Treasury Bills and US Government bonds as of September 26, 2026 was $15,612,554 and was $8,769,363 as of December 27, 2025.

(8) Net Income Per Common and Common Equivalent 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 options 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.

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

(9) Commitments & Contingencies

Commitments

Operating Leases

The Company leases its manufacturing and office under two operating leases expiring in February 2028 (the “Norton facility lease”) and March 2039 (the “Attleboro facility lease”). The Company also has certain equipment leases that are generally short term in nature. The Company has elected not to recognize right-of-use assets and lease liabilities for leases with terms of 12 months or less.

Operating lease right-of-use assets and lease liabilities are recognized based on the present value of future lease payments over the lease term using the Company’s incremental borrowing rate at lease commencement. Lease liabilities are classified between current and noncurrent portions on the condensed balance sheets. Renewal options are included in the lease term when the Company is reasonably certain to exercise such options. The Company’s lease agreements do not contain material residual value guarantees or restrictive covenants.

The Norton lease facility covers approximately 38,000 square feet and is a triple-net-lease under which the Company is responsible for real estate taxes, operating costs and utilities. The lease provides renewal options through February 2032, which have been excluded from the lease term as the Company is not reasonably certain to exercise them. Annual base rent is approximately $169,000 through expiration.

In September 2026, when the premises were made available to the Company for use, the Company recognized an operating lease for a new manufacturing and office facility in Attleboro, Massachusetts, comprising approximately 80,000 square feet. The Company expects to occupy the facility in November 2027 following completion of planned improvements. The lease expires in March 2039 and provides fortwo five-year renewal options, which have been excluded from the lease term as the Company is not reasonable certain to exercise them. The lease is a triple-net arrangement under which the Company is responsible for real estate taxes, operating costs, and utilities. Base rent payments commence in December 2027 at $85,000 per month for the first six months, increasing to approximately $1.1 million annually thereafter with annual lease increases over the remaining lease term.

The Attleboro facility lease provides for a tenant improvement allowance of $3.2 million to reimburse the Company for qualifying construction and improvement expenditures subject to certain conditions under the lease. As the allowance is contingent upon qualifying expenditures and satisfaction of the applicable conditions, it was not included in the initial measurement of the operating lease right-of-use asset or lease liability. The Company will recognize the allowance as a lease incentive when the applicable conditions have been satisfied and the reimbursement becomes receivable.

In connection with the Attleboro facility lease the Company maintains $510,000 of restricted cash at Rockland Trust Bank as collateral for a standby letter of credit securing its obligations under the lease. The restricted cash is classified as a noncurrent asset in the accompanying condensed balance sheet.

The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s capitalized operating leases as ofSeptember 26, 2026:

Operating Lease Costs and Cash Flows

Operating lease cost was $130 thousand during the third quarter of 2026 and $214 thousand during the nine months ended September 26, 2026. Cash paid for operating leases included in cash flows from operating activities was $41 thousand during the third quarter of 2026 and $125 thousand for the nine months ended September 26, 2026. These costs and cash payments related to the Norton and Attleboro facility operating leases. All other short-term leases were immaterial.

Finance Leases

The Company doesnot have any finance leases.

(10) 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 quarter endedSeptember 26, 2026,no stock options were granted to employees or to outside directors under the Company’s2020 Equity Incentive Plan Stock Incentive Plan (the “Plan”). For the nine months endedSeptember 26, 2026 a total of 99,600 stock options and 37,500 stock options were granted to employees and directors, respectively. During the quarter endedSeptember 27, 2025,no stock options were granted to employees under the Plan andno stock options were granted to outside directors. For the nine months endedSeptember 27, 2025 a total of 115,000 stock options and 75,000 stock options were granted to employees and directors, respectively.

During thethree andnine months endedSeptember 26, 2026,there were 37,500 and 309,750 options exercised and corresponding shares issued at a weighted average price of $2.20 and $2.32. During thethree andnine months ended*September 27, 2025,*there were 5,500 options exercised and corresponding shares issued at a weighted average price of $1.44.

During thethree andnine months endedSeptember 26, 2026,the Company repurchased 0 and 72,942 shares for employees to facilitate their exercise of stock options. During thethree andsix months ended*September 27, 2025,*the Company repurchased 2,183 shares for employees to facilitate their exercise of stock options.

There were also 892,400 options outstanding at a weighted average price of $2.82 with a weighted average remaining contractual term of 7.07 years as ofSeptember 26, 2026,and there were 486,175 options exercisable at a weighted average price of $2.79 with a weighted average remaining term of 6.36 years.There were 1,077,800 options outstanding at a weighted average price of $2.45 with a weighted average remaining contractual term of 7.13 years as ofSeptember 27, 2025and there were 635,500 shares exercisable at a weighted average price of $2.45 with a weighted average remaining term of 6.37 years. The Plan, as amended, is authorized to issue 1,500,000 shares of common stock. As of*September 26, 2026,there were 281,270 shares available for future grants under the 2020 Plan and 49,200 shares outstanding under the 2009 Plan. As ofSeptember 27, 2025,*there were 421,400 shares available for future grants under the 2020 Plan and 138,900 shares outstanding under the 2009 Plan.

As of*September 26, 2026,*there was $525 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 1.85 years.

During thethree andsix months ended*September 26, 2026,*the Company recognized $57,160 and $280,264 respectively, as shared-based compensation expense related to previously granted shares under the Plan.

During thethree andsix months ended*September 27, 2025,*the Company recognized $49,354 and $220,894 respectively, as shared-based compensation expense related to previously granted shares under the Plan.

(11) Inventories

Inventories consist of the following:

(12) Accrued Expenses

Accrued expenses consist of the following:

(13) Line of Credit

The Company has 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 (6.75% atSeptember 26, 2026). On*September 26, 2026 and December 27, 2025,*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 line of credit remains in effect until terminated per mutual agreement by both parties. Total interest expense in 2026 was $0 and was $0 in 2025.

(14)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. 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:

(15) 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. Management has determined that a valuation allowance is not needed as it expects that the deferred tax asset will be fully utilized.

For thethree and nine months ended September 26, 2026 the deferred tax asset decreased by $174,339 and increased by $58,473, respectively, reflecting for the estimated tax effects of each period.

On July 4, 2025, the President signed into law the One Big Beautiful Bill Act (Public Law 119-21), which includes significant modifications to the Internal Revenue Code. The legislation permanently extends and modifies key provisions of the Tax Cuts and Jobs Act of 2017 and introduces new deductions and credits applicable to both individuals and businesses.

Key provisions relevant to the Company include:

Restoration of Immediate Expensing for Domestic Research and Experimental (“R&E”***) Expenditures:***Effective for tax years beginning after December 31, 2024, domestic R&E expenditures may be immediately expensed under new Section 174A, reversing the prior capitalization and amortization requirement. This change may materially impact the Company’s deferred tax assets and current tax expense depending on the volume of qualifying expenditures.

As of September 26, 2026, the Company had $216,914 of unamortized Section 174 R&E expenditures relating to tax years 2022 through 2024, which are expected to be fully deducted in the fourth quarter of 2026, subject to further analysis.

***Enhancement of Section 179 Expensing:***The maximum Section 179 deduction is increased to $2.5 million, with a phase-out threshold beginning at $4 million. This expansion is expected to accelerate tax deductions for qualifying property and benefit capital investment strategies.

***Permanent Reinstatement of 100% Bonus Depreciation:***For qualified property acquired and placed in service after January 19, 2025, the Company may elect full expensing under Section 168(k), which is expected to accelerate tax deductions and reduce taxable income in applicable periods.

***Modifications to FDII (now FDDEI):***The deduction under Section 250 for foreign-derived intangible income is reduced to 33.34%, and eligibility criteria are narrowed. These changes may impact export-related tax incentives and deferred tax projections tied to U.S.-held IP.

The Company is currently evaluating the impact of these provisions on its financial statements and tax positions. While the changes are not expected to materially affect prior period results, they may influence future effective tax rates, deferred tax balances, and cash tax obligations. The Company incorporated these changes into its tax planning and provision calculations for fiscal year 2025 and beyond. However, the full effect of these provisions will depend on the Company's future capital expenditures, R&E activities, financing arrangements, and international operations.

(16) Equity Capital Raise

On May 27, 2026, the Company filed with the Secretary of State of Delaware a Certificate of Amendment of the Company’s Restated Certificate of Incorporation, effective as the same date. The amendment increased the number of shares of common stock that the Company is authorized to issue from 20,000,000 to 25,000,000.

On May 27, 2026, the Company entered into securities purchase agreements with certain institutional investors for the sale by the Company of 1,200,000 shares of common stock, par value $0.01 per share, in a registered direct offering (the “Offering”), at a purchase price of $8.00 per share. The Offering was priced at-the-market under Nasdaq rules. The closing of the Offering occurred on May 29, 2026. The net proceeds to the Company were $8,958,193.