What changed in this filing

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Item 1. Business

2025-03-17 compared with 2024-03-14 · 43 added, 20 removed, 135 unchanged (32% of the section changed)

6 unchanged sentences

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 internet infrastructure.

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’s Hermetic Packaging 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 heat spreaders 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.

The Company’s products allow higher performance and improved energy efficiency, particularly in applications in which there is a high cost of failure.

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

Due to its ability to withstand extreme environments and high threat levels, CPS armor has been selected as the solution for the U.S.

Navy’s crew served weapons station program.

Due to its ability to withstand extreme environments and high threat levels, CPS armor has been selected as the solution for crew served weapons stations on the U.S.

Navy’s aircraft carriers.

Its light weight also makes it an ideal solution for aircraft and other vehicles requiring a high strength to weight ratio.

1 unchanged sentence

Compared to conventional materials, MMCs provide superior thermal conductivity, improved thermal expansion matching, greater stiffness and lighter weight.

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.

This makes CPS products very useful for applications in which there is a high cost of failure.

These factors, in particular the lighter weight and durability, 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.

2 unchanged sentences

The technologies developed by the Company during these programs will further enhance CPS’ intellectual property portfolio.

In 2024 CPS received funding for its first two Phase II SBIRs confirming its decision to participate in these programs and further advancing this portfolio.

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 have a number of significant production orders generating revenue, but also have many significant opportunities for new products which could lead to significant production orders in new product lines in the future.

Some of these opportunities may come to fruition as early as the next year or two, while others will take longer to develop.

We believe we have validated this model as we are now supplying customers at all stages of the technology adoption lifecycle.

19 unchanged sentences

and at the system level, higher density circuit boards are being assembled closer together.

Silicon carbide chips are slowly replacing silicon chips due to their higher efficiency.

Silicon carbide chips run at higher temperatures than silicon chips, furthering the need for proper thermal management.

The designer must resolve the thermal management issues or the system will fail.

5 unchanged sentences

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.

Typically 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 conductivity of the AlSiC composite.

CPS produces products made of AlSiC in the shapes and configurations required for each application, for example, in the form of lids, substrates, housings, etc.

3 unchanged sentences

Nevertheless, its proprietary Quickset- Quickcast process technology can be used to produce other MMCs to meet market requirements.

For example, CPS is able to combine aluminum with other ceramic fillers such as graphite and fibers.

For example, CPS combines aluminum with other ceramic or metal components such as ceramic fibers, tungsten and boron carbide.

An important development in power processing is the emergence of wide-band gap semiconductors, particularly SiC semiconductors.

3 unchanged sentences

Armor has traditionally been comprised of steel panels.

As threat levels have increased, the amount of steel required to provide sufficient ballistic protection has become unacceptably detrimental to a vehicle’s performance.

As threat levels have increased, the amount of steel required to provide sufficient ballistic protection has become unacceptably heavy and therefore detrimental to a vehicle’s performance.

military has increasingly used ceramic armor in weight sensitive applications.

3 unchanged sentences

The Company’s HybridTech Armor® panels are particularly well suited for extreme environments – the panels do not degrade in salt spray or extreme heat.

The Company is producing armor panel strikefaces for the U.S.

Navy and believes it will increasingly be used in these and other surface vessel applications.

The Company has produced armor panel strikefaces for the U.S.

Navy aircraft carrier fleet and expects it will be used in other surface vessel applications in the future.

Product Development Overview

Since our reengagement in the SBIR/STTR programs, CPS has added significant resources for developing new products.

Many of these new product initiatives are for markets not currently served by CPS, and they involve the utilization of our current materials science and manufacturing expertise to address well-defined customer requirements.

Our Phase II SBIR for the US Navy involves using our aluminum infiltration process with nitinol for use in thermal energy storage.

Nitinol allows for significantly better storage than the Navy’s current solution.

Similarly, our Phase II SBIR for the Department of Energy to create radiation shielding for the transportation of nuclear micro-reactors involves the infiltration of boron carbide and tungsten with aluminum to create a lightweight solution to this problem, allowing for their safe transportation.

CPS also self-funds a number of product development efforts.

In March 2024 we announced our worldwide, exclusive licensing agreement with Triton Systems for their Fiber Reinforced Aluminum (FRA).

FRA is stronger and more durable than neat aluminum, especially at high temperatures, at only a marginally higher weight.

Target applications for FRA include helicopter bearing liners, with FRA serving as a replacement for much heavier steel, providing a lighter weight solution that allows for more cargo weight.

While this could lead to large production orders to CPS, it will likely take several years of testing before this comes to fruition.

Based on customer interest, we anticipate other potential applications for this material, which could result in a faster move into regular production.

We continue to work on broadening our armor offerings.

The development of STANAG 6 ballistic protection remains a priority.

If successful this could lead to the incorporation of CPS armor into ground vehicles.

Similarly, we continue to work on lightweight armor for helicopter flooring which came out of a Phase I SBIR funded by the US Army.

Although the US Army did not allocate any Phase II for this program, due to interest from certain helicopter OEMs, CPS has successfully performed ballistic testing on the flooring, which was not part of the funded Phase I effort.

CPS also has a number of other product development initiatives which may or may not lead to additional business in the future.

Specific Markets and Products

1 unchanged sentence

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 reductions 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;

This growth is the result of several factors including emerging high-power applications which demand power modules such as trains, subways and certain industrial equipment, and cost reductions in power modules which increasingly make variable speed drives cost effective.

Power semiconductors are a significant portion of the cost of variable speed drives, and the cost of the module housing and thermal management system are also significant;

cost reductions of all these components are driving increased use of variable speed drives.

11 unchanged sentences

As voltage levels and the heat related to them go up, MMC baseplates become the preferred solution.

Currently, HEV/EV manufacturers who want to save on short term costs are using power modules with copper baseplates, while those who want longer term reliability, such as those in the luxury vehicle market, will use power modules with an MMC (AlSiC) baseplate.

Currently, HEV/EV manufacturers who want to save on short term costs are using power modules with copper baseplates, while those who want longer term reliability, such as those in the luxury vehicle market, may use power modules with an MMC (AlSiC) baseplate.

Of particular interest is the move to using Silicon Carbide (SiC) semiconductors instead of silicon semiconductors.

2 unchanged sentences

As such, the voltage level at which AlSiC becomes preferred over copper would be lower, creating expanded opportunities for AlSiC baseplates.

The Company is working with multiple tier one and tier two suppliers to the automobile industry on several new designs, including SiC modules, for future introduction.

The Company believes the HEV and EV markets may be the source of significant and long-term growth for the Company.

Hermetic Packages

17 unchanged sentences

In addition, the Company had several international patents covering the same subject matter as the U.S.

In addition, CPS has applied for patent protection for its nuclear shielding solution.

We intend to continue to apply for domestic and foreign patent protection in appropriate cases.

3 unchanged sentences

Virtually 100% of the Company's product sales are custom in that they are based on customers’ drawings and the large majority of these sales are "designed in" and sold over multiple years.

Major customers typically give the Company a non-binding forecast of demand for a one-year period and then negotiate a pricing agreement with the Company valid for that one-year period.

Some large customers typically give the Company a non-binding forecast of demand for a one-year period and then negotiate a pricing agreement with the Company valid for that one-year period.

These and other customers typically issue purchase orders to be shipped on a particular date, or to be drawn against and shipped under releases.

2 unchanged sentences

Under certain circumstances, customers may be able to cancel existing orders or extend the period over which orders may be shipped.

Some of these changes may be significant, which would reduce this backlog.

Some of these changes may be significant, which would reduce this backlog or extend the timing of these shipments.

We have developed and expect to continue to develop products for a number of different end markets, and we will encounter competition from different producers of MMCs, hermetic packages, armor, and other competing materials.

7 unchanged sentences

Some of these companies are competitors of CPS, while others focus on product types not sold by CPS.

CPS continues to expand its technical competence to increase its offerings in areas in which we previously did not participate.

CPS continues to expand our technical competence to increase our offerings in areas in which we previously did not participate.

Based on these increased offerings, combined with our emphasis on quality and customer service, we expect to see continued growth in our hermetic package product line.

Our main domestic competitors in this arena include Egide, Ametek, and Qnnect (formerly Hermetic Solutions Group).

The company currently has orders to produce its HybridTech Armor® panels.

The company does not currently have orders to produce its HybridTech Armor® panels as the aircraft carrier order has been completed.

We continue to work with Kinetic Protection, the Navy’s prime contractor, to get new orders for other classes of Navy ships.

To our knowledge, we do not have any direct competitors who produce encapsulated armor.

13 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-K

Item 1. Business