CPS Technologies (CPSH) 10-Q 11 May 16 2016 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - USD ($)	3 Months Ended
	Apr. 02, 2016	May. 09, 2016
Document And Entity Information
Entity Registrant Name	CPS TECHNOLOGIES CORP/DE/
Entity Central Index Key	814,676
Document Type	10-Q
Document Period End Date	Apr. 2, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float		$ 13,199,118
Entity Common Stock, Shares Outstanding		14,000,000
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2,016

Balance Sheets (Unaudited)

Balance Sheets (Unaudited) - USD ($)	Apr. 02, 2016	Dec. 26, 2015
Current assets:
Cash and cash equivalents	$ 3,709,660	$ 3,412,649
Accounts receivable-trade, net	2,701,446	3,572,479
Inventories, net	2,626,699	2,632,444
Prepaid expenses and other current assets	146,683	104,761
Deferred taxes	437,431	467,374
Total current assets	9,621,919	10,189,707
Property and equipment:
Production equipment	8,503,402	8,460,727
Furniture and office equipment	410,841	409,793
Leasehold improvements	854,215	854,215
Total cost	9,768,458	9,724,735
Accumulated depreciation and amortization	(8,683,322)	(8,593,236)
Construction in progress	835,140	557,054
Net property and equipment	1,920,276	1,688,553
Deferred taxes, non-current portion	1,683,375	1,683,375
Total Assets	13,225,570	13,561,635
Current liabilities:
Accounts payable	1,362,108	1,622,564
Accrued expenses	578,674	931,916
Total current liabilities	1,940,782	2,554,480
Stockholders equity:
Common stock, $0.01 par value, authorized 20,000,000 shares; issued 13,413,492 and 13,412,292 shares; outstanding 13,199,118 and 13,197,918 shares; at April 02, 2016 and December 26, 2015, respectively	134,135	134,123
Additional paid-in capital	35,325,523	35,245,030
Accumulated deficit	(23,667,817)	(23,864,945)
Less cost of 214,374 common shares repurchased at April 02, 2016 and December 26, 2015	(507,053)	(507,053)
Total stockholders equity	11,284,788	11,007,155
Total liabilities and stockholders equity	$ 13,225,570	$ 13,561,635

Balance Sheets (Parenthetical)

Balance Sheets (Parenthetical) - $ / shares	Apr. 02, 2016	Dec. 26, 2015
Statement of Financial Position [Abstract]
Common Stock, authorized	20,000,000	20,000,000
Common Stock, issued shares	13,413,492	13,412,292
Common Stock, outstanding shares	13,199,118	13,197,918
Common Stock, par value	$ .01	$ .01

Statements of Operations (Unaud

Statements of Operations (Unaudited) - USD ($)	3 Months Ended
	Apr. 02, 2016	Mar. 28, 2015
Revenues:
Product sales	$ 5,215,617	$ 5,248,012
Research and development under cooperative agreement		42,254
Total revenues	$ 5,215,617	5,290,266
Cost of product sales	$ 4,084,060	4,119,931
Cost of research and development under cooperative agreement		34,970
Gross Margin	$ 1,131,557	1,135,365
Selling, general, and administrative	908,169	1,012,838
Income from operations	223,388	$ 122,527
Other income, net	3,740
Income before taxes	227,128	$ 122,527
Income tax provision	30,000	48,740
Net income	$ 197,128	$ 73,787
Net income per basic common share	$ 0.01	$ 0.01
Weighted average number of basic common shares outstanding	13,198,236	13,147,672
Net income per diluted common share	$ 0.01	$ 0.01
Weighted average number of diluted common shares outstanding	13,503,656	13,731,364

Statements of Cash Flows (Unaud

Statements of Cash Flows (Unaudited) - USD ($)	2 Months Ended	3 Months Ended
	Feb. 28, 2015	Apr. 02, 2016
Cash flows from operating activities:
Net income	$ 73,787	$ 197,128
Adjustments to reconcile net income to cash provided by (used) in operating activities:
Depreciation and amortization	142,030	135,264
Share-based compensation	66,347	78,612
Deferred taxes	48,740	30,000
Excess tax benefit from stock options exercised	(21,500)	(57)
Changes in:
Accounts receivable-trade	(494,919)	871,033
Inventories	(4,717)	5,745
Prepaid expenses and other current assets	(38,611)	(41,922)
Accounts payable	334,510	(260,456)
Accrued expenses	(163,379)	(353,242)
Net cash provided by (used) in operating activities	(57,712)	662,105
Cash flows from investing activities:
Purchases of property and equipment	(97,595)	(366,987)
Net cash used in investing activities	(97,595)	(366,987)
Cash flows from financing activities:
Excess tax benefit from stock options exercised	21,500	57
Proceeds from issuance of common stock	62,216	$ 1,836
Repurchase of common stock	(62,015)
Net cash provided by financing activities	21,701	$ 1,893
Net change in cash and cash equivalents	(133,606)	297,011
Cash and cash equivalents at beginning of period	2,305,580	3,412,649
Cash and cash equivalents at end of period	$ 2,171,974	3,709,660
Supplemental cash flow information:
Cash paid for taxes, net of refunds		$ 8,000

(1) Nature of Business

(1) Nature of Business	3 Months Ended
	Apr. 02, 2016
Accounting Policies [Abstract]
(1) Nature of Business	(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) Interim Financial Statement

(2) Interim Financial Statements	3 Months Ended
	Apr. 02, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
(2) Interim Financial Statements	(2) Interim Financial Statements 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 26, 2015 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 26, 2015. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

(3) Net Income Per Common and C

(3) Net Income Per Common and Common Equivalent Share	3 Months Ended
	Apr. 02, 2016
Earnings Per Share [Abstract]
(3) Net Income Per Common and Common Equivalent Share	(3) 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. The following table presents the calculation of both basic and diluted earnings per share (“EPS”): For periods ended April 2, March 28, 2016 2015 Basic EPS Computation: Numerator: Net income $ 197,128 $ 73,787 Denominator: Weighted average common shares Outstanding 13,198,236 13,147,672 Basic EPS $ 0.01 $ 0.01 Diluted EPS Computation: Numerator: Net income $ 197,128 $ 73,787 Denominator: Weighted average common shares Outstanding 13,198,236 13,147,672 Dilutive effect stock options 305,420 583,692 Total Shares 13,503,656 13,731,364 Diluted EPS $ 0.01 $ 0.01

(4) Share-Based Payments

(4) Share-Based Payments	3 Months Ended
	Apr. 02, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
(4) Share-Based Payments	(4) 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. During the quarters ended April 2, 2016 and March 28, 2015, a total of 129,000 and 123,500 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, respectively. During the quarters ended April 2, 2016 and March 28, 2015 the Company issued 1,200 and 41,700 shares, respectively as a result of employee option exercises. During the quarter ended April 2, 2016 there were 40,000 expired stock options and during the quarter ended March 28, 2015 there were no expired stock options. During the quarter ended April 2, 2016 the Company did not repurchase shares. During the quarter ended March 28, 2015 the Company repurchased 21,170 shares from employees to facilitate their exercise of stock options. As of April 2, 2016, there was $428 thousand of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the plans; that cost is expected to be recognized over a weighted average period of 2.48 years. During the quarters ended April 2, 2016 and March 28, 2015, the Company recognized $79 thousand and $66 thousand, respectively as shared-based compensation expense related to previously granted shares under the Plan.

(5) Inventories

(5) Inventories	3 Months Ended
	Apr. 02, 2016
Inventory Disclosure [Abstract]
(5) Inventories	(5) Inventories Inventories consist of the following: April 2, December 26, 2016 2015 Raw materials $ 545,292 $ 670,318 Work in process 1,255,565 970,598 Finished goods 1,291,342 1,447,028 Gross inventory 3,092,199 3,087,944 Reserve for obsolescence (465,500) (455,500) Inventories, net $ 2,626,699 $ 2,632,444

(6) Accrued Expenses

(6) Accrued Expenses	3 Months Ended
	Apr. 02, 2016
Payables and Accruals [Abstract]
(6) Accrued Expenses	(6) Accrued Expenses Accrued expenses consist of the following: April 2, December 26, 2016 2015 Accrued legal and accounting $ 64,000 $ 101,000 Accrued payroll and related 422,335 666,846 Accrued other 92,339 161,921 Accrued income taxes — 2,149 Total Accrued Expenses $ 578,674 $ 931,916 The accrued payroll and related at April 2, 2016 and December 26, 2015 includes $5 thousand and $140 thousand, respectively for incentive bonuses. December 26, 2015 includes $120 thousand for 401k company match.

(7) Line of Credit and Equipmen

(7) Line of Credit and Equipment Finance Facility Agreements	3 Months Ended
	Apr. 02, 2016
Debt Disclosure [Abstract]
(7) Line of Credit and Equipment Finance Facility Agreements	(7) Line of Credit and Equipment Finance Facility Agreements In April 2016, the Company renewed its $2 million revolving line of credit (“LOC”) and $500 thousand of an equipment finance facility (“Lease Line”) with Santander Bank. Both agreements mature in May 2017. The LOC is secured by the accounts receivable and other assets of the Company, has an interest rate of “prime” and a one-year term. Under the terms of the agreement, the Company is required to maintain its operating accounts with Santander Bank. The LOC and the Lease Line are cross defaulted and cross collateralized. The Company is also subject to certain financial covenants within the terms of the LOC that require the Company to maintain a targeted coverage ratio as well as targeted debt to equity and current ratios. At April 2, 2016, the Company was in compliance with all covenants. At April 2, 2016 the Company had no borrowings under either the LOC or the capital lease line. Further, the Company’s borrowing base at the time would have permitted $1,536 thousand to have been borrowed under the LOC.

(8) Income Taxes

(8) Income Taxes	3 Months Ended
	Apr. 02, 2016
Income Tax Disclosure [Abstract]
(8) Income Taxes	(8) Income Taxes The Company has a current and non-current deferred tax asset aggregating $2,120,806 and $2,150,749 on the Company’s balance sheet at April 2, 2016 and December 26, 2015, respectively. A valuation allowance 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. The Company believes that it will generate sufficient future taxable income to realize the tax benefits related to the remaining deferred tax assets and as such no valuation allowance has been provided against the deferred tax asset. During 2015, all remaining net operating loss carryforwards were utilized in full. The Company recorded a tax expense of $37 thousand for federal income taxes and a tax benefit of $7 thousand for state income taxes during the quarter ended April 2, 2016. The Company recorded a tax expense of $38 thousand for federal taxes and $11 thousand for state income taxes during the quarter ended March 28, 2015.

(9) Commitment

(9) Commitment	3 Months Ended
	Apr. 02, 2016
Notes to Financial Statements
(9) Commitment	( 9) Commitment The Company entered into a 10-year lease for the Norton facilities effective on March 1, 2006. The leased facilities comprise approximately 38 thousand square feet. In January 2015 this lease was amended to extended the lease to February 28, 2017. In addition in this amendment the Company obtained two, one-year options which, if fully exercised, would enable it to continue to lease through February 28, 2019. The lease 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 are $100 thousand in year one increasing to $152 thousand at the end of the extended term. In February 2011, the Company entered into a lease for an additional 13.8 thousand square feet in Attleboro, MA. The lease term is for one year and has an option to extend the lease for five additional one-year periods. Monthly rent, which includes utilities, is $6,900. The Company renewed the lease in 2013 for one additional year and also obtained two years of additional options which could extend the Company use through February 2019. In October 2015, the Company exercised its option to extend the lease through the end of February 2017.

(3) Net Income Per Common and15

(3) Net Income Per Common and Common Equivalent Share (Tables)	3 Months Ended
	Apr. 02, 2016
Earnings Per Share [Abstract]
The following table presents the calculation of basic and diluterd earnings per share	For periods ended April 2, March 28, 2016 2015 Basic EPS Computation: Numerator: Net income $ 197,128 $ 73,787 Denominator: Weighted average common shares Outstanding 13,198,236 13,147,672 Basic EPS $ 0.01 $ 0.01 Diluted EPS Computation: Numerator: Net income $ 197,128 $ 73,787 Denominator: Weighted average common shares Outstanding 13,198,236 13,147,672 Dilutive effect stock options 305,420 583,692 Total Shares 13,503,656 13,731,364 Diluted EPS $ 0.01 $ 0.01

(5) Inventories (Tables)

(5) Inventories (Tables)	3 Months Ended
	Apr. 02, 2016
Inventory Disclosure [Abstract]
Inventories	April 2, December 26, 2016 2015 Raw materials $ 545,292 $ 670,318 Work in process 1,255,565 970,598 Finished goods 1,291,342 1,447,028 Gross inventory 3,092,199 3,087,944 Reserve for obsolescence (465,500) (455,500) Inventories, net $ 2,626,699 $ 2,632,444

(6) Accrued Expenses (Tables)

(6) Accrued Expenses (Tables)	3 Months Ended
	Apr. 02, 2016
Payables and Accruals [Abstract]
Total Accrued Expenses	April 2, December 26, 2016 2015 Accrued legal and accounting $ 64,000 $ 101,000 Accrued payroll and related 422,335 666,846 Accrued other 92,339 161,921 Accrued income taxes — 2,149 Total Accrued Expenses $ 578,674 $ 931,916

(3) Net Income Per Common and18

(3) Net Income Per Common and Common Equivalent Share - The following table presents the calculation of basic and diluterd earnings per share (Details) - USD ($)	3 Months Ended
	Apr. 02, 2016	Mar. 28, 2015
Basic EPS Computation:
Net income	$ 197,128	$ 73,787
Weighted average common shares Outstanding	13,198,236	13,147,672
Basic EPS	$ 0.01	$ 0.01
Diluted EPS Computation:
Net income	$ 197,128	$ 73,787
Weighted average common shares Outstanding	13,198,236	13,147,672
Dilutive effect stock options	$ 305,420	$ 583,692
Total Shares	13,503,656	13,731,364
Diluted EPS	$ 0.01	$ 0.01

(4) Share-Based Payments (Detai

(4) Share-Based Payments (Details Narrative) - USD ($)	3 Months Ended
	Apr. 02, 2016	Mar. 28, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Shares granted	129,000	123,500
Shares issued as a result of option exercises	1,200	41,700
Stock options expired during period	40,000
Shares repurchased from empoyees to facilitate exercise	21,170
Share-based compensation expense expected to be recognized	$ 428,000
Share-based compensation expense recognized during the period	$ 79,000	$ 66,000

(5) Inventories - Inventories (

(5) Inventories - Inventories (Details) - USD ($)	Apr. 02, 2016	Dec. 26, 2015
Inventory Disclosure [Abstract]
Raw materials	$ 545,292	$ 670,318
Work in process	1,255,565	970,598
Finished goods	1,291,342	1,447,028
Gross inventory	3,092,199	3,087,944
Reserve for obsolescence	(465,500)	(455,500)
Inventories, net	$ 2,626,699	$ 2,632,444

(6) Accrued Expenses - Total Ac

(6) Accrued Expenses - Total Accrued Expenses (Details) - USD ($)	Apr. 02, 2016	Dec. 26, 2015
Payables and Accruals [Abstract]
Accrued legal and accounting	$ 64,000	$ 101,000
Accrued payroll and related	422,335	666,846
Accrued other	$ 92,339	161,921
Accrued income taxes		2,149
Total Accrued Expenses	$ 578,674	$ 931,916

(8) Income Taxes (Details Narra

(8) Income Taxes (Details Narrative) - USD ($)	3 Months Ended
	Apr. 02, 2016	Mar. 28, 2015	Dec. 26, 2015
Income Tax Disclosure [Abstract]
Current and Non-current deferred tax asset	$ 2,120,806		$ 2,150,749
Federal income tax expense(benefit)	37	$ 38
State income tax expense(benefit)	$ 7	$ 11