What changed in this filing

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Item 1. Financial Statements

2023-08-04 compared with 2023-05-09 · 164 added, 145 removed, 298 unchanged (51% of the section changed)

4 unchanged sentences

Cash and cash equivalents

$ 7,369,863  

$ 8,266,753  

Accounts receivable-trade, net

4,714,138  

3,777,975  

Accounts receivable-other

700,703  

685,668  

Inventories, net

4,692,655  

4,875,901  

Prepaid expenses and other current assets

299,601  

211,242  

Total current assets

17,776,960  

17,817,539  

Property and equipment:

Production equipment

10,900,344  

10,770,427  

Furniture and office equipment

952,883  

Leasehold improvements

985,649  

12,838,876  

12,708,959  

Accumulated depreciation and amortization

( 11,571,509 )

( 11,446,901 )

Construction in progress

111,612  

64,910  

Net property and equipment

1,378,979  

1,326,968  

Right-of-use lease asset (note 4, leases)

433,000  

466,000  

Right-of-use lease asset

Deferred taxes, net

1,842,992  

2,069,436  

$ 21,431,931  

21,679,943  

LIABILITIES AND STOCKHOLDERS’

See accompanying notes to financial statements.

CPS TECHNOLOGIES CORP.

Balance Sheets (Unaudited)

LIABILITIES AND STOCKHOLDERS` EQUITY

Current liabilities:

22 unchanged sentences

31,277  

231,020  

Long term lease liability

4 unchanged sentences

5,974,427  

Commitments & Contingencies

Stockholders’

Commitments and contingencies (note 4)

Stockholders` equity:

Common stock, $ 0.01 par value, authorized 20,000,000 shares;

1 unchanged sentence

outstanding 14,511,544 and 14,450,470 shares;

at April 1, 2023 and December 31, 2022, respectively

at July 1, 2023 and December 31, 2022, respectively

145,465  

6 unchanged sentences

( 24,125,092 )

Less cost of 10,301 and 10,016 common shares repurchased at April 1, 2023 and December 31, 2022, respectively

Total stockholders’

Less cost of 34,943 and 10,016 common shares repurchased at July 1, 2023 and December 31, 2022, respectively

Total stockholders` equity

16,946,592  

15,705,516  

Total liabilities and stockholders’equity

Total liabilities and stockholders` equity

$ 22,504,101  

3 unchanged sentences

Statements of Operations (Unaudited)

Fiscal Quarters Ended

Three Months Ended

Six Months Ended

Product sales

$ 7,100,267  

$ 6,652,714  

Total revenues

7,100,267  

6,652,714  

Cost of product sales

4,855,564  

4,689,224  

2,244,703  

1,963,490  

Selling, general, and administrative expense

1,550,522  

1,416,393  

Income from operations

694,181  

547,097  

Other income (expense), net

15,590  

Income before taxes

709,771  

545,184  

Interest income (expense), net

Net income before income tax

Income tax provision

250,570  

125,748  

$ 459,201  

$ 419,436  

Net income per basic common share

$ 0.03  

Weighted average number of basic common shares outstanding

14,452,284  

14,389,857  

Net income per diluted common share

$ 0.03  

Weighted average number of diluted common shares outstanding

14,639,600  

14,657,939  

See accompanying notes to financial statements.

CPS TECHNOLOGIES CORPORATION

CPS TECHNOLOGIES CORP.

STATEMENTS OF STOCKHOLDERS’

EQUITY (UNAUDITED)

FOR THE THREE MONTHS ENDED APRIL 1, 2023 AND April 2, 2022

stockholders’

FOR THE THREE AND SIX MONTHS ENDED JULY 1, 2023 AND JULY 2, 2022

stockholders'

shares issued

Balance at April 1, 2023

Share-based compensation expense

Issuance of common stock

Employee option exercises

Balance at July 1, 2023

stockholders'

shares issued

Balance at December 31, 2022

Share-based compensation expense

Employee options exercises

Issuance of common stock

Employee options Exercised

Balance at July 1, 2023

stockholders'

shares issued

Balance at April 2, 2022

Share-based compensation expense

Issuance of common stock

Employee option exercises

Balance at July 2, 2022

stockholders'

shares issued

Balance at December 25, 2021

1 unchanged sentence

Issuance of common stock

Employee options exercises

Balance at April 2, 2022

Employee options Exercised

Balance at July 2, 2022

See accompanying notes to financial statements.

1 unchanged sentence

Statements of Cash Flows (Unaudited)

Fiscal Quarters Ended

Six Months Ended

Cash flows from operating activities:

1 unchanged sentence

$ 874,544  

Adjustments to reconcile net income to cash used in operating activities:

Adjustments to reconcile net income to cash provided by (used in) operating activities:

Depreciation and amortization

5 unchanged sentences

Accounts receivable-trade

Accounts receivable - other  

( 1,296,584 )

333,048  

Accounts receivable-other

611,028  

3 unchanged sentences

522,667  

150,871  

Accrued expenses

40,658  

Deferred taxes

2 unchanged sentences

Deferred revenue

Net cash used in operating activities

45,405  

Net cash provided by operating activities

835,875  

210,784  

Cash flows from investing activities:

Purchases of property and equipment

Proceeds from sale of property and equipment

Net cash used in investing activities

Cash flows from financing activities:

Net borrowings on line of credit

Proceeds from exercise of employee stock options

Proceeds from exercise of employee stock options, net of repurchases

33,615  

154,724  

Proceeds from issuance of common stock, net of expenses

Payments on note payable

1 unchanged sentence

12,176  

Net decrease in cash and cash equivalents

106,817  

Net increase in cash and cash equivalents

414,472  

25,970  

Cash and cash equivalents at beginning of period

6 unchanged sentences

Cash paid for interest

Cash paid for taxes  

79,456  

3 unchanged sentences

71,090  

18,334  

See accompanying notes to financial statements.

CPS TECHNOLOGIES CORP.

Notes to Financial Statement

Notes to Financial Statements

Nature of Business

CPS Technologies Corporation (the “Company”

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 which are a combination of metal and ceramic. 

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 threat levels.

The Company sells into several end markets including the wireless communications infrastructure market, high-performance microprocessor market, motor controller market, and other microelectronic and defense markets. 

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.

Summary of Significant Accounting Policies

11 unchanged sentences

Three Months Ended

Six Months Ended

Basic EPS Computation:

Net income (loss)

$ 600,503  

$ 455,108  

$ 1,059,704  

$ 874,544  

Weighted average

Common shares

14,493,970  

14,431,825  

14,473,128  

14,410,064  

$ 0.04  

$ 0.03  

$ 0.07  

$ 0.06  

Diluted EPS Computation:

Net income (loss)

$ 600,503  

$ 455,108  

$ 1,059,704  

$ 874,544  

Weighted average

Common shares

14,493,970  

14,431,825  

14,473,128  

14,410,064  

Dilutive effect of stock options

127,959  

276,821  

157,637  

272,452  

14,621,929  

14,708,646  

14,630,765  

14,682,516  

$ 0.04  

$ 0.03  

$ 0.07  

$ 0.06  

Commitments & Contingencies

3 unchanged sentences

The real estate lease expiring in 2026 (the “Norton facility lease”) is included as a right-of-use lease asset and corresponding lease liability on the balance sheet.

This asset and liability was recognized on April 1, 2023 based on the present value of lease payments over the lease term using the Company’s incremental borrowing rate at commencement date.

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.

3 unchanged sentences

The Company also has an option to renew the lease starting in March 2026 through February 2032.

The Company is not reasonably certain these extensions will be exercised at this time, and therefore are not included in the lease asset or liability. 

Annual rental payments range from $ 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 operating leases as of April 1, 2023

The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s capitalized operating lease as of July 1, 2023

(Dollars in Thousands)

April 1, 2023

Maturity of capitalized lease liabilities

Remaining 2023

Lease payments

Total undiscounted operating lease payments

6 unchanged sentences

Other Information

Weighted-average remaining lease term for capitalized operating leases (in months)

Weighted-average discount rate for capitalized operating leases

Remaining lease term for capitalized operating lease (months)

Discount rate for capitalized operating leases

Operating Lease Costs and Cash Flows

Operating lease cost and cash paid was $ 41 thousand during the first quarter of 2023.

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

Operating lease cost and cash paid was $ 41 thousand during the second quarter of 2023 and $ 81 thousand for the six months ended July 1, 2023.

These costs are related to its long-term operating lease.

All other short-term leases were immaterial.

7 unchanged sentences

The company uses the Black-Scholes option pricing model to determine the fair value of the stock options granted.

During the quarters ended April 1, 2023 and April 2, 2022, a total of 0 and 170,000 stock options, respectively, were granted to employees under the Company’s 2020 Equity Incentive Plan (the “Plan”) and a total of 50,000 and 38,000 stock options, respectively, were granted to outside directors during the quarters ended April 1, 2023 and April 2, 2022.

During the quarter ended April 1, 2023, there were 7,001 options exercised and corresponding shares issued at a weighted average price of $ 1.47 .

 During the quarter ended April 2, 2022, there were 72,700 options exercised and corresponding shares issued at a weighted average price of $ 2.08 . 

During the quarter ended April 1, 2023, the Company repurchased 285 shares for employees to facilitate their exercise of stock options.

During the quarter ended April 2, 2022, the Company repurchased 840 shares for employees to facilitate their exercise of stock options.

There were also 1,004,400 options outstanding at a weighted average price of $ 2.51 with a weighted average remaining term of 6.10 years as of April 1, 2023, and there were 971,600 options outstanding at a weighted average price of $ 2.37 with a weighted average remaining term of 6.67 years as of April 2, 2022.

During the quarter ended July 1, 2023, a total of 60,000 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 1, 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 2, 2022, issued at a weighted average price of $ 4.41 per share.

During the three and six months ended July 1, 2023, there were 79,000 and 86,000 options exercised and corresponding shares issued at a weighted average price of $ 1.20 and $ 1.22 , respectively.

During the three and six months ended July 2, 2022, there were 15,300 and 88,000 options exercised and corresponding shares issued at a weighted average price of $ 1.44 and $ 1.97 , respectively. 

During the three and six months ended July 1, 2023, the Company repurchased 24,642 and 24,927 shares, respectively, for employees to facilitate their exercise of stock options.

During the three and six months ended July 2, 2022, the Company repurchased 3,143 and 3,983 shares, respectively, for employees to facilitate their exercise of stock options. 

There were also 754,800 shares outstanding at a weighted average price of $ 2.61 with a weighted average remaining term of 5.67 years as of July 1, 2023, and there were 551,000 shares exercisable at a weighted average price of $ 2.45 with a weighted average remaining term of 4.75 years as of July 1, 2023.

The Plan, as amended, is authorized to issue 1,500,000 shares of common stock.

As of April 1, 2023, there were 865,800 shares available for future grants.

639,100 grants remain exercisable under the Company’s Equity Incentive Plans.

As of April 1, 2023, there was $ 523 thousand of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan;

As of July 1, 2023, there were 1,036,400 shares available for future grants.

As of July 1, 2023, there was $ 294 thousand of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan;

that cost is expected to be recognized over a weighted average period of 1.92 years.

During the quarters ended April 1, 2023 and April 2, 2022, the Company recognized approximately $ 130 thousand and $ 124 thousand, respectively, as shared-based compensation expense related to previously granted shares under the Plan. 

During the three and six months ended July 1, 2023, the Company recognized $ 17,316 and $ 147,757 , respectively, as shared-based compensation expense related to previously granted shares under the Plan.

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.

Inventories consist of the following:

Raw materials

$ 2,886,278  

$ 2,645,442  

Work in process

1,603,511  

1,863,512  

Finished goods

Gross inventory

516,889  

525,872  

Total inventory

5,006,678  

5,034,826  

Reserve for obsolescence

Inventories, net

$ 4,813,753  

$ 4,875,901  

Accrued Expenses

9 unchanged sentences

25,153  

Total Accrued Expenses

$ 861,514  

1 unchanged sentence

Line of Credit

In September 2019, the Company entered into a revolving line of credit (LOC) with Massachusetts Business Development Corporation (BDC) in the amount of $ 2.5 million.

The agreement includes a demand note allowing the Lender to call the loan at any time.

The Company may terminate the agreement without a termination fee after 3 years.

In May of 2020 this credit line was increased to $ 3.0 million.

The LOC is secured by the accounts receivable and other assets of the Company and has an interest rate of LIBOR plus 550 basis points.

On April 1, 2023, the Company had $ 0 thousand of borrowings under this LOC and its borrowing base at the time would have permitted an additional $ 3.0 million to have been borrowed.

The line of credit is subject to certain financial covenants, all of which have been met.

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 1, 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.

Note Payable          

In March 2020, the Company acquired inspection equipment for a price of $ 208 thousand.

3 unchanged sentences

Remaining in:

Payments due by period

$ 22,272  

2 unchanged sentences

77,119  

Total interest expense on notes payable during Q1 2023 was $ 1,538 compared to $ 2,269 in Q1 2022.

Total interest expense on notes payable during 2023 was $ 2,902 .

( 10 )  

A valuation allowance against deferred tax assets is required to be established or maintained when it is "more likely than not" that all or a portion of deferred tax assets will not be realized.

In December 2018, the Company established a valuation allowance reserve, as it is judged more likely than not that all or a portion of its deferred tax assets will not be utilized before they expire.

This decision was reached after giving greater weight to the Company’s losses in recent years as compared to its forecasts.

In September 2021 this decision was reevaluated in light of the Company’s recent profitability and its forecasts for future profitability.

The Company concluded that it is “more likely than not ”

that the Company will be able to fully utilize the deferred tax asset.

This reversal of the valuation allowance was made net of the expected tax liability for 2021.

 For the first quarter of 2023 a charge against the deferred tax asset of $ 226 for the estimated tax liability on Q1 income was made.

For the three and six months ended July 1, 2023 there were charges against the deferred tax asset of $ 179 and $ 405 , respectively.

MANAGEMENT ’

33 unchanged sentences

In March 2007, we changed our name from Ceramics Process Systems Corporation to CPS Technologies Corporation.

Results of Operations for the First Fiscal Quarter of 2023 (Q1 2023) Compared to the First Fiscal Quarter of 2022 (Q1 2022);

Results of Operations for the Second Fiscal Quarter of 2023 (Q2 2023) Compared to the Second Fiscal Quarter of 2022 (Q2 2022);

(all $ in 000 ’

Revenues totaled $7,418 in Q2 2023 compared with $7,100 generated in Q1 2022, an increase of 4%.

Two factors in particular contributed to this growth.

One of our largest customers, which was particularly hard hit by the Covid-19 pandemic, has continued to grow as that pandemic has subsided.

Additionally, our shipments of armor for the US Navy also saw significant growth from 2022 to 2023.

This increase was mainly due to increased shipments of armor for the US Navy in 2023 as compared to 2022.

Gross margin in Q2 2023 totaled $2,196 or 30% of sales.

This compares with gross margin in Q2 2022 of $1,829 or 26% of sales.

This moderate percentage increase was due to the company’s continuing efforts to improve manufacturing efficiencies as well as the impact of higher sales volumes on fixed costs.

This percentage increase was due to the company’s continuing efforts to improve manufacturing efficiencies as well as the impact of higher sales volumes on fixed costs.

Selling, general and administrative (SG&A) expenses totaled $1,465 in Q2 2023 compared with SG&A expenses of $1,159 in Q2 2022.

There were two primary reasons for this increase.

There were three major reasons for this increase.

First there was a significant increase in travel expenses.

3 unchanged sentences

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

The Company experienced an operating profit of $731 in Q2 2023 compared with an operating profit of $669 in Q2 2022, an increase of 9%.

This increase was a result of the increased gross margin, partially offset by the increase in SG&A expenses.

Results of Operations for the First Six Months of 2023 Compared to the First Six Months of 2022 (all $ in 000s)

Total revenue was $14,518 in the first half of 2023, a 6% increase compared with total revenue of $13,723 in the first half of 2022.

This increase was mainly due to increased shipments of armor for the US Navy in 2023 as compared to 2022.

Gross margin in the first six months of 2023 totaled $4,441 or 31% of sales.

In the first six months of 2022 gross margin totaled $3,792 or 28% of sales.

This increase was due to the increase in revenue and the increased coverage of our fixed costs.

Selling, general and administrative (SG&A) expenses were $3,016 during the first six months of 2023, up 17% compared with SG&A expenses of $2,576 in the first six months of 2022.

Increased variable compensation accruals due to higher 2023 profitability as well as the travel costs, payroll costs and severance, mentioned above, were the primary reasons for this increase.

During the first half of 2023, the Company had net interest income of $95.

This compares with interest expense of $0 incurred during the first half of 2022.

The increase in interest income is due to our strong cash position and higher interest rates.

In the first six months of 2023 the Company had operating income of $1,425 compared with $1,217 in the same period last year.

The net income for the first six months of 2023 totaled $1,060 versus $875 in the first six months of 2022.

The Company has had extremely minimal sales to both Russia and Ukraine over the last several years, the loss of which would be immaterial to these financial statements.

11 unchanged sentences

s unless noted)

The Company’s cash and cash equivalents at April 1, 2023 totaled $7,370.

The Company’s cash and cash equivalents at July 1, 2023 totaled $8,681.

This compares to cash and cash equivalents at December 31, 2022 of $8,267.

The decrease in cash was due primarily to increases in accounts receivable and significant reductions in deferred revenue offset by net profit.

Accounts receivable at April 1, 2023 totaled $5,415 compared with $4,464 at December 31, 2022.

The increase in cash was due primarily to the Company’s profitability, partially offset by increase in working capital required for this growth.

Accounts receivable at July 1, 2023 totaled $5,148 compared with $4,464 at December 31, 2022.

Days Sales Outstanding (DSO) increased from 56 days at the end of 2022 to 62 days at the end of Q2 2023.

The increase in DSO was due to the inclusion of deferred revenue of $0.6M in the year end accounts receivable balance, which was collected during Q1 2023.

The accounts receivable balances at December 31, 2022, and April 1, 2023 were both net of an allowance for doubtful accounts of $10.

Inventories totaled $4,693 at April 1, 2023 compared with inventory totaling $4,876 at December 31, 2022.

The accounts receivable balances at December 31, 2022, and July 1, 2023 were both net of an allowance for doubtful accounts of $10.

Inventories totaled $4,814 at July 1, 2023 compared with inventory totaling $4,876 at December 31, 2022.

The inventory turnover in the most recent four quarters ending Q2 2023 was 4.1 times (based on a 5 point average) compared with 4.2 times averaged during the four quarters of 2022.

7 unchanged sentences

s unless otherwise noted)

In September 2019, the Company entered into revolving line of credit (LOC) with Massachusetts Business Development Corporation (BDC) in the amount of $2.5 million.

This agreement was amended in May 2020 to increase the line to $3.0 million.

The agreement includes a demand note allowing the Lender to call the loan at any time.

The Company may terminate the agreement without a termination fee after 3 years.

The LOC is secured by the accounts receivable and other assets of the Company and has an interest rate of LIBOR plus 550 basis points.

The Company was in compliance with all debt covenants as of April 1, 2023, had $0 borrowings under this LOC and its borrowing base at the time would have permitted $3.0 to have been borrowed.

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 1, 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.

In March 2020, the company acquired a scanning acoustic microscope for a price of $208 thousand.

6 unchanged sentences

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-Q

Item 1. Financial Statements