CPS TECHNOLOGIES CORP/DE/ 10-K

Item 1. Business. CPS Technologies Corp. (the “Company” or “CPS”) is a Massachusetts-based advanced materials company founded in 1984 (originally as Ceramics Process Systems Corporation) and publicly listed on Nasdaq since 1987. Renamed CPS Technologies Corp. in 2007, the Company designs, manufactures, and sells high-performance material solutions for global customers across diverse markets, including transportation, energy, automotive, electronics, telecommunications, aerospace, and defense. CPS possesses significant proprietary expertise in metal matrix composites (MMCs), which are custom-engineered materials that combine metals and ceramics to deliver superior performance properties. Due to these properties, which include improved thermal conductivity, stiffness, durability, lighter weight, and thermal expansion matching compared to conventional materials, the Company's products are well suited for applications with high performance demands. CPS’s components are used in high-speed trains, mass transit, HVDC power systems, electrical infrastructure, internet equipment, electric and hybrid vehicles, wind turbines, satellites, and even NASA Mars rovers. Hermetic Packaging products, the Company’s second product category, are used in high reliability communications and power modules for avionics and satellite applications, including GPS systems. The Company’s products include housings and heat spreaders for high-performance microprocessors, graphics processing chips, and application-specific integrated circuits. The Company’s products allow higher performance and improved energy efficiency, particularly in applications in which there is a high cost of failure. The Company is a fully qualified supplier to many major global electronics OEMs. Using its proprietary MMC technology, the Company also produces lightweight, high performance armor. Due to its ability to withstand extreme environments and high threat levels, the Company's HybridTech 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. CPS maintains a strong focus on research and development and is actively expanding its product portfolio. The Company's strategy is to drive sustained, profitable growth by developing and delivering advanced, high-performance material solutions to a diversified set of global, high-growth end markets. The Company focuses on applications where performance and reliability are critical, and where the cost of failure is often high. While many of these new product initiatives involve the utilization of our current materials science and manufacturing expertise, many of them address large markets which we have not historically served. The Company believes its diversified end-market strategy, emphasis on innovation, growing portfolio of market-driven intellectual property (IP), and reputation for quality and reliability position the Company for sustained growth in high-value, technology-driven markets. Central to this strategy is leveraging CPS’s proprietary MMC technologies and specialized manufacturing processes (Quickset and QuickCast) to create customized products that are difficult for competitors to replicate. CPS emphasizes technical differentiation, quality, and reliability to maintain strong customer relationships with leading OEMs in electronics, transportation, energy, aerospace, and defense. In 2022 the Company resumed participation in U.S. government Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, through which it has now secured multiple Phase I and Phase II awards, strengthening its intellectual property portfolio. These programs provide funding for innovative research and development to domestic small businesses, who maintain certain intellectual property rights. In 2024 CPS received funding for its first two Phase II SBIRs. In 2025, CPS received funding for its third Phase II program as well as five new phase I SBIRs. CPS management believes our business model of providing advanced material solutions to a portfolio of high growth markets provides CPS with the opportunity for sustained growth and a diversified customer base. While we have a number of ongoing production orders generating significant revenue, we also have many new product opportunities 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. Operationally, the Company typically follows a build-to-order, highly customized manufacturing model, supported by ongoing investments in employee training, automation, and process efficiency. CPS also emphasizes regulatory compliance, cybersecurity, and export controls to support its growing presence in defense- and aerospace-related markets. Overall, CPS’s strategy is to combine advanced materials science, proprietary processes, disciplined operations, and targeted investment in product development to build a diversified, defensible business positioned for long-term growth in demanding, technology-driven markets. In 2025, our three largest customers accounted for 39%, 13%, and 12% of revenues, respectively. In 2025, approximately 81% of our revenues were derived from commercial applications and 19% from defense-related applications. CPS’s website is http://www.cpstechnologysolutions.com. Products Metal Matrix Composites We design, manufacture and sell custom MMC components that improve the performance and reliability of systems in applications that include high-speed trains, mass transit, hybrid and electric cars, energy infrastructure, High-Voltage Direct Current (HVDC) converter stations, wind-turbines, routers, switches and fiber optic components for internet infrastructure. MMCs are advanced materials formed by combining metals with ceramics. Compared to conventional materials, MMCs offer higher thermal conductivity, better thermal expansion matching, increased stiffness, and significantly lower weight. These advantages, in particular the lighter weight and durability, are why CPS components have been used on the last two Mars Rovers, as well as on numerous satellites. CPS produces MMCs by combining a ceramic and a metal at the microstructural level, creating materials that efficiently dissipate heat while maintaining a coefficient of thermal expansion closely matched to surrounding components. This compatibility is critical to the long-term reliability of the assembly. Typically, the ceramic is silicon carbide (SiC) and the metal is aluminum (Al), resulting in an aluminum silicon carbide (AlSiC) composite. By adjusting the SiC-to-aluminum ratio, CPS can tailor the thermal expansion of AlSiC components to meet the requirements of each customer’s application. We provide baseplates and heat spreaders on which power semiconductors are mounted to produce modules for motor control. The power semiconductors are typically Insulated Gate Bipolar Transistor, or IGBTs. Our MMC baseplates have sufficient thermal conductivity to enable removal of heat through the baseplate and have a thermal expansion rate sufficiently similar to the other components in the assembly to ensure reliability over time as the assembly thermally cycles. We believe this market will continue to grow as the use of power modules penetrates additional motor applications, and as electric motors themselves penetrate new applications such as hybrid and electric vehicles and HVDC converter stations. CPS produces products made of AlSiC in the shapes and configurations required for each application, for example, in the form of baseplates, lids, substrates, housings, etc. Every product is made to a customer’s specifications. The CPS process technology allows most products to be made to net shape, requiring little or no final machining. Although the Company primarily manufactures MMC components comprised of AlSiC, its proprietary Quickset and Quickcast process technologies can be used to produce other MMCs to meet market requirements. 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. SiC chips are more efficient than Si chips and are being used more frequently in power applications. Modules using SiC chips run at higher temperatures, increasing the need for improved thermal management, a need which the Company's products address. CPS’s MMC products enable higher system performance, improved energy efficiency, and enhanced reliability across a broad range of advanced industrial, electronics, energy, aerospace, and defense applications. CPS’s MMC products are targeted at customers operating in high-performance, high-reliability industries where material properties such as thermal management and durability are critical. Hermetic Packaging Products CPS’s hermetic packaging products are designed for high-reliability electronic and power applications in aerospace, defense, space, telecommunications, and advanced electronics. These products leverage CPS’s materials science expertise and precision manufacturing capabilities to protect microelectronics from moisture, contaminants, and harsh operating environments. CPS’s products support mission-critical systems with a high cost of failure. Extended reliability, effective environmental sealing, and superior thermal performance are critical product attributes. These products are frequently used for space applications such as satellites, flight applications such as avionics and undersea applications such as torpedoes, submarines and communications buoys. The Company also produces housings and heat spreaders for high-performance microprocessors, graphics processing chips, and application-specific integrated circuits. To our knowledge, CPS is the only producer of hermetic packages with AlSiC bases, combining our expertise in hermetic package production with our expertise in MMC production. The CPS AlSiC hermetic package provides tremendous benefits in terms of reduced weight and CTE matching which are extremely important for space-based programs. CPS hermetic packages are used in every current generation GPS satellite, the Mars Perseverance rover as well as many other aerospace applications. There are even CPS parts on NASA’s New Horizons mission, currently well beyond Pluto and in the Kuiper Belt! We sell primarily to major microelectronics systems houses in the U.S., Europe and Asia. Our customers typically purchase prototype and evaluation quantities of our products over a one to three year period before purchasing production volumes. HybridTech Armor ® CPS’s armor products, marketed under the HybridTech Armor® brand, utilize the Company’s proprietary MMC technology to deliver lightweight, high-strength protection capable of withstanding extreme environments and advanced ballistic threats. Designed for defense customers operating across diverse and demanding conditions, the MMC-based armor line addresses mission requirements where reducing weight without compromising protection is critical. Historically, armor systems have relied on steel panels. As ballistic threat levels have increased, the amount of steel required to achieve adequate protection has become prohibitively heavy, negatively impacting platform performance. While ceramic armor has been adopted by the U.S. military for weight-sensitive applications, it has notable limitations, including reduced multi-hit capability. CPS’s MMC technology overcomes these challenges by embedding ceramic armor elements within a metal matrix, resulting in a lightweight, durable armor system with excellent ballistic performance (including robust multi-hit capability) that is well suited for demanding operational environments. HybridTech Armor® is suitable for a wide range of applications, including ground vehicles, naval and amphibious vessels, aircraft, and fixed installations. Compared with traditional armor materials, CPS’s solutions provide superior ballistic protection at significantly reduced weight, along with enhanced durability in harsh environments such as salt spray and extreme heat. Armor panels are custom engineered to meet specific ballistic threat levels and to integrate seamlessly with vehicle, aircraft, or platform design requirements. From 2021 through 2024, CPS manufactured armor panel strikefaces for the U.S. Navy’s aircraft carrier fleet. These panels are currently being installed on these ships, beginning with the USS Abraham Lincoln. The Company expects this technology to be adopted for additional surface vessel applications in the future. A new Phase I program funded by the U.S. Navy in 2025 provides for the lightweighting of the U.S. Marine Corps Amphibious Combat Vehicle (ACV). CPS’s HybridTech armor solution offers a potential replacement for the steel panels currently used for ballistic protection on the ACV, which would provide significant weight reduction. Product Development CPS’s product development efforts are focused on leveraging its core materials science expertise and proprietary manufacturing technologies to address clearly defined customer requirements in high-growth markets. Using this methodology, the Company is developing products for new applications while strengthening its intellectual property portfolio. New initiatives are typically built on CPS’s established strengths, such as the design and manufacture of MMCs, enabling the Company to reuse established processes while expanding into new markets. These materials can provide desirable properties, including low density, high strength and stiffness, low coefficient of thermal expansion, and be either highly conductive or insulating. These properties allow MMCs to function in thermal management applications, as lightweight structures, and as supports that provide high levels of dimensional stability. CPS follows a solution-driven process for developing new products, often involving close collaboration with the customer. New product ideas are typically based on well-defined customer requirements, often in high-reliability, mission-critical applications. Components often undergo rigorous testing to meet customer specifications. For example, hermetic packaging products receive specialized testing for challenging environments (e.g., salt fog) while armor products are tested for ballistic performance at specialized laboratories. The vast majority of CPS’s solutions are internally developed, However, in March 2024 the Company announced it had entered into a worldwide, exclusive licensing agreement with Triton Systems for their Fiber Reinforced Aluminum (FRA) solution. FRA, which CPS is marketing as AlMax, is stronger and more durable than neat aluminum, especially at high temperatures, at only a marginally higher weight. Target applications include helicopter bearing liners, with FRA serving as a replacement for much heavier steel, providing a lighter weight solution. While this could lead to large production orders for 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. The Company’s pipeline management approach allocates resources to projects that have strong technical differentiation and a high potential for commercialization. The Company seeks to: ● Broaden its product portfolio ● Strengthen its competitive advantage through technical differentiation ● Develop unique materials, designs, and manufacturing processes that create defensible barriers to entry ● Expand its engineering, design, simulation, prototyping, and testing capabilities ● Shorten internal development cycles ● Validate product performance to meet established standards Current areas of active development include: ● Injection molded alloys and ceramics: CPS has utilized Quickset Injection Molding as part of the fabrication process for AlSiC composites for decades. The process offers broad compatibility with most alloys (stainless steels, tungsten, nickel alloys, and others) and ceramics (silicon carbide, boron carbide, alumina, silicon nitride, and others). CPS is actively pursuing opportunities for fabricating these materials, offering an alternative to traditional injection molding. The CPS process results in larger, more complex, easier to sinter alloys and ceramics with demonstrated high volume capacity. ● Infiltration of composites: CPS utilizes QuickCast Pressure Infiltration to convert porous silicon carbide preforms to AlSiC composites. The same molten aluminum infiltration process can be used to fabricate other types of MMCs. CPS is actively maturing and commercializing AlMax, a high strength aluminum composite reinforced with discontinuous ceramic fibers. Additional opportunities include utilizing the process with reinforcements that yield unique properties such as radiation shielding (boron carbide and/or tungsten) and ultra-high strength (continuous ceramic fibers). ● HybridTech Armor: These products have been successfully installed on U.S. Navy aircraft carriers. HybridTech is easily modified by altering ceramic fiber reinforcements, ceramic tile composition, and overall panel thickness. CPS is actively engaged in developing alternate HybridTech designs to meet demand across platforms that demand both extremely low density armor solutions (aircraft) and heavy, high-threat situations (land vehicles). SBIR and STTR Programs CPS actively participates in the SBIR (Small Business Innovation Research) and STTR (Small Business Technology Transfer) programs of the U.S. government. Since reengaging in these programs in 2022, the Company has secured 13 Phase I or Phase II awards, as of December 27, 2025, funded by either the Department of Defense or the Department of Energy. These programs now support a significant portion of the Company’s new product development efforts. The Company’s three active Phase II programs, as of December 27, 2025, are as follows: modular radiation shielding for nuclear applications (funded by the Department of Energy); the application of MMCs to thermal management for long range missiles (funded by the U.S. Navy); and development of a controlled fragmentation tungsten warhead (funded by the U.S. Army). SBIR and STTR contracts are administered by the Small Business Administration to promote domestic research and development of innovative technologies. The awards fund advanced research and development (R&D) initiatives, reduce financial risk, and contribute to the expansion of CPS’s intellectual property portfolio. CPS is among a relatively small number of publicly traded companies that meet the program’s eligibility requirements, including size, ownership structure, and U.S. operational presence. Through SBIR and STTR funding, CPS is able to pursue research avenues that might not otherwise be possible, while retaining certain intellectual property rights. Technologies developed under these federal programs often transition into commercial product pipelines, strengthening the Company’s long term innovation and IP strategy. The typical SBIR/STTR funding structure is as follows: ● Phase I: Feasibility Study. Initial government funding to evaluate the technical merit, feasibility, and commercial potential of the solution proposed in response to a published need. ● Phase II: Prototype Development. Funding for the development of prototypes, engineering models, and testing based to expand upon Phase I results. Enables the small business to refine products and prepare them for commercialization. ● Phase III: Commercialization. No direct SBIR/STTR funding. The small business uses commercial or non-SBIR government funding to bring products to market. Successful Phase I/II projects often attract commercial interest or government contracts. An important element of the SBIR/STTR program is the “Phase III mandate.” Federal agencies are required to grant non-competitive, follow-on contracts to small businesses for technology developed under Phase I and Phase II contracts, provided the work derives from or extends that earlier work. This provides a mechanism to commercialize technology without additional competition, enabling rapid procurement to satisfy government needs. To satisfy this mandate, federal agencies should, "to the greatest extent practicable," award Phase III contracts to the original Phase I/II awardee, bypassing the need for a separate, formal competition. There is no limit on the number, duration, or dollar value of Phase III awards. Additionally, although the Company must be a small business to receive Phase I or Phase II funding, they may have outgrown small business status by the time of the Phase III award. This directive ensures that the government can continue to access the promising technology which was developed with government funding. Competition CPS’s primary competitor for MMC baseplates is Denka, a large Japanese chemical company. Other potential competitors include emerging Chinese manufacturers offering lower-priced products. For customers whose applications are less demanding, a copper baseplate is an attractive alternative. Copper is less expensive than an AlSiC solution, but its rate of thermal expansion is significantly different than that of the silicon semiconductors mounted to the baseplates. In low voltage applications, a copper solution is sufficient as the heat being generated is not enough to degrade the reliability of the power module. As voltage levels and the heat related to them go up, MMC baseplates become the preferred solution. The market for HPB products is highly fragmented with multiple specialized manufacturers. Key competitors of CPS include Egide, Ametek, and Qnnect. Due to the nature of the business, most of CPS’s competitors in this market are domestic. CPS has no direct competitors for its armor solution. Rather competition is based on three factors, effectiveness, weight and price. By effectiveness we mean not only its ability to stop ballistic threats, but also its durability in the environment in which it will be deployed. We believe our armor solution provides significant advantages regarding its effectiveness per pound, hence the reason it was selected by the US Navy for the crew served weapons stations on its air craft carrier fleet. Raw Materials We use a variety of raw materials from numerous domestic and foreign suppliers. These materials are primarily aluminum ingots, ceramic powders, chemicals and hermetic assembly components. None of the raw materials we use is believed to be scarce or restricted for national security reasons. We use no conflict metals. Sales, Marketing and Order Backlog CPS’s go-to-market strategy leverages its proprietary solutions to address well-defined customer requirements. CPS primarily sells custom, high-reliability products to OEMs in various markets. The sales effort emphasizes key attributes for a given market, such as technical performance, reliability, and energy efficiency. The Company targets customers at all stages of the technology adoption lifecycle, from early-stage innovators to large, established OEMs. Sales efforts include direct engagement with engineers, procurement teams, and program managers to establish clearly defined requirements. In its marketing efforts, the Company leverages industry reputation, technical competence, and successful past projects to demonstrate credibility. Long-standing relationships with major OEMS and federally funded research programs serve as valuable indicators of technical capability. Marketing emphasizes performance, quality, and reliability as critical product differentiators. The majority 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. Some large customers typically give the Company a non-binding forecast of demand for a one-year period and then negotiate a pricing agreement for that 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. The Company has a backlog of $26 million as of December 27, 2025. This backlog consists of orders received from customers which are, for the most part, scheduled to ship in 2026. Under certain circumstances, customers may be able to cancel existing orders or extend the period over which orders are shipped. Some of these changes may be significant, which would reduce this backlog or extend the timing of these shipments. Intellectual Property CPS’s intellectual property consists primarily of proprietary processes and technical know-how. Some of this intellectual property is protected by the filing and maintenance of patents, both domestically and internationally. In other cases, we believe we are better served by reliance on trade secret protection. In all cases, we seek protection for our technological developments to preserve our competitive position. As of December 27, 2025, the Company had 8 United States patents. In addition, the Company had several international patents covering the same subject matter as the U.S. patents. CPS has also applied for patent protection for its nuclear shielding solution. We intend to continue to apply for domestic and foreign patent protection in appropriate cases. The Company’s intellectual property portfolio provides competitive differentiation, protects innovation, and supports commercialization. Key proprietary manufacturing processes include the Company's Quickset™ Injection Molding Process (for precision MMC components with superior thermal and structural performance) and QuickCast™ Pressure Infiltration Process (for complex MMC parts with uniform properties and high strength-to-weight ratios). Proprietary processes such as these allow CPS to offer unique solutions that are difficult for competitors to replicate. Ongoing R&D, including funded SBIR/STTR contracts, helps enhance the Company's IP portfolio, supporting new product development and potential expansion into new markets. Regulatory and Environmental Matters Regulatory Compliance CPS operates in industries subject to aerospace, defense, electronics, and international trade regulations. Certain activities, such as the import/export of raw materials, intermediate products, and finished goods, may require compliance with U.S. Departments of Commerce, State, and Treasury regulations. Work in the aerospace and defense sector also subjects CPS to government requirements for handling controlled unclassified information (CUI); more information about this is provided in the cybersecurity section of this document. Environmental Compliance The Company produces non-nuclear, non-medical hazardous waste in its R&D and manufacturing operations. Disposal of this waste is governed by federal and state environmental regulations. CPS actively manages hazardous materials and byproducts to ensure compliance with all applicable laws and minimize environmental impact. Employees As of December 27, 2025, we had 117 permanent full-time employees. 107 were engaged in manufacturing and engineering and 10 in sales and administration, including finance, human resources and general management. We also have approximately 33 manufacturing personnel who are employed through temporary employment agencies. During 2025, the Company continued its efforts to increase factory efficiency both in terms of employee training as well as increased automation. None of our employees are covered by a collective bargaining agreement. We consider our relations with our employees to be excellent.