CPS TECHNOLOGIES CORP/DE/

CPS Technologies Corp. is a Massachusetts-based advanced materials company founded in 1984 (originally as Ceramics Process Systems Corporation) and publicly listed on Nasdaq since 1987. The Company designs, manufactures, and sells high-performance material solutions for global customers across diverse markets, including transportation, energy, automotive, electronics, telecommunications, aerospace, and defense. CPS possesses significant proprietary expertise in metal matrix composites (MMCs), which are custom-engineered materials that combine metals and ceramics to deliver superior performance properties. The Company's components are used in high-speed trains, mass transit, HVDC power systems, electrical infrastructure, internet equipment, electric and hybrid vehicles, wind turbines, satellites, and even NASA Mars rovers. The Company's products include housings and heat spreaders for high-performance microprocessors, graphics processing chips, and application-specific integrated circuits.

CPS's primary competitor for MMC baseplates is Denka, a large Japanese chemical company, with other potential competitors including emerging Chinese manufacturers offering lower-priced products. For customers whose applications are less demanding, a copper baseplate is an attractive alternative. The market for hermetic packaging products is highly fragmented with multiple specialized manufacturers; key competitors include Egide, Ametek, and Qnnect. CPS has no direct competitors for its armor solution, with competition based on effectiveness, weight, and price. The Company believes its diversified end-market strategy, emphasis on innovation, growing portfolio of market-driven intellectual property, and reputation for quality and reliability position it for sustained growth. CPS emphasizes technical differentiation, quality, and reliability to maintain strong customer relationships with leading OEMs in electronics, transportation, energy, aerospace, and defense.

CPS generates revenue through the design, manufacture, and sale of custom, high-performance material solutions, primarily metal matrix composites and hermetic packaging products. The Company typically follows a build-to-order, highly customized manufacturing model. CPS primarily sells custom, high-reliability products to OEMs in various markets, with the majority of product sales being custom based on customers' drawings, with the large majority of these sales 'designed in' and sold over multiple years. Some large customers typically give the Company a non-binding forecast of demand for a one-year period and then negotiate a pricing agreement for that period. In 2025, approximately 81% of revenues were derived from commercial applications and 19% from defense-related applications.

CPS designs, manufactures, and sells custom MMC components that improve the performance and reliability of systems in applications including high-speed trains, mass transit, hybrid and electric cars, energy infrastructure, High-Voltage Direct Current (HVDC) converter stations, wind-turbines, routers, switches and fiber optic components for internet infrastructure. MMCs are advanced materials formed by combining metals with ceramics, offering higher thermal conductivity, better thermal expansion matching, increased stiffness, and significantly lower weight compared to conventional materials. CPS produces products made of AlSiC in the forms of baseplates, lids, substrates, housings, etc., with every product made to a customer's specifications. The Company's MMC products enable higher system performance, improved energy efficiency, and enhanced reliability across a broad range of advanced industrial, electronics, energy, aerospace, and defense applications. CPS's hermetic packaging products are designed for high-reliability electronic and power applications in aerospace, defense, space, telecommunications, and advanced electronics, protecting microelectronics from moisture, contaminants, and harsh operating environments. These products are frequently used for space applications such as satellites, flight applications such as avionics, and undersea applications such as torpedoes, submarines and communications buoys. CPS is the only producer of hermetic packages with AlSiC bases, combining expertise in hermetic package production with expertise in MMC production. CPS hermetic packages are used in every current generation GPS satellite, the Mars Perseverance rover, and many other aerospace applications. The Company's armor products, marketed under the HybridTech Armor brand, utilize proprietary MMC technology to deliver lightweight, high-strength protection. HybridTech Armor has been selected as the solution for crew served weapons stations on the U.S. Navy's aircraft carriers. A new Phase I program funded by the U.S. Navy in 2025 provides for the lightweighting of the U.S. Marine Corps Amphibious Combat Vehicle (ACV).

In March 2024, the Company announced it had entered into a worldwide, exclusive licensing agreement with Triton Systems for their Fiber Reinforced Aluminum (FRA) solution, which CPS is marketing as AlMax. In 2022, the Company resumed participation in U.S. government Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, through which it has now secured multiple Phase I and Phase II awards. In 2024, CPS received funding for its first two Phase II SBIRs. In 2025, CPS received funding for its third Phase II program as well as five new Phase I SBIRs. As of December 27, 2025, the Company has secured 13 Phase I or Phase II awards funded by either the Department of Defense or the Department of Energy. The Company's three active Phase II programs as of December 27, 2025 are: modular radiation shielding for nuclear applications (funded by the Department of Energy); the application of MMCs to thermal management for long range missiles (funded by the U.S. Navy); and development of a controlled fragmentation tungsten warhead (funded by the U.S. Army). On October 8, 2025, the Company closed an equity raise underwritten by Roth Capital Partners, which acquired 3,450,000 ¹ shares of the Company's common stock at a price of $3.00 ² per share, with net proceeds to the Company of $9,540,025 ³. In August 2025, the Company extended the lease for the Norton facility through February 2028. The Company is considering a move to a larger facility near its current location to support anticipated growth.

Total revenue was $32.6 million ⁴ in 2025, a 54% ⁵ increase compared with total revenue of $21.1 million ⁶ in 2024. Gross profit in 2025 totaled $5.3 million ⁷ or 16% ⁸ of sales, compared with $(0.1) million ⁹, or (1)% ¹⁰ of sales, in 2024. Selling, general and administrative expenses were $4.8 million ¹¹ during 2025, up from $4.3 million ¹² in 2024. The Company generated operating income of $0.4 million ¹³ in 2025, compared with an operating loss of $4.4 million ¹⁴ in 2024. The Company recorded net income of $0.4 million ¹⁵ in 2025 compared to a net loss of $3.1 million ¹⁶ in 2024. In 2025, the Company recorded a provision for income taxes of $0.3 million ¹⁷ compared to a tax benefit of $1.0 million ¹⁸ in 2024. Cash and cash equivalents at December 27, 2025 totaled $4.5 million ¹⁹, with marketable debt securities at fair value of $8.8 million ²⁰, compared with cash and cash equivalents at December 28, 2024 of $3.3 million ²¹, restricted cash of $85 thousand ²², and marketable debt securities at fair value of $1.0 million ²³.

CPS's strategy is to drive sustained, profitable growth by developing and delivering advanced, high-performance material solutions to a diversified set of global, high-growth end markets. The Company focuses on applications where performance and reliability are critical, and where the cost of failure is often high. Many new product initiatives involve the utilization of current materials science and manufacturing expertise and address large markets which have not historically been served. Current areas of active development include injection molded alloys and ceramics, infiltration of composites (including commercializing AlMax, a high strength aluminum composite reinforced with discontinuous ceramic fibers), and HybridTech Armor designs for platforms demanding extremely low density armor solutions (aircraft) and heavy, high-threat situations (land vehicles). The Company is actively pursuing opportunities for fabricating injection molded alloys and ceramics, offering an alternative to traditional injection molding with demonstrated high volume capacity. CPS is actively maturing and commercializing AlMax, with target applications including helicopter bearing liners as a replacement for much heavier steel. Based on customer interest, CPS anticipates other potential applications for this material which could result in a faster move into regular production. The Company's three active Phase II SBIR/STTR programs as of December 27, 2025 are: modular radiation shielding for nuclear applications (funded by the Department of Energy); the application of MMCs to thermal management for long range missiles (funded by the U.S. Navy); and development of a controlled fragmentation tungsten warhead (funded by the U.S. Army). The Company expects its HybridTech Armor technology to be adopted for additional surface vessel applications in the future. A new Phase I program funded by the U.S. Navy in 2025 provides for the lightweighting of the U.S. Marine Corps Amphibious Combat Vehicle (ACV), with CPS's HybridTech armor solution offering a potential replacement for steel panels.

The Company believes the underlying demand for MMCs is growing as the electronics and other industries seek higher performance, higher reliability, and reduced costs. CPS believes it is well positioned to offer solutions to current and new customers as these demands grow. An important development in power processing is the emergence of wide-band gap semiconductors, particularly SiC semiconductors, which are more efficient than Si chips and are being used more frequently in power applications. Modules using SiC chips run at higher temperatures, increasing the need for improved thermal management, a need which the Company's products address. The Company's products contribute to the electrification of the green economy, including baseplates for motor controllers used in high-speed electric trains, subway cars, wind turbines, hybrid and electric vehicles, and the transmission of High Voltage Direct Current (HVDC). The Company's pipeline management approach allocates resources to projects that have strong technical differentiation and a high potential for commercialization. The Company seeks to broaden its product portfolio, strengthen its competitive advantage through technical differentiation, develop unique materials, designs, and manufacturing processes that create defensible barriers to entry, expand its engineering, design, simulation, prototyping, and testing capabilities, shorten internal development cycles, and validate product performance to meet established standards.

The Company incurs significant fixed costs needed to support the business which do not vary significantly with changes in sales volume, including the fixed costs of applications engineering, tooling design and fabrication, process engineering, etc. Accordingly, changes in sales volume generally result in even greater changes in financial performance on a percentage basis as fixed costs are spread over a larger or smaller base. Sales volume is therefore a key financial metric used by management. The increase in gross margin in 2025 was primarily due to the impact of increased revenue, as CPS incurs significant fixed costs in its operations. A mitigating factor in the increased margin was the impact of rising gold prices; the methodologies in recovering increased gold costs can vary by customer, but generally the Company does not generate a profit on these gold cost recovery charges, which reduced profit margin by about 1% ²⁴. Recent inflationary trends have had an impact on profitability, with wage increases, improvements to the benefit package, and price increases from some suppliers. The Company has been able to pass along many of these price increases to customers, though in some cases it has had to absorb them for a period of time before being able to pass them along.

The Company is considering a move to a larger facility near its current location in Norton, Massachusetts to support anticipated growth and improve operational capabilities. The relocation process could disrupt manufacturing operations and business activities, with potential temporary reductions in production capacity, inefficiencies, delays in order fulfillment, quality issues, or increased scrap and rework as equipment is moved, installed, calibrated, and validated. The Company may be required to demonstrate to customers that it can successfully manufacture products at the new facility. The anticipated benefits of the larger facility may not be realized on the timeline expected, or at all, and if revenue growth or demand levels that underlie the need for a larger facility do not materialize, the Company could be left with higher fixed operating costs and reduced operating margins. During 2025, the Company continued its efforts to increase factory efficiency both in terms of employee training as well as increased automation. As of December 27, 2025, the Company had 117 ²⁵ permanent full-time employees, with 107 ²⁶ engaged in manufacturing and engineering and 10 ²⁷ in sales and administration, and approximately 33 ²⁸ manufacturing personnel employed through temporary employment agencies.

The Company funded its operations from its cash balances in 2025 and expects it will continue to be able to fund its operations during 2026 from existing cash balances and profits. On October 8, 2025, the Company closed an equity raise underwritten by Roth Capital Partners, which acquired 3,450,000 ²⁹ shares at $3.00 ³⁰ per share, with net proceeds of $9,540,025 ³¹. The Company has a line of credit (LOC) in the amount of $3.0 million ³² with Rockland Trust Company, secured by accounts receivable and other assets, with an interest rate of the National Prime Rate (6.75% ³³ at December 27, 2025). As of December 27, 2025, the Company had $0 ³⁴ of borrowings under this LOC and its borrowing base would have permitted an additional $3.0 million ³⁵ to have been borrowed. The LOC was renewed in August 2025 and remains in effect until terminated by either party. As of December 27, 2025, the Company had $460 thousand ³⁶ of construction in progress and no material outstanding commitments to purchase production equipment. The Company has never paid cash dividends on its Common Stock and currently plans to reinvest earnings for use in the business, with no intention to pay cash dividends in the foreseeable future.

The Company's customer base is highly concentrated, with three customers accounting for approximately 64% ³⁷ of revenue in 2025, compared to 58% ³⁸ in 2024. The loss of any large customer could be difficult to replace and may have a material adverse effect on financial condition and results of operations. The Company expects that a relatively small number of customers will continue to account for a substantial portion of its business, and the composition of the customer base and volume of sales to any single customer may vary significantly from quarter to quarter and year to year. The lengthy and variable sales cycle, ranging from several months to several years, makes it difficult to accurately forecast financial results. Fluctuations in foreign exchange rates could negatively affect competitiveness against foreign-based competitors, as several major competitors are located outside the United States. Changes in the value of the U.S. dollar relative to competitors' local currencies can make products more expensive for customers compared to competing products. The Company relies on outside vendors for certain steps in its manufacturing process, and some major customers require the use of only customer-approved vendors for specific manufacturing steps, typically plating, which in certain cases are sole-sourced. If a sole-sourced vendor raises prices, the Company may be unable to pass the increase on to the customer, which would erode margins.

The Company's MMC products are currently exported into the European Union (EU) on a duty-free basis. If a European manufacturer begins producing similar products, import duties could be imposed, increasing costs for EU customers and potentially reducing demand for products. Changes in trade policy could materially affect the business, as some raw materials originate from other countries and tariffs could increase supplier prices, potentially reducing profit margins. Additionally, a significant portion of products are exported, and if foreign countries impose tariffs on U.S. goods, the Company could face a competitive disadvantage compared with companies located outside the United States. The Company operates in highly competitive global markets, and some competitors have significantly greater financial and operational resources, which could place CPS at a competitive disadvantage. The Company may face increasing price pressure, as many customers are highly price sensitive and inflationary pressures may further intensify pricing competition. If the Company is unable to continue differentiating products based on performance and service, it may be required to reduce prices to remain competitive, which could result in lower profit margins.

The Company's customer base is highly concentrated, with three customers accounting for approximately 64% ³⁹ of revenue in 2025, compared to 58% ⁴⁰ in 2024, and the loss of any large customer could be difficult to replace and may have a material adverse effect on financial condition and results of operations. The lengthy and variable sales cycle, ranging from several months to several years, makes it difficult to accurately forecast financial results and increases the risk that customers may delay or cancel the launch of their end products. The Company relies on outside vendors for certain manufacturing steps, and some major customers require the use of only customer-approved vendors that are sole-sourced for specific processes, such as plating; if a sole-sourced vendor raises prices, the Company may be unable to pass the increase on to the customer, which would erode margins. The Company is considering moving to a larger facility, and the relocation process could disrupt manufacturing operations, cause temporary reductions in production capacity, and result in costs that may exceed estimates, while the anticipated benefits may not be realized on the expected timeline or at all. Fluctuations in foreign exchange rates could negatively affect competitiveness against foreign-based competitors, as changes in the value of the U.S. dollar relative to competitors' local currencies can make products more expensive for customers compared to competing products.

Management's message emphasizes the Company's strategy to drive sustained, profitable growth by developing and delivering advanced, high-performance material solutions to a diversified set of global, high-growth end markets, focusing on applications where performance and reliability are critical and the cost of failure is often high. Management believes the Company's diversified end-market strategy, emphasis on innovation, growing portfolio of market-driven intellectual property, and reputation for quality and reliability position the Company for sustained growth in high-value, technology-driven markets. Central to this strategy is leveraging CPS's proprietary MMC technologies and specialized manufacturing processes (Quickset and QuickCast) to create customized products that are difficult for competitors to replicate. Management believes the business model of providing advanced material solutions to a portfolio of high growth markets provides CPS with the opportunity for sustained growth and a diversified customer base. While the Company has a number of ongoing production orders generating significant revenue, it also has many new product opportunities which could lead to significant production orders in new product lines in the future, with some opportunities potentially coming to fruition as early as the next year or two, while others will take longer to develop. Management emphasizes that the Company's products contribute to the electrification of the green economy and that CPS is well positioned to offer solutions to current and new customers as demands for higher performance, higher reliability, and reduced costs grow. The Company expects to continue to be able to fund its operations during 2026 from existing cash balances and profits.