UNITED STATES ~~SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q~~

~~(Mark~~SECURITIES ~~One)~~AND ☒EXCHANGE ~~Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended October 1, 2022 or~~COMMISSION

☐Washington, ~~Transition~~D.C. ~~Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to~~20549

FORM 10-Q

(Mark One)

☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the period ended April 1, 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 0-16088

CPS TECHNOLOGIES CORP.

(Exact Name of Registrant as Specified in its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization	04-2832509 (I.R.S. Employer Identification No.)
Delaware (State or Other Jurisdiction of Incorporation or Organization)	04-2832509 (I.R.S. Employer Identification No.)
111 South Worcester Street Norton MA (Address of principal executive offices)	02766-2102 (Zip Code)

(508) 222-0614 ~~Registrants Telephone Number, including Area Code:~~

~~CPS~~Registrant’s ~~Technologies~~Telephone ~~Corp.~~Number, including Area Code:

CPS TECHNOLOGIES CORP.

111 South Worcester Street

Norton, MA 02766-2102

Former Name, Former Address and Former Fiscal Year if Changed since Last Report

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definition 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☐~~

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. ☐

Indicate 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 (~~15U~~15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Yes ☐ No ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act):

☐ Yes ☒ No

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

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, $0.01 par value	CPSH	~~NASDAQ~~Nasdaq Capital ~~Markets~~Market

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Number of shares of common stock outstanding as of ~~October~~April 2425, ~~2022~~2023: 14,~~438~~469,~~786~~677.

PART I FINANCIAL INFORMATION ~~ITEM 1 FINANCIAL STATEMENTS (Unaudited) CPS TECHNOLOGIES CORP. Balance Sheets (Unaudited) (continued on next page)~~

	October 1,			December 25,
	2022			2021
ASSETS
Current assets:
Cash and cash equivalents	$	5,598,503		$	5,050,312
Accounts receivable-trade, net		5,835,738			4,870,021
Inventories, net		4,868,550			3,911,602
Prepaid expenses and other current assets		246,680			225,873
Total current assets		16,549,471			14,057,808
Property and equipment:
Production equipment		10,771,477			10,489,729
Furniture and office equipment		940,128			673,305
Leasehold improvements		968,509			951,384
Total cost		12,680,114			12,114,418
Accumulated depreciation and amortization		(11,317,632	)		(11,028,154	)
Construction in progress		46,267			246,669
Net property and equipment		1,408,749			1,332,933
Right-of-use lease asset		497,000			586,000
Deferred taxes, net		2,118,223			2,823,978
Total assets	$	20,573,443		$	18,800,719

ITEM 1 FINANCIAL STATEMENTS (Unaudited)

CPS TECHNOLOGIES CORP.

Balance Sheets (Unaudited)

	April 1, 2023			December 31, 2022
ASSETS

Current assets:
Cash and cash equivalents	$	7,369,863		$	8,266,753
Accounts receivable-trade, net		4,714,138			3,777,975
Accounts receivable-other		700,703			685,668
Inventories, net		4,692,655			4,875,901
Prepaid expenses and other current assets		299,601			211,242
Total current assets		17,776,960			17,817,539
Property and equipment:
Production equipment		10,900,344			10,770,427
Furniture and office equipment		952,883			952,883
Leasehold improvements		985,649			985,649
Total cost		12,838,876			12,708,959
Accumulated depreciation and amortization		(11,571,509	)		(11,446,901	)
Construction in progress		111,612			64,910
Net property and equipment		1,378,979			1,326,968
Right-of-use lease asset (note 4, leases)		433,000			466,000
Deferred taxes, net		1,842,992			2,069,436
Total Assets	$	21,431,931			21,679,943

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Note payable, current portion		44,424			43,711
Accounts payable		2,046,893			1,836,865
Accrued expenses		731,454			820,856
Deferred revenue		1,828,068			2,521,128
Lease liability, current portion		157,000			157,000

Total current liabilities		4,807,839			5,379,560

Note payable less current portion		43,439			54,847
Deferred Revenue – Long term		-			231,020
Long term lease liability		276,000			309,000

Total liabilities		5,127,278			5,974,427
Commitments & Contingencies
Stockholders’ equity:
Common stock, $0.01 par value, authorized 20,000,000 shares; issued 14,467,487 and 14, 460,486 shares; outstanding 14,457,186 and 14, 450,470 shares; at April 1, 2023 and December 31, 2022, respectively		144,675			144,605
Additional paid-in capital		39,867,507			39,726,851
Accumulated deficit		(23,665,891	)		(24,125,092	)
Less cost of 10,301 and 10,016 common shares repurchased at April 1, 2023 and December 31, 2022, respectively		(41,638	)		(40,848	)

Total stockholders’ equity		16,304,653			15,705,516

Total liabilities and stockholders’equity	$	21,431,931		$	21,679,943

See accompanying notes to financial statements.

CPS TECHNOLOGIES CORP. ~~Balance Sheets (Unaudited) (concluded)~~

	October 1,			December 25,
	2022			2021
LIABILITIES AND STOCKHOLDERS` EQUITY
Current liabilities:
Note payable, current portion		43,136			55,906
Accounts payable		2,044,857			2,100,251
Accrued expenses		865,537			1,086,429
Deferred revenue		1,707,138			1,707,138
Lease liability, current portion		157,000			155,000
Total current liabilities		4,817,668			5,104,724
Note payable less current portion		65,947			98,684
Long term lease liability		340,000			431,000
Total liabilities		5,223,615			5,634,408
Commitments (note 4)
Stockholders` equity:
Common stock, $0.01 par value, authorized 20,000,000 shares; issued 14,438,786 and 14,350,786, respectively; outstanding 14,434,468 and 14,348,451, respectively; at October 1, 2022 and December 25, 2021;		144,388			143,508
Additional paid-in capital		39,620,372			39,281,810
Accumulated deficit		(24,394,083	)		(26,256,492	)
Less cost of 4,318 and 335 common shares repurchased, respectively; at October 1, 2022 and December 25, 2021		(20,849	)		(2,515	)
Total stockholders` equity		15,349,828			13,166,311
Total liabilities and stockholders` equity	$	20,573,443		$	18,800,719

Statements of Operations (Unaudited)

	Fiscal Quarters Ended
	April 1, 2023		April 2, 2022

Revenues:
Product sales	$	7,100,267	$	6,652,714

Total revenues		7,100,267		6,652,714
Cost of product sales		4,855,564		4,689,224

Gross Margin		2,244,703		1,963,490
Selling, general, and administrative expense		1,550,522		1,416,393

Income from operations		694,181		547,097
Other income (expense), net		15,590		(1,913	)

Income before taxes		709,771		545,184
Income tax provision		250,570		125,748

Net income	$	459,201	$	419,436

Net income per basic common share	$	0.03	$	0.03

Weighted average number of basic common shares outstanding		14,452,284		14,389,857

Net income per diluted common share	$	0.03	$	0.03

Weighted average number of diluted common shares outstanding		14,639,600		14,657,939

See accompanying notes to financial statements.

CPS TECHNOLOGIES ~~CORP.~~CORPORATION ~~Statements~~STATEMENTS ofOF ~~Operations~~STOCKHOLDERS’ EQUITY (~~Unaudited~~UNAUDITED) FOR THE THREE MONTHS ENDED APRIL 1, 2023 AND April 2, 2022

	Fiscal Quarters Ended						Nine Months Ended
	Common Stock
	October 1,			September 25,			October 1,			September 25,
	Number of shares issued			Par Value			Additional paid-in capital			Accumulated deficit			Stock repurchased			Total stockholders’ equity
	2022			2021			2022			2021
Balance at December 31, 2022		14,460,486		$	144,605			39,726,851		$	(24,125,092	)	$	(40,848	)	$	15,705,516
Revenues:
Share-based compensation expense		—			—			130,441			—			—			130,441
Product sales	$	6,748,117		$	5,514,872		$	20,471,574		$	16,242,762
Employee options exercises		7,001			70			10,215			—			(790	)		9,495
Total Revenues		6,748,117			5,514,872			20,471,574			16,242,762
Net income		—			—			—			459,201			—			459,201
Cost of product sales		4,864,876			4,375,676			14,796,206			12,807,844
Balance at April 1, 2023		14,467,487			144,675			39,867,507			(23,665,891	)		(41,638	)		16,304,653
Gross Margin		1,883,241			1,139,196			5,675,368			3,434,918
Balance at December 25, 2021		14,350,786		$	143,508		$	39,281,810			(26,256,492	)		(2,515	)		13,166,311
Selling, general and administrative expense		1,174,581			1,227,258			3,750,131			3,234,344
Share-based compensation expense		—			—			124,471			—			—			124,471
Operating income (loss)		708,660			(88,062	)		1,925,237			200,574
Issuance of Common Stock		—			—			(9,614	)		—			—			(9,614	)
Interest income (expense), net		(1,892	)		(2,633	)		(6,245	)		(32,776	)
Employee options exercises		72,700			727			150,308			—			(3,108	)		147,927
Other income (expense), net		645,594			18,665			649,628			30,728
Net income		—			—			—			419,436			—			419,436
Net income (loss) before income tax expense		1,352,362			(72,030	)		2,568,620			198,526
Balance at April 2, 2022		14,423,486			144,235			39,546,975			(25,837,056	)		(5,623	)		13,848,531
Income tax provision (benefit)		364,497			(2,799,997	)		706,211			(2,799,541	)
Net income	$	987,865		$	2,727,967		$	1,862,409		$	2,998,067
Net income per basic common share	$	0.07		$	0.19		$	0.13		$	0.21
Weighted average number of basic common shares outstanding		14,434,468			14,324,136			14,417,995			13,963,563
Net income per diluted common share	$	0.07		$	0.18		$	0.13		$	0.21
Weighted average number of diluted common shares outstanding		14,686,476			14,811,259			14,683,632			14,542,356

See accompanying notes to financial statements.

CPS TECHNOLOGIES CORP. ~~STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) FOR THE THREE AND NINE MONTHS ENDED October 1, 2022 AND SEPTEMBER 25, 2021~~

	Common Stock
	Number of				Additional									Total
	shares				paid-in			Accumulated			Stock			stockholders'
	issued		Par Value		capital			deficit			repurchased			equity
Balance at July 2, 2022		14,438,786	$	144,388	$	39,600,085			(25,381,948	)		(20,849	)		14,341,676
Share-based compensation expense		-		-		43,422			-			-			43,422
Issuance of common stock (net of costs)		-		-		(23,135	)		-			-			(23,135	)
Employee option exercises		-		-		-						-			-
Net income									987,865			-			987,865
Balance at October 1, 2022		14,438,786		144,388		39,620,372			(24,394,083	)		(20,849	)		15,349,828

Statements of Cash Flows (Unaudited)

	Common Stock
	Fiscal Quarters Ended
	Number of						Additional									Total
	April 1, 2023			April 2, 2022
	shares						paid-in			Accumulated			Stock			stockholders'
Cash flows from operating activities:
	issued			Par Value			capital			deficit			repurchased			equity
Net income	$	459,201		$	419,436
Balance at December 25, 2021		14,350,786		$	143,508		$	39,281,810			(26,256,492	)		(2,515	)		13,166,311
Adjustments to reconcile net income to cash used in operating activities:
Share-based compensation expense		-			-			207,277			-			-			207,277
Depreciation and amortization		124,608			105,121
Issuance of common stock (net of costs)		-			-			(40,893	)		-			-			(40,893	)
Share-based compensation		130,441			124,471
Employee options exercised		88,000			880			172,178						(18,334	)		154,724
Changes in:
Treasury shares		-			-			-			-			-			-
Accounts receivable - trade		(936,163	)		(32,497	)
Net income											1,862,409			-			1,862,409
Accounts receivable - other		(15,035	)		--
Balance at October 1, 2022		14,438,786			144,388			39,620,372			(24,394,083	)		(20,849	)		15,349,828
Inventories		183,246			(793,924
Prepaid expenses and other current assets		(88,359	)		(109,090	)
Accounts payable		210,028			150,871
Accrued expenses		(89,402	)		(368,947	)
Deferred Taxes		226,444			125,292
Deferred revenue		(924,080	)		--
Net cash used in operating activities		(719,071	)		(379,267	)
Cash flows from investing activities:
Purchases of property and equipment		(176,618	)		(94,683	)
Proceeds from sale of property and equipment		--			--
Net cash used in investing activities		(176,618	)		(94,683	)
Cash flows from financing activities:
Net borrowings on line of credit		--			--
Proceeds from exercise of employee stock options		9,495			138,313
Payments on note payable		(10,696	)		(14,981	)
Net cash provided by financing activities		(1,201	)		123,332
Net decrease in cash and cash equivalents		(896,890	)		(350,618	)
Cash and cash equivalents at beginning of period		8,266,753			5,050,312
Cash and cash equivalents at end of period	$	7,369,863		$	4,699,694
Supplemental disclosures of cash flows information:
Cash paid for interest	$	1,538		$	2,269
Supplemental disclosures of non-cash activity:
Net exercise of stock options	$	790		$	3,108

	Common Stock
	Number of				Additional								Total
	shares				paid-in		Accumulated			Stock			stockholders'
	issued		Par Value		capital		deficit			repurchased			equity
Balance at June 26, 2021		14,300,771	$	143,007	$	38,956,952		(29,202,268	)		(1,770	)		9,895,921
Share-based compensation expense		-		-		28,117		-			-			28,117
Issuance of common stock (net of costs)		47,515		475		284,503		-			-			284,978
Employee option exercises		500		5		740					(745	)		-
Net income								2,727,967			-			2,727,967
Balance at September 25, 2021		14,348,786		143,487		39,270,312		(26,474,301	)		(2,515	)		12,936,983

	Common Stock
	Number of						Additional									Total
	shares						paid-in			Accumulated			Stock			stockholders'
	issued			Par Value			capital			deficit			repurchased			equity
Balance at December 26, 2020		13,746,242		$	137,462		$	36,688,894			(29,472,368	)		(996,323	)		6,357,665
Share-based compensation expense		-			-			147,652			-			-			147,652
Issuance of common stock (net of costs)		526,804			5,268			3,417,102			-			-			3,422,370
Employee options exercised		630,400			6,304			1,235,370						(1,230,445	)		11,229
Treasury shares retired		(554,660	)		(5,547	)		(2,218,706	)		-			2,224,253			-
Net income											2,998,067			-			2,998,067
Balance at September 25, 2021		14,348,786			143,487			39,270,312			(26,474,301	)		(2,515	)		12,936,983

See accompanying notes to financial statements.

CPS TECHNOLOGIES CORP. ~~Statements of Cash Flows (Unaudited)~~

	Nine Month Periods Ended
	October 1,			September 25,
	2022			2021
Cash flows from operating activities:
Net income	$	1,862,409		$	2,998,067
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities
Depreciation and amortization		316,469			411,465
Share-based compensation		207,277			147,653
Deferred taxes		705,755			(2,790,809	)
Gain on sale of property and equipment		-			(2,047	)
Changes in:
Accounts receivable-trade		(965,717	)		(2,117,387	)
Inventories		(956,948	)		(63,757	)
Prepaid expenses		(20,807	)		(60,809	)
Accounts payable		(55,394	)		789,864
Deferred revenue		-			1,138,620
Accrued expenses		(220,891)			98,108
Net cash provided by (used in) operating activities		872,153			548,968
Cash flows from investing activities:
Purchases of property and equipment		(392,286	)		(298,760	)
Proceeds from sale of property and equipment		-			2,047
Net cash provided by (used in) investing activities		(392,286	)		(296,713	)
Cash flows from financing activities:
Net borrowings on line of credit		-			-
Proceeds from employee stock options		154,724			11,229
Proceeds from issuance of common stock		(40,893	)		3,422,370
Payments on note payable		(45,507	)		(43,320	)
Net cash provided by (used in) financing activities		68,324			3,390,279
Net increase (decrease) in cash and cash equivalents		548,191			3,642,534
Cash and cash equivalents at beginning of period		5,050,312			195,203
Cash and cash equivalents at end of period	$	5,598,503		$	3,837,737
Supplemental disclosures of cash flows information:
Cash paid for income taxes	$	456		$	456
Cash paid for interest		6,243			32,776
Supplemental disclosures of non-cash activity:
Net exercise of stock options		18,334			441,022

Notes to Financial Statement

~~See accompanying notes to financial statements.~~(Unaudited)

CPS TECHNOLOGIES CORP. Notes to Financial Statements (Unaudited)

(1) Nature of Business

CPS Technologies ~~Corp.~~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’s)~~ which are a combination of metal and ceramic.

CPS also assembles housings and packages for hybrid circuits. These housings and packages may include components made of metal-matrix composites or they may include 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 ~~ballistic~~ threat levels.

The Company sells into several end markets including the ~~aerospace & defense markets,~~ 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 Form 10-Q, these notes are condensed and do not 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 at December 2531, ~~2021~~2022 has been derived from the audited financial statements at that date, but does not 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 Form 10-K for the year ended December 2531, ~~2021~~2022 and 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 are not necessarily indicative of the results to be expected for the full year.

(3) 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. 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:

	Three Months Ended				~~Nine Months Ended~~
	October 1,		September 25,		October 1,		September 25,
	April 1, 2023		April 2, 2022
	2022		2021		2022		2021
Basic EPS Computation:
Basic EPS Computation:
Numerator:
Numerator:
Net income	$	459,201	$	419,436
Net income	$	987,865	$	2,727,967	$	1,862,409	$	2,998,067
Denominator:
Denominator:
Weighted average
Weighted average Common shares Outstanding		14,434,468		14,324,136		14,417,995		13,963,563
Common shares
Basic EPS	$	0.07	$	0.19	$	0.13	$	0.21
Outstanding		14,452,284		14,389,857
Diluted EPS Computation:
Basic EPS	$	0.03	$	0.03
Numerator:
Diluted EPS Computation:
Net income	$	987,865	$	2,727,967	$	1,862,409	$	2,998,067
Numerator:
Denominator:
Net income	$	459,201	$	419,436
Weighted average Common shares Outstanding		14,434,468		14,324,136		14,417,995		13,963,563
Denominator:
Dilutive effect of stock options		252,008		487,124		265,637		578,793
Weighted average
Total Shares		14,686,476		14,811,259		14,683,632		14,542,356
Common shares
Diluted EPS	$	0.07	$	0.18	$	0.13	$	0.21
Outstanding		14,452,284		14,389,857
Dilutive effect of stock options		187,316		268,082
Total Shares		14,639,600		14,657,939
Diluted EPS	$	0.03	$	0.03

(4) Commitments & Contingencies

Commitments

Leases

The Company has one real estate lease 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 of 12 months or fewer.

The real estate lease expiring in 2026 (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 was recognized on April 1, 2023 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 do not contain any material residual value guarantees or material restrictive covenants.

Operating Leases

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 in March 2026 through February 2032. The Company is not reasonably certain these extensions will be exercised at this time, and therefore are not 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 of ~~October~~April 1, ~~2022~~2023

(Dollars in Thousands)	~~October~~April 1, ~~2022~~2023
Maturity of capitalized lease liabilities	Lease payments
2022		41
Remaining 2023		121
2023		162
2024		165
2025		165
2026		28
Total undiscounted operating lease payments	$	~~561~~479
Less: Imputed interest		(6446	)
Present value of operating lease liability	$	~~497~~433
Balance Sheet Classification
Current lease liability	$	157
Long-term lease liability		~~340~~276
Total operating lease liability	$	~~497~~433
Other Information
Weighted-average remaining lease term for capitalized operating leases (in months)		4135
Weighted-average discount rate for capitalized operating leases		6.6	%

Operating Lease Costs and Cash Flows

Operating lease cost and cash paid was $41 thousand during the ~~third~~first quarter of ~~2022 and $120 thousand for the nine months ended October 1, 2022~~2023. ~~These~~This ~~costs~~cost ~~are~~is related to its long-term operating lease. All other short-term leases were immaterial.

Finance Leases

The company does not have any finance leases.

(5) 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~~quarters ended ~~October~~April 1, 2023 and April 2, 2022, ~~there~~a ~~were~~total 25of 0 and 170,000 stock options, respectively, were granted to employees under the Company’s 2020 Equity Incentive Plan. ~~There~~(the ~~were~~“Plan”) 5and a total of 50,000 and 38,000 stock options, respectively, were granted ~~under~~to ~~the~~outside ~~Plan~~directors during ~~quarter~~the quarters ended ~~September~~April 251, ~~2021~~2023 and April 2, 2022.

During the quarter ended ~~October~~April 1, ~~2022~~2023, nothere ~~options~~ were ~~exercised.~~7,001 ~~During~~options ~~the~~exercised ~~quarter~~and ~~ended October~~corresponding 1,shares ~~2022,~~issued ~~10,000~~at ~~options~~a ~~were~~weighted ~~forfeited~~average ~~and~~price ~~none~~of ~~expired~~$1. 47. During the quarter ended ~~September~~April 252, ~~2021~~2022, ~~500~~there ~~options~~ were 72,700 options exercised and corresponding shares issued at a weighted average price of $12.~~49, 32,500 options were forfeited and none expired~~08.

During the quarter ended ~~October~~April 1, ~~2022~~2023, the Company ~~did~~repurchased ~~not~~285 ~~repurchase any~~ shares for employees to facilitate their exercise of stock options. During the quarter ended ~~September~~April 252, ~~2021~~2022, the Company repurchased ~~112~~840 shares for employees to facilitate their exercise of stock options.

There were also ~~983~~1,~~100~~004,400 ~~shares~~options outstanding at a weighted average price of $2.4451 with a weighted average remaining term of 6.310 years as of ~~October~~April 1, ~~2022~~2023, and there were ~~518~~971,~~800~~600 ~~shares~~options ~~exercisable~~outstanding at a weighted average price of $2.0337 with a weighted average remaining term of 46.367 years as of ~~October~~April 12, 2022. The Plan, as amended, is authorized to issue 1,500,000 shares of common stock. As of ~~October~~April 1, ~~2022~~2023, there were ~~915~~865,800 shares available for future grants. 639,100 grants remain exercisable under the Company’s Equity Incentive Plans.

~~During~~As ~~the three and nine months ended~~of ~~October~~April 1, ~~2022~~2023, ~~the~~there ~~Company~~was ~~recognized approximately~~ $43523 thousand ~~and~~of ~~$207~~total ~~thousand,~~unrecognized ~~respectively as share-based~~ compensation ~~expense~~cost related to nonvested share-based ~~and~~compensation ~~option~~arrangements ~~grants.~~granted ~~These~~under ~~amounts~~the ~~are~~Plan; ~~included~~that ascost ais ~~component~~expected ofto ~~selling,~~be ~~general~~recognized ~~and~~over ~~administrative~~a ~~expenses~~weighted inaverage ~~the~~period ~~statement~~ of ~~operations~~1.41 years.

During the ~~three~~quarters ~~and~~ended April ~~nine~~1, ~~months~~2023 ~~ended~~and ~~September~~April 252, ~~2021~~2022, the Company recognized approximately $28130 thousand and $~~148~~124 thousand, respectively, as ~~share~~shared-based compensation expense related to ~~share~~previously ~~and~~granted ~~option~~shares ~~grants.~~under ~~These amounts are included as a component of selling, general and administrative expenses in~~ the ~~statement of operations~~Plan.

(6) Inventories

Inventories consist of the following:

	October 1,			December 25,
	April 1, 2023			December 31, 2022
	2022			2021
Raw materials	$	2,732,661		$	2,645,442
Raw materials	$	2,427,477		$	2,080,778
Work in process		1,726,410			1,863,512
Work in process		2,032,969			1,309,572
Finished goods		483,009			525,872
Finished goods		574,417			805,159
Gross inventory		4,942,081			5,034,826
Total inventory		5,034,863			4,195,509
Reserve for obsolescence		(249,425	)		(158,925	)
Reserve for obsolescence		(166,313	)		(283,907	)
Inventories, net	$	4,692,655		$	4,875,901
Inventories, net	$	4,868,550		$	3,911,602

(7) Accrued Expenses

Accrued expenses consist of the following:

	October 1,		December 25,
	April 1, 2023		December 31, 2022
	2022		2021
Accrued legal and accounting	$	32,500	$	35,398
Accrued legal and accounting	$	38,148	$	79,917
Accrued payroll and related expenses		576,532		760,305
Accrued payroll		693,382		905,698
Accrued other		122,422		25,153
Accrued other		134,007		100,814
Total Accrued Expenses	$	731,454	$	820,856
	$	865,537	$	1,086,429

(8) Line of Credit

In September 2019, the Company entered into a revolving line of credit (LOC) with Massachusetts Business Development Corporation (BDC) in the amount of $2.5 million. The agreement includes a demand note allowing the Lender to call the loan at any time. The Company may terminate the agreement without a termination fee after 3 years. In May of 2020 this credit line was increased to $3.0 million. The LOC is secured by the accounts receivable and other assets of the Company and ~~had~~has an interest rate of LIBOR plus ~~650 basis points. In May of 2021 the interest rate was reduced to LIBOR plus~~ 550 basis points. On ~~October~~April 1, ~~2022~~2023, the Company had $0 thousand 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 is subject to certain financial covenants, all of which have been met ~~or waived~~.

(9) Note Payable

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

In July 2020 CPS placed into service a piece of manufacturing equipment which it financed with the machine’s vendor. The equipment cost of $40 thousand was paid in full during the quarter ended October 1, 2022.

The aggregate maturities of the notes payable based on the payment terms of the agreement are as follows:

Remaining in:	~~Payments due by period~~
FY 2022	$	10,399
FY 2023		33,016
FY 2023	$	43,837
FY 2024	$	46,757
FY 2025	$	8,090
Total		~~109~~87,~~083~~863

Total interest expense on notes payable during ~~2022~~Q1 2023 was $61,~~243~~538 compared to $2,269 in Q1 2022.

(10) Income Taxes

A valuation allowance against deferred tax assets is required to be established or maintained when it is "more likely than not" that all or a portion of deferred tax assets will not be realized. In December 2018, the Company established a valuation allowance reserve, as it is judged more likely than not that all or a portion of its deferred tax assets will not be utilized before they expire. This decision was reached after giving greater weight to the Company’s losses in recent years as compared to its forecasts.

In September 2021, this decision was reevaluated in light of the Company’s recent profitability and its forecasts for future profitability. The Company concluded that it is “more likely than not” that the Company will be able to fully utilize the deferred tax asset. This reversal of the valuation allowance was made net of the expected tax liability for 2021 ~~in the amount of $2,790,201~~. For the ~~third~~first quarter of ~~2022~~2023 a charge against the deferred tax asset of $~~364,497~~226 for the estimated tax liability on Q3Q1 income was made. For the 9 months ended October 1, 2022, a charge against the tax asset of $705,755 was made for the estimated tax liability on year-to-date income. The Company has calculated its tax liability using a 21% rate for federal taxes and an 8.6% rate for state taxes.

~~(11) Other~~ITEM ~~Taxes~~2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

InThe Q3following ~~the~~discussion ~~Company~~and ~~determined~~analysis ~~that~~of itfinancial ~~was~~condition ~~eligible~~and ~~for~~results ~~the~~of ~~Employee~~operations ~~Retention~~is ~~Tax~~based ~~Credit~~upon ~~(“ERTC”).~~and ~~This~~should ~~amount~~be ~~was~~read ~~determined~~in toconjunction bewith ~~$641,086~~the financial statements of the Company and isnotes thereto included in ~~Accounts~~this ~~Receivable~~report and ~~Other~~the ~~Income.~~Company’s ~~The~~Annual ~~Company~~Report ~~has~~on ~~filed~~Form ~~its~~10-K ~~tax~~for ~~returns~~the toyear ~~reflect~~ended ~~this~~December ~~income~~31, 2022 and ~~has~~in ~~included~~CPS’s ~~its~~other ~~impact~~SEC inreports, which are accessible on the Q3SEC’s ~~tax~~website ~~calculation~~at www.sec.gov and the Company’s website at www.cpstechnologysolutions.com.

ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial condition and results of operations is based upon and should be read in conjunction with the financial statements of the Company and notes thereto included in this report and the Company’s Annual Report on Form 10-K for the year ended December 25, 2021.

Forward-Looking Statements

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 COVID-19 pandemic and the Russian invasion of Ukraine, 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.

Critical Accounting Policies

The critical accounting policies utilized by the Company in preparation of the accompanying financial statements are set forth in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 2531, ~~2021~~2022, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. There have been no material changes to these policies since December 2531, ~~2021~~2022.

Overview

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~~light-weight vehicle armor, particularly for extreme environments and heavy threat levels.

CPS’s products are custom rather than catalog items. They are made to customers’ designs and are used as components in systems built and sold by our customers. At any point in time our product mix will consist of some products with on-going production demand, and some products which are in the prototyping or evaluation stages at our customers. The Company seeks to have a portfolio of products which include products in every stage of the technology adoption lifecycle at our customers. CPS’ growth is dependent upon the level of demand for those products already in production, as well as its success in achieving new "design wins" for future products.

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.

The Company believes the underlying demand for MMC, housings for hybrid circuits and our proprietary armor solution is growing as the electronics and other industries seek higher performance, higher reliability, and reduced costs. CPS believes that the Company is well positioned to offer our solutions to current and new customers as these demands grow.

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~~Corporation.

Results of Operations for the ~~Third~~First Fiscal Quarter of ~~2022~~2023 (Q3Q1 ~~2022~~2023) Compared to the ~~Third~~First Fiscal Quarter of ~~2021~~2022 (Q3Q1 ~~2021~~2022); (all $ in ~~000s~~000’s)

~~Total~~Revenues ~~revenue~~totaled ~~was~~$7,100 in Q1 2023 compared with $6,~~748~~653 generated in Q3Q1 2022, aan ~~22%~~ increase ~~compared~~of ~~with~~7%. ~~total~~Two ~~revenue~~factors ofin ~~$5,515~~particular incontributed Q3to ~~2021~~this growth. ~~This~~One ~~increase~~of ~~was~~our ~~due~~largest ~~primarily~~customers, towhich ~~increases~~was inparticularly hard hit by the ~~Company’s~~Covid-19 ~~armor~~pandemic, ~~production~~has ascontinued ~~well~~to grow as ~~increases~~that inpandemic ~~sales~~has tosubsided. ~~other~~Additionally, ~~customers~~our inshipments of armor for the ~~aerospace~~US ~~and~~Navy ~~defense~~also ~~markets~~saw significant growth from 2022 to 2023.

Gross margin in Q3Q1 ~~2022~~2023 totaled $12,~~883~~245 or 2832% of sales. InThis Q3compares ~~2021,~~with gross margin ~~was~~in Q1 2022 of $1,~~139~~963 or 2130% of sales. This ~~increase~~moderate inpercentage ~~margin~~increase ~~directly~~was ~~correlates~~due to the ~~increased~~company’s ~~revenue~~continuing ~~and~~efforts to improve manufacturing efficiencies as well as the impact ~~increased~~of ~~revenue~~higher ~~has~~sales volumes on fixed ~~manufacturing~~ costs.

Selling, general and administrative ~~expenses~~ (SG&A) ~~were~~expenses totaled $1,~~175~~551 in Q3Q1 ~~2022, down~~2023 ~~4% when~~ compared with SG&A expenses of $1,~~227~~416 in Q3Q1 ~~2021~~2022. ~~This~~There ~~decrease~~were two primary reasons for this increase. First there was ~~primarily~~a ~~due~~significant increase in travel expenses. In 2022 we were just beginning to ~~non~~come out of the Covid-~~recurring~~19 ~~restructuring~~pandemic. ~~costs~~Many ofconferences ~~$327~~continued ~~incurred~~to inbe ~~2021,~~virtual ~~partially~~and ~~offset~~many bycustomers ancontinued ~~increase~~to inprohibit ~~variable~~outside ~~compensation~~visitors. In 2023 this has changed thus our business development team, in ~~2022~~particular, ~~incurred~~have asbeen doing significantly more travel than a ~~result~~year ofago. Secondly, the ~~Company’s~~company increased ~~revenue~~its 401k matching formula in 2023 resulting in increased payroll costs.

InThe ~~Q3,~~Company ~~2022,~~experienced ~~the~~an ~~Company~~operating ~~incurred~~profit ~~interest~~of ~~expense~~$694 in Q1 2023 compared with an operating profit of $2547 ~~due~~in toQ1 ~~equipment~~2022, ~~financing~~an increase of 27%. This ~~compares~~increase ~~with~~was ~~interest~~a ~~expense~~result of $3the inincreased Q3gross ofmargin, ~~2021~~partially offset by the increase in SG&A expenses.

The Company ~~generated~~has ~~operating~~had ~~income~~extremely ofminimal ~~$709~~sales ~~compared~~to ~~with~~both anRussia ~~operating~~and ~~loss~~Ukraine ofover ~~$88 in~~ the ~~same quarter~~ last ~~year.~~several ~~This increase in operating income is due to the non-recurring restructuring costs~~years, ~~discussed above, as well as~~ the ~~impact~~loss of ~~higher~~which ~~revenue~~would onbe ~~the~~immaterial ~~absorption~~to ofthese ~~fixed~~financial ~~costs~~statements. ~~The~~Neither ~~net~~does ~~income~~CPS ~~for~~rely Q3on ~~2022~~raw ~~totaled~~materials ~~$988~~from ~~versus~~that ~~net~~part ~~income~~ of ~~$2,728~~the ~~in Q3 2021~~world. ~~This~~ ~~differential~~As ina ~~net~~result, ~~income~~we isdo ~~due~~not tobelieve ~~the~~that ~~reversal of~~ the ~~deferred~~Russian ~~tax~~invasion ~~asset~~of ~~valuation~~Ukraine ~~allowance~~will inhave Q3a ~~2021,~~direct ~~discussed~~impact inon ~~footnote~~our 10results. ~~above~~Nevertheless, ~~partially~~there ~~offset~~could bybe ~~the~~an ~~ERTC~~indirect inimpact ~~2022,~~regarding ~~discussed~~supply inchain ~~footnote~~and 11inflationary ~~above. The~~issues ~~pre-tax~~as ~~net~~a inresult ~~2021~~of ~~loss~~this ~~was $72~~war.

~~Results~~Inflation ofhas ~~Operations~~had ~~for~~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 ~~First~~future. ~~Nine~~In ~~Months~~addition, there is often a lag between when the costs increase and when we can adjust customer prices. Some of ~~2022~~our ~~Compared~~larger customers will have pricing agreements, typically for one year, and we must wait for those agreements to end before making any pricing adjustments. Wage increases are also part of the ~~First~~inflation ~~Nine~~impact. ~~Months~~We have instituted a combination of ~~2021~~wage ~~(all~~increases $as well as richer benefits, such as the increased 401k match mentioned above, in ~~000s)~~order to retain the folks making up our workforce.

~~Total~~These ~~revenue~~factors ~~was~~combine ~~$20,472~~to increate ~~the first nine months of 2022,~~ a ~~26%~~higher ~~increase~~degree ~~compared with total revenue~~ of ~~$16,243~~uncertainty inregarding ~~the~~future ~~first~~financial ~~nine months of 2021~~performance. ~~This increase was due to the growth of our armor and hermetic package product lines.~~

~~Gross~~Liquidity ~~margin~~and inCapital ~~the~~Resources ~~first~~(all ~~nine months of 2022 totaled~~ $~~5,675~~ orin ~~28%~~000’s ofunless ~~sales. In the first nine months of 2021 gross margin totaled $3,435 or 21% of sales. This increase was due to higher sales volumes and the impact those higher volumes have on our fixed costs.~~noted)

~~Selling,~~The ~~general~~Company’s cash and ~~administrative~~cash ~~(SG&A)~~equivalents ~~expenses~~at ~~were~~April $31,~~750~~ ~~during~~2023 ~~the~~totaled ~~first~~$7,370. ~~nine~~This ~~months~~compares ofto ~~2022,~~cash upand ~~16%~~cash ~~compared~~equivalents ~~with~~at ~~SG&A~~December ~~expenses of $3~~31,~~234~~ in2022 ~~the first nine months~~ of ~~2021~~$8,267. The ~~hiring~~decrease ofin ~~our~~cash ~~new~~was ~~CDO, increased variable compensation accruals~~ due primarily to ~~higher~~increases ~~2022~~in ~~operating~~accounts ~~profitability~~receivable and ~~increased~~significant ~~costs~~reductions ~~associated~~in ~~commissions~~deferred onrevenue ~~armor~~offset ~~product~~by ~~shipments~~net ~~were the primary reasons for this increase~~profit.

~~During~~Accounts ~~the~~receivable ~~first~~at ~~nine~~April ~~months~~1, of2023 ~~2022~~totaled $5,415 ~~the~~compared ~~Company~~with ~~incurred~~$4,464 ~~interest~~at ~~expense~~December of31, $62022. onDays ~~its~~Sales ~~notes~~Outstanding ~~payable.~~(DSO) ~~This~~increased ~~compares~~from ~~with~~56 ~~interest~~days ~~expense~~at the end of ~~$33~~2022 ~~incurred~~to ~~during~~60 days at the ~~first~~end ~~nine~~of ~~months~~Q1 2023. The increase in DSO was due to the inclusion of ~~2021~~deferred ~~which~~revenue ~~included~~of $0.6M in the ~~notes~~year ~~payable~~end asaccounts ~~well~~receivable asbalance, ~~bank~~which ~~borrowings~~was incollected during Q1 2023. The accounts receivable balances at December 31, 2022, and Q2April 1, 2023 were both net of ~~2021~~an allowance for doubtful accounts of $10.

InInventories ~~the~~totaled ~~first~~$4,693 ~~nine~~at ~~months~~April ~~of 2022 the Company generated operating income of $~~1,~~925~~ 2023 compared with ~~operating~~inventory ~~income~~totaling of $~~201 in the same period last year. Similar to revenue~~4,876 ~~the~~at ~~difference~~December ~~between the first quarter of 2022 compared to the Covid impacted first quarter of 2021~~31, ~~plus the non-recurring restructuring costs account for this difference~~2022. The ~~net~~inventory ~~income~~turnover ~~for~~in the ~~first~~most ~~nine~~recent ~~months~~four ofquarters ~~2022~~ending ~~totaled~~Q1 ~~$1,862~~2023 ~~versus~~was ~~net~~4.1 ~~income~~times of(based ~~$2,998~~on ina ~~the~~5 ~~first~~point ~~nine~~average) ~~months~~compared ofwith ~~2021~~4.2 ~~This~~times ~~difference~~averaged isduring ~~due to~~ the ~~tax~~four ~~impact~~quarters onof Q3 2021 ~~described in note 10 above offset by the ERTC in 2022 described in note 11 above~~.

~~Liquidity~~The ~~and~~Company ~~Capital~~financed ~~Resources~~its ~~(all~~increase in $non-cash working capital in ~~000s~~Q1 ~~unless~~2023 ~~noted)~~from its profit and usage of cash on hand. The Company expects it will continue to be able to fund its operations for the remainder of 2023 from operations and existing cash balances.

The Company’s ~~cash~~continues to sell to a limited number of customers and ~~cash~~the ~~equivalents~~loss atof ~~October~~any 1,one ~~2022~~of ~~totaled~~these ~~$5,599.~~customers ~~This~~could ~~compares~~cause tothe ~~cash~~Company ~~and~~to ~~cash~~require ~~equivalents~~additional atexternal ~~December~~financing. ~~25,~~Failure ~~2021~~to ofgenerate $5sufficient revenues,~~050.~~ ~~The~~raise ~~increase~~additional incapital ~~cash~~or ~~was~~reduce ~~primarily~~certain ~~due~~discretionary tospending ~~our~~could ~~net~~have ~~profit,~~a ~~offset~~material byadverse ~~increased~~effect ~~accounts~~on ~~receivable~~the ~~and~~Company’s ~~inventory~~ability to ~~support~~achieve ~~higher~~its ~~sales~~business objectives.

~~Accounts~~Management ~~receivable~~believes atthat ~~October~~existing 1,cash ~~2022~~balances ~~totaled~~will ~~$5,836~~be ~~compared~~sufficient ~~with~~to ~~$4,870~~fund atour ~~December~~cash ~~25,~~requirements ~~2021~~for the foreseeable future. ~~The~~However, Q3there ~~2022~~is ~~total~~no ~~includes~~assurance ~~$641~~that ~~receivable~~we ~~for~~will be able to generate sufficient revenues or reduce certain discretionary spending in the ~~ERTC~~event that planned operational goals are not met such that we will be able to meet our obligations as they become due.

~~Days~~Contractual ~~Sales~~Obligations ~~Outstanding~~ (~~DSO)~~all ~~decreased~~$ ~~from 72 days at the end of 2021 to 69 days at the end of Q3 2022, based on trade receivables. This decrease was due to deferred revenue included~~ in ~~accounts~~000’s ~~receivable~~unless atotherwise ~~the end of 2021 not yet reflected in revenue. The accounts receivable balances at December 25, 2021, and October 1, 202 were both net of an allowance for doubtful accounts of $10.~~noted)

~~Inventories~~In ~~totaled~~September $42019,~~869~~ atthe ~~October~~Company 1,entered ~~2022~~into ~~compared~~revolving line of credit (LOC) with ~~inventory~~Massachusetts ~~totaling~~Business ~~$3,912~~Development atCorporation ~~December~~(BDC) ~~25,~~in ~~2021~~the amount of $2.5 ~~The~~million. ~~increase~~This agreement was amended in ~~inventory~~May ~~was~~2020 ~~necessary~~to increase the line to ~~support~~$3.0 ~~rising~~million. ~~sales~~The ~~and~~agreement ~~due~~includes a demand note allowing the Lender to ~~product~~call ~~mix,~~the asloan ~~some~~at ~~products~~any ~~are~~time. ~~more~~The ~~labor~~Company ~~intensive,~~may ~~while~~terminate ~~others~~the ~~are~~agreement ~~more~~without ~~materials~~a ~~intensive~~termination fee after 3 years. The ~~inventory~~LOC ~~turnover~~is insecured by the ~~most~~accounts ~~recent~~receivable ~~four~~and ~~quarters~~other ~~ending~~assets Q3of ~~2022~~the ~~was~~Company ~~4.5~~and ~~times,~~has ~~slightly~~an ~~down~~interest ~~from~~rate 4of LIBOR plus 550 basis points.6 ~~times~~The ~~averaged~~Company ~~during~~was ~~the~~in ~~four~~compliance ~~quarters~~with all debt covenants as of ~~2021~~April ~~(based~~1, on2023, ahad 5$0 ~~point~~borrowings ~~average)~~under this LOC and its borrowing base at the time would have permitted $3.0 to have been borrowed.

~~The~~In ~~Company~~March ~~financed~~2020, ~~its~~the ~~working~~company ~~capital~~acquired ~~during~~a ~~the~~scanning ~~first~~acoustic ~~nine~~microscope ~~months~~for a price of ~~2022~~$208 ~~from~~thousand. ~~its~~The ~~net~~full ~~profit~~amount ~~during~~was ~~the~~financed ~~period~~through a 5 year note payable with a financing company. The ~~Company~~note ~~expects~~is itcollateralized ~~will~~by ~~continue~~the tomicroscope beand ~~able~~is tobeing ~~fund~~paid ~~its~~in ~~working~~monthly ~~capital~~installments ~~requirements~~of ~~for~~$4 ~~the~~thousand, ~~remainder~~consisting of ~~2022~~principal ~~from~~plus ~~existing~~interest ~~cash~~at ~~balances~~a rate of 6.47%

Although the Company’s customer base is expanding, the Company continues to sell to a limited number of customers and the loss of any one of these customers could cause the Company to require additional external financing. Failure to generate sufficient revenues, raise additional capital or reduce certain discretionary spending could have a material adverse effect on the Company’s ability to achieve its business objectives.

Contractual Obligations

In September 2019, the Company entered into revolving line of credit (LOC) with Massachusetts Business Development Corporation (BDC) in the amount of $2.5 million. This agreement was amended in May 2020 to increase the line to $3.0 million. The agreement includes a demand note allowing the Lender to call the loan at any time. The Company may terminate the agreement without a termination fee after 3 years. The LOC is secured by the accounts receivable and other assets of the Company and has an interest rate of LIBOR plus 550 basis points. The Company was in compliance with all debt covenants as of October 1, 2022, had $0 borrowings under this LOC and its borrowing base at the time would have permitted $3.0 million to have been borrowed.

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%.

In July 2020 CPS placed into service a piece of manufacturing equipment which it financed through a capital lease with the machine’s vendor. The original lease amount was $40 thousand and will be paid at the rate of $2 thousand per month over 2 years with an interest rate of 1.9%.

As of October 1, 2022, the Company had $46 of construction in progress and no outstanding commitments to purchase production equipment.

The Company has one real estate lease 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 have been capitalized. (Note 4, Leases)

Management believes that a combination of existing cash balances and borrowings, if necessary, will be sufficient to fund our cash requirements for the foreseeable future. However, there is no assurance that we will be able to generate sufficient revenues or reduce certain discretionary spending in the event that planned operational goals are not met such that we will be able to meet our obligations as they become due.

ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is not significantly exposed to the impact of interest rate changes or foreign currency fluctuations. The Company has not used derivative financial instruments.

Although CPS has not been directly impacted by the war in Ukraine, potential supply chain disruptions and its impact on energy costs are areas where we could be impacted in the future.

Inflation is an area where we have seen some impact on our business. We have seen significant price increases in commodity raw materials, such as aluminum, as well as increases in other costs of doing business. As we receive new orders we have been able to pass on most of these costs to our customers. In the case of longer term pricing agreements, we have been able to pass on some of these costs through surcharges and in other ways to mitigate the impact on our profit. As inflation continues, our ability to continue to absorb higher costs by raising customer prices cannot be guaranteed.

ITEM 4

CONTROLS AND PROCEDURES

(a) The Company’s ~~Chief~~Acting ~~Executive~~President ~~Officer~~ and Chief Financial Officer ~~have~~has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 15d - 14(c) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Form 10-Q (the “Evaluation Date”). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, 1) the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports the Company files under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and 2) the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.

(b) Changes in Internal Controls. There has been no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

PART II OTHER INFORMATION

ITEM 1 LEGAL PROCEEDINGS ~~None.~~

~~ITEM 1A RISK FACTORS There have been no material changes to the risk factors as discussed in our 2020 Form 10-K~~None.

ITEM 1A

RISK FACTORS

There have been no material changes to the risk factors as discussed in our 2022 Form 10-K.

ITEM 2

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. None.

ITEM 3 DEFAULTS UPON SENIOR SECURITIES ~~None.~~

~~ITEM 4 MINE SAFETY DISCLOSURES Not applicable~~None.

ITEM ~~5 OTHER~~4 ~~INFORMATION Not~~MINE ~~applicable.~~SAFETY DISCLOSURES

~~ITEM~~Not ~~6 EXHIBITS (a) Exhibits:~~applicable.

~~Exhibit~~ITEM ~~31.1~~5 ~~Certification~~OTHER ~~of Chief Executive Officer Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 302 of The Sarbanes-Oxley Act Of 2002~~INFORMATION

~~Exhibit~~Not 31applicable.~~2 Certification of Chief Financial Officer Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 302 of The Sarbanes-Oxley Act Of 2002~~

~~Exhibit~~ITEM ~~32.1~~6 ~~Certification~~EXHIBITS ~~Pursuant~~AND ToREPORTS 18ON ~~U.S.C.~~FORM ~~Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes~~8-~~Oxley Act of 2002~~K:

(a)

Exhibits:

Exhibit 31.1 Certification Of Acting President and Chief Financial Officer Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 302 Of The Sarbanes-Oxley Act Of 2002

Exhibit 32.1 Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002

101.INS Inline XBRL Instance Document

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

104 Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101)

(b) Reports on Form 8-K

None

SIGNATURES

Pursuant to the requirements 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.

CPS TECHNOLOGIES ~~CORP. (Registrant)~~CORPORATION

~~Date: November 8, 2022~~(Registrant)

~~/s/~~Date: ~~Michael~~May E.8, ~~McCormack~~2023

Michael E. McCormack Chief Executive Officer

Date: November 8, 2022

/s/ Charles K. Griffith Jr.

Charles K. Griffith Jr.

Acting President and Chief Financial Officer

Filing Compare · CPS TECHNOLOGIES CORP/DE/