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Item 1. Financial Statements

2025-05-02 compared with 2024-11-01 · 120 added, 190 removed, 217 unchanged (59% of the section changed)

ITEM 1 FINANCIAL STATEMENTS (Unaudited)

CPS TECHNOLOGIES CORP.

PS TECHNOLOGIES CORP.

Balance Sheets (Unaudited)

September 28,

Current assets:

1 unchanged sentence

Marketable securities, at fair value

Accounts receivable-trade, net

Accounts receivable-trade

Accounts receivable-other

11 unchanged sentences

Deferred taxes, net

See accompanying notes to financial statements.

CPS TECHNOLOGIES CORP.

Balance Sheets (Unaudited)

September 28,

LIABILITIES AND STOCKHOLDERS’ EQUITY

6 unchanged sentences

Total current liabilities

Note payable less current portion

Deferred revenue – long term

1 unchanged sentence

Total liabilities

Commitments and contingencies (note 7)

Commitments & Contingencies

Stockholders’ equity:

1 unchanged sentence

issued 14,661,487 shares;

outstanding 14,525,960 shares at September 28, 2024 and issued 14,601,487 shares;

outstanding 14,519,215 shares at December 30, 2023

Preferred stock, no shares issued or outstanding

outstanding 14,525,960 shares at each March 29, 2025 and December 28, 2024

Additional paid-in capital

1 unchanged sentence

Accumulated deficit

Less cost of 135,527 common shares repurchased at September 28, 2024 and 82,272 common shares repurchased at December 30, 2023

Less cost of 135,527 common shares repurchased at each March 29, 2025 and December 28, 2024

Total stockholders’ equity

2 unchanged sentences

CPS TECHNOLOGIES CORP.

Statements of Operations and Other Comprehensive Income (Unaudited)

Three Months Ended

Nine Months Ended

September 28,

September 30,

September 28,

September 30,

Statements of Operations and Other Comprehensive Income (Loss)

Fiscal Quarters Ended

March 29, 2025

March 30, 2024

Product sales

Total revenues

Cost of product sales

Gross profit (loss)

Selling, general, and administrative expense

Income (loss) from operations

Interest income (expense), net

Other income (expense), net

Net income (loss) before income tax

Selling, general, and administrative expenses

Operating income (loss)

Other income, net

Income (loss) before income taxes

Income tax provision (benefit)

2 unchanged sentences

Net unrealized gains on available for sale securities

Reclassification adjustment for gains included in net income

Total other comprehensive income

Total comprehensive income (loss)

Comprehensive income (loss)

Net income (loss) per basic common share

5 unchanged sentences

STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 28, 2024 AND SEPTEMBER 30, 2023

comprehensive

stockholders’

Balance at June 29, 2024

Share-based compensation expense

Employee option exercises

Other comprehensive income

Balance at September 28, 2024

comprehensive

FOR THE THREE MONTHS ENDED MARCH 29, 2025 AND MARCH 30, 2024

Accumulated other comprehensive income

stockholders’

1 unchanged sentence

Share-based compensation expense

Employee option exercises

Other comprehensive income

Balance at September 28, 2024

shares issued

stockholders'

Balance at July 1, 2023

Share-based compensation expense

Employee option exercises

Balance at September 30, 2023

shares issued

stockholders'

Net unrealized gains on available for sale securities

Reclassification adjustment for gains included in net income

Balance at March 29, 2025

Balance at December 30, 2023

Share-based compensation expense

Employee options exercised

Balance at September 30, 2023

Balance at March 30, 2024

See accompanying notes to financial statements.

1 unchanged sentence

Statements of Cash Flows (Unaudited)

Nine Months Ended

September 28,

September 30,

Fiscal Quarters Ended

Cash flows from operating activities:

4 unchanged sentences

Deferred taxes

Realized gain on sale of marketable securities

Accounts receivable - trade

7 unchanged sentences

Purchases of property and equipment

Purchase of marketable securities

Proceeds from sale of marketable securities

Purchases of marketable securities

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from exercise of employee stock options, net of repurchases

Payments on note payable

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

Net cash used in financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash, cash equivalents and restricted cash at end of period

Restricted cash at end of period

Cash and cash equivalents at end of period

Supplemental disclosures of cash flows information:

Cash paid for income taxes

Cash paid for interest

Supplemental disclosures of non-cash activity:

Share repurchases as a reduction of stock option exercise proceeds

See accompanying notes to financial statements.

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CPS Technologies Corporation (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") which are a combination of metal and ceramic.

CPS also assembles housings and packages for hybrid circuits.

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The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

(3) Cash, Cash Equivalents and Restricted Cash

Our cash and cash equivalents are carried at fair value and consist primarily of cash, money market funds, cash deposits with commercial banks, U.S.

government bonds and notes, and highly rated direct short-term instruments with an original maturity of 90 days or less.

The Company has a restricted cash account in the amount of $ 84,715 , as of September 28, 2024 to cover an open letter of credit for overseas purchases.

Upon presentation of documents evidencing shipment of these goods, the issuing bank will draw on this account and make payment to the vendor.

There was no restricted cash as of December 30, 2023.

September 28, 2024

December 30, 2023

Cash and cash equivalents

Restricted cash 1

Total cash, cash equivalents and restricted cash

Recognized in prepaid expenses and other current assets on our Balance Sheet.

(3) Marketable Securities

10 unchanged sentences

CPS’ marketable securities consist solely of US Government bonds with a maturity of 12 months or less and which fall under Level II of the fair value hierarchy.

The fair value of these bonds as of September 28, 2024 was $ 1,020,952 .

CPS held no investments in marketable securities as of December 30, 2023.

September 28, 2024

December 30, 2023

The value of these bonds as of March 29, 2025 was $ 1,039,714 and, as of December 28, 2024, was $ 1,031,001 .

Unrealized gain

Total fair value

(6) Net Income Per Common and Common Equivalent Share

Basic net income per common share is calculated by dividing net income by the weighted average number of common shares outstanding during the period.

Diluted net income per common share is calculated by dividing net income by the sum of the weighted average number of common shares plus additional common shares that would have been outstanding if potential dilutive common shares had been issued for granted stock options and stock purchase rights.

Common stock equivalents are excluded from the diluted calculations when a net loss is incurred as they would be anti-dilutive.

( 5 ) Net Income (Loss) Per Common and Common Equivalent Share

Basic net income (loss) per common share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period.

Diluted net income (loss) per common share is calculated by dividing net income (loss) by the sum of the weighted average number of common shares plus additional common shares that would have been outstanding if potential dilutive common shares had been issued for granted stock options and stock purchase rights.

Had there been a profit in Q1 2024, the dilutive effect would have been 74,285 shares.

Common stock equivalents are excluded from the diluted calculations when a net loss is incurred as they would be anti-dilutive.

The following table presents the calculation of both basic and diluted EPS:

Three Months Ended

Nine Months Ended

September 28,

September 30,

September 28,

September 30,

Basic EPS Computation:

Net income (loss)

Weighted average

Common shares

Weighted average common shares outstanding

Diluted EPS Computation:

Net income (loss)

Weighted average

Common shares

Weighted average common shares outstanding

Dilutive effect of stock options

4 unchanged sentences

None of these equipment leases have been capitalized as the Company elected an accounting policy for short-term leases, which allows lessees to avoid recognizing right-of-use assets and liabilities for leases with terms of 12 months or fewer.

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

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

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

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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 $ 152 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 lease as of September 28, 2024:

The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s capitalized operating leases as of March 29, 2025

(Dollars in Thousands)

Maturity of capitalized lease liabilities

Lease payments

Remaining 2025

Total undiscounted operating lease payments

6 unchanged sentences

Other Information

Remaining lease term for capitalized operating lease (months)

Discount rate for capitalized operating leases

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

Weighted-average discount rate for capitalized operating leases

Operating Lease Costs and Cash Flows

Operating lease cost and cash paid was $ 41 thousand during the third quarter of 2024 and $ 123 thousand for the nine months ended September 28, 2024.

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

Operating lease cost and cash paid was $ 41 thousand during the first quarter of 2025.

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

All other short-term leases were immaterial.

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

During the quarter ended September 28, 2024, no 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 September 28, 2024 .

During the quarter ended September 30, 2023, a total of 229,500 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 September 30, 2023 .

During the three and nine months ended September 28, 2024, there were 60,000 options exercised and corresponding shares issued at a weighted average price of $ 1.50 .

During the three and nine months ended September 28, 2024, 53,100 and 69,200 options were forfeited, respectively, and none expired.

During the three and nine months ended September 30, 2023, there were 55,000 and 141,001 options exercised and corresponding shares issued at a weighted average price of $ 2.65 and $ 1.78 , respectively.

During the three and nine months ended September 30, 2023, 27,400 and 233,000 options were forfeited and none and 25,000 expired, respectively.

During the three and nine months ended September 28, 2024, the Company repurchased 53,255 shares for employees to facilitate their exercise of stock options.

During the three and nine months ended September 30, 2023, the Company repurchased 47,329 and 72,256 shares, respectively, for employees to facilitate their exercise of stock options.

There were also 984,800 options outstanding at a weighted average price of $ 2.68 with a weighted average remaining term of 6.73 years as of September 28, 2024, and there were 543,800 options exercisable at a weighted average price of $ 2.58 with a weighted average remaining term of 5.13 years as of September 28, 2024.

During the quarters ended March 29, 2025 and March 30, 2024, a total of 115,000 and 135,500 stock options, respectively, were granted to employees under the Company’s 2020 Equity Incentive Plan (the “Plan”) and a total of 75,000 and 75,000 stock options, respectively, were granted to outside directors during the quarters ended March 29, 2025 and March 30, 2024.

During the quarters ended March 29, 2025 and March 30, 2024 , there were 0 options exercised.

During the quarters ended March 29, 2025 and March 30, 2024 , the Company repurchased 0 shares for employees to facilitate their exercise of stock options.

There were also 1,083,300 options outstanding at a weighted average price of $ 2.45 with a weighted average remaining contractual term of 7.6 years as of March 29, 2025 and there were 581,900 shares exercisable at a weighted average price of $ 2.37 with a weighted average remaining term of 6.7 years.

There were 1,097,900 options outstanding at a weighted average price of $ 2.61 with a weighted average remaining contractual term of 7.1 years as of March 30, 2024 and there were 582,800 shares exercisable at a weighted average price of $ 2.44 with a weighted average remaining term of 5.3 years.

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

As of September 28, 2024, there were 626,400 shares available for future grants under the 2020 Plan and 248,400 shares outstanding under the 2009 Plan.

As of September 28, 2024, there was $ 604 thousand of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan;

As of March 29, 2025, there were 466,400 shares available for future grants.

As of March 29, 2025, there was $ 608 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 2.41 years.

During the three and nine months ended September 28, 2024, the Company recognized $ 44,480 and $ 249,922 , respectively, as shared-based compensation expense related to previously granted shares under the Plan.

These amounts are included as a component of selling, general and administrative expenses in the statement of operations.

During the three and nine months ended September 30, 2023, the Company recognized $ 27,941 and $ 175,698 , respectively, as shared-based compensation expense related to previously granted shares under the Plan.

These amounts are included as a component of selling, general and administrative expenses in the statement of operations.

During the quarters ended March 29, 2025 and March 30, 2024, the Company recognized approximately $ 122 thousand and $ 161 thousand, respectively, as shared-based compensation expense related to previously granted shares under the Plan.

( 8 ) Inventories

Inventories consist of the following:

September 28,

Raw materials

1 unchanged sentence

Finished goods

Total inventory

Gross inventory

Reserve for obsolescence

2 unchanged sentences

Accrued expenses consist of the following:

September 28,

Accrued legal and accounting

Accrued payroll and related expenses

Accrued product returns

Accrued other

( 11 ) Line of Credit

In May 2023, the Company terminated its $ 3.0 million revolving line of credit (LOC) with Massachusetts Business Development Corporation (BDC).

A new LOC in the amount of $ 3.0 million was entered into with Rockland Trust Company.

The LOC is secured by the accounts receivable and other assets of the Company and has an interest rate of the National Prime Rate as published by the Wall Street Journal ( 8.0 % at September 28, 2024) .

On September 28, 2024, the Company had $ 0 of borrowings under this LOC and its borrowing base at the time, consisting of eligible accounts receivable, would have permitted an additional $ 2.9 million to have been borrowed.

The line of credit remains in effect and has been extended to August 5, 2025.

( 12 ) Note Payable

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

The full amount was financed through a 5 year note payable with a third -party equipment finance company.

The note is collateralized by the equipment and is being paid in monthly installments of $ 4 thousand, consisting of principal plus interest at a rate of 6.47 %.

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

Remaining in:

Payments due by

Total interest expense on notes payable during 2024 was $ 1,917 .

Total Accrued Expenses

( 10 ) Revolving Line of Credit

In May 2023, the Company entered into a line of credit (LOC) in the amount of $ 3.0 million 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 ( 7.5 % at March 29, 2025).

On March 29, 2025 and March 30, 2024, the Company had $ 0 of borrowings under this LOC and its borrowing base at the time would have permitted an additional $ 3.0 million to have been borrowed.

The LOC remains in effect until terminated per mutual agreement by both parties.

Total interest expense for Q1 2025 was $0 and was $0 for Q1 2024.

( 11 ) Income Taxes

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.

Management has determined that a valuation allowance is not needed as it expects that the deferred tax asset will be fully utilized.

For the three and nine months ended September 28, 2024 the deferred tax asset was increased $ 372,683 and $ 680,259 for the estimated tax benefit on Q3 and year to date net losses, respectively.

The Company believes that it is “more likely than not ” that the Company will be able to fully utilize the deferred tax asset.

For the first quarter of 2025 the deferred tax asset was decreased $ 84 for the estimated tax on Q1 net income.

(12) Segment Reporting

The Company views its operations and manages its business as one segment.

The Company produces and sells advanced material solutions, primarily metal matrix composites, to assemblers of high density electronics and other specialty components and subassemblies.

The Company also assembles housings and packages for hybrid circuits, selling to the same customers mentioned above.

These customers represent a single market or segment with similar stringent and well-defined requirements.

The Company’s customers, in turn, sell the components and subassemblies which incorporate the products into many different end markets, however, these end markets are two to three levels removed from the Company.

The Company also sells armor strike faces to armor manufacturers, using the same manufacturing process used in its other product solutions.

The Company makes operating decisions and assesses financial performance only for the Company as a whole and does not make operating decisions or assess financial performance by the end markets which ultimately use the products.

Our chief operating decision maker (CODM) is Brian Mackey, our President and CEO.

The Company's CODM regularly reviews financial information presented and does not evaluate the Company's operating segment using asset or liability information.

Instead, the CODM uses revenue, gross margin, and net income or loss to allocate operating and capital resources and assess performance by comparing actual results to historical results and previously forecasted financial information.

The following table presents segment information for the Company's single reporting segment:

March 29, 2025

March 30, 2024

Product sales

Cost of product sales

Selling, general, and administrative expenses

Income (loss) from operations

Income (loss) before income tax

Income tax provision (benefit)

Net income (loss)

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

3 unchanged sentences

There are a number of factors that could cause the Company’s actual results to differ materially from those forecasted or projected in such forward-looking statements.

This includes the impact of the Russian invasion of Ukraine, the ongoing conflict in Gaza and Lebanon and other conflicts and potential conflicts throughout the world.

It also includes the impact of a strong dollar on the prices the Company charges to foreign customers, which are discussed in Item 3 of this report.

This includes the impact of the Russian invasion of Ukraine and other conflicts and potential conflicts, including economic conflicts, throughout the world, which are discussed in Item 3 of this report.

Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof.

10 unchanged sentences

they may include components made of more traditional materials such as aluminum, cold rolled steel and Kovar.

Using its proprietary MMC technology, the Company also produces light-weight vehicle armor, particularly for extreme environments and heavy threat levels.

In addition the Company engages in research and development activities with the goal of developing new products that address challenging customer requirements.

These activities typically leverage the company’s extensive knowledge base in the development and volume manufacturing of advanced materials.

Using its proprietary MMC technology, the Company also produces lightweight armor, particularly for extreme environments and heavy threat levels.

CPS’s products are custom rather than catalog items.

5 unchanged sentences

These costs include the fixed costs of applications such as engineering, tooling design and fabrication, process engineering, and others.

Accordingly, particularly given our current size, changes in sales volume generally result in even greater changes in financial performance on a percentage basis as fixed costs are spread over a larger or smaller base.

Accordingly, particularly given our size, changes in sales volume generally result in even greater changes in financial performance on a percentage basis as fixed costs are spread over a larger or smaller base.

Sales volume is therefore a key financial metric used by management.

3 unchanged sentences

In July 1987, CPS completed our initial public offering of 1.5 million shares of our Common Stock.

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

Results of Operations for the Third Fiscal Quarter of 2024 (Q3 2024) Compared to the Third Fiscal Quarter of 2023 (Q3 2023);

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 2025 (Q1 2025) Compared to the First Fiscal Quarter of 2024 (Q1 2024);

(all $ in 000 ’ s)

Revenues totaled $4,247 in Q3 2024 compared with $6,285 generated in Q3 2023, a decrease of 32%.

This decrease was mainly due to the completion of the armor contract for the US Navy in Q2 2024 as compared to 2023.

In addition, one of the Company’s major customers in 2023 significantly reduced their purchases in Q3 2024 due to their having excess inventory that they are in the process of working down.

Gross loss in Q3 2024 totaled $523 or -12% of sales.

This compares with gross profit in Q3 2023 of $1,236 or 20% of sales.

This percentage decrease was mainly due to the impact of fixed costs on significantly lower revenues.

In addition, CPS opened a third shift effective the last week of August.

During Q3 those folks were added to payroll and came in during the first shift to work alongside our experienced operators for training, which added to the overall cost of goods sold for the quarter.

Selling, general and administrative (SG&A) expenses totaled $963 in Q3 2024 compared with SG&A expenses of $1,105 in Q3 2023, a 13% reduction year over year.

This decrease was primarily due to the reduction in variable compensation as a result of weaker results from operations in Q3 2024 as compared to Q3 2023.

In addition, new hires in 2023 resulted in increased payroll taxes and some overlap in the same position (duplicate salaries) in Q3 2023.

The Company experienced an operating loss of $1,486 in Q3 2024 compared with an operating profit of $131 in Q3 2023.

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

The net loss for Q3 2024 was $1,043 compared to a net profit in Q3 2023 of $171.

Results of Operations for the First Nine Months of 2024 Compared to the First Nine Months of 2023 (all $ in 000s)

Total revenue was $15,190 in the first nine months of 2024, a 27% decrease compared with total revenue of $20,803 in the first nine months of 2023.

This decrease was mainly due to the completion of our armor order for the US Navy in 2024 as compared to 2023.

In addition, one of the Company’s major customers in 2023 significantly reduced their purchases during 2024 due to their having excess inventory that they are in the process of working down.

Gross margin in the first nine months of 2024 totaled $153 or 2% of sales.

In the first nine months of 2023 gross margin totaled $5,677 or 27% of sales.

This decrease was due to the decrease in revenue and the decreased coverage of our fixed costs, as well as the increased costs incurred by the training incurred during Q3 for the addition of the third shift.

Selling, general and administrative (SG&A) expenses were $3,215 during the first nine months of 2024, down 22% compared with SG&A expenses of $4,121 in the first nine months of 2023.

Decreased variable compensation accruals due to lower 2024 profitability as well as a further reduction in selling and administrative payroll expense.

During the first nine months of 2024, the Company had net interest income of $242.

This compares with interest income of $176 realized during the first nine months of 2023.

The increase in interest income is primarily due to higher interest rates.

In the first nine months of 2024 the Company had an operating loss of $3,062 compared with operating income $1,556 in the same period last year.

The net loss for the first nine months of 2024 totaled $2,140 versus net income of $1,231 in the first nine months of 2023.

CPS does not rely on raw materials from Ukraine, Russia, Israel, Lebanon or Gaza.

As a result, we do not believe that the Russian invasion of Ukraine or the conflict surrounding Israel will have a direct impact on our results.

Nevertheless, there could be an indirect impact regarding supply chain and inflationary issues as a result of these conflicts.

Revenues totaled $7,506 in Q1 2025 compared with $5,913 generated in Q1 2024, an increase of 27%.

The major factor contributing to this increase is the continued expansion of production capacity to meet growing demand, including the addition of our third shift and the continued improvement of our production associates as they gain more experience.

As announced in Q4 2024, CPS received an order from an existing customer approximately $5 million greater than the same order received in Q4 2023.

Gross margin in Q1 2025 totaled $1,231 or 16% of sales.

This compares with gross margin in Q1 2024 of $906 or 15% of sales.

This increase was primarily due to the impact of higher sales volumes on fixed costs.

Selling, general and administrative (SG&A) expenses totaled $1,101 in Q1 2025 compared with SG&A expenses of $1,166 in Q1 2024, a 6% decrease year over year.

There are a number of areas in which management has been able to reduce SG&A expenses compared to last year.

The Company experienced operating income of $130 in Q1 2025 compared with an operating loss of $260 in Q1 2024.

This increase was a result of the increased gross margin and by the decrease in SG&A expenses.

Net after tax income was $96 in Q1 2025 compared to an after tax loss of $143 in Q1 2024.

CPS does not rely on raw materials from Ukraine, Russia, Israel or Gaza.

As a result, we do not believe that the Russian invasion of Ukraine or the conflict in Israel and Gaza will have a direct impact on our results.

Most of our raw materials are sourced domestically.

In some cases, our suppliers may be sourcing these materials from a foreign source.

To date, we have not seen any cost increases that we believe are attributable to tariffs, however this could change in the future.

Inflation has had an impact on our costs.

Thus far, we have been able to pass along these increases to our customers, but there is no guarantee that we will be able to continue this in the future.

Thus far, we have largely been able to pass along these increases to our customers, but there is no guarantee that we will be able to continue this in the future.

In addition, there is often a lag between when the costs increase and when we can adjust customer prices.

Some of our larger customers will have pricing agreements, typically for one year, and we must wait for those agreements to end before making any pricing adjustments.

Further, several of our larger customers buy from our major competitor in Japan.

The devaluation of the Japanese yen related to the US dollar has made it more difficult for us to increase our prices in an amount necessary to fully make up for higher costs.

These factors combine to create a higher degree of uncertainty regarding future financial performance.

Wages have also been impacted by inflation.

We have instituted a combination of wage increases as well as more competitive benefits in order to retain the personnel making up our workforce.

The factors mentioned above, including inflation and tariffs, create elevated uncertainty regarding future financial performance.

Liquidity and Capital Resources (all $ in 000 ’ s unless noted)

The Company’s liquid assets at September 28, 2024 consist of cash and cash equivalents of $4,689, restricted cash of $85 and marketable debt securities with a fair value of $1,021.

This compares to cash and cash equivalents at December 30, 2023 of $8,814 and no restricted cash or marketable debt securities held at December 30, 2023.

The decrease in cash was due primarily to a decrease in working capital, higher expenditures for capital equipment acquired to improve future performance as well as the operating losses incurred in 2024.

Accounts receivable at September 28, 2024 totaled $4,017 compared with $4,472 at December 30, 2023.

Days Sales Outstanding (DSO) increased from 60 days at the end of 2023 to 78 days (calculated based on trade receivables only) at the end of Q3 2024.

The increase in DSO was due to several large payments due at the end of Q3 2024 being delayed to the beginning of Q4 2024, as well as significantly higher sales volumes at the end of Q3 2024 as compared to the beginning of Q3 2024.

The accounts receivable balances at December 30, 2023, and September 28, 2024 were both net of an allowance for doubtful accounts of $10.

Inventories totaled $4,433 at September 28, 2024 compared with inventory totaling $4,582 at December 30, 2023.

The Company’s cash and cash equivalents at March 29, 2025 totaled $1,930, with marketable securities of $1,040.

This compares to cash and cash equivalents at December 28, 2024 of $3,281 and marketable securities of $1,031.

The change in cash is predominantly due to our increased accounts receivable which are discussed in more detail below.

Trade accounts receivable at March 29, 2025 totaled $6,303 compared with $4,858 at December 28, 2024.

Days Sales Outstanding (DSO) increased from 76 days at the end of 2024 to 78 days at the end of Q1 2025.

The reason for this increase is that sales dollars per week grew throughout the quarter, resulting in a higher percentage of Q1 sales remaining in accounts receivable than would be expected, had weekly sales been relatively uniform during the quarter.

The accounts receivable balances at December 28, 2024, and March 29, 2025 were both net of an allowance for credit losses of $10.

Inventories totaled $4,813 at March 29, 2025 compared with inventory totaling $4,331 at December 28, 2024.

The inventory turnover in the most recent four quarters ending Q1 2025 was 5.5 times (based on a 5 quarter end average) compared with 5.9 times averaged during the four quarters of 2024.

The Company expects it will continue to be able to fund its operations for the remainder of 2024 and 2025 from operations and existing cash balances.

The Company expects it will continue to be able to fund its operations for the remainder of 2025 from operations and existing cash balances.

The Company continues to sell to a limited number of customers and the loss of any one of these customers could cause the Company to require additional external financing.

3 unchanged sentences

Contractual Obligations (all $ in 000 ’ s unless otherwise noted)

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 Company maintains a $3.0 million revolving line of credit (LOC) 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 September 28, 2024, the Company had $0 of borrowings under this LOC and its borrowing base at the time would have permitted an additional $2.9 million to have been borrowed.

On March 29, 2025, the Company had $0 of borrowings under this LOC and its borrowing base at the time would have permitted the full $3.0 million to have been borrowed.

The LOC remains in effect until terminated per mutual agreement by both parties.

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

The full amount was financed through a 5 year note payable with a financing company.

The note is collateralized by the microscope and is being paid in monthly installments of $4 thousand, consisting of principal plus interest at a rate of 6.47%

The note was paid in full during the quarter ended March 29, 2025.

The Company has one real estate lease expiring in February 2026.

3 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