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

~~SECURITIES~~(Mark ~~AND~~One) ~~EXCHANGE~~☒ ~~COMMISSION~~Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended September 30, 2023 or

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

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 July 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 ~~Registrant’s~~Registrants Telephone 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 every Interactive Data File required to be submitted 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 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.S.C. 7262(b)) by the registered ~~public~~ 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

☐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 Capital Markets

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 ~~July~~October 2520, 2023: 14,~~516~~519,~~544~~215.

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

ITEM 1 FINANCIAL STATEMENTS (Unaudited)

	September 30,			December 31,
	2023			2022
ASSETS

Current assets:
Cash and cash equivalents	$	8,778,856		$	8,266,753
Accounts receivable-trade, net		5,006,451			3,777,975
Accounts receivable-other		17,043			685,668
Inventories, net		4,827,957			4,875,901
Prepaid expenses and other current assets		337,476			211,242
Total current assets		18,967,783			17,817,539
Property and equipment:
Production equipment		11,195,993			10,770,427
Furniture and office equipment		952,883			952,883
Leasehold improvements		985,649			985,649
Total cost		13,134,525			12,708,959

Accumulated depreciation and amortization		(11,810,209	)		(11,446,901	)
Construction in progress		206,693			64,910
Net property and equipment		1,531,009			1,326,968
Right-of-use lease asset		367,000			466,000
Deferred taxes, net		1,645,467			2,069,436
Total assets	$	22,511,259		$	21,679,943

CPS TECHNOLOGIES CORP.

Balance Sheets (Unaudited)

	July 1,			December 31,
	2023			2022
ASSETS
Current assets:
Cash and cash equivalents	$	8,681,225		$	8,266,753
Accounts receivable-trade, net		5,074,559			3,777,975
Accounts receivable-other		74,639			685,668
Inventories, net		4,813,753			4,875,901
Prepaid expenses and other current assets		288,315			211,242
Total current assets		18,932,491			17,817,539
Property and equipment:
Production equipment		11,028,500			10,770,427
Furniture and office equipment		952,883			952,883
Leasehold improvements		985,649			985,649
Total cost		12,967,032			12,708,959
Accumulated depreciation and amortization		(11,699,870	)		(11,446,901	)
Construction in progress		240,415			64,910
Net property and equipment		1,507,578			1,326,968
Right-of-use lease asset		400,000			466,000
Deferred taxes, net		1,664,032			2,069,436
Total assets	$	22,504,101		$	21,679,943

See accompanying notes to financial statements.

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

CPS TECHNOLOGIES CORP.

	September 30,			December 31,
	2023			2022
LIABILITIES AND STOCKHOLDERS` EQUITY

Current liabilities:
Note payable, current portion		57,457			43,711
Accounts payable		2,151,127			1,836,865
Accrued expenses		1,067,293			820,856
Deferred revenue		1,675,086			2,521,128
Lease liability, current portion		159,000			157,000
Total current liabilities		5,109,963			5,379,560
Note payable less current portion		8,655			54,847
Deferred revenue-long term		31,277			231,020
Lease liability less current portion		208,000			309,000
Total liabilities		5,357,895			5,974,427

Commitments (note 4)

Stockholders` equity:
Common stock, $0.01 par value, authorized 20,000,000 shares; issued 14,601,487 and 14,460,486, respectively; outstanding 14,519,215 and 14,450,470, respectively; at September 30, 2023 and December 31, 2022		146,015			144,605
Additional paid-in capital		40,151,794			39,726,851
Accumulated deficit		(22,894,307	)		(24,125,092	)
Less cost of 82,272 and 10,016 common shares repurchased, respectively; at September 30, 2023 and December 31, 2022		(250,138	)		(40,848	)
Total stockholders` equity		17,153,364			15,705,516
Total liabilities and stockholders` equity	$	22,511,259		$	21,679,943

Balance Sheets (Unaudited)

(concluded)

	July 1,			December 31,
	2023			2022
LIABILITIES AND STOCKHOLDERS` EQUITY
Current liabilities:
Note payable, current portion	$	56,681		$	43,711
Accounts payable		2,359,532			1,836,865
Accrued expenses		861,514			820,856
Deferred revenue		1,828,068			2,521,128
Lease liability, current portion		158,000			157,000
Total current liabilities		5,263,795			5,379,560
Note payable less current portion		20,437			54,847
Deferred revenue – long term		31,277			231,020
Long term lease liability		242,000			309,000
Total liabilities		5,557,509			5,974,427
Commitments and contingencies (note 4)
Stockholders` equity:
Common stock, $0.01 par value, authorized 20,000,000 shares; issued 14,546,487 and 14,460,486 shares; outstanding 14,511,544 and 14,450,470 shares; at July 1, 2023 and December 31, 2022, respectively		145,465			144,605
Additional paid-in capital		39,978,453			39,726,851
Accumulated deficit		(23,065,388	)		(24,125,092	)
Less cost of 34,943 and 10,016 common shares repurchased at July 1, 2023 and December 31, 2022, respectively		(111,938	)		(40,848	)
Total stockholders` equity		16,946,592			15,705,516
Total liabilities and stockholders` equity	$	22,504,101		$	21,679,943

See accompanying notes to financial statements.

CPS TECHNOLOGIES CORP. Statements of Operations (Unaudited)

Statements of Operations (Unaudited)

	Fiscal Quarters Ended						Nine Months Ended
	September 30,			October 1,			September 30,			October 1,
	2023			2022			2023			2022
Revenues:
Product sales	$	6,285,041		$	6,748,117		$	20,803,447		$	20,471,574
Total Revenues		6,285,041			6,748,117			20,803,447			20,471,574

Cost of product sales		5,049,177			4,864,876			15,126,621			14,796,206
Gross Profit		1,235,864			1,883,241			5,676,826			5,675,368

Selling, general and administrative expense		1,105,227			1,174,581			4,121,099			3,750,131
Operating income		130,637			708,660			1,555,727			1,925,237

Interest income (expense), net		78,181			(1,892	)		176,325			(6,245	)
Other income (expense), net		(1,228	)		645,594			(4,130	)		649,628
Net income before income tax expense		207,590			1,352,362			1,727,922			2,568,620
Income tax provision		36,509			364,497			497,137			706,211
Net income	$	171,081		$	987,865		$	1,230,785		$	1,862,409
Net income per basic common share	$	0.01		$	0.07		$	0.08		$	0.13
Weighted average number of basic common shares outstanding		14,517,364			14,434,468			14,487,873			14,417,995
Net income per diluted common share	$	0.01		$	0.07		$	0.08		$	0.13
Weighted average number of diluted common shares outstanding		14,636,241			14,686,476			14,632,591			14,683,632

	Three Months Ended				Six Months Ended
	July 1,		July 2,		July 1,		July 2,
	2023		2022		2023		2022
Revenues:
Product sales	$	7,418,138	$	7,070,743	$	14,518,405	$	13,723,457
Total revenues		7,418,138		7,070,743		14,518,405		13,723,457
Cost of product sales		5,221,880		5,242,106		10,077,444		9,931,330
Gross Margin		2,196,259		1,828,637		4,440,961		3,792,127
Selling, general, and administrative expense		1,465,349		1,159,157		3,015,871		2,575,550
Income from operations		730,910		669,480		1,425,090		1,216,577
Interest income (expense), net		79,652		1,594		95,242		(319	)
Net income before income tax		810,562		671,074		1,520,332		1,216,258
Income tax provision		210,058		215,966		460,628		341,714
Net income	$	600,503	$	455,108	$	1,059,704	$	874,544
Net income per basic common share	$	0.04	$	0.03	$	0.07	$	0.06
Weighted average number of basic common shares outstanding		14,493,970		14,431,825		14,473,128		14,410,064
Net income per diluted common share	$	0.04	$	0.03	$	0.07	$	0.06
Weighted average number of diluted common shares outstanding		14,621,929		14,708,646		14,630,765		14,682,516

See accompanying notes to financial statements.

CPS TECHNOLOGIES CORP. STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) FOR THE THREE AND ~~SIX~~NINE MONTHS ENDED ~~JULY~~SEPTEMBER 130, 2023 AND ~~JULY~~OCTOBER 21, 2022

	Common Stock				~~Additional~~					~~Total~~
	Number of				~~paid-in~~Additional		~~Accumulated~~			~~Stock~~			~~stockholders'~~Total
	shares issued		Par Value		capital		deficit			repurchased			equity
	shares				paid-in		Accumulated			Stock			stockholders'
Balance at April 1, 2023		14,467,487	$	144,675	$	39,867,507		(23,665,891	)		(41,638	)		16,304,653
	issued		Par Value		capital		deficit			repurchased			equity
Share-based compensation expense		--		--		17,316		--			--			17,316
Issuance of common stock		--		--		--		--			--			--
Employee option exercises		79,000		790		93,630		--			(70,300	)		24,120
Net income		--		--		--		600,503			--			600,503
Balance at July 1, 2023		14,546,487		145,465		39,978,453		(23,065,388	)		(111,938	)		16,946,592
Share-based compensation expense		-		-		27,941		-			-			27,941
Employee option exercises		55,000		550		145,400		-			(138,200	)		7,750
Net income		-		-		-		171,081			-			171,081
Balance at September 30, 2023		14,601,487		146,015		40,151,794		(22,894,307	)		(250,138	)		17,153,364

	Common Stock				~~Additional~~								~~Total~~
	Number of				~~paid-in~~Additional		~~Accumulated~~			~~Stock~~			~~stockholders'~~Total
	shares issued		Par Value		capital		deficit			repurchased			equity
	shares				paid-in		Accumulated			Stock			stockholders'
	issued		Par Value		capital		deficit			repurchased			equity
Balance at December 31, 2022		14,460,486	$	144,605	$	39,726,851		(24,125,092	)		(40,848	)		15,705,516
Share-based compensation expense		--		--		~~147~~175,~~757~~698		--			--			~~147~~175,~~757~~698
Issuance of common stock		--		--		--		--			--			--
Employee options exercised		141,001		1,410		249,245		-			(209,290	)		41,365
Employee options Exercised		86,001		860		103,845		--			(71,090	)		33,615
Net income		-		-		-		1,230,785			-			1,230,785
Net income		--		--		--		1,059,704			--			1,059,704
Balance at September 30, 2023		14,601,487		146,015		40,151,794		(22,894,307	)		(250,138	)		17,153,364
Balance at July 1, 2023		14,546,487		145,465		39,978,453		(23,065,388	)		(111,938	)		16,946,592

	Common Stock				~~Additional~~									~~Total~~
	Number of				~~paid-in~~Additional			~~Accumulated~~			~~Stock~~			~~stockholders'~~Total
	shares issued		Par Value		capital			deficit			repurchased			equity
	shares				paid-in			Accumulated			Stock			stockholders'
Balance at April 2, 2022		14,423,486	$	144,235	$	39,546,975			(25,837,056	)		(5,623	)		13,848,531
	issued		Par Value		capital			deficit			repurchased			equity
Share-based compensation expense		--		--		39,384			--			--			39,384
Balance at July 2, 2022		14,438,786	$	144,388	$	39,600,085			(25,381,948	)		(20,849	)		14,341,676
Issuance of common stock		--		--		(8,144	)		--			--			(8,144	)
Share-based compensation expense		-		-		43,422			-			-			43,422
Employee option exercises		15,300		153		21,870			--			(15,226	)		6,797
Issuance of common stock (net of costs)		-		-		(23,135	)		-			-			(23,135
Net income		--		--		--			455,108			--			455,108
Employee option exercises		-		-		-						-			-
Balance at July 2, 2022		14,438,786		144,388		39,600,085			(25,381,948	)		(20,849	)		14,341,676
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

	Common Stock				~~Additional~~									~~Total~~
	Number of				~~paid-in~~Additional			~~Accumulated~~			~~Stock~~			~~stockholders'~~Total
	shares issued		Par Value		capital			deficit			repurchased			equity
	shares				paid-in			Accumulated			Stock			stockholders'
	issued		Par Value		capital			deficit			repurchased			equity
Balance at December 25, 2021		14,350,786	$	143,508	$	39,281,810			(26,256,492	)		(2,515	)		13,166,311
Share-based compensation expense		--		--		~~163~~207,~~855~~277			--			--			~~163~~207,~~855~~277
Issuance of common stock		--		--		(17,758	)		--			--			(17,758	)
Issuance of common stock (net of costs)		-		-		(40,893	)		-			-			(40,893	)
Employee options Exercised		88,000		880		172,178			--			(18,334	)		154,724
Employee options exercised		88,000		880		172,178						(18,334	)		154,724
Net income		--		--		--			874,544			--			874,544
Treasury shares retired		-		-		-			-			-			-
Balance at July 2, 2022		14,438,786		144,388		39,600,085			(25,381,948	)		(20,849	)		14,341,676
Net income									1,862,409			-			1,862,409
Balance at October 1, 2022		14,438,786		144,388		39,620,372			(24,394,083	)		(20,849	)		15,349,828

See accompanying notes to financial statements.

CPS TECHNOLOGIES CORP. Statements of Cash Flows (Unaudited)

Statements of Cash Flows (Unaudited)

	Nine Month Periods Ended
	September 30,			October 1,
	2023			2022

Cash flows from operating activities:
Net income	$	1,230,785		$	1,862,409
Adjustments to reconcile net income to cash provided by operating activities
Depreciation and amortization		363,308			316,469
Share-based compensation		175,698			207,277
Deferred taxes		423,969			705,755

Changes in:
Accounts receivable-trade		(1,228,476	)		(965,717	)
Accounts receivable-other		668,625			-
Inventories		47,944			(956,948	)
Prepaid expenses		(126,234	)		(20,807	)
Accounts payable		314,262			(55,394
Deferred revenue		(1,045,785	)		-
Accrued expenses		246,437			(220,891	)
Net cash provided by operating activities		1,070,533			872,153
Cash flows from investing activities:
Purchases of property and equipment		(567,349	)		(392,286	)
Net cash provided by (used in) investing activities		(567,349	)		(392,286	)

Cash flows from financing activities:
Proceeds from employee stock options		41,365			154,724
Stock issuance costs in excess of proceeds		-			(40,893	)
Payments on note payable		(32,446	)		(45,507	)
Net cash provided by financing activities		8,918			68,324
Net increase in cash and cash equivalents		512,103			548,191
Cash and cash equivalents at beginning of period		8,266,753			5,050,312
Cash and cash equivalents at end of period	$	8,778,856		$	5,598,503
Supplemental disclosures of cash flows information:
Cash paid for income taxes	$	109,456		$	456
Cash paid for interest		4,130			6,243

Supplemental disclosures of non-cash activity:

Share repurchases as a reduction of stock option exercise proceeds		209,290			18,334

	Six Months Ended
	July 1,			July 2,
	2023			2022
Cash flows from operating activities:
Net income	$	1,059,704		$	874,544
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Depreciation and amortization		252,969			211,641
Share-based compensation		147,757			163,855
Changes in:
Accounts receivable-trade		(1,296,584	)		333,048
Accounts receivable-other		611,028			--
Inventories		62,148			(754,117	)
Prepaid expenses and other current assets		(77,073	)		(87,628	)
Accounts payable		522,667			(478,973	)
Accrued expenses		40,658			(438,249	)
Deferred taxes		405,404			341,258
Deferred revenue		(892,803	)		45,405
Net cash provided by operating activities		835,875			210,784
Cash flows from investing activities:
Purchases of property and equipment		(433,579	)		(291,631	)
Net cash used in investing activities		(433,579	)		(291,631	)
Cash flows from financing activities:
Proceeds from exercise of employee stock options, net of repurchases		33,615			154,724
Proceeds from issuance of common stock, net of expenses		--			(17,758	)
Payments on note payable		(21,439	)		(30,149	)
Net cash provided by financing activities		12,176			106,817
Net increase in cash and cash equivalents		414,472			25,970
Cash and cash equivalents at beginning of period		8,266,753			5,050,312
Cash and cash equivalents at end of period	$	8,681,225		$	5,076,282
Supplemental disclosures of cash flows information:
Cash paid for interest		2,902			4,353
Cash paid for taxes		79,456			79,456
Supplemental disclosures of non-cash activity:
Net exercise of stock options		71,090			18,334

See accompanying notes to financial statements.

CPS TECHNOLOGIES CORP.
Notes to Financial Statements
(Unaudited)

(1) Nature of Business

CPS Technologies Corp. (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 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 31, 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 31, 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 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:

	Three Months Ended				~~Six~~Nine Months Ended
	July 1,		July 2,		July 1,		July 2,
	September 30,		October 1,		September 30,		October 1,
	2023		2022		2023		2022
Basic EPS Computation:
Numerator:
Net income (loss)	$	600,503	$	455,108	$	1,059,704	$	874,544
Net income	$	171,081	$	987,865	$	1,230,785	$	1,862,409
Denominator:
Weighted average
Weighted average Common shares Outstanding		14,517,364		14,434,468		14,487,873		14,417,995
Common shares
Basic EPS	$	0.01	$	0.07	$	0.08	$	0.13
Outstanding		14,493,970		14,431,825		14,473,128		14,410,064
Basic EPS	$	0.04	$	0.03	$	0.07	$	0.06
Diluted EPS Computation:
Numerator:
Net income (loss)	$	600,503	$	455,108	$	1,059,704	$	874,544
Net income	$	171,081	$	987,865	$	1,230,785	$	1,862,409
Denominator:
Weighted average
Weighted average Common shares Outstanding		14,517,364		14,434,468		14,487,873		14,417,995
Common shares
Dilutive effect of stock options		118,877		252,008		144,718		265,637
Outstanding		14,493,970		14,431,825		14,473,128		14,410,064
Total Shares		14,636,241		14,686,476		14,632,591		14,683,632
Dilutive effect of stock options		127,959		276,821		157,637		272,452
Diluted EPS	$	0.01	$	0.07	$	0.08	$	0.13
Total Shares		14,621,929		14,708,646		14,630,765		14,682,516
Diluted EPS	$	0.04	$	0.03	$	0.07	$	0.06

(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 March 1, 2021 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 Company has one real estate lease expiring in February 2026. CPS also has a few operating leases for equipment which are minor in nature and are generally short-term in duration. None of these equipment leases has 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 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.

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. Annual rental payments range from $160 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~~facility ~~operating~~ lease as of ~~July~~September 130, 2023.

(Dollars in Thousands)	~~July 1, 2023~~
Maturity of capitalized lease liabilities	Lease payments
2023		8141
2024		165
2025		165
2026		2827
Total undiscounted operating lease payments	$	~~439~~398
Less: Imputed interest		(3931	)
Present value of operating lease liability	$	~~400~~367
Balance Sheet Classification
Current lease liability	$	159
Long-term lease liability		208
Total operating lease liability	$	367
Other Information
Remaining lease term for capitalized operating leases (in months)		29
Discount rate		6.6	%

Balance Sheet Classification
Current lease liability	$	158
Long-term lease liability		242
Total operating lease liability	$	400
Other Information
Remaining lease term for capitalized operating lease (months)		32
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 ~~second~~third quarter of 2023 and $81122 thousand for the ~~six~~nine months ended ~~July~~September 130, 2023. These costs are 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~~Company uses the Black-Scholes option pricing model to determine the fair value of the stock options granted.

During the quarter ended ~~July~~September 130, 2023, athere ~~total~~were ~~of 60~~229,~~000~~500 stock options ~~were~~ granted ~~to employees~~ under the ~~Company’s 2020 Equity Incentive~~ Plan. ~~Stock~~There ~~Incentive Plan (the “Plan”) and no stock options~~ were ~~granted to outside directors during the quarter ended July 1~~25, ~~2023, issued at a weighted average price of $2.66 per share. During the quarter ended July 2, 2022, a total of 15,~~000 stock options ~~were~~ granted ~~to employees~~ under the ~~Company’s 2020 Equity Incentive~~ Plan ~~Stock Incentive Plan (the “Plan”) and no stock options were granted to outside directors~~ during the quarter ended ~~July~~October 2,1 2022~~, issued at a weighted average price of $4~~.~~41 per share.~~

During the ~~three~~quarter ~~and six months~~ ended ~~July~~September 130, 2023, ~~there were 79~~55,000 ~~and 86,000~~ options were exercised ~~and corresponding shares issued~~ at a weighted average ~~price~~cost of $12.2065 ~~and~~per $1share.~~22,~~ ~~respectively.~~ During the ~~three~~quarter ~~and six months~~ ended ~~July~~September 230, ~~2022~~2023, ~~there~~27,400 options were ~~15,300~~forfeited and ~~88,000~~none ~~options~~expired. ~~exercised~~During ~~and~~the ~~corresponding~~quarter ~~shares~~ended October ~~issued~~1, at2022, ano ~~weighted~~options ~~average~~were ~~price~~exercised, of10,000 ~~$1.44~~options were forfeited and ~~$1.97,~~none ~~respectively~~expired.

During the ~~three~~quarter ~~and six months~~ ended ~~July~~September 130, 2023, the Company repurchased 24138,~~642~~200 ~~and 24,927~~ shares, ~~respectively,~~ for employees to facilitate their exercise of stock options. During the ~~three~~quarter ~~and six months~~ ended ~~July~~October 21, 2022, the Company ~~repurchased~~did ~~3,143~~not ~~and~~repurchase ~~3,983~~any shares, ~~respectively,~~ for employees to facilitate their exercise of stock options.

There were also ~~754~~901,~~800~~900 shares outstanding at a weighted average price of $2.6167 with a weighted average remaining term of 56.677 years as of ~~July~~September 130, 2023, and there were ~~551~~497,000 shares exercisable at a weighted average price of $2.4543 with a weighted average remaining term of 4.758 years as of ~~July~~September 130, 2023. The Plan, as amended, is authorized to issue 1,500,000 shares of common stock. As of ~~July~~September 130, 2023, there were 1834,~~036,400~~300 shares available for future grants.

AsDuring ofthe three and nine months ended ~~July~~September 130, 2023, ~~there~~the ~~was~~Company recognized approximately $~~294~~28 thousand ofand ~~total~~$176 ~~unrecognized~~thousand, respectively, as share-based compensation ~~cost~~expense related to ~~nonvested~~ share~~-based~~ ~~compensation~~and ~~arrangements~~option ~~granted~~grants. ~~under~~These ~~the~~amounts ~~Plan;~~are ~~that~~included ~~cost~~as isa ~~expected~~component toof beselling, ~~recognized~~general ~~over~~and aadministrative ~~weighted~~expenses ~~average~~in ~~period~~the statement of 1operations.~~92 years.~~

During the three and ~~six~~nine months ended ~~July~~October 1, ~~2023~~2022, the Company recognized approximately $~~17,316~~43 thousand and $~~147~~207 thousand,~~757,~~ respectively, as ~~shared~~share-based compensation expense related to ~~previously~~share ~~granted~~and ~~shares~~option ~~under~~grants. These amounts are included as a component of selling, general and administrative expenses in the ~~Plan~~statement of operations.

During the three and six months ended July 2, 2022, the Company recognized $39,384 and $163,855, respectively, as shared-based compensation expense related to previously granted shares under the Plan.

(6) Inventories

Inventories consist of the following:

	July 1,			December 31,
	September 30,			December 31,
	2023			2022
Raw materials	$	2,~~886~~781,~~278~~188		$	2,645,442
Work in process		1,~~603~~512,~~511~~835			1,863,512
Finished goods		~~516~~729,~~889~~359			525,872
Total inventory		5,~~006~~023,~~678~~382			5,034,826
Reserve for obsolescence		(~~192~~195,~~925~~425	)		(158,925	)
Inventories, net	$	4,~~813~~827,~~753~~957		$	4,875,901

(7) Accrued Expenses

Accrued expenses consist of the following:

	July 1,		December 31,
	September 30,		December 31,
	2023		2022
Accrued legal and accounting	$	5169,~~489~~189	$	35,398
Accrued payroll and related expenses		685,785		760,305
Accrued payroll		795,952		760,305
Accrued other		~~124~~202,~~240~~152		25,153
	$	~~861~~1,~~514~~067,293	$	820,856

(8) Line of Credit

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. On ~~July~~September 130, 2023, the Company had $0 of borrowings under this LOC and its borrowing base at the time would have permitted an additional $3.0 million to have been borrowed. The LOC remains in effect until terminated per mutual agreement by both parties.

(9) Note Payable

In March 2020, the 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 fixed rate of 6.47%.

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

Remaining in:	Payments due by period
Year	Payments due by period
FY 2023	$	22,272
2023 (remaining)	$	11,265
FY 2024	$	46,757
2024	$	46,757
FY 2025	$	8,090
2025	$	8,090
Total		7766,~~119~~112

Total interest expense on notes payable during 2023 was $24,~~902~~130.

(10) Income Taxes

~~For~~The ~~the~~Company’s ~~three~~current income tax expense and ~~six~~deferred income tax expense are $73 and $424, respectively, for the nine months ended ~~July~~September 130, 2023. ~~there~~The ~~were~~Company’s ~~charges~~current ~~against~~income ~~the~~tax expense and deferred income tax ~~asset~~expense ofare $~~179~~18 and $~~405~~19, respectively, for the three months ended September 30, 2023.

ITEM 2 MANAGEMENTS ~~MANAGEMENT’S~~ 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 31, 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.

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~~the ~~are~~war ~~discussed~~ in ~~Item~~Israel/Gaza 3and ofother ~~this~~geopolitical ~~report~~events. 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~~estimates 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 31, 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 31, 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 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 Corporation.

Results of Operations for the ~~Second~~Third Fiscal Quarter of 2023 (Q2Q3 2023) Compared to the ~~Second~~Third Fiscal Quarter of 2022 (Q2Q3 2022); (all $ in ~~000’s~~000s)

~~Revenues~~Total ~~totaled~~revenue was $76,~~418~~285 in Q2Q3 2023, a 7% decrease compared with ~~$7,100~~total ~~generated~~revenue inof ~~Q1 2022~~$6,748 anin ~~increase~~Q3 ~~of 4%~~2022. This ~~increase~~decrease was ~~mainly~~ due primarily to ~~increased~~customers moving expected Q3 shipments ofinto ~~armor~~Q4. ~~for~~The bulk of the USdeferrals ~~Navy~~of these shipments was in ~~2023~~armor which did not affect production as ~~compared~~we tobuilt ~~2022~~up our finished goods armor inventory for the Q4 shipments.

Gross ~~margin~~profit in Q2Q3 2023 totaled $21,~~196~~236 or 3020% of sales. ~~This~~In ~~compares~~Q3 ~~with~~2022, gross ~~margin~~profit inwas ~~Q2 2022 of~~ $1,~~829~~883 or 2628% of sales. This ~~percentage~~decrease ~~increase~~in ~~was~~profit ~~due~~directly correlates to the ~~company’s~~decreased ~~continuing~~revenue ~~efforts~~and tothe ~~improve~~impact increased revenue has on fixed manufacturing ~~efficiencies~~costs. asIn ~~well~~addition, aswe ~~the~~are ~~impact~~replacing a piece of ~~higher~~testing ~~sales~~equipment ~~volumes~~and onin ~~fixed~~the interim are outsourcing the testing, resulting in higher costs.

Selling, general and administrative expenses (SG&A) ~~expenses~~were ~~totaled~~ $1,~~465~~105 in Q2Q3 2023, down 6% when compared with SG&A expenses of $1,~~159~~175 in Q2Q3 2022. ~~There~~This ~~were~~decrease ~~three major reasons for this increase. First there~~ was aprimarily ~~significant~~due ~~increase in travel expenses. In 2022 we were just beginning~~ to ~~come~~decreased ~~out~~variable ofcompensation ~~the Covid-19 pandemic. Many conferences continued to be virtual and many customers continued to prohibit outside visitors. In 2023 this has changed, thus our business development team,~~ in ~~particular,~~Q3 ~~have~~as ~~been doing significantly more travel than~~ a ~~year~~result ~~ago.~~of ~~Secondly,~~ the ~~company increased its 401k matching formula in 2023 resulting in increased payroll costs. Lastly, the~~ Company’s ~~accrued~~decreased ~~severance to a long time employee whose service with the Company was terminated~~revenue.

~~The~~In ~~Company~~Q3 ~~experienced an operating profit of $731 in Q2~~ 2023, ~~compared~~the ~~with~~Company anincurred ~~operating~~interest ~~profit~~expense of $~~669~~1 indue Q2to ~~2022,~~equipment ~~an increase of 9%~~financing. This ~~increase~~compares ~~was~~with ainterest ~~result~~expense of ~~the~~$2 ~~increased gross margin, partially offset by the increase~~ in ~~SG&A~~Q3 ~~expenses~~of 2022.

~~Results~~The Company generated operating income of ~~Operations~~$131 ~~for~~compared with operating income of $709 in the ~~First~~same ~~Six~~quarter ~~Months~~last ofyear. ~~2023~~This ~~Compared~~decrease in operating income is due to the ~~First~~reduction ~~Six~~in ~~Months~~gross profit, discussed above. The net income for Q3 2023 totaled $171 versus net income of $988 in Q3 2022. This ~~(all~~differential $in net income is due to the decrease in ~~000s~~operating income, discussed above, as well as the Employee Retention Tax Credit ("ERTC") in 2022 which was claimed and recognized in 2022.

~~Total~~Results ~~revenue~~of ~~was~~Operations ~~$14,518~~for in the ~~first~~First ~~half~~Nine Months of 2023, aCompared 6%to ~~increase~~the ~~compared~~First ~~with~~Nine ~~total~~Months ~~revenue~~ of ~~$13,723 in the first half of~~ 2022. ~~This~~(all ~~increase~~$ ~~was mainly due to increased shipments of armor for the US Navy~~ in ~~2023 as compared to 2022.~~000s)

~~Gross~~Total ~~margin~~revenue was $20,803 in the first ~~six~~nine months of 2023 ~~totaled $4~~,~~441~~ ora 312% increase compared with total revenue of ~~sales.~~$20,472 Inin the first ~~six~~nine months of 2022. ~~gross~~A ~~margin~~reduction ~~totaled~~in ~~$3,792~~shipments ~~or 28%~~ of ~~sales.~~hermetic ~~This~~packages ~~increase~~ was ~~due~~more tothan ~~the~~offset by an increase in ~~revenue~~MMC ~~and the increased coverage of our fixed costs~~shipments.

~~Selling,~~Gross ~~general~~margin ~~and~~in ~~administrative (SG&A) expenses were $3,016 during~~ the first ~~six~~nine months of 2023 totaled $5,677 upor 1727% ~~compared with SG&A expenses~~ of ~~$2,576~~sales. inIn the first ~~six~~nine months of 2022. ~~Increased~~gross ~~variable~~margin ~~compensation~~totaled ~~accruals due to higher 2023 profitability as well as the travel costs~~$5,675 ~~payroll~~or ~~costs~~28% ~~and~~of ~~severance, mentioned above, were the primary reasons for this increase~~sales.

~~During~~Selling, general and administrative (SG&A) expenses were $4,121 during the first ~~half~~nine months of 2023, ~~the~~up ~~Company~~10% ~~had~~compared ~~net~~with ~~interest~~SG&A ~~income~~expenses of $~~95.~~3,750 ~~This~~in ~~compares~~the ~~with~~first ~~interest~~nine ~~expense~~months of $02022. ~~incurred~~There ~~during~~were ~~the~~three ~~first~~major ~~half~~reasons offor ~~2022~~this increase. ~~The~~First there was a significant increase in ~~interest~~travel ~~income~~expenses. isIn ~~due~~2022 we were just beginning to ~~our~~come ~~strong~~out ~~cash~~of ~~position~~the Covid-19 pandemic. Many conferences continued to be virtual and ~~higher~~many ~~interest~~customers ~~rates~~continued to prohibit outside visitors. In 2023 this has changed, thus our business development team, in particular, have been doing significantly more travel than a year ago. Secondly, the Company increased its 401k matching formula in 2023 resulting in increased payroll costs. Lastly, the Company accrued severance to a long-time employee whose service with the Company was terminated.

InDuring the first ~~six~~nine months of 2023, the Company ~~had~~incurred ~~operating~~interest ~~income~~expense of $~~1,425~~4 ~~compared~~on ~~with~~its ~~$1,217~~notes ~~in the same period last year~~payable. ~~The~~This ~~net~~compares ~~income~~with ~~for~~interest ~~the~~expense ~~first six months~~ of ~~2023 totaled~~ $~~1,060~~6 ~~versus~~incurred ~~$875~~during in the first ~~six~~nine months of 2022.

~~The~~In ~~Company~~the ~~has~~first ~~had~~nine ~~extremely~~months ~~minimal~~of ~~sales~~2023, tothe ~~both~~Company ~~Russia~~generated ~~and~~operating ~~Ukraine~~income ~~over~~of ~~the~~$1,556 ~~last~~compared ~~several~~with ~~years,~~operating ~~the~~income ~~loss~~ of ~~which~~$1,925 ~~would~~in bethe ~~immaterial~~same toperiod ~~these~~last ~~financial statements~~year. ~~Neither~~This ~~does~~difference ~~CPS~~is ~~rely~~primarily ondue ~~raw~~to ~~materials~~the ~~from~~increased ~~that~~SG&A ~~part~~discussed ~~of the world~~above. AsThe anet ~~result,~~income wefor ~~do not believe that~~ the ~~Russian~~first ~~invasion~~nine months of ~~Ukraine~~2023 ~~will~~totaled ~~have~~$1,231 aversus ~~direct~~net ~~impact~~income onof ~~our~~$1,862 ~~results.~~in ~~Nevertheless,~~the ~~there~~first ~~could~~nine bemonths anof ~~indirect~~2022. ~~impact~~As ~~regarding~~mentioned ~~supply~~above, ~~chain~~the ~~and~~ERTC ~~inflationary~~which ~~issues~~was asrecognized ain ~~result~~2022, ofaccounted for this ~~war~~difference.

~~Inflation~~Liquidity 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~~Capital weResources ~~can~~(all ~~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. Wage increases are also part of the inflation impact. We have instituted a combination of wage increases as well as richer benefits, such as the increased 401k match mentioned above, in ~~order~~000s tounless ~~retain the folks making up our workforce.~~noted)

~~These~~The ~~factors~~Company’s ~~combine~~cash and cash equivalents at September 30, 2023 totaled $8,779. This compares to ~~create~~cash aand ~~higher~~cash ~~degree~~equivalents at December 31, 2022 of ~~uncertainty~~$8,267. ~~regarding~~The ~~future~~increase ~~financial~~in ~~performance~~cash was primarily due to our net profit, offset by increased accounts receivable to support higher sales.

~~Liquidity~~Accounts ~~and~~receivable ~~Capital~~at ~~Resources~~September ~~(all~~30, 2023 totaled $5,023 incompared ~~000’s~~with ~~unless~~$4,464 ~~noted)~~at December 31, 2022. The 2022 total includes $641 receivable for the ERTC.

~~The~~Days ~~Company’s~~Sales ~~cash~~Outstanding ~~and~~(DSO) ~~cash~~increased ~~equivalents~~from 52 days at ~~July~~the 1,end ~~2023~~of ~~totaled~~2022 $8to 72 days at the end of Q3 2023,~~681~~ based on trade receivables. This ~~compares~~change was due to ~~cash~~the ~~and~~reduction ~~cash~~of ~~equivalents~~deferred atrevenue ~~December~~occurring ~~31,~~in ~~2022~~the 4th quarter of ~~$8,267~~2022. ~~The~~Prepayments ~~increase~~received in ~~cash~~2021 ~~was~~were ~~due~~used ~~primarily~~ to pay for shipments shipped in the ~~Company’s~~4th ~~profitability~~quarter thus immediately reducing accounts receivable, ~~partially~~rather ~~offset~~than bythe ~~increase~~customer inpaying ~~working~~30-45 ~~capital~~days ~~required~~later. The accounts receivable balances at September 30, 2023, and December 31, 2022 were both net of an allowance for ~~this~~doubtful ~~growth~~accounts of $10.

~~Accounts~~Inventories ~~receivable~~totaled $4,828 at ~~July~~September 130, 2023 ~~totaled $5,148~~ compared with inventory totaling $4,~~464~~876 at December 31, 2022. ~~Days~~The ~~Sales~~inventory ~~Outstanding~~turnover ~~(DSO)~~in ~~increased from 56 days at~~ the ~~end~~most ofrecent ~~2022~~four toquarters 62ending ~~days~~Q3 ~~at the end of Q2~~ 2023. ~~The increase in DSO~~ was ~~due to the inclusion of deferred revenue of $0~~4.6M1 ~~in the year end accounts receivable balance~~times, ~~which~~slightly ~~was~~down ~~collected~~from ~~during Q1 2023~~4.2 ~~The~~times ~~accounts~~averaged ~~receivable~~during ~~balances~~the atfour ~~December~~quarters ~~31,~~of 2022, ~~and~~(based ~~July~~on 1,a ~~2023~~5 ~~were~~point ~~both net of an allowance for doubtful accounts of $10~~average).

~~Inventories~~The ~~totaled~~Company ~~$4,814~~financed atits ~~July~~working 1,capital ~~2023~~during ~~compared~~the ~~with~~first ~~inventory~~nine ~~totaling~~months ~~$4,876~~of at2023 ~~December~~from ~~31,~~its ~~2022.~~net ~~The~~profit ~~inventory~~during ~~turnover in~~ the ~~most~~period. ~~recent~~The ~~four~~Company ~~quarters~~expects ~~ending~~it Q2will ~~2023~~continue ~~was~~to ~~4.1~~be ~~times~~able ~~(based~~to onfund aits 5working ~~point~~capital ~~average)~~requirements ~~compared~~for ~~with~~the ~~4.2~~remainder ~~times~~of ~~averaged~~2023 ~~during~~from ~~the~~existing ~~four~~cash ~~quarters of 2022~~balances.

~~The~~Although the Company’s ~~financed~~customer ~~its~~base ~~increase in~~is ~~non-cash~~expanding, ~~working~~the ~~capital~~Company incontinues Q1to ~~2023~~sell ~~from~~to ~~its~~a ~~profit~~limited number of customers and ~~usage~~the loss of ~~cash~~any one of these customers could have significant negative consequences on ~~hand~~future results. ~~The~~Although the Company ~~expects~~is itin ~~will~~a ~~continue~~good tocash beposition ~~able~~today, failure to ~~fund~~generate ~~its~~sufficient ~~operations~~revenues, ~~for~~raise ~~the~~additional ~~remainder~~capital ofor ~~2023~~reduce ~~from~~certain ~~operations~~discretionary ~~and~~spending ~~existing~~could ~~cash~~have ~~balances~~a material adverse effect on the Company’s ability to achieve its business objectives.

~~The~~Contractual 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.Obligations

~~Management~~In ~~believes~~May ~~that~~2023, ~~existing~~the ~~cash~~Company ~~balances~~terminated ~~will~~its be$3.0 ~~sufficient~~million torevolving ~~fund~~line ~~our~~of ~~cash~~credit ~~requirements~~(LOC) ~~for~~with Massachusetts Business Development Corporation (BDC). A new LOC in the ~~foreseeable~~amount ~~future~~of $3.0 ~~However,~~million ~~there~~was entered into with Rockland Trust Company. The LOC is nosecured ~~assurance~~by ~~that~~the weaccounts ~~will~~receivable beand ~~able~~other toassets ~~generate~~of ~~sufficient~~the ~~revenues~~Company orand ~~reduce~~has ~~certain~~an ~~discretionary~~interest ~~spending~~rate inof the ~~event~~National ~~that~~Prime ~~planned~~Rate ~~operational~~as ~~goals~~published ~~are~~by ~~not~~the ~~met~~Wall ~~such~~Street ~~that~~Journal. weOn ~~will~~September be30, ~~able~~2023, 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 ~~meet~~have ~~our~~been ~~obligations~~borrowed. The asLOC ~~they~~remains ~~become~~in ~~due~~effect until terminated per mutual agreement by both parties.

~~Contractual~~In ~~Obligations~~March ~~(all~~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 ~~000’s~~monthly ~~unless~~installments ~~otherwise~~of ~~noted)~~$4 thousand, consisting of principal plus interest at a rate of 6.47%

InThe ~~May 2023, the~~ Company ~~terminated~~has ~~its~~one ~~$3.0~~real ~~million~~estate ~~revolving~~lease ~~line~~expiring ~~of credit (LOC) with Massachusetts Business Development Corporation (BDC). A new LOC~~ in ~~the~~February ~~amount of $3~~2026.0 ~~million~~CPS ~~was~~also ~~entered~~has ~~into~~a ~~with~~few ~~Rockland~~leases ~~Trust~~for ~~Company.~~equipment ~~The~~which ~~LOC~~are isminor ~~secured~~in bynature ~~the accounts receivable~~ and ~~other~~are ~~assets~~generally ofshort-term ~~the~~in ~~Company and has an interest rate of the National Prime Rate as published by the Wall Street Journal~~duration. OnNone ~~July 1, 2023, the Company had $0~~ of ~~borrowings~~these ~~under this LOC and its borrowing base at the time would~~ have ~~permitted~~been ~~an additional $3~~capitalized.0 ~~million~~(Note to4, ~~have been borrowed.~~Leases)

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%

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 ~~Acting~~Chief ~~President~~Executive Officer and Chief Financial Officer ~~has~~have 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.

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

ITEM 1A2 UNREGISTERED ~~RISK~~SALES ~~FACTORS~~OF EQUITY SECURITIES AND USE OF PROCEEDS. None.

~~There~~ITEM ~~have~~3 DEFAULTS ~~been~~UPON noSENIOR ~~material changes to the risk factors as discussed in our 2022 Form 10-K~~SECURITIES None.

ITEM 24 MINE ~~UNREGISTERED~~SAFETY ~~SALES~~DISCLOSURES Not ~~OF EQUITY SECURITIES AND USE OF PROCEEDS~~applicable.

~~None~~ITEM 5 OTHER INFORMATION Not applicable.

ITEM ~~3 DEFAULTS UPON SENIOR SECURITIES~~6 EXHIBITS (a) Exhibits:

~~None~~Exhibit 31.1 Certification 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

~~ITEM~~Exhibit 431.2 ~~MINE~~Certification ~~SAFETY~~of ~~DISCLOSURES~~Chief Financial Officer Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 302 of The Sarbanes-Oxley Act Of 2002

~~Not~~Exhibit ~~applicable~~32.1 Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002

ITEM 5 OTHER INFORMATION

Not applicable.

ITEM 6 EXHIBITS AND REPORTS ON FORM 8-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 ~~CORPORATION~~CORP. (Registrant)

~~(Registrant)~~Date: November 3, 2023

~~Date:~~/s/ ~~August~~Brian 4,T. ~~2023~~Mackey

Brian T. Mackey
Chief Executive Officer

Date:

November 3, 2023

/s/	Charles K. Griffith Jr.

Charles K. Griffith Jr.

~~Acting President and~~ Chief Financial Officer

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