UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the period ended March 30,June 29, 2019
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission file number 0-16088
CPS TECHNOLOGIES CORP.CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware
| 04-2832509
|
111 South Worcester Street
|
02766-2102
|
(508) 222-0614
Registrant’s Telephone Number, including Area Code:
CPS TECHNOLOGIES CORP.Technologies Corporation
111 South Worcester Street
Norton, MA 02766-2102
None
(Former Name, Former Address and Former Fiscal Year if Changed since Last Report
Report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period than the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X ][X] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer or a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company”” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X] Smaller reporting company [X]
Emerging growth company[ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act):
[ ] Yes [X] No
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.01 par value CPSH NASDAQ Capital Markets
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Number of shares of common stock outstanding as of May 10,August 2, 2019: 13,207,436.
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS (Unaudited)
CPS TECHNOLOGIES CORP.CORPORATION
Balance Sheets (Unaudited)
March 30, | December 29, | |||||||
2019 | 2018 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 231,069 | $ | 628,804 | ||||
Accounts receivable-trade, net | 3,191,758 | 3,053,091 | ||||||
Inventories, net | 3,077,591 | 3,192,933 | ||||||
Prepaid expenses and other current assets | 203,547 | 156,338 | ||||||
Total current assets | 6,703,965 | 7,031,166 | ||||||
Property and equipment: | ||||||||
Production equipment | 9,571,484 | 9,550,043 | ||||||
Furniture and office equipment | 525,055 | 519,779 | ||||||
Leasehold improvements | 891,817 | 891,817 | ||||||
Total cost | 10,988,356 | 10,961,639 | ||||||
Accumulated depreciation and amortization | (9,862,234) | (9,722,767) | ||||||
Construction in progress | 123,926 | 34,314 | ||||||
Net property and equipment | 1,250,048 | 1,273,186 | ||||||
Right-of-use lease asset (note 4, leases) | 276,000 | — | ||||||
Deferred taxes, net | 186,747 | 186,747 | ||||||
Total Assets | $ | 8,416,760 | $ | 8,491,099 |
June 29, | December 29, | |||||||
2019 | 2018 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 161,601 | $ | 628,804 | ||||
Accounts receivable-trade, net | 4,110,388 | 3,053,091 | ||||||
Inventories, net | 2,900,900 | 3,192,933 | ||||||
Prepaid expenses and other current assets | 220,642 | 156,338 | ||||||
Total current assets | 7,393,531 | 7,031,166 | ||||||
Property and equipment: | ||||||||
Production equipment | 9,587,309 | 9,550,043 | ||||||
Furniture and office equipment | 525,054 | 519,779 | ||||||
Leasehold improvements | 891,813 | 891,817 | ||||||
Total cost | 11,004,176 | 10,961,639 | ||||||
Accumulated depreciation and amortization | (10,001,133) | (9,722,767) | ||||||
Construction in progress | 157,785 | 34,314 | ||||||
Net property and equipment | 1,160,828 | 1,273,186 | ||||||
Right-of-use lease asset (note 4, leases) | 241,000 | — | ||||||
Deferred taxes, net | 186,747 | 186,747 | ||||||
Total assets | $ | 8,982,106 | $ | 8,491,099 |
See accompanying notes to financial statements.
(continued)
CPS TECHNOLOGIES CORP.CORPORATION
Balance Sheets (Unaudited)
(concluded)
March 30, | December 29, | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | 2019 | 2018 | ||||||
Current liabilities: | ||||||||
Line of credit | 200,000 | — | ||||||
Accounts payable | 2,068,882 | 1,680,263 | ||||||
Accrued expenses | 719,335 | 975,315 | ||||||
Current portion lease liability | 148,000 | — | ||||||
Total current liabilities | 3,136,217 | 2,655,578 | ||||||
Long term lease liability | 128,000 | — | ||||||
Total liabilities | 3,264,217 | 2,655,578 | ||||||
Commitments (note 4) | ||||||||
Stockholders’ equity: | ||||||||
Common stock, $0.01 par value, | ||||||||
authorized 20,000,000 shares; | ||||||||
issued 13,427,492 and 13,425,992 shares; | ||||||||
outstanding 13,207,436 and 13,205,936 shares; | ||||||||
at March 30, 2019 and December 29, 2018, | 134,275 | 134,260 | ||||||
Additional paid-in capital | 36,021,766 | 35,960,545 | ||||||
Accumulated deficit | (30,486,445) | (29,742,231) | ||||||
Less cost of 220,056 common shares repurchased | ||||||||
at March 30, 2019 and December 29, 2018 | (517,053) | (517,053) | ||||||
Total stockholders’ equity | 5,152,543 | 5,835,521 | ||||||
Total liabilities and stockholders’ | ||||||||
equity | $ | 8,416,760 | $ | 8,491,099 |
See accompanying notes to financial statements.
CPS TECHNOLOGIES CORP.
Statements of Operations (Unaudited)
Fiscal Quarters Ended | ||||||||
March 30, | March 31, | |||||||
2019 | 2018 | |||||||
Revenues: | ||||||||
Product sales | $ | 5,269,538 | $ | 4,155,004 | ||||
Total revenues | 5,269,538 | 4,155,004 | ||||||
Cost of product sales | 5,110,114 | 4,011,131 | ||||||
Gross Margin | 159,424 | 143,873 | ||||||
Selling, general, and | ||||||||
administrative expense | 903,686 | 908,117 | ||||||
Income (loss) from operations | (744,262) | (764,244) | ||||||
Other income, net | 48 | 58 | ||||||
Income (loss) before taxes | (744,214) | (764,186) | ||||||
Income tax provision (benefit) | — | (190,000) | ||||||
Net income (loss) | $ | (744,214) | $ | (574,186) | ||||
Net income (loss) per | ||||||||
basic common share | $ | (0.06) | $ | (0.04) | ||||
Weighted average number of | ||||||||
basic common shares | ||||||||
outstanding | 13,206,069 | 13,203,436 | ||||||
Net income (loss) per | ||||||||
diluted common share | $ | (0.06) | $ | (0.04) | ||||
Weighted average number of | ||||||||
diluted common shares | ||||||||
outstanding | 13,206,069 | 13,203,436 | ||||||
See accompanying notes to financial statements.
CPS TECHNOLOGIES CORPORATIONSTATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)FOR THE THREE MONTHS ENDED MARCH 30, 2019 AND MARCH 31, 2018
Common Stock | ||||||||||||||||||||||||
Number of | Additional | Total | ||||||||||||||||||||||
shares | Par | paid-in | Accumulated | Stock | stockholders' | |||||||||||||||||||
issued | Value | capital | deficit | repurchased | equity | |||||||||||||||||||
Balance at December 29, 2018 | 13,425,992 | $ | 134,260 | $ | 35,960,545 | (29,742,231) | (517,053) | 5,835,521 | ||||||||||||||||
Share-based compensation expense | — | — | 58,986 | — | — | 58,986 | ||||||||||||||||||
Issuance of common stock | 1,500 | 15 | 2,235 | — | — | 2,250 | ||||||||||||||||||
Net (loss) | (744,214) | — | (744,214) | |||||||||||||||||||||
Balance at March 30, 2019 | 13,427,492 | 134,275 | 36,021,766 | (30,486,445) | (517,053) | 5,152,543 | ||||||||||||||||||
Balance at December 30, 2017 | 13,423,492 | $ | 134,235 | $ | 35,739,916 | (26,036,264) | (517,053) | 9,320,834 | ||||||||||||||||
Share-based compensation expense | — | — | 72,027 | — | — | 72,027 | ||||||||||||||||||
Issuance of common stock | — | — | — | — | — | |||||||||||||||||||
Net (loss) | (574,186) | — | (574,186) | |||||||||||||||||||||
Balance at March 31, 2018 | 13,423,492 | 134,235 | 35,811,943 | (26,610,450) | (517,053) | 8,818,675 |
June 29, | December 29, | |||||||
2019 | 2018 | |||||||
LIABILITIES AND STOCKHOLDERS` EQUITY | ||||||||
Current liabilities: | ||||||||
Line of credit | 800,000 | — | ||||||
Accounts payable | 1,685,082 | 1,680,263 | ||||||
Accrued expenses | 826,471 | 975,315 | ||||||
Current portion lease liability | 148,000 | — | ||||||
Total current liabilities | 3,459,553 | 2,655,578 | ||||||
Long term lease liability | 93,000 | — | ||||||
Total liabilities | 3,552,553 | 2,655,578 | ||||||
Commitments (note 4) | ||||||||
Stockholders` equity: | ||||||||
Common stock, $0.01 par value, | ||||||||
authorized 20,000,000 shares; | ||||||||
issued 13,427,492 and 13,425,992; | ||||||||
outstanding 13,207,436 and 13,205,936; | ||||||||
at June 29, 2019 and December 29, 2018; | 134,275 | 134,260 | ||||||
Additional paid-in capital | 36,048,177 | 35,960,545 | ||||||
Accumulated deficit | (30,235,846) | (29,742,231) | ||||||
Less cost of 220,056 common shares repurchased | ||||||||
at June 29, 2019 and December 29, 2018 | (517,053) | (517,053) | ||||||
Total stockholders` equity | 5,429,553 | 5,835,521 | ||||||
Total liabilities and stockholders` | ||||||||
equity | $ | 8,982,106 | $ | 8,491,099 |
See accompanying notes to financial statements.
CPS TECHNOLOGIES CORP.CORPORATION
Statements of Cash FlowsOperations (Unaudited)
Fiscal Quarters Ended | ||||||||
March 30, | March 31, | |||||||
2019 | 2018 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (744,214) | $ | (574,186) | ||||
Adjustments to reconcile net loss | ||||||||
to cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 139,465 | 142,104 | ||||||
Share-based compensation | 61,236 | 72,028 | ||||||
Deferred taxes | — | (190,000) | ||||||
Changes in: | ||||||||
Accounts receivable-trade | (138,667) | (638,432) | ||||||
Inventories | 115,342 | (902,519) | ||||||
Prepaid expenses and other current assets | (47,209) | 344 | ||||||
Accounts payable | 388,619 | 942,191 | ||||||
Accrued expenses | (255,980) | 82,228 | ||||||
Net cash used in operating activities | (481,408) | (1,066,242) | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (116,327) | (142,750) | ||||||
Net cash used in investing | ||||||||
activities | (116,327) | (142,750) | ||||||
Cash flows from financing activities: | ||||||||
Net borrowings on line of credit | 200,000 | — | ||||||
Net cash provided by (used in) | ||||||||
Financing activities | 200,000 | — | ||||||
Net decrease in cash and cash equivalents | (397,735) | (1,208,992) | ||||||
Cash and cash equivalents at beginning of period | 628,804 | 1,339,572 | ||||||
Cash and cash equivalents at end of period | $ | 231,069 | $ | 130,580 | ||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 29, | June 30, | June 29, | June 30, | |||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenues: | ||||||||||||||||
Product sales | $ | 6,366,951 | $ | 5,228,721 | $ | 11,636,489 | $ | 9,383,725 | ||||||||
Total revenues | 6,366,951 | 5,228,721 | 11,636,489 | 9,383,725 | ||||||||||||
Cost of product sales | 5,191,964 | 4,623,033 | 10,302,078 | 8,634,164 | ||||||||||||
Gross Margin | 1,174,987 | 605,688 | 1,334,411 | 749,561 | ||||||||||||
Selling, general, and | ||||||||||||||||
administrative expense | 917,079 | 931,358 | 1,820,765 | 1,839,474 | ||||||||||||
Income (loss) from operations | 257,908 | (325,669) | (486,353) | (1,089,913) | ||||||||||||
Interest income (expense), net | (7,310) | (11,692) | (7,262) | (11,634) | ||||||||||||
Net income (loss) before | ||||||||||||||||
income tax | 250,598 | (337,361) | (493,615) | (1,101,547) | ||||||||||||
Income tax provision (benefit) | — | (80,000) | — | (270,000) | ||||||||||||
Net income (loss) | $ | 250,598 | $ | (257,361) | $ | (493,615) | $ | (831,547) | ||||||||
Net income (loss) per | ||||||||||||||||
basic common share | $ | 0.02 | $ | (0.02) | $ | (0.04) | $ | (0.06) | ||||||||
Weighted average number of | ||||||||||||||||
basic common shares | ||||||||||||||||
outstanding | 13,206,069 | 13,203,436 | 13,206,756 | 13,203,436 | ||||||||||||
Net income (loss) per | ||||||||||||||||
diluted common share | $ | 0.02 | $ | (0.02) | $ | (0.04) | $ | (0.06) | ||||||||
Weighted average number of | ||||||||||||||||
diluted common shares | ||||||||||||||||
outstanding | 13,260,261 | 13,203,436 | 13,206,756 | 13,203,436 | ||||||||||||
See accompanying notes to financial statements.
CPS TECHNOLOGIES CORP.CORPORATION
STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 29, 2019 AND JUNE 30, 2018
Common Stock | ||||||||||||||||||||||||
Number of | Additional | Total | ||||||||||||||||||||||
shares | Par | paid-in | Accumulated | Stock | stockholders' | |||||||||||||||||||
issued | Value | capital | deficit | repurchased | equity | |||||||||||||||||||
Balance at March 30, 2019 | 13,427,492 | $ | 134,275 | $ | 36,021,766 | (30,486,445) | (517,053) | 5,152,543 | ||||||||||||||||
Share-based compensation expense | — | — | 26,411 | — | — | 26,411 | ||||||||||||||||||
Issuance of common stock | — | — | — | — | — | — | ||||||||||||||||||
Net income | 250,599 | — | 250,599 | |||||||||||||||||||||
Balance at June 29, 2019 | 13,427,492 | 134,275 | 36,048,177 | (30,235,846) | (517,053) | 5,429,553 |
Common Stock | ||||||||||||||||||||||||
Number of | Additional | Total | ||||||||||||||||||||||
shares | Par | paid-in | Accumulated | Stock | stockholders' | |||||||||||||||||||
issued | Value | capital | deficit | repurchased | equity | |||||||||||||||||||
Balance at December 29, 2018 | 13,425,992 | $ | 134,260 | $ | 35,960,545 | (29,742,231) | (517,053) | 5,835,521 | ||||||||||||||||
Share-based compensation expense | — | — | 85,397 | — | — | 85,397 | ||||||||||||||||||
Issuance of common stock | 1,500 | 15 | 2,235 | — | — | 2,250 | ||||||||||||||||||
Net (loss) | (493,615) | — | (493,615) | |||||||||||||||||||||
Balance at June 29, 2019 | 13,427,492 | 134,275 | 36,048,177 | (30,235,846) | (517,053) | 5,429,553 |
Common Stock | ||||||||||||||||||||||||
Number of | Additional | Total | ||||||||||||||||||||||
shares | Par | paid-in | Accumulated | Stock | stockholders' | |||||||||||||||||||
issued | Value | capital | deficit | repurchased | equity | |||||||||||||||||||
Balance at March 31, 2018 | 13,423,492 | $ | 134,235 | $ | 35,811,943 | (26,610,450) | (517,053) | 8,818,675 | ||||||||||||||||
Share-based compensation expense | — | — | 31,002 | — | — | 31,002 | ||||||||||||||||||
Issuance of common stock | — | — | — | — | — | — | ||||||||||||||||||
Net (loss) | (257,361) | — | (257,361) | |||||||||||||||||||||
Balance at June 30, 2018 | 13,423,492 | 134,235 | 35,842,945 | (26,867,811) | (517,053) | 8,592,316 |
Common Stock | ||||||||||||||||||||||||
Number of | Additional | Total | ||||||||||||||||||||||
shares | Par | paid-in | Accumulated | Stock | stockholders’ | |||||||||||||||||||
issued | Value | capital | deficit | repurchased | equity | |||||||||||||||||||
Balance at December 30, 2017 | 13,423,492 | $ | 134,235 | $ | 35,739,916 | (26,036,264) | (517,053) | 9,320,834 | ||||||||||||||||
Share-based compensation expense | — | — | 103,029 | — | — | 103,029 | ||||||||||||||||||
Issuance of common stock | — | — | — | — | — | |||||||||||||||||||
Net (loss) | (831,547) | — | (831,547) | |||||||||||||||||||||
Balance at June 30, 2018 | 13,423,492 | 134,235 | 35,842,945 | (26,867,811 | ) | (517,053) | 8,592,316 |
See accompanying notes to financial statements.
CPS TECHNOLOGIES CORPORATION
Statements of Cash Flows (Unaudited)
Six Months Ended | |||||||||
June 29, | June 30, | ||||||||
2019 | 2018 | ||||||||
Cash flows from operating activities: | |||||||||
Net loss | $ | (493,615) | $ | (831,547) | |||||
Adjustments to reconcile net loss | |||||||||
to cash provided by (used in) operating activities: | |||||||||
Depreciation and amortization | 278,369 | 284,209 | |||||||
Share-based compensation | 87,647 | 103,029 | |||||||
Deferred taxes | — | (270,000) | |||||||
Changes in: | |||||||||
Accounts receivable-trade | (1,057,298) | (497,231) | |||||||
Inventories | 292,034 | (1,652,830) | |||||||
Prepaid expenses and other current assets | (64,304) | (1,338) | |||||||
Accounts payable | 4,819 | 1,064,654 | |||||||
Deferred revenue | — | (100,000) | |||||||
Accrued expenses | (148,844) | 331,799 | |||||||
Net cash provided by (used in) operating | |||||||||
activities | (1,101,192) | (1,569,255) | |||||||
Cash flows from investing activities: | |||||||||
Purchases of property and equipment | (166,011) | (252,250) | |||||||
Net cash provided by (used in) investing | |||||||||
activities | (166,011) | (252,250) | |||||||
Cash flows from financing activities: | |||||||||
Net borrowings on line of credit | 800,000 | 900,000 | |||||||
Net cash provided by (used in) | |||||||||
financing activities | 800,000 | 900,000 | |||||||
Net increase (decrease) in cash and cash equivalents | (467,203) | (921,505) | |||||||
Cash and cash equivalents at beginning of period | 628,804 | 1,339,572 | |||||||
Cash and cash equivalents at end of period | $ | 161,601 | $ | 418,067 | |||||
See accompanying notes to financial statements.
CPS TECHNOLOGIES CORPORATION
Notes to Financial Statement
Statements
(Unaudited)
(1) Nature of Business
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.
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.
The Company sells into several end markets including the wireless communications infrastructure market, high-performance microprocessor market, motor controller market, and other microelectronic and structural markets.
(2) Summary of Significant Accounting Policies
As permitted by the rules of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, these notes are condensed and do not contain all disclosures required by generally accepted accounting principles.
The accompanying financial statements are unaudited. In the opinion of management, the unaudited financial statements of CPS reflect all normal recurring adjustments which are necessary to present fairly the financial position and results of operations for such periods.
The Company’s balance sheet at December 29, 2018 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.
For further information, refer to the financial statements and footnotes thereto included in the Registrant’s Annual Report on Form 10-K for the year ended December 29, 2018 and in CPS’s other SEC reports, which are accessible on the SEC’s website at www.sec.gov and the Company’s website at www.alsic.com.
The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.
New Accounting Pronouncements
Pronouncements adopted in 2019
The Company adopted Accounting Standards Codification (ASC) 842 for leases effective at the beginning of the fiscal year, December 30, 2018, using the cumulative-effect adjustment transition method, which applies the provisions of the standard at the effective date without adjusting the comparative periods presented. 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.
We have lease agreements with lease and non-lease components, which are generally accounted for separately. We have not elected the practical expedient to account for lease and non-lease components as one lease component. The Company has elected certain practical expedients upon adoption and therefore has not reassessed whether any expired or existing contracts contain leases, has not reassessed the lease classification for any expired or existing leases and has not reassessed initial direct costs for any existing leases.
Adoption of the standard resulted in the recognition of operating lease right-of-use assets and corresponding lease liabilities of $310 thousand on the consolidated balance sheet as of December 30, 2018. The standard did not materially impact operating results or liquidity. Disclosures related to the amount, timing and uncertainty of cash flows arising from leases are included in Note 4, Leases.
(3) 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. Common stock equivalents are excluded from the diluted calculations when a net loss is incurred as they would be anti-dilutive.
(4) Commitments & Contingencies
Commitments
Leases
The Company has two real estate leases—one expiring in February 2021 and one with a 12 month duration with options to extend additional years. Since the latter is not reasonably certain that any options will be exercised, it has not been recorded on the balance sheet in accordance with the accounting policy elected in Note 2. CPS also has a few other leases for equipment which are minor in nature and are generally short-term in duration. None of these have been capitalized.
The lease expiring in 2021 (the “Norton facility lease’) is included as a right-of-use lease asset and corresponding lease liability on the balance sheet. This asset and liability was recognized on December 30, 2018 based on the present value of remaining lease payments over the remaining lease term using the Company’s incremental borrowing rate at commencement dates.date of adoption. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Operating Leases
Lease expense for operating leases is recognized on a straight-line basis over the lease term. Lease expense is includedallocated between Cost of Product Sales and Selling, General and Administrative Expense in rents on the income statements and is reported net of lease income. Lease income is not material to the results of operations for the quarter ended March 30, 2019.statement
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 30,June 29, 2019
(Dollars in Thousands) | March 30, 2019 | June 29, 2019 | ||||||
Maturity of capitalized lease liabilities | Lease payments | Lease payments | ||||||
2019 (remaining) | $ | 114 | $ | 76 | ||||
2020 | 152 | 152 | ||||||
2021 | 26 | 26 | ||||||
Total undiscounted operating lease payments | $ | 292 | $ | 254 | ||||
Less: Imputed interest | (16) | (13) | ||||||
Present value of operating lease liability | $ | 276 | $ | 241 |
Additionally, the Company has no short-term lease commitments not reflected in the schedule above and not recorded as a right-of-use asset in accordance with the Company’s accounting policy.
Balance Sheet Classification | ||||
Current lease liability (recorded in other current liabilities) | $ | 148 | ||
Long-term lease liability | 128 | |||
Total operating lease liability | $ | 276 | ||
Other Information | ||||
Weighted-average remaining lease term for capitalized operating leases | 13 months | |||
Weighted-average discount rate for capitalized operating leases | 6.5% |
Balance Sheet Classification | ||||
Current lease liability (recorded in other current liabilities) | $ | 148 | ||
Long-term lease liability | 93 | |||
Total operating lease liability | $ | 241 | ||
Other Information | ||||
Weighted-average remaining lease term for capitalized operating leases | 11.5 months | |||
Weighted-average discount rate for capitalized operating leases | 6.5 % |
Cash Flows
An initial right-of-use asset of $310 thousand was recognized as a non-cash asset addition with the adoption of the new lease accounting standard. Cash paid for the amounts included in the present value of operating lease liabilities was $38$76 thousand during the first quarterhalf year of 2019 and is included in operating cash flows.
Operating Lease Costs
Operating lease cost was $38$76 thousand during the first quarterhalf year of 2019. This cost is related to its long-term operating lease. All other short-term leases were immaterial.
Finance Leases
The company does not have any finance leases.
Loss contingency
The Company manufactures baseplates for power module manufacturers. Most baseplates manufactured by CPS require a nickel coating be applied to the baseplate (“Ni plating”). CPS warranties its baseplates meet the Ni plating specifications required by our customers, and we flowflows this requirement to ourits Ni plating vendors.
On January 24, 2018 the Company received a “Claim and Non-Conformance Notification” from one of its European customers relating to the Ni plating on our baseplates. Upon investigation, it was determined that one employee of the Ni plating vendor used by CPS had deviated from the prescribed work instruction for Ni plating from mid-September 2017 until mid-January 2018. The Company's Ni plating vendor has acknowledged this violation and is committedworked with the customer to correctingresolve the problem.
In the case of affected baseplates, which have not been assembled into modules, it is a straight-forward process for the Ni plating vendor to rework these baseplates. The larger issue is baseplates that have already been assembled into modules. During this four-month period approximately 15,000 baseplates from this Ni plating vendor were assembled into modules; only a small portion of these baseplates are affected.
In alertingOn April 11, 2018 the Company to “non-conformance”received a “Follow-up Claim and Non-Conformance Notification” from the European customer. The customer stated that it “may incur several additional expenses, costs and consequential damages due to this non-conformity.” The notification went on to say that “the exactestimated the total value of such expenses, costs and consequential damages cannot be calculated until the quality issue will be completely solved.” Although the Company expects this issueclaim to be resolved amicably, there is a possibility that this could result$1.0 million “as of today”, and reserves the right to claim additional damages in legal proceedings.the future.
The Company is working closely with its customer and its Ni plating vendor to correct the situation and has informed its insurer of potential claimsthis claim and the Ni plating vendor has donedid the same with its insurer. The Company believesNo amounts for damages had been recorded in the financial statements as management believed that it is possible that damages will be assessed but it iswas not possible at thisthe time to quantify the potential financial impact, especially whenif any, to the Company.
On July 9, 2019, the Company received confirmation from its customer accepting the settlement offer of the Company’s insurer. The settlement is covered by the Company’s insurance is considered. No amounts for damages have been recorded inpolicy and the accompanying financial statements relatedCompany does not expect to this situation.incur any losses as part of the settlement.
(5) Share-Based Payments
The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. That cost is recognized over the period during which an employee is required to provide services in exchange for the award, the requisite service period (usually the vesting period). The Company provides an estimate of forfeitures at initial grant date. Reductions in compensation expense associated with the forfeited options are estimated at the date of grant, and this estimated forfeiture rate is adjusted periodically based on actual forfeiture experience. The company uses the Black-Scholes option pricing model to determine the fair value of the stock options granted.
DuringThere were 75,000 stock options granted during the quarter ended June 29, 2019 and 5,000 stock options granted during the quarter ended June 30, 2018
There were no options exercised during the quarters ended MarchJune 29, 2019 or June 30, 2019 and March 31, 2018 a total of 79,000 and 113,000 stock options, respectively, were granted to employees under the Company’s 2009 Stock Incentive Plan (the “Plan) and a total of 45,000 stock options were granted to outside directors during each of the quarters ended.2018.
During the quarterthree and six months ended March 30,June 29, 2019, there were 1,500 shares issuedthe Company recognized $26,412 and during the quarter ended March 31, 2018 there were no shares issued.
As of March 30, 2019, there was $270 thousand of total unrecognized$85,397, respectively, as shared-based compensation costexpense related to nonvested share-based compensation arrangementspreviously granted shares under the Plan; that cost is expected to be recognized over a weighted average period of 1.92 years.Plan.
During the quartersthree and six months ended MarchJune 30, 2019 and March 31, 2018, the Company recognized approximately $59 thousand$31,000 and $72 thousand,$103,029, respectively, as shared-based compensation expense related to previously granted shares under the Plan.
(6) Inventories
Inventories consist of the following:
March 30, | December 29, | |||||||
2019 | 2018 | |||||||
Raw materials | $ | 707,288 | $ | 706,982 | ||||
Work in process | 2,233,664 | 2,248,370 | ||||||
Finished goods | 633,001 | 693,943 | ||||||
Gross inventory | 3,573,953 | 3,649,295 | ||||||
Reserve for obsolescence | (496,362) | (456,362) | ||||||
Inventories, net | $ | 3,077,591 | $ | 3,1921,933 |
June 29, | December 29, | |||||||
2019 | 2018 | |||||||
Raw materials | $ | 687,105 | $ | 706,982 | ||||
Work in process | 1,838,555 | 2,248,370 | ||||||
Finished goods | 887,912 | 693,943 | ||||||
Total inventory | 3,413,572 | 3,649,295 | ||||||
Reserve for obsolescence | (512,672) | (456,362) | ||||||
Inventories, net | $ | 2,900,900 | $ | 3,192,933 | ||||
(7) Accrued Expenses
Accrued expenses consist of the following:
March 30, | December 29, | |||||||
2019 | 2018 | |||||||
Accrued legal and accounting | $ | 33,000 | $ | 67,000 | ||||
Accrued payroll and related expenses | 521,706 | 594,641 | ||||||
Accrued other | 164,629 | 313,674 | ||||||
Total Accrued Expenses | $ | 719,335 | $ | 975,315 |
June 29, | December 29, | |||||||
2019 | 2018 | |||||||
Accrued legal and accounting | $ | 46,222 | $ | 67,000 | ||||
Accrued payroll | 567,058 | 594,641 | ||||||
Accrued other | 213,191 | 313,674 | ||||||
$ | 826,471 | $ | 975,315 | |||||
(8) Line of Credit
In early November 2018,May 2019, the Company renewedamended its $1.5 million revolving line of credit line with Santander Bank.Bank to $1.25 million. The agreement will mature on June 30,matures at the end of September 2019. The LOC is secured by the accounts receivable and other assets of the Company and has an interest rate of prime plus 100 basis points. Under the terms of the agreement, the Company is required to maintain its operating accounts with Santander Bank. The Company is also subject to certain financial covenants. These include specific earningsEBITDA levels, a targeted current ratiosratio and a targeted debt to tangible net worth ratiosratio at the end of subsequent quarters. The covenants exclude the requirements of Accounting Standards Codification (ASC) 842 for leases. At March 30,June 29, 2019, the net loss for the quarter exceeded the earnings covenant. A waiver to maintainCompany was in compliance with the loan agreement was obtained on May 13, 2019.all existing covenants. Also, at March 30,June 29, 2019 the Company had $200$800 thousand of borrowings under this LOC and its borrowing base at the time would have permitted an additional $1.3 million$450 thousand to have been borrowed.
(9) 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. In December 2018, the Company established a partial valuation allowance reserve, as it is judged more likely than not that all or a portionmajority of theits tax creditsdeferred tax assets will not be used before they expire. This decision was reached after giving greater weight to its losses over the previous three years compared with its forecast of the future.
The Company Consistent with this conclusion, no income tax provision/(benefit) has been recorded a deferred tax benefit of $156 thousand for federal income taxes and a deferred tax benefit of $64 thousand for state income taxes towards the valuation reserve during the quarter ended March 30,and six month ending June 29, 2019. The Company has determined that it is more likely than not that all or a portion of this deferred tax benefit will not be realized. As a result, the Company has recorded an increase to the valuation allowance of $220 thousand to fully-offset the deferred tax benefit.
The Company recorded a tax benefit of $160$67 thousand and $227 thousand for federal income taxes during the three and six months ended June 30, 2018, respectively. The Company recorded a tax benefit of $30$13 and $43 thousand for state income taxes during the quarterthree and six months ended March 31, 2018.June 30, 2018, respectively.
(10) Subsequent Events
In April 2019 the Company hired a Chief Financial Officer who assumed the position effective May 6, 2019. Mr. Griffith replaces Ralph Norwood as CFO, who retired from the Company effective May 6, 2019. The terms of the offer letter include a base salary as well as a performance based compensation. In addition, the Chief Financial Officer was granted stock options to purchase 75,000 shares of the Company`s common stock
ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of operations is based upon and should be read in conjunction with the financial statements of the Company and notes thereto included in this report and the Company’s Annual Report on Form 10-K for the year ended December 29, 2018 and in CPS’s other SEC reports, which are accessible on the SEC’s website at www.sec.gov and the Company’s website at www.alsic.com.
2018.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements that involve a number of risks and uncertainties. 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. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements which may be made to reflect events or changed circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Critical Accounting Policies
The critical accounting policies utilized by the Company in preparation of the accompanying financial statements are set forth in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 29, 2018, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. There have been no material changes to these policies since December 29, 2018, other than the adoption of ASU No. 2016-02, Leases.
Overview
CPS Technologies Corporation (the ‘Company’ or ‘CPS’) provides advanced material solutions to the electronics, power generation, automotive and other industries.industries.
The Company’s products are generally used in high-power, high-reliability applications. These applications always involve energy use or energy generation and the Company’s products allow higher performance and improved energy efficiency. The Company is an important participant in the growing movement towards alternative energy and "green" lifestyles. For example, the Company’s products are used in mass transit, hybrid and electric cars, wind-turbines for electricity generation as well as routers and switches for the internet which in turn allows telecommuting.
The Company’s primary advanced material solution is metal matrix composites (MMCs), a new class of materials which are a combination of metal and ceramic. CPS has a leading, proprietary position in metal matrix composites. Metal matrix composites have several superior properties compared to conventional materials including improved thermal conductivity, thermal expansion matching, stiffness and light weight which enable higher performance and higher reliability in our customers’ products.
Like plastics several decades ago, we believe metal-matrix composites will penetrate many end markets over many years. CPS management believes our business model of providing advanced material solutions to a portfolio of high growth end markets which are, at any point in time, in various stages of the technology adoption lifecycle, provides CPS with the opportunity for sustained growth and a diversified customer base. We believe we have validated this model as we are now supplying customers at all stages of the technology adoption lifecycle.
CPS is the leader in supplying metal matrix composites to certain high growth electronics end markets which are well along in the adoption lifecycle and therefore generating significant demand. These end markets include high-performance integrated circuits and circuit boards used in internet switches and routers, as well as motor controllers used in high-speed electric trains, subway cars and wind turbines. CPS supplies heat spreaders, lids and baseplates to customers in these end markets. CPS is a fully qualified manufacturer for many of the world’s largest electronics OEMs.
CPS also assembles housings and packages for hybrid circuits. These housings and packages may include components made of metal-matrix composites; they may include components made of more traditional materials such as aluminum, copper-tungsten, etc.
A market at an earlier stage of the adoption lifecycle is the market for hybrid and electric automobiles. In 2012 the Company announced a multi-year supply agreement with a major tier one automotive supplier for the supply of AlSiC pin fin baseplates for use in motor controllers for hybrid and electric automobiles.
We are also actively working with customers in end markets at the beginning stages of the adoption lifecycle.
The Company believes that its hybrid hard face armor tiles will find application in many military vehicles as well as armored commercial vehicles.
Our products are manufactured by proprietary processes we have developed including the QuicksetTM Injection Molding Process (‘Quickset Process’) and the QuickCastTM Pressure Infiltration Process (‘QuickCast Process’).
CPS was incorporated in Massachusetts in 1984 as Ceramics Process Systems Corporation and reincorporated in Delaware in April 1987 through a merger into a wholly-owned Delaware subsidiary organized for purposes of the reincorporation. 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 Corporation.
Results of Operations for the FirstSecond Fiscal Quarter of 2019 (Q1(Q2 2019) Compared to the FirstSecond Fiscal Quarter of 2018 (Q1(Q2 2018); (all $ in 000’s)000s)
Revenues totaled $5,270Total revenue was $6,367 in Q1Q2 2019, a 22% increase compared with total revenue of $5,229 in Q2 2018. This increase was due primarily to an increase in the sale of baseplates and, to a lesser degree, to an increase in the sale of hermetic packages and armor revenue. There were no significant price changes in Q2 2019 compared with $4,155 generated in Q1 2018, an increase of 27%. The increase was due to almost equal increases in hermetic packages and baseplates. Price changes were insignificant in Q1 2019 compared with Q1Q2 2018.
Gross margin in Q1Q2 2019 totaled $159$1,175 or 3%18% of sales. In Q2 2018, gross margin was $606 or 12% of sales. This increase in margin was primarily due to higher sales volume and product mix.
Selling, general and administrative expenses (SG&A) were $917 in Q2 2019, down slightly when compared with SG&A expenses of $931 in Q2 2018. During 8 weeks of Q2 2019 the company incurred the salaries of both the incoming CFO and the retiring CFO resulting in an extra $25k of SG&A salaries. Without this duplication SG&A spend would have been down by 4%.
In Q2, 2019, the Company incurred interest expense of $7 due to bank borrowings. This compares with interest expense of $12 in Q2 of 2018.
The Company experienced operating income of $258 compared with an operating loss of $326 in the same quarter last year. This increase in operating income is due primarily to the increase in revenue, discussed above. Increased revenue resulted in higher gross margin due to more coverage of fixed factory overhead. The net income for Q2 2019 totaled $251 versus a net loss of $257 in Q1Q2 2018.
Results of Operations for the First Six Months of 2019 Compared to the First Six Months of 2018 (all $ in 000s)
Total revenue was $11,636 in the first half of $144 or 3%2019, a 24% increase compared with total revenue of sales. $9,384 in the first six months of 2018. This increase was due primarily to an increase in the sale of baseplates as well as housings and packages for hybrid circuits. There were no significant price changes during the first half of 2019 compared with the first half of 2018.
Gross margin in Q1the first six months of 2019 was essentially flat with Q1totaled $1,334 or 11% of sales. In the first six months of 2018 despite the revenue increase. The largest factor affecting margin, other than sales volume, was an unfavorable mix in customers and products. The Company sold less to customers where the margins are on the high side and also sold a higher percentage of hermetic packages where the margins are less than those earned on the sale of baseplates. To a lesser extent, gross margin totaled $750 or 8% of sales. This increase was also adversely affected by unfavorable variancesalmost entirely due to the increase in its manufacturing operations.revenues, as well as a change in product mix.
Selling, general and administrative (SG&A) expenses totaled $904 in Q1were $1,821 during the first six months of 2019, down 1% compared with SG&A expenses of $908$1,839 in Q1 2018. While essentially flatthe first six months of 2018 During 8 weeks of 2019 the company incurred the salaries of both the incoming CFO and the retiring CFO resulting in total, the Company’s incurred higher spending for marketing activities in Q1 2019 which was offsetan extra $25k of SG&A salaries. Without this duplication SG&A spend would have been down by lower sales commissions.2%.
TheDuring the first half of 2019, the Company experiencedincurred interest expense of $7 due to bank borrowings. This compares with interest expense of $12 incurred during the first half of 2018.
In the first six months of 2019 the Company incurred an operating loss of $744 in Q1 2019$486 compared with an operating loss of $764$1,090 in Q1 2018.the same period last year. The company did not report a tax credit on this loss due to the fact that the credits associated with the operating loss was offset by a valuation reserve. In Q1 2018 the net loss for the quarterfirst six months of 2019 totaled $574 as it applied$494 versus a 25% effective tax rate during that period.net loss of $832 in the first six months of 2018.
Liquidity and Capital Resources (all $ in 000’s000s unless noted)
The Company’s net cash and cash equivalents at March 30,June 29, 2019 totaled $31. (Net$162. The Company’s net cash, is defined as cash + cash equivalents lesswhich considers the $800 of bank borrowings.)borrowings, totaled a negative $638 at the end of the second quarter. This compares to cash and cash equivalents at December 29, 2018 of $629. The decrease in net cash was due primarily to the loss from operations, offset in part by a decreaseincrease in working capital (i.e.i.e. receivables and inventory less payables and accruals).accruals, coupled with the loss from operations.
Accounts receivable at March 30,June 29, 2019 totaled $3,192$4,110 compared with $3,053 at December 29, 2018.
Days Sales Outstanding (DSO) increased from 45 days at the end of 2018 to 5458 days at the end of Q1Q2 2019. DSO’s at the end of 2018 were unusually low due to the fact that sales during Q4 2018 were more heavily loaded toward the front end of the quarter. TheWhereas DSOs at the end of Q1Q2 2019 represent a more normal levelwere higher due to higher sales at the end of receivables.the quarter. The accounts receivable balances at December 29, 2018, and March 30,June 29, 2019 were both net of an allowance for doubtful accounts of $10.
Inventories totaled $3,078$2,901 at March 30,June 29, 2019 compared with inventory totaling $3,193 at December 29, 2018. This decrease was due primarily to the decision to begin the summer manufacturing vacation period the final week of Q2 instead of the first week of Q3. The inventory turnover in the most recent four quarters ending Q1Q2 2019 was 5.96.2 times, (based on a 5 point average) compared withup from 6.0 times averaged during the four quarters of 2018.2018 (based on a 5 point average).
All consigned inventory is shipped under existing purchase orders and per customers’ requests. At March 30,June 29, 2019 and December 29, 2018, $1,297$1,288 and $1,556, respectively, was located at customer locations pursuant to consigned inventory agreements.
The Company financed its loss from operationsincrease in Q1working capital during the first half of 2019 from a combination of its cash balanceat the beginning of the year and borrowing $200 from its line of credit with Santander Bank.bank borrowings. The Company expects it will continue to be able to fund its operationsworking capital requirements for the remainder of 2019 from existing cash balances and bank borrowings.
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. Failure to generate sufficient revenues, raise additional capital or reduce certain discretionary spending could have a material adverse effect on the Company’s ability to achieve its business objectives.
Contractual Obligations (all $ in 000’s unless otherwise noted)
In November 2018,May 2019, the Company renewedamended its revolving line of credit line with Santander Bank for $1.5to $1.25 million. The agreement matures at the end of JuneSeptember 2019. The LOC is secured by the accounts receivable and other assets of the Company and has an interest rate of prime plus 100 basis points. Under the terms of the agreement, the Company is required to maintain its operating accounts with Santander Bank.
The Company is also subject to certain financial covenants. These include specific EBITDA levels, a targeted current ratio and a targeted debt to tangible net worth ratio at the end of subsequent quarters. The covenants exclude the requirements of Accounting Standards Codification (ASC) 842 for leases. At March 30,June 29, 2019, the Company was in compliance with all existing covenants. Also, at June 29, 2019 the Company had $200$800 thousand of borrowings under this LOC and its borrowing base at the time would have permitted an additional $1.3 million$450 thousand to have been borrowed. The Company is also subject to certain financial covenants.
The financial covenant requirementsrequirement at the end of the first quarterQ2, 2019 are shown below, together with the actual ratios achieved:
Covenant | Requirement | Actual | ||||||
Current Ratio | Minimum of 2.0X | 2.2X | ||||||
Liabilities to Tangible Net Worth | Maximum of 0.7X | 0.6X | ||||||
Borrowings under the line of credit | Maximum of $1,250 | $ | 800 | |||||
EBITDA | Minimum of $130 | $ | 397 |
As of March,June 29, 2019, the Company had $124$158 of construction in progress and no outstanding commitments to purchase production equipment.
Our leasing arrangements consistAs of June 29, 2019, all our manufacturing, engineering, sales and administrative operations were and continue to be located in leased facilities in Norton, Massachusetts and Attleboro, Massachusetts.
In February 2018, the Company signed a lease for the Norton MA and Attleboro, MA facility leases.facilities through February 2021. The Norton facilityleased facilities comprise approximately 38 thousand square feet. The lease expires in February 2021 and is a triple net lease wherein the Company is responsible for payment of all real estate taxes, operating costs and utilities. The Company also has an option to buy the property and a first right of refusal during the term of the lease. Annual rental payments continue at $152.$152 thousand.
In February 2011, the Company entered into a lease for an additional 13.8 thousand square feet in Attleboro, MA. The Attleboro facility lease has the option to renew annually in February of each year. The current Attleboro facility lease expires in February 2020 and the Company has two, one-year options at the current annual rental payments of $83, with minor escalation for real estate tax increases. (Note 4, Leases).
Management believes that a combination of existing cash balances and borrowings, if necessary, will be sufficient to fund our cash requirements for the foreseeable future. However, there is no assurance that we will be able to generate sufficient revenues or reduce certain discretionary spending in the event that planned operational goals are not met such that we will be able to meet our obligations as they become due.
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is not significantly exposed to the impact of interest rate changes or foreign currency fluctuations. The Company has not used derivative financial instruments.
ITEM 4 CONTROLS AND PROCEDURES
(a) The Company’sCompany`s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’sCompany`s disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 15d - 14(c)15d-14(c) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Form 10-Q (the “Evaluation Date”). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, 1) the Company’sCompany`s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports the Company files under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and 2) the Company’sCompany`s disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.
(b) Changes in Internal Controls. There has been no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
None.
ITEM 1A RISK FACTORS
There have been no material changes to the risk factors as discussed in our 2018 Form 10-K.10-K
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.PROCEEDS
None.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5 OTHER INFORMATION
Not applicable.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K:
(a)Exhibits:
Exhibit 31.1 Certification Of Chief Executive Officer Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 302 Of The Sarbanes-Oxley Act Of 2002
Exhibit 31.2 Certification Of Chief Financial Officer Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 302 Of The Sarbanes-Oxley Act Of 2002
Exhibit 32.1 Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002
(b)Reports on Form 8-K:
On MarchApril 8, 2019 the Company filed a report on form 8-K announcing the selection of Charles Griffith as its new CFO, to assume those responsibilities on May 6, 2019.
On May 2, 2019 the Company filed a report on Form 8-K relating to the announcement of its financial resultsearnings report for the yearfiscal first quarter ended December 29, 2018 as presented in a press release dated March 5,30, 2019.
On April 8,May 7 2019 the Company filed a report on form 8-K announcing the retirement of Ralph Norwood as CFO and the appointment of Charles Griffith as the new CFO.
On May 14, 2019 the Company filed a report on Form 8-K incorporatingwhich included final tabulation of votes from the press release announcing the selectionCompany’s Annual Meeting of Charles K. Griffith Jr.as Chief Financial Officer.Shareholders held on May 13, 2019.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CPS TECHNOLOGIES CORPORATION
(Registrant)
Date: May 13,August 8, 2019
/s/ Grant C. Bennett
Grant C. Bennett
Chief Executive Officer
Date: May 13,August 8, 2019
/s/ Charles K. Griffith Jr.
Charles K. Griffith Jr.
Chief Financial Officer