CPS Technologies (CPSH) 10-Q 12 May 20 2020 Q1 Quarterly report Financial data

Cover

Cover - shares	3 Months Ended
	Mar. 28, 2020	May 08, 2020
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 28, 2020
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2020
Current Fiscal Year End Date	--12-26
Entity File Number	0-16088
Entity Registrant Name	CPS TECHNOLOGIES CORP/DE/
Entity Central Index Key	0000814676
Entity Incorporation, State or Country Code	DE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		13,207,436

Balance Sheets (Unaudited)

Balance Sheets (Unaudited) - USD ($)	Mar. 28, 2020	Dec. 28, 2019
Current assets:
Cash and cash equivalents	$ 122,255	$ 133,965
Accounts receivable-trade, net	5,959,224	4,086,945
Inventories, net	3,595,338	3,099,824
Prepaid expenses and other current assets	227,459	147,786
Total current assets	9,904,276	7,468,520
Property and equipment:
Production equipment	9,919,484	9,649,169
Furniture and office equipment	508,423	508,423
Leasehold improvements	934,195	934,195
Total cost	11,362,102	11,091,787
Accumulated depreciation and amortization	(10,224,691)	(10,110,663)
Construction in progress	286,891	255,754
Net property and equipment	1,424,302	1,236,878
Right-of-use lease asset	136,000	171,000
Deferred taxes, net	147,873	147,873
Total Assets	11,612,451	9,024,271
Current liabilities:
Borrowings against line of credit	1,577,506	1,249,588
Note payable, current portion	45,980
Accounts payable	2,621,862	1,436,417
Accrued expenses	691,921	815,166
Deferred revenue	381,216	21,110
Lease liability, current portion	136,000	148,000
Total current liabilities	5,454,485	3,670,281
Note payable less current portion	159,649
Long term lease liability		23,000
Total liabilities	5,614,134	3,693,281
Stockholders’ equity:
Common stock, $0.01 par value, authorized 20,000,000 shares; issued 13,427,492 shares; outstanding 13,207,436 shares; at March 28, 2020 and December 28, 2019, respectively	134,275	134,275
Additional paid-in capital	36,159,874	36,094,201
Accumulated deficit	(29,778,779)	(30,380,433)
Less cost of 220,056 common shares repurchased at March 28, 2020 and December 28, 2019,	(517,053)	(517,053)
Total stockholders’ equity	5,998,317	5,330,990
Total liabilities and stockholders’ equity	$ 11,612,451	$ 9,024,271

Balance Sheets (Parenthetical)

Balance Sheets (Parenthetical) - $ / shares	Mar. 28, 2020	Dec. 28, 2019
Statement of Financial Position [Abstract]
Common stock,authorized shares	20,000,000	20,000,000
Common stock, issued shares	13,427,492	13,427,492
Common stock, outstanding shares	13,207,436	13,207,436
Common stock, par value	$ .01	$ .01

Statements of Operations (Unaud

Statements of Operations (Unaudited) - USD ($)	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Income Statement [Abstract]
Product sales	$ 6,511,571	$ 5,269,538
Cost of product sales	4,961,361	5,110,114
Gross Margin	1,550,210	159,424
Selling, general, and administrative expense	928,590	903,686
Income (loss) from operations	621,620	(744,262)
Other income (expense), net	(19,966)	48
Income (loss) before taxes	601,654	(744,214)
Income tax provision (benefit)
Net income (loss)	$ 601,654	$ (744,214)
Net income (loss) per basic common share	$ 0.05	$ (0.06)
Weighted average number of basic common shares outstanding	13,207,436	13,206,069
Net income (loss) per diluted common share	$ 0.05	$ (0.06)
Weighted average number of diluted common shares outstanding	13,247,131	13,206,069

Shareholders Equity (Unaudited)

Shareholders Equity (Unaudited) - USD ($)	Common Stock	Additional Paid-In Capital	Comprehensive Income / Loss	Stock Repurchased	Retained Earnings / Accumulated Deficit	Total
Beginning balance, stockholders equity at Dec. 29, 2018					$ 5,835,521
Beginning balance, shares at Dec. 29, 2018	13,425,992
Beginning balance, par value of shares issued at Dec. 29, 2018	$ 134,260
Share-based compensation expense		$ 58,986				$ 58,986
Repurchase of common stock
Issuance of common stock pursuant to exercise of stock options		2,235
Issuance of common stock pursuant to exercise of stock options, number of shares issued	1,500
Issuance of common stock pursuant to exercise of stock options, par value	$ 15
Net income(loss)			$ 744,214			(744,214)
Ending balance, stockholders equity at Mar. 30, 2019						5,152,543
Ending Ending balance, shares at Mar. 30, 2019	13,427,492
Ending balance, par value shares issued at Mar. 30, 2019	$ 134,275
Beginning balance, stockholders equity at Dec. 28, 2019					$ 5,330,990	$ 5,330,990
Beginning balance, shares at Dec. 28, 2019						13,427,492
Share-based compensation expense		65,673				$ 65,673
Issuance of common stock pursuant to exercise of stock options
Issuance of common stock pursuant to exercise of stock options, number of shares issued
Issuance of common stock pursuant to exercise of stock options, par value
Net income(loss)			$ 601,654			601,654
Ending balance, stockholders equity at Mar. 28, 2020						$ 5,998,317
Ending Ending balance, shares at Mar. 28, 2020	13,427,492					13,427,492
Ending balance, par value shares issued at Mar. 28, 2020	$ 134,275

Statements of Cash Flows (Unaud

Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Cash flows from operating activities:
Net income (loss)	$ 601,654	$ (744,214)
Adjustments to reconcile net income (loss) to cash used in operating activities:
Depreciation and amortization	128,759	139,465
Share-based compensation	65,673	61,236
Gain on sale of property and equipment	(5,000)
Changes in:
Accounts receivable-trade	(1,872,279)	(138,667)
Inventories	(495,514)	115,342
Prepaid expenses and other current assets	(79,673)	(47,209)
Accounts payable	1,185,445	388,619
Accrued expenses	(123,245)	(255,980)
Deferred revenue	360,106
Net cash used in operating activities	(234,074)	(481,408)
Cash flows from investing activities:
Purchases of property and equipment	(107,600)	(116,327)
Proceeds from sale of property and equipment	5,000
Net cash used in investing activities	(102,600)	(116,327)
Cash flows from financing activities:
Net borrowings on line of credit	327,918	200,000
Payments on note payable	(2,954)
Net cash provided by financing activities	324,964	200,000
Net decrease in cash and cash equivalents	(11,710)	(397,735)
Cash and cash equivalents at beginning of period	133,965	628,804
Cash and cash equivalents at end of period	122,255	231,069
Supplemental disclosures of cash flows information:
Cash paid for interest	33,216
Supplemental disclosures of non-cash activity:
Issuance of note payable to finance equipment purchase	$ 208,583

(1) Nature of Business

(1) Nature of Business	3 Months Ended
	Mar. 28, 2020
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) Summary of Significant Acco

(2) Summary of Significant Accounting Policies	3 Months Ended
	Mar. 28, 2020
Accounting Policies [Abstract]
(2) Summary of Significant Accounting Policies	(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 28, 2019 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 28, 2019 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.

(3) Net Income (Loss) Per Commo

(3) Net Income (Loss) Per Common Equivalent Share	3 Months Ended
	Mar. 28, 2020
Earnings Per Share [Abstract]
(3) Net Income (Loss) Per Common Equivalent Share	(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. The following table presents the calculation of both basic and diluted EPS: Three Months Ended March 28, March 30, 2020 2019 Basic EPS Computation: Numerator: Net income (loss) $ 601,654 $ (744,214) Denominator: Weighted average Common shares Outstanding 13,207,436 13,206,069 Basic EPS $ 0.05 $ (0.06) Diluted EPS Computation: Numerator: Net income (loss) $ 601,654 $ (744,214) Denominator: Weighted average Common shares Outstanding 13,207,436 13,206,069 Dilutive effect of stock options 39,695 — Total Shares 13,247,131 13,206,069 Diluted EPS $ 0.05 $ (0.06)

(4) Commitments & Contingencies

(4) Commitments & Contingencies	3 Months Ended
	Mar. 28, 2020
Commitments (note 4)
(4) Commitments & Contingencies	(4) Commitments & Contingencies Commitments Leases The Company has two real estate leases—one expiring in February 2021 and one with an 11 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. 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 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. 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 included in rents on the statements of operations and is reported net of lease income. Lease income is not material to the results of operations for the quarter ended March 28, 2020. 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 28, 2020 (Dollars in Thousands) March 28, 2020 Maturity of capitalized lease liabilities Lease payments 2020 117 2021 26 Total undiscounted operating lease payments $ 143 Less: Imputed interest (7) Present value of operating lease liability $ 136 Balance Sheet Classification Current lease liability $ 136 Long-term lease liability 0 Total operating lease liability $ 136 Other Information Weighted-average remaining lease term for capitalized operating leases 11 months Weighted-average discount rate for capitalized operating leases 6.5% Operating Lease Costs and Cash Flows Operating lease cost and cash paid was $38 thousand during the first quarter of 2020. 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.

(5) Share-Based Payments

(5) Share-Based Payments	3 Months Ended
	Mar. 28, 2020
Share-based Payment Arrangement [Abstract]
(5) Share-Based Payments	(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. During the quarters ended March 28, 2020 and March 30, 2019 a total of 59,000 and 79,000 stock options, respectively, were granted to employees under the Company’s 2020 Equity Incentive Plan and 2009 Stock Incentive Plan, respectively (collectively the “Plan”) and a total of 60,000 and 45,000 stock options, respectively, were granted to outside directors during the quarters ended March 28, 2020 and March 30, 2019 During the quarter ended March 28, 2020 there were no shares issued and during the quarter ended March 30, 2019 there were 1,500 shares issued. As of March 28, 2020, there was $198 thousand of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan; that cost is expected to be recognized over a weighted average period of 1.47 years. During the quarters ended March 28, 2020 and March 30, 2019, the Company recognized approximately $66 thousand and $59 thousand, respectively, as shared-based compensation expense related to previously granted shares under the Plan.

(6) Inventories

(6) Inventories	3 Months Ended
	Mar. 28, 2020
Inventory Disclosure [Abstract]
(6) Inventories	(6) Inventories Inventories consist of the following: March 28, December 28, 2020 2019 Raw materials $ 818,501 $ 778,409 Work in process 2,005,211 1,898,916 Finished goods 1,220,988 871,861 Gross inventory 4,044,700 3,549,186 Reserve for obsolescence (449,362) (449,362) Inventories, net $ 3,595,338 $ 3,099,824

(7) Accrued Expenses

(7) Accrued Expenses	3 Months Ended
	Mar. 28, 2020
Payables and Accruals [Abstract]
(7) Accrued Expenses	(7) Accrued Expenses Accrued expenses consist of the following: March 28, December 28, 2020 2019 Accrued legal and accounting $ 28,755 $ 62,725 Accrued payroll and related expenses 508,327 518,015 Accrued other 154,839 234,426 Total Accrued Expenses $ 691,921 $ 815,166

(8) Line of Credit

(8) Line of Credit	3 Months Ended
	Mar. 28, 2020
Commitments (note 4)
(8) Line of Credit	(8) Line of Credit In September 2019, the Company entered into revolving line of credit with The Massachusetts Business Development Corporation (BDC) in the amount of $2.5 million. The agreement includes a demand note allowing the Lender to call the loan at any time. CPS may terminate the agreement without a termination fee after 3 years. The LOC is secured by the accounts receivable and other assets of the Company and has an interest rate of LIBOR plus 650 basis points. At March 28, 2020 the Company had $1.578 million of borrowings under this LOC and its borrowing base at the time would have permitted an additional $922 thousand to have been borrowed. The line of credit is subject to certain financial covenants, all of which have been met.

(9) Note Payable

(9) Note Payable	3 Months Ended
	Mar. 28, 2020
Debt Disclosure [Abstract]
(9) Note Payable	(9) Note Payable In March 2020, the company acquired a Sonoscan ultrasound microscope for a price of $208. The full amount was financed through a 5 year note payable with Crest Capital Corporation. The note is collateralized by the microscope and is being paid in monthly installments of $4, consisting of principal plus interest at a rate of 6.47%.

(10) Income Taxes

(10) Income Taxes	3 Months Ended
	Mar. 28, 2020
Income Tax Disclosure [Abstract]
(10) Income Taxes	(10) 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 valuation allowance reserve, as it is judged more likely than not that all or a portion of its deferred tax assets will not be utilized before they expire. This decision was reached after giving greater weight to the Company’s losses in recent years as compared to its forecasts. The Coronavirus Aid, Relief and Economic Security Act (“Act”) became law on March 27, 2020. The Act contains two provisions that provide a tax benefit to the Company. The Act suspends the current 80% limitation on the utilization of net operating losses for taxable years beginning in 2018, 2019 and 2020. The Act also allows net operating losses arising in 2018, 2019 and 2020 to be carried back five years. The Act also accelerates the ability of the Company to recover Federal alternative minimum tax credits. The Company recorded a reduction of the valuation allowance reserve of $216 thousand during the quarter ended March 28, 2020 to account for the utilization of deferred tax assets to reduce the current tax liability for the quarter ended March 28, 2020. As a result of the utilization of deferred tax assets, the Company did not record a provision for income taxes for the quarter ended March 28, 2020.

(3) Net Income (Loss) Per Com_2

(3) Net Income (Loss) Per Common Equivalent Share (Tables)	3 Months Ended
	Mar. 28, 2020
Earnings Per Share [Abstract]
Calculation of basic and diluted EPS	Three Months Ended March 28, March 30, 2020 2019 Basic EPS Computation: Numerator: Net income (loss) $ 601,654 $ (744,214) Denominator: Weighted average Common shares Outstanding 13,207,436 13,206,069 Basic EPS $ 0.05 $ (0.06) Diluted EPS Computation: Numerator: Net income (loss) $ 601,654 $ (744,214) Denominator: Weighted average Common shares Outstanding 13,207,436 13,206,069 Dilutive effect of stock options 39,695 — Total Shares 13,247,131 13,206,069 Diluted EPS $ 0.05 $ (0.06)

(4) Commitments & Contingenci_2

(4) Commitments & Contingencies (Tables)	3 Months Ended
	Mar. 28, 2020
Commitments (note 4)
Maturity of capitalized lease liabilities	(Dollars in Thousands) March 28, 2020 Maturity of capitalized lease liabilities Lease payments 2020 117 2021 26 Total undiscounted operating lease payments $ 143 Less: Imputed interest (7) Present value of operating lease liability $ 136 Balance Sheet Classification Current lease liability $ 136 Long-term lease liability 0 Total operating lease liability $ 136 Other Information Weighted-average remaining lease term for capitalized operating leases 11 months Weighted-average discount rate for capitalized operating leases 6.5%

(6) Inventories (Tables)

(6) Inventories (Tables)	3 Months Ended
	Mar. 28, 2020
Inventory Disclosure [Abstract]
Inventories	March 28, December 28, 2020 2019 Raw materials $ 818,501 $ 778,409 Work in process 2,005,211 1,898,916 Finished goods 1,220,988 871,861 Gross inventory 4,044,700 3,549,186 Reserve for obsolescence (449,362) (449,362) Inventories, net $ 3,595,338 $ 3,099,824

(7) Accrued Expenses (Tables)

(7) Accrued Expenses (Tables)	3 Months Ended
	Mar. 28, 2020
Payables and Accruals [Abstract]
Accrued expenses	March 28, December 28, 2020 2019 Accrued legal and accounting $ 28,755 $ 62,725 Accrued payroll and related expenses 508,327 518,015 Accrued other 154,839 234,426 Total Accrued Expenses $ 691,921 $ 815,166

(3) Net Income (Loss) Per Com_3

(3) Net Income (Loss) Per Common Equivalent Share - Calculation of basic and diluted EPS (Details) - USD ($)	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Basic EPS Computation:
Net income (loss)	$ 601,654	$ (744,214)
Weighted average Common shares Outstanding	13,207,436	13,206,069
Basic EPS	$ 0.05	$ (0.06)
Diluted EPS Computation:
Net income (loss)	$ 601,654	$ (744,214)
Weighted average Common shares Outstanding	13,207,436	13,206,069
Dilutive effect of stock options	$ 39,695
Total Shares	13,247,131	13,206,069
Diluted EPS	$ 0.05	$ (0.06)

(4) Commitments & Contingenci_3

(4) Commitments & Contingencies - Maturity of capitalized lease liabilities (Details)	Mar. 28, 2020USD ($)
Commitments (note 4)
2020 (remaining)	$ 117
2021	26
Total undiscounted operating lease payments	143
Less: Imputed interest	(7)
Present value of operating lease liability	136
Current lease liability	136
Long-term lease liability	0
Total operating lease liability	$ 136
Weighted-average remaining lease term for capitalized operating leases	11 months
Weighted-average discount rate for capitalized operating leases	650.00%

(5) Share-Based Payments (Detai

(5) Share-Based Payments (Details Narrative) - USD ($)	3 Months Ended
	Mar. 28, 2020	Mar. 30, 2019
Share-based Payment Arrangement [Abstract]
Stock options granted in the period	119,000	124,000
Shares issued		1,500
Unrecognized compensation cost (in Thousands)	$ 198
Weighted average period to be recognized	1 year 1 month 17 days
Share-based compensation expense recognized (in Thousands)	$ 66	$ 59

(6) Inventories - Inventories (

(6) Inventories - Inventories (Details) - USD ($)	Mar. 28, 2020	Dec. 28, 2019
Inventory Disclosure [Abstract]
Raw materials	$ 818,501	$ 778,409
Work in process	2,005,211	1,898,916
Finished goods	1,220,988	871,861
Gross inventory	4,044,700	3,549,186
Reserve for obsolescence	(449,362)	(449,362)
Inventories, net	$ 3,595,338	$ 3,099,824

(7) Accrued Expenses - Accrued

(7) Accrued Expenses - Accrued expenses (Details) - USD ($)	Mar. 28, 2020	Dec. 28, 2019
Payables and Accruals [Abstract]
Accrued legal and accounting	$ 28,755	$ 62,725
Accrued payroll and related expenses	508,327	518,015
Accrued other	154,839	234,426
Total Accrued Expenses	$ 691,921	$ 815,166

(8) Line of Credit (Details Nar

(8) Line of Credit (Details Narrative)	3 Months Ended
	Mar. 28, 2020USD ($)
The Massachusetts Business Development Corporation
Revolving line of credit maximum borrowing capacity	$ 2,500,000
Line of credit agreement length (terms in years)	3 years
Borrowing base available	$ 1,578,000