What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-03-17 compared with 2020-03-13 · 335 added, 254 removed, 429 unchanged (58% of the section changed)

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all directors, officers (including the principal executive officer, principal financial officer and treasurer) and employees.

copy of this code can be found on the Company’s website at www.alsic.com/investor-relations.

A copy of this code can be found on the Company’s website at www.alsic.com/investor-relations.

Executive Compensation

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thereunto duly authorized.

CPS TECHNOLOGIES CORPORATION

CPS TECHNOLOGIES CORP.

President and Chief Executive Officer

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dates indicated.

President and Chief Executive Officer

/s/ Charles K.

Chief Financial Officer

and Chief Executive Officer

Financial Officer

/s/ Francis J.

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/s/ Thomas M.

CPS TECHNOLOGIES CORPORATION

March 16, 2021

CPS TECHNOLOGIES CORP.

EXHIBIT INDEX

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33-14616)(the ‘1987 S-1Registration Statement’)

Certificate of Amendment

of Restated Certificate of Incorporation of the Company dated May 14, 2014

Certificate of Ownership

and Merger Merging CPS Superconductor Corporation into Ceramics Process Systems Corporation dated March 15, 2007

Specimen certificate for shares of Common Stock of the Company is incorporated herein by reference to Exhibit 4 to the 1987 S-1 Registration Statement

Description of Capital Stock contained in the Restated Certificate of Incorporation of the Company, as amended, filed as Exhibit 3.1

Amendment dated May 12,

2020 to Credit and Security Agreement by and between CPS Technologies Corp.

and The Massachusetts Business Development Corporation

dated September 25, 2019

CNC Associates, Inc.

Notification of Approval of Financing dated May 26, 2020.

Credit and Security Agreement

by and between CPS Technologies Corp.

and The Massachusetts Business Development September 25, 2019

Amendment No.

November 7, 2008 to Standard Form Commercial Lease by and between Gifford Investments, Inc.(lessor) and Ceramics Process

Systems Corporation dated July 19, 2006

Retirement Savings Plan, effective September 1, 1987 is incorporated by reference to Exhibit 10.35 to the Company’s 1989 S-1 Registration Statement

1999 Stock Incentive Plan adopted by the Company’s Board of Directors on January 22, 1999

2009 Stock Incentive Plan ("2009 Plan") on December 10, 2009.

Consent of Wolf & Company, P.C.

Certification Pursuant to Exchange Act Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification Pursuant to 18 U.S.C.

Amendment No.

May 7, 2009 to Standard Form Commercial Lease by and between Gifford Investments, Inc.(lessor) and Ceramics Process Systems

dated July 19, 2006.

Third Amendment dated

January 6, 2015 to Standard Form Commercial Lease by and between Gifford Investments, Inc.(lessor) and CPS Technologies Corp.

dated July 19, 2006

Fourth Amendment dated

February 28, 2018 to Standard Form Commercial Lease by and between Gifford Investments, Inc.

and CPS Technologies Corp.

July 19, 2006

Fifth Amendment dated

January 25, 2021 to Standard Form Commercial Lease by and between Gifford Investments, Inc.

and CPS Technologies Corp.

July 19, 2006

1999 Stock Incentive

Plan adopted by the Company’s Board of Directors on January 22, 1999

2009 Stock Incentive Plan ("2009

Plan") on December 10, 2009.

2020 Stock Incentive

Plan (“2020 Plan”) on March 3, 2020

Amended and Restated

2009 Stock Incentive Plan

Form of Stock Option

Agreement for 2020 Equity Incentive Plan and Amended and Restated 2009 Stock Option Plan

Consent of Wolf &

Company, P.C.

Certification Pursuant

to Exchange Act Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification Pursuant

Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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INDEX TO FINANCIAL STATEMENTS

CPS TECHNOLOGIES CORPORATION

CPS TECHNOLOGIES CORP.

Report of Independent Registered Public Accounting Firm

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Notes to Financial Statements

Report of Independent Registered

Public Accounting Firm

Report of Independent Registered Public

Accounting Firm

To the Board of Directors and Stockholders of CPS Technologies

Opinion on the Financial Statements

We have audited the accompanying balance sheets of CPS

Technologies Corporation (the "Company") as of December 28, 2019 and December 29, 2018, the related statements of operations,

stockholders’

equity and cash flows for the years then ended, and the related notes (collectively referred to as the "financial

statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of

the Company as of December 28, 2019 and December 29, 2018, and the results of its operations and its cash flows for the years then

ended, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying balance sheets of CPS Technologies

(the "Company") as of December 26, 2020 and December 28, 2019, the related statements of operations, stockholders’

equity and cash flows for each of the two years in the period ended December 26, 2020, and the related notes (collectively referred

to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects,

the financial position of the Company as of December 26, 2020 and December 28, 2019, and the results of its operations and its

cash flows for each of the two years in the period ended December 26, 2020, in conformity with accounting principles generally

accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the

Company's management.

These financial statements are the responsibility of the Company's

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")

and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards

of the PCAOB.

We are a public

accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required

to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and

regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial

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understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness

of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the

risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Our audits included performing procedures to assess the risks

of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial

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for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current

period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,

subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ Wolf & Company, P.C.

We have served as the Company's auditor since 2005.

Boston, Massachusetts

March 16, 2021

CPS TECHNOLOGIES CORPORATION

We have served as the Company's auditor since 2005.

CPS TECHNOLOGIES CORP.

BALANCE SHEETS

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See accompanying notes to financial statements.

CPS TECHNOLOGIES CORPORATION

CPS TECHNOLOGIES CORP.

BALANCE SHEETS

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Borrowings against line of credit

Notes payable, current portion

Accounts payable

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Deferred revenue

Current portion lease liability

Lease liability, current portion

Total current liabilities

Notes payable less current portion

Long term lease liability

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Accumulated deficit

Less cost of 220,056 common shares repurchased

at December 28, 2019 and December 29, 2018

Less cost of 432,452 and 220,056 common shares repurchased

at December 26, 2020 and December 28, 2019, respectively

Total stockholders’

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See accompanying notes to financial statements.

CPS TECHNOLOGIES CORPORATION

CPS TECHNOLOGIES CORP.

STATEMENTS OF OPERATIONS

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Net income (loss)

$ (3,705,967)

Net income (loss) per

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See accompanying notes to financial statements.

CPS TECHNOLOGIES CORPORATION

CPS TECHNOLOGIES CORP.

STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 26, 2020 AND DECEMBER 28, 2019

holders’

shares issued

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$ (29,742,231)

Share-based compensation expense

compensation expense

Issuance of Common Stock

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$ (30,380,433 )

Share-based compensation expense

Issuance of Common stock

compensation expense

Issuance of common

Employee option exercises

December 26, 2020

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See accompanying notes to financial statements.

CPS TECHNOLOGIES CORPORATION

CPS TECHNOLOGIES CORP.

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 26, 2020 AND DECEMBER 28, 2019

from operating activities:

income (loss)

$ (3,705,967)

to reconcile net income (loss)

cash provided (used) by operating

and amortization

on sale of property and equipment

in operating assets and liabilities:

receivable –

expenses and other current assets

cash provided (used) by operating activities

flows from investing activities:

of property and equipment

from sale of property and equipment

flows from financing activities:

borrowings on lines of credit

cash provided by financing activities

increase (decrease) in cash and cash equivalents

and cash equivalents at beginning of year

and cash equivalents at end of year

cash flow information:

taxes paid (refunded), net

accompanying notes to financial statements.

CPS Technologies Corporation

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss)

to cash provided (used) by operating

Share-based compensation

Depreciation and amortization

Deferred taxes

Gain on sale of property and equipment

Changes in operating assets and liabilities:

Accounts receivable –

Prepaid expenses and other current assets

Accounts payable

Accrued expenses

Deferred revenue

Net cash provided (used) by operating activities

Cash flows from investing activities:

Purchases of property and equipment

Proceeds from sale of property and equipment

Net cash used by

investing activities

Cash flows from financing activities:

Net borrowings (repayments) on line of credit

Proceeds from employee stock options

Payment on notes payable

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Supplemental cash flow information:

Cash paid (refunded) for income taxes

Cash paid for interest

Supplemental disclosures of non-cash activity:

Net exercise of stock options

Issuance of long term debt to finance equipment purchases

See accompanying notes to financial statements.

CPS Technologies Corp .

Years Ended December 26, 2020 and December 28, 2019

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(1) Nature of Business

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.

CPS Technologies Corp.

(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

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

in these end markets.

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becomes available that may affect the allowance.

The Company maintains an allowance for doubtful accounts of $10,000

as of December 26, 2020 and December 28, 2019.

(2)(c) Inventories

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(2)(f) Revenue Recognition

The Company adopted Accounting Standards Codification

(ASC) 606, “Revenue from Contracts with Customers” in fiscal 2018.

The adoption of FASB ASC Topic 606 did not have

a material impact on the Company’s financial statements and no cumulative adjustment was required.

Revenue is recognized in accordance with the

five-step method under Accounting Standards Codification (ASC) 606, “Revenue from Contracts with Customers.”

Identifying the Contract with the

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as agreements that create enforceable rights and obligations.

In the case of a few large customers the Company has executed long-term

Master Sales Agreements (“MSA”).

These are umbrella agreements which typically define the terms and conditions under

which a customer can order goods from CPS.

These in themselves do not constitute a contract as no products are committed to be

transferred and the customer has no obligation to make payments.

In the case of a few large customers the Company has executed

long-term Master Sales Agreements (“MSA”).

These are umbrella agreements which typically define the terms and

conditions under which a customer can order goods from CPS.

These in themselves do not constitute a contract as no products

are committed to be transferred and the customer has no obligation to make payments.

The Company contract is only enforceable once

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a blueprint for a product, the Company provides a quote and the customer responds with a purchase order.

In these cases the Company’s

acceptance of the purchase order constitutes an enforceable contract.

In these cases

the Company’s acceptance of the purchase order constitutes an enforceable contract.

Identifying the Performance Obligations in the Contract

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This guarantees that the product functions as promised and meets specifications.

Under its terms and conditions the Company offers

a 30 day warranty and replaces defective or non-conforming products.

The expense of replacement is recorded at the time the Company

agrees to replace a defective or non-conforming product.

This assurance type warranty is not considered to be a distinct performance

Under its terms and conditions the Company

offers a 30 day warranty and replaces defective or non-conforming products.

The expense of replacement is recorded at the

time the Company agrees to replace a defective or non-conforming product.

This assurance type warranty is not considered

to be a distinct performance obligation.

Determining the Transaction Price

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accounting pronouncements issued by the Financial Accounting Standard Board (“FASB”).

Based upon this review, except

as noted below, management does not expect any of the recently issued accounting pronouncements, which have not already been adopted,

to have a material impact on the Company’s consolidated financial statements.

New Accounting Pronouncements

Pronouncements adopted in 2019

The Company adopted Accounting Standards Codification (ASC) 842 for

leases effective at the beginning of the fiscal year, December 30, 2018, using the cumulative-effect adjustment transition method,

which applies the provisions of the standard at the effective date without adjusting the comparative periods presented.

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.

We have lease agreements with lease and non-lease components, which

are generally accounted for separately.

We have not elected the practical expedient to account for lease and non-lease components

as one lease component.

The Company has elected certain practical expedients upon adoption and therefore has not reassessed whether

any expired or existing contracts contain leases, has not reassessed the lease classification for any expired or existing leases

and has not reassessed initial direct costs for any existing leases.

Adoption of the standard resulted in the recognition of operating

lease right-of-use assets and corresponding lease liabilities of $310 thousand on the balance sheet as of December 30, 2018.

standard did not materially impact operating results or liquidity.

Disclosures related to the amount, timing and uncertainty of

cash flows arising from leases are included in Note 4, Leases.

Based upon this review, management

does not expect any of the recently issued accounting pronouncements, which have not already been adopted, to have a material impact

on the Company’s financial statements.

(2)(k) Use of Estimates in the Preparation of Financial Statements

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inventories consisted of the following:

for obsolescence

Company has two real estate leases—one expiring in February 2021 and one with a 12 month duration with options to extend

additional years.

Since the latter is not reasonably certain that any options will be exercised, it has not been recorded on the

balance sheet in accordance with the accounting policy elected in Note 2.

Raw materials

Work in process

Finished goods

Gross Inventory

Reserve for obsolescence

The Company had two real estate leases in 2020—one expiring

in February 2021 and one expiring December 2020.

The latter lease was not renewed.

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.

lease expiring in 2021 (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 December 30, 2018 based on the present value of remaining

lease payments over the remaining lease term using the Company’s incremental borrowing rate at date of adoption.

The Company’s

lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Norton facility lease comprises approximately 38 thousand square feet.

The lease is a 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 buy the property

and a first right of refusal during the term of the lease.

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 2021 (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 are based on the present value of remaining lease payments over the remaining lease term using the Company’s incremental

borrowing rate at date of adoption of the lease guidance.

The Company does not separate lease components from non-lease components.

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

The lease is a 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 buy the property and a first right of refusal during the term of the lease.

Annual rental payments are $152 thousand through maturity.

following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s capitalized

operating leases as of December 28, 2019

The following table presents information about the amount, timing

and uncertainty of cash flows arising from the Company’s capitalized operating leases as of December 26, 2020

(Dollars in Thousands)

December 26, 2020

Maturity of capitalized lease liabilities

capitalized lease payments

Lease payments

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Weighted-average discount rate for capitalized operating leases

An initial right-of-use

asset of $310 thousand was recognized as a non-cash asset addition with the adoption of the new lease accounting standard on December

Cash paid for the amounts included in the present value of operating lease liabilities was $152 thousand during 2019

and is included in operating cash flows.

Cash paid for the amounts included in the present

value of operating lease liabilities was $152 thousand during 2020 and is included in operating cash flows.

Operating Lease Costs

Operating lease

cost was $152 thousand during 2019.

Operating lease cost was $152 thousand

This cost is related to its long-term operating lease.

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Finance Leases

The company does

not have any finance leases.

(5) Share-Based Compensation

adopted the 2009 Stock Incentive Plan ("2009 Plan") on December 10, 2009.

Under the terms of the 2009 Plan all of the

Company’s employees, officers, directors, consultants and advisors are eligible to be granted options, restricted stock

awards, or other stock-based awards.

Some outstanding options are nonstatutory stock options;

The company does not have any finance leases

that qualify for capitalization.

Subsequent to year end, the Company renewed the Norton facility lease

for an additional 5 years.

Estimated monthly payments under the terms of the renewed lease, which is not reflected in the

2020 lease asset or liability escalate from approximately $12 thousand to $16 thousand over the lease term

(5) Share-Based Compensation Plans

The Company adopted the 2020 Equity Incentive

Plan ("2020 Plan") on March 3, 2020.

Under the terms of the 2020 Plan all of the Company’s employees, officers,

directors, consultants and advisors are eligible to be granted options, restricted stock awards, or other stock-based awards.

outstanding options are nonstatutory stock options;

some are incentive stock options.

All options granted are exercisable at the fair market value of the stock on the date of grant, and expire ten years from the

date of grant.

The options granted to employees generally vest in equal annual installments over a five-year period.

granted to directors generally vest immediately on date of grant.

Under the 2009

Plan a total of 2,848,100 shares of common stock are available for issuance, of which 1,053,995 shares remain available for grant

as of December 28, 2019.

stock option activity as of December 28, 2019 and changes during the year then ended is presented below:

All options granted are exercisable

at the fair market value of the stock on the date of grant, and expire ten years from the date of grant.

The options granted to

employees generally vest in equal annual installments over a five-year period.

The options granted to directors generally vest

immediately on date of grant.

Under the 2020 Plan a total of 1,500,000 shares

of common stock are available for issuance, of which 1,386,000 shares remain available for grant as of December 26, 2020.

A summary of stock option activity as of December

26, 2020 and changes during the year then ended is presented below:

Outstanding at

beginning of year

Outstanding at end of year

Options exercisable at year-end

options were exercised during

fiscal 2019 or 2018.

The fair value

of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model.

The following table presents

the annualized weighted average values of the significant assumptions used to estimate the fair values of the options granted

during 2019 and 2018:

Outstanding at

Options exercisable

No options were exercised during fiscal 2019

and 199,500 options were granted during fiscal 2019.

The fair value of each option grant is estimated

on the date of grant using the Black-Scholes option-pricing model.

The following table presents the annualized weighted average

values of the significant assumptions used to estimate the fair values of the options granted during 2020 and 2019:

Risk-free interest rate

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Weighted average fair value of grants

are granted with an exercise price equal to the fair market value of the underlying common stock on the date of grant.

recognized $133,671 and $220,654 as stock based compensation expense in 2019 and 2018, respectively including $131,421 related

to stock options outstanding and $2,250 related to the issue of common stock in 2019.

As of December 28, 2019, there was $171,332

of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plan;

cost is expected to be recognized over a weighted average period of 2.2 years.

Accrued expenses

at December 28, 2019 and December 29, 2018 consist of the following:

All options are granted with an exercise price

equal to the fair market value of the underlying common stock on the date of grant.

The Company recognized $117,842 and $133,671

as stock based compensation expense in 2020 and 2019, respectively.

As of December 26, 2020, there was $146,017 of total unrecognized compensation

cost related to non-vested share-based compensation arrangements granted under the plan;

that cost is expected to be recognized

over a weighted average period of 2.05 years.

Accrued expenses at December 26, 2020 and December

28, 2019 consist of the following:

Accrued legal and accounting

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Accrued other

(7) Revolving

Line of Credit

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 replaces the $1.25 million line of credit with Santander

(7) Revolving Line of Credit

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.

The LOC is secured by the accounts receivable and other assets of the Company and has

an interest rate of LIBOR plus 650 basis points.

The LOC was initially limited to a maximum of $2.0 million and included a requirement

that the total loss for 2019 be $640 thousand or better before the company will be able to access the full $2.5 million.

28, 2019 the Company had $1.25 million of borrowings under this LOC and its borrowing base at the time would have permitted an

additional $750 thousand to have been borrowed .

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 has an interest rate of LIBOR

plus 650 basis points.

The Company is subject to certain financial and non-financial covenants, all of which have been waived

by BDC for 2020.

At December 26, 2020 the Company had $0 borrowings under this LOC and its borrowing base at the time would

have permitted an additional $2.2 to have been borrowed.

Total Interest Expense for 2020 was $104 thousand.

Components of

income tax expense (benefit) for each year are as follows:

(8) Notes Payable

March 2020, the company acquired a Sonoscan ultrasound microscope for a price of $208 thousand.

The full amount was financed

through a 5 year note payable with Crest Capital Corporation.

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 with the machine’s vendor.

The equipment cost of $40 thousand will be paid at the rate

of $2 thousand per month over 2 years, resulting in an implied interest rate of 1.90%.

The aggregate maturities of the notes payable based on the

payment terms of the agreement are as follows:

Remaining in:

Payments due by period

Total interest expense on notes payable

during 2020 was $10,816.

(9) Income Taxes

Components of income tax expense (benefit)

for each year are as follows:

Current income tax provision (benefit):

Deferred income tax provision (benefit), net

assets as of December 28, 2019 and December 29, 2018 are as follows:

Deferred tax assets as of December 26, 2020

and December 28, 2019 are as follows:

December 26, 2020

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Deferred Tax Assets:

Net operating loss carryforwards

Net operating loss

carryforwards

Stock compensation

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Net deferred tax assets

At December 28, 2019 and December

29, 2018 the Company had net operating loss carryforwards of approximately $3,278,463 and $2,742,700, respectively, available

to offset future income for U.S.

Federal income tax purposes.

established a valuation reserve as it is judged more likely than not that all or a portion of the tax credits will not be used

before they expire.

This decision was initially reached in 2018 after giving greater weight to its losses over the last three

years compared with its forecast of the future.

the change in the deferred tax asset is as follows:

Balance at beginning of year

At December 26, 2020 and December 28, 2019 the Company had net operating

loss carryforwards of approximately $2,754,601 and $3,278,463, respectively, available to offset future income for U.S.

income tax purposes.

These net operating loss carryforwards occurred over several years, which begin to expire in the year ended

The Company established a valuation reserve

as it is judged more likely than not that all or a portion of the tax credits will not be used before they expire.

This decision

was initially reached in 2018 after giving greater weight to its losses over the last three years compared with its forecast of

A summary of the change in the deferred tax

asset is as follows:

Gross deferred tax balance at beginning of year

Deferred tax benefit (provision)

Valuation allowance

Balance at end of year

Income tax expense

is different from the amounts computed by applying the U.S.

federal statutory income tax rate of 21 percent to pretax income as

a result of the following:

Balance at end of year, net

Income tax expense is different from the amounts

computed by applying the U.S.

federal statutory income tax rate of 21 percent to pretax income as a result of the following:

Tax at statutory rate

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Valuation allowance

The Company’s

income tax filings are subject to review and examination by federal and state taxing authorities.

The Company is currently open

to audit under the applicable statutes of limitations for the years 2016 through 2019.

(9) Retirement

sponsors a Retirement Savings Plan (the ‘Plan’) under the provisions of Section 401 of the Internal Revenue Code.

Employees, as defined in the Plan, are eligible to participate in the Plan after 30 days of employment.

Under the terms of the

Plan, the Company may match employee contributions under such method as described in the Plan and as determined each year by the

Board of Directors.

During 2019 and 2018 the Company did not offer a 401k match.

(10) Concentrations

of Credit Risk, Significant Customers and Geographic Information

Financial instruments

which subject the Company to concentrations of credit risk consist principally of cash, cash equivalents and trade accounts receivable.

The Company maintains such cash deposits in a high credit quality financial institution.

extends credit to customers who consist principally of microelectronics systems companies in the United States, Europe and Asia.

The Company generally does not require collateral or other security as a condition of sale rather relying on credit approval,

balance limitation and monitoring procedures to control credit risk of trade accounts receivable.

Management conducts on-going

credit evaluations of its customers, and historically the Company has not experienced any significant credit-related losses with

respect to its trade accounts receivable.

Revenues from

significant customers as a percentage of total revenues in 2019 and 2018 were as follows:

The Company’s income tax filings are

subject to review and examination by federal and state taxing authorities.

The Company is currently open to audit under the applicable

statutes of limitations for the years 2017 through 2020.

(10) Retirement Savings Plan

The Company sponsors a Retirement Savings Plan

(the ‘Plan’) under the provisions of Section 401 of the Internal Revenue Code.

Employees, as defined in the Plan, are

eligible to participate in the Plan after 30 days of employment.

Under the terms of the Plan, the Company may match employee contributions

under such method as described in the Plan and as determined each year by the Board of Directors.

During 2020 the Company matched

½% of each of the first 2% of employee contributions amounting to $64 thousand.

In 2019 the Company did not offer

a 401k match.

(11) Concentrations of Credit Risk, Significant

Customers and Geographic Information

Financial instruments which subject the Company

to concentrations of credit risk consist principally of cash, cash equivalents and trade accounts receivable.

The Company maintains

such cash deposits in a high credit quality financial institution.

The Company extends credit to customers who

consist principally of microelectronics systems companies in the United States, Europe and Asia.

The Company generally does not

require collateral or other security as a condition of sale rather relying on credit approval, balance limitation and monitoring

procedures to control credit risk of trade accounts receivable.

Management conducts on-going credit evaluations of its customers,

and historically the Company has not experienced any significant credit-related losses with respect to its trade accounts receivable.

Revenues from significant customers as a percentage

of total revenues in 2020 and 2019 were as follows:

Percent of Total Revenues

Significant Customer

As of December 28, 2019, the Company

had trade accounts receivable due from these three customers that accounted for 85% of total trade accounts receivable as of that

No other customer balances constitute 10% or more of accounts receivable at December 28, 2019.

To further mitigate the potential

for credit losses the Company has acquired a credit insurance policy covering most of our sales to non-US accounts.

believes that any credit risks have been properly provided for in the accompanying financial statements.

The Company’s

revenue was derived from the following countries in 2018 and 2017:

As of December 26, 2020, the Company had trade accounts receivable

due from these three customers that accounted for 70% of total trade accounts receivable as of that date.

No other customer balances

constitute 10% or more of accounts receivable at December 26, 2020.

To further mitigate the potential for credit losses the Company

has acquired a credit insurance policy covering most of our sales to non-US accounts.

Management believes that any credit

risks have been properly provided for in the accompanying financial statements.

The Company’s revenue was derived from

the following countries in 2020 and 2019:

Percent of Total Revenues

United States of America

Company’s customers based in the United States conduct design, purchasing and payable functions in the United States, but

manufacture overseas.

Revenue generated from shipments made to customers’ locations outside the United States accounted

for 75% and 67% of total revenue in 2019 and 2018, respectively.

All of the Company’s

long-lived assets and operations are located in the United States.

Commitments and Contingencies

On January 24,

2018 the Company received a “Claim and Non-Conformance Notification” from one of its European customers related to

plating performed by a third party vendor of the Company.

On April 11, 2018 the Company received a “Follow-up Claim and

Non-Conformance Notification” from the customer.

No amounts for damages had been recorded in the financial statements as

management believed that it was not possible at the time to quantify the potential impact, if any, to the Company.

On July 9, 2019,

the Company received confirmation from its customer accepting the settlement offer of the Company’s insurer and on October

9, 2019 the Company entered into a Settlement and Release Agreement resulting in no loss to the Company.

Many of the Company’s customers based

in the United States conduct design, purchasing and payable functions in the United States, but manufacture overseas.

Revenue generated

from shipments made to customers’ locations outside the United States accounted for 77% and 75% of total revenue in 2020

and 2019, respectively.

All of the Company’s long-lived assets

and operations are located in the United States.

(12) Net Income (Loss) Per Share

The following reconciles the basic and diluted

net income (loss) per share calculations.

Basic EPS Computation:

Net income (loss)

Weighted average

Common shares

Diluted EPS Computation:

Net income (loss)

Weighted average

Common shares

Dilutive effect of stock options

Diluted net income (loss) per share

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 9A. Controls and Procedures