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Item 1. Business

2021-03-17 compared with 2020-03-13 · 173 added, 162 removed, 102 unchanged (77% of the section changed)

CPS Technologies Corporation (the ‘Company’

or ‘CPS’) provides advanced material solutions to the transportation, automotive, energy, computing/internet, telecommunications,

aerospace, defense and oil and gas end markets.

Our primary material solution is metal matrix composites.

We design, manufacture and sell custom metal matrix composite components which improve the performance and reliability of systems

in these end markets.

The Company is an important participant in the growing movement

towards alternative energy and "green"

For example, the Company’s products are used in high-speed trains,

mass transit, hybrid and electric cars, wind-turbines for electricity generation as well as routers and switches for the internet

which enable telecommuting.

These applications involve energy use or energy generation;

the Company’s products allow higher

performance and improved energy efficiency.

Metal matrix composites (MMCs) are a class of materials

consisting of a combination of metals and ceramics.

CPS Technologies Corp.

(the ‘Company’ or ‘CPS’)

provides advanced material solutions to the transportation, automotive, energy, computing/internet, telecommunications, aerospace

and defense markets.

CPS products are important elements in electrifying the green economy.

Our primary material solution is metal matrix composites (MMCs).

We design, manufacture and sell custom metal matrix composite components to the performance and reliability of systems in the end

markets in which we participate.

The Company is an important participant in the growing movement towards

alternative energy and green lifestyles.

The Company’s products are used in high-speed trains, mass transit, hybrid

and electric cars, wind-turbines for electricity generation, routers, switches and fiber optic components for the internet backbone.

The Company’s products are used in high reliability communications and power modules for avionics and satellite applications

such as the current generation of GPS satellites.

The Company also produces housings and heatspreaders for high-performance

microprocessors, graphics processing chips, and application-specific integrated circuits.

All of these applications

involve electrical energy use or energy generation;

the Company’s products allow higher performance and improved energy efficiency.

Using its proprietary MMC technology, the Company also produces light-weight

vehicle armor, particularly for extreme environments and heavy threat levels.

Metal matrix composites (MMCs) are a class of materials consisting

of a combination of metals and ceramics.

Compared to conventional materials, MMCs provide superior thermal conductivity,

improved thermal expansion matching, greater stiffness and lighter weight.

For 30 years CPS has been the leader in manufacturing MMC

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 heatspreaders used with high performance integrated circuits for use in internet switches and routers.

baseplates and housings used in modules built with Wide Band Gap Semiconductors like SiC and GaN.

CPS also assembles housings and

packages for hybrid circuits.

These housings and packages may include MMC components;

they may also include components made of

more traditional materials such as aluminum, copper-tungsten, etc.

These factors, in particular the lighter weight,

are among the reasons CPS parts are on the last two Mars Rovers as well as many satellites.

CPS is a fully qualified manufacturer for many of the world’s

largest electronics OEMs.

CPS management believes our business model of providing

advanced material solutions to a portfolio of high growth end markets in various stages of the technology adoption lifecycle provides

CPS with the opportunity for sustained growth and a diversified customer base.

We believe we have validated this model as we are

now supplying customers at all stages of the technology adoption lifecycle.

Our products are manufactured by proprietary processes we

have developed including the QuicksetTM Injection Molding Process (‘Quickset Process’) and the QuickCastTM Pressure

Infiltration Process (‘QuickCast Process’).

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, the Company changed its name from Ceramics Process Systems Corporation to CPS Technologies Corporation.

CPS management believes our business model of providing advanced

material solutions to a portfolio of high growth end markets in various stages of the technology adoption lifecycle provides CPS

with the opportunity for sustained growth and a diversified customer base.

We believe we have validated this model as we are now

supplying customers at all stages of the technology adoption lifecycle.

Our products are manufactured by proprietary processes we have developed

including the QuicksetTM Injection Molding Process (‘Quickset Process’) and the QuickCastTM Pressure Infiltration Process

(‘QuickCast Process’).

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

In March 2007, the Company changed its name from Ceramics Process Systems Corporation to CPS Technologies Corp..

CPS website is http://www.alsic.com.

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Electronics Markets Overview

End-user demand continues to motivate the electronics industry

to produce products which:

- operate at higher speeds;

The electronics world can be divided into power processing and signal

Power processing consists of converting the electrical power provided by the power source into the appropriate

voltage and amperage needed for the device using the power.

Signal processing consists of the myriad ways digital and analog

signals are used in computing, communications, etc.

In both power processing and signal processing end-user demand continues

to motivate the electronics industry to produce products which:

- operate with lower losses and/or at higher speeds;

- are smaller in size;

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closer together.

The designer must resolve the thermal management issues

or the system will fail.

For every 10 degree Celsius rise in temperature above a threshold level, the reliability of a circuit

is decreased by approximately half.

In addition, heat usually causes changes in parameters which degrade the performance of both

active and passive electronic components.

To resolve thermal management issues the designer is primarily

concerned with two properties of the materials which comprise the system:

1) thermal conductivity, which is the rate at which heat

moves through materials, and 2) thermal expansion rate (Coefficient of Thermal Expansion or CTE) which is the rate at which materials

The designer must resolve the thermal management issues or the system

For every 10 degree Celsius rise in temperature above a threshold level, the reliability of a integrated circuit is

decreased by approximately half.

In addition, heat usually causes changes in parameters which degrade the performance of both active

and passive electronic components.

To resolve thermal management issues the designer is primarily concerned

with two properties of the materials which comprise the system:

1) thermal conductivity, which is the rate at which heat moves

through materials, and 2) thermal expansion rate (Coefficient of Thermal Expansion or CTE) which is the rate at which materials

expand or contract as temperature changes.

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delaminating, etc.

CPS combines at the microstructural level a ceramic with

a metal to produce a metal matrix composite which has the thermal conductivity needed to remove heat, and a thermal expansion rate

which is sufficiently close to other components in the assembly to ensure the assembly is reliable.

The ceramic is silicon carbide

(SiC), the metal is aluminum (Al), and the composite is aluminum silicon carbide (AlSiC), a metal-matrix composite.

CPS can adjust

the thermal expansion rate of AlSiC components to match the specific application by modifying the amount of SiC compared to the

amount of Al in the component.

CPS combines at the microstructural level a ceramic with a metal

to produce a metal matrix composite which has the thermal conductivity needed to remove heat, and a thermal expansion rate which

is sufficiently close to other components in the assembly to ensure the assembly is reliable.

The ceramic is silicon carbide (SiC),

the metal is aluminum (Al), and the composite is aluminum silicon carbide (AlSiC), a metal-matrix composite.

CPS can adjust the

thermal expansion rate of AlSiC components to match the specific application by modifying the amount of SiC compared to the amount

of Al in the component.

The Company also has the capability of encapsulating Pyrolytic Graphite inserts to enhance the thermal

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Although the Company’s focus today is on AlSiC components,

it believes its proprietary Quickset- Quickcast process technology can be used to produce other metal-matrix composites which may

meet future market needs.

Today, the problem of thermal management is most acute in

high-performance, high-density applications such as high-performance microprocessors, application-specific integrated circuits

for internet routers and switches, motor controllers for trains, subway cars and wind turbines, and components for satellite communications.

However, as the trends towards faster speeds, reduced size and increased reliability continue, and as high-density circuitry is

used in a larger number of applications, we believe our products will be used in an increasing number of applications across many

Structural Markets Overview

Structural applications perform primarily a mechanical rather

than electrical function.

it believes its proprietary Quickset- Quickcast process technology can be used to produce other metal-matrix composites to meet

future market needs.

An important development in power processing is the emergence of

wide-band gap semiconductors, particularly SiC semiconductors.

SiC chips are more efficient than Si chips and are being used

more frequently in power applications.

Modules using SiC chips run at higher temperatures, increasing the need for improved

thermal management, need which the Company’s products meet.

Armor and Structural Markets Overview

Vehicle armor has traditionally been steel panels.

threat levels have increased the amount of steel required to provide ballistic protection has reached a point where the weight

degrades the vehicle’s performance.

military has increasingly used ceramic armor in weight sensitive applications.

However, ceramic armor has several limitations, including limited multi-hit capability.

By embedding ceramic armor

tiles in a metal matrix, these problems are overcome;

the result is vehicle armor that is light-weight, has excellent ballistic

protection, and environmental durability.

The Company’s HybridTech Armor panels are particularly well

suited for extreme environments – the panels don’t degrade in salt spray, or near heat, for example, and for high threat

levels wherein steel does not provide the needed level of protection.

The Company believes its armor panels will increasingly

be used in these applications.

Structural applications perform primarily a mechanical rather than

electrical function.

In any mechanical assembly with moving parts the stiffness and weight of moving parts can have a significant

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the stiffness and reducing the weight of reciprocating components improves the performance and energy efficiency of the equipment.

Today many mechanical components are made of steel because

steel has the stiffness required for the particular application.

AlSiC has approximately the same stiffness as steel, but is only

one-third the weight of steel.

Today many mechanical components are made of steel because steel

has the stiffness required for the particular application.

AlSiC has approximately the same stiffness as steel, but is only one-third

the weight of steel.

AlSiC is higher cost than steel.

However, we believe there are many mechanical applications where

the customer will pay the higher cost for AlSiC because of significant improvements in performance resulting from the superior

stiffness-to-weight ratio of AlSiC.

However, we believe there are many mechanical applications where the customer

will pay the higher cost for AlSiC because of significant improvements in performance resulting from the superior stiffness-to-weight

ratio of AlSiC.

Examples of structural applications for which we have developed

and supplied components include robotic arms for semiconductor manufacturing equipment and components.

The Company continues to

identify opportunities for using advanced materials in such diverse areas as non-skid coatings, fire/heat barriers, consumer electronics

and working with nuclear waste.

and supplied components include robotic arms for semiconductor manufacturing equipment, and stiffeners for satellites.

Specific Markets and Products

Motor Controller Applications (Insulated Gate Bipolar

Transistor ("IGBT") Applications)

The use of power modules to control electric motors of all

sizes is growing.

This growth is the result of several factors including emerging high-power applications which demand power controllers

such as trains, subways and certain industrial equipment, and cost declines in power modules which increasingly make variable speed

drives cost effective.

Power semiconductors are a very significant portion of the cost of variable speed drives, and the cost of

the module housing and thermal management system are also significant;

declines in the costs of all these components is driving

increased use of variable speed drives.

We provide baseplates and heat spreaders on which power

semiconductors are mounted to produce modules for motor control.

The power semiconductors are typically IGBTs and these applications

are often referred to as IGBT applications.

Our AlSiC baseplates have sufficient thermal conductivity to allow for removal of heat

through the baseplate, and have a thermal expansion rate sufficiently similar to the other components in the assembly to ensure

reliability over time as the assembly thermally cycles.

We believe this market will continue to grow as the use of power modules

penetrates additional motor applications, and as electric motors themselves penetrate new applications such as the hybrid electric

Today our primary products for IGBT applications are used

in electric trains, subway cars, wind turbines and hybrid and electric vehicles.

Major automobile companies around the world are introducing

hybrid electric vehicles (HEVs) and electric vehicle (EVs) at an increasing rate.

This focus on more energy efficient vehicles

is being driven by increases in energy costs and concerns about climate change.

There are many varieties of HEVs and EVs, but all

HEVs and EVs contain an electric motor and contain one or more motor controller modules.

The Company provides baseplates on which

motor controller modules are assembled;

these baseplates are lighter weight and provide greater reliability than baseplates made

from more conventional materials.

The Company is working with multiple tier one and tier two

suppliers to the automobile industry on several new designs for future introduction.

The Company believes the HEV and EV markets

will be the source of significant and long-term growth for the Company.

Motor Controller Applications (Insulated Gate Bipolar Transistor

("IGBT") Applications)

The electrification of the economy – particularly the use of

electric motors and power modules to control electric motors of all sizes - is growing.

This growth is the result of several factors

including emerging high-power applications which demand power controllers such as trains, subways and certain industrial equipment,

and cost declines in power modules which increasingly make variable speed drives cost effective.

Power semiconductors are a very

significant portion of the cost of variable speed drives, and the cost of the module housing and thermal management system are

also significant;

declines in the costs of all these components is driving increased use of variable speed drives.

We provide baseplates and heat spreaders on which power semiconductors

are mounted to produce modules for motor control.

The power semiconductors are typically IGBTs and these applications are often

referred to as IGBT applications.

Our AlSiC baseplates have sufficient thermal conductivity to allow for removal of heat through

the baseplate and have a thermal expansion rate sufficiently similar to the other components in the assembly to ensure reliability

over time as the assembly thermally cycles.

We believe this market will continue to grow as the use of power modules penetrates

additional motor applications, and as electric motors themselves penetrate new applications such as the hybrid and electric

Today our primary products for IGBT applications are used in electric

trains, subway cars, wind turbines and hybrid and electric vehicles.

Major automobile companies around the world are introducing hybrid

electric vehicles (HEVs) and electric vehicle (EVs) at an increasing rate.

This focus on more energy efficient vehicles is being

driven by concerns about climate change.

There are many varieties of HEVs and EVs, but all HEVs and EVs contain an electric motor

and contain one or more motor controller modules.

The Company provides baseplates on which motor controller modules are assembled;

these baseplates are lighter weight and provide greater reliability than baseplates made from more conventional materials.

The Company is working with multiple tier one and tier two suppliers

to the automobile industry on several new designs for future introduction.

The Company believes the HEV and EV markets will be

the source of significant and long-term growth for the Company.

Lids and Heat Spreaders for High-Performance Microprocessors,

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Increases in speed, circuit density, and the number of connections

in microprocessor chips (CPUs) and application-specific integrated circuits (ASICs) are accelerating a transition in the way in

which these circuits are packaged.

Packages provide mechanical protection to the integrated circuit (IC), enable the IC to be connected

to other circuits via pins, solder bumps or other connectors, and allow attachment of a heat sink or fan to ensure the IC does

not overheat.

In the past most high-performance ICs were electrically connected to the package by fine wires in a process known

as wire bonding.

Today, most high-performance semiconductors are connected to the package by placing metal bumps on the connection

points of the die, turning the die upside down in the package, and directly connecting the bumps on the die with corresponding

bumps on the package base by reflowing the bumps.

in graphics processors (GPUs), microprocessor chips (CPUs) and application-specific integrated circuits (ASICs) are accelerating

a transition in the way in which these circuits are packaged.

Packages provide mechanical protection to the integrated circuit

(IC), enable the IC to be connected to other circuits via pins, solder bumps or other connectors, and allow attachment of a heat

sink or fan to ensure the IC does not overheat.

In the past most high-performance ICs were electrically connected to the package

by fine wires in a process known as wire bonding.

Today, most high-performance semiconductors are connected to the package by placing

metal bumps on the connection points of the die, turning the die upside down in the package, and directly connecting the bumps

on the die with corresponding bumps on the package base by reflowing the bumps.

This is referred to as a "flip-chip package".

Flip chip packages allow

for connection of a larger number of leads in a smaller space, and can provide other electrical performance advantages compared

to wire bonded packages.

In many flip chip configurations a lid or heat spreader

is placed over the die to protect the die from mechanical damage and to facilitate the removal of heat from the die.

sink or fan is then attached to the lid.

For a high-density die the package designer must ensure that the lid has sufficient thermal

conductivity to remove heat from the die and that all components of the package assembly - the die itself, the package base, and

the package lid - are made from materials with sufficiently similar thermal expansion rates to ensure the assembly will not break

apart over time as it thermally cycles.

Our composite material, AlSiC, has been developed to meet

these two needs:

it is engineered to have sufficient thermal conductivity to allow the heat generated by the die to be removed

through the lid, and it is engineered to expand upon heating at a rate similar to other materials used in the package assembly

in order to ensure reliability of the package over time as it thermally cycles.

We produce lids made of AlSiC for high performance

microprocessors and application-specific integrated circuits used in servers, internet switches and other applications.

Most participants in the semiconductor industry believe

the densities of ICs will continue to increase following the well-known "Moore’s Law".

As IC densities increase,

generally so does the IC size, and the amount of heat generated by the IC.

We believe the need for thermal management will continue

to grow rapidly.

Flip chip packages allow for connection of a larger number of leads in a smaller space, and can provide other electrical performance

advantages compared to wire bonded packages.

In many flip chip configurations a lid or heat spreader is placed

over the die to protect the die from mechanical damage and to facilitate the removal of heat from the die.

Often a heat sink or

fan is then attached to the lid.

For a high-density die the package designer must ensure that the lid has sufficient thermal conductivity

to remove heat from the die and that all components of the package assembly - the die itself, the package base, and the package

lid - are made from materials with sufficiently similar thermal expansion rates to ensure the assembly will not break apart over

time as it thermally cycles.

Our composite material, AlSiC, has been developed to meet these two

it is engineered to have sufficient thermal conductivity to allow the heat generated by the die to be removed through the

lid, and it is engineered to expand upon heating at a rate similar to other materials used in the package assembly in order to

ensure reliability of the package over time as it thermally cycles.

We produce lids made of AlSiC for high performance microprocessors

and application-specific integrated circuits used in servers, internet switches and other applications.

Most participants in the semiconductor industry believe the densities

of ICs will continue to increase following the well-known "Moore’s Law".

As IC densities increase, generally so

does the IC size, and the amount of heat generated by the IC.

We believe the need for thermal management will continue to grow

We sell primarily to major microelectronics

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composites and other competing materials.

We believe that the principal competitive factors

in our end markets today include technical competence, product performance, quality, reliability, price, delivery performance,

corporate reputation, and strength of sales and marketing resources.

We believe our proprietary processes, reputation, and the

price at which we can offer products for sale will enable us to compete successfully in the many electronics end markets.

Our primary direct competitor in metal matrix composites is Denka, a large chemical company based in Japan.

We have also seen attempts

by manufacturers in China to penetrate our markets.

We believe they offer their products at lower prices, but have yet to be able

to provide the delivery, performance, quality and reliability required by the market.

We believe that the principal competitive

factors in our end markets today include technical competence, product performance, quality, reliability, price, delivery

performance, corporate reputation, and strength of sales and marketing resources.

We believe our proprietary processes,

reputation, and the price at which we can offer products for sale will enable us to compete successfully in the many

electronics end markets.

Our primary direct competitor in metal matrix composites is Denka, a large chemical company

based in Japan.

We see manufacturers in China seeking to penetrate our markets.

We believe they offer their products at

lower prices but have generally not yet been to be able to provide the delivery, performance, quality and reliability

required by the market.

Government Regulation

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business