10-Q

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 June 29, 2013
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 CORPORATION

(Exact Name of Registrant as Specified in its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization	04-2832509 (I.R.S. Employer Identification No.)
111 South Worcester Street Norton MA (Address of principal executive offices)	02766-2102 (Zip Code)

(508) 222-0614
Registrants Telephone Number, including Area Code:

CPS Technologies Corporation

111 South Worcester Street

Norton, MA 02766-2102

Former Name, Former Address and Former Fiscal Year if Changed since Last 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] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act):
[ ] Yes [X] No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date. Number of shares of common stock outstanding as of August 5, 2013: 13,061,974.

PART I FINANCIAL INFORMATION

ITEM 1 FINANCIAL STATEMENTS (Unaudited)

CPS TECHNOLOGIES CORPORATION
Balance Sheets (Unaudited)

	June 29,			December 29,
	2013			2012
ASSETS
Current assets:
Cash and cash equivalents	$	222,199		$	306,854
Restricted cash		70,000			—
Accounts receivable-trade, net		3,661,732			2,876,149
Inventories, net		2,080,417			2,457,315
Prepaid expenses and other current assets		120,380			140,723
Deferred taxes		364,378			354,825
Total current assets		6,519,106			6,135,866
Property and equipment:
Production equipment		7,484,700			7,430,783
Furniture and office equipment		355,547			354,490
Leasehold improvements		735,099			735,099
Total cost		8,575,346			8,520,372
Accumulated depreciation
and amortization		(7,195,073	)		(6,877,285	)
Construction in progress		362,057			138,133
Net property and equipment		1,742,330			1,781,220
Deferred taxes, non-current portion		2,432,148			2,432,148
Total assets	$	10,693,584		$	10,349,234

See accompanying notes to financial statements.

(continued)

CPS TECHNOLOGIES CORPORATION
Balance Sheets (Unaudited)
(concluded)

LIABILITIES AND STOCKHOLDERS`	June 29,			December 29,
EQUITY	2013			2012
Current liabilities:
Line of credit	$	—		$	500,000
Equipment lease line of credit		163,155			—
Accounts payable		1,564,421			1,179,313
Accrued expenses		833,967			938,043
Current portion of obligations under capital leases		92,655			123,366
Total current liabilities		2,654,198			2,740,722
Obligations under capital
leases		35,097			76,372
Total liabilities		2,689,295			2,817,094
Commitments (note 9)
Stockholders` equity:
Common stock, $0.01 par value,
authorized 15,000,000 shares;
issued 13,165,042 and 12,928,042 shares;
outstanding 13,061,974 and 12,871,759 shares;
at June 29, 2013 and December 29, 2012, respectively		131,650			129,281
Additional paid-in capital		34,126,099			33,821,961
Accumulated deficit		(26,045,675	)		(26,284,787	)
Less cost of 103,068 and 56,283 common shares
repurchased at June 29, 2013 and December 29, 2012,
respectively		(207,785	)		(134,315	)
Total stockholders` equity		8,004,289			7,532,140
Total liabilities and stockholders`
equity	$	10,693,584		$	10,349,234

See accompanying notes to financial statements.

CPS TECHNOLOGIES CORPORATION
Statements of Operations (Unaudited)

	Three Months Ended						Six Months Ended
	June 29,			June 30,			June 29,			June 30,
	2013			2012			2013			2012
Revenues:
Product sales	$	5,240,817		$	3,529,672		$	10,154,164		$	6,872,325
Research and development
under cooperative agreement		59,725			98,593			177,456			310,716
Total revenues		5,300,542			3,628,265			10,331,620			7,183,041
Cost of product sales		3,887,713			3,352,442			7,906,468			6,758,017
Cost of research and development
under cooperative agreement		49,531			82,844			147,418			265,885
Gross Margin		1,363,298			192,979			2,277,734			159,139
Selling, general, and
administrative expense		1,008,118			845,009			1,908,032			1,653,732
Operating income (loss)		355,180			(652,030	)		369,702			(1,494,593	)
Interest expense, net		(12,678	)		(5,694	)		(22,870	)		(11,466	)
Net income (loss) before
income tax expense (benefit)		342,502			(657,724	)		346,832			(1,506,059	)
Income tax expense (benefit)		106,000			(285,000	)		107,720			(599,000	)
Net income (loss)	$	236,502		$	(372,724	)	$	239,112		$	(907,059	)
Net income (loss) per
basic common share	$	0.02		$	(0.03	)	$	0.02		$	(0.07	)
Weighted average number of
basic common shares
outstanding		12,961,506			12,869,483			12,916,633			12,867,571
Net income (loss) per
diluted common share	$	0.02		$	(0.03	)	$	0.02		$	(0.07	)
Weighted average number of
diluted common shares
outstanding		13,091,084			12,869,483			13,101,855			12,867,571

See accompanying notes to financial statements.

CPS TECHNOLOGIES CORPORATION
Statements of Cash Flows (Unaudited)

	Six Months Ended
	June 29,			June 30,
	2013			2012
Cash flows from operating activities:
Net income (loss)	$	239,112		$	(907,059	)
Adjustments to reconcile net income (loss)
to cash provided by (used in) operating activities:
Depreciation and amortization		317,788			398,039
Share-based compensation		115,765			113,251
Deferred taxes		(107,720	)		(599,000	)
Excess tax benefit from stock options exercised		(117,273	)		—
Changes in:
Accounts receivable-trade, net		(785,583	)		1,363,249
Inventories		376,898			(221,798	)
Prepaid expenses and other current assets		20,343			41,812
Accounts payable		385,108			(483,131	)
Accrued expenses		(104,076	)		(147,640	)
Net cash provided by (used in) operating
activities		555,802			(442,277	)
Cash flows from investing activities:
Purchases of property and equipment		(278,898	)		(196,859	)
Net cash used in investing
activities		(278,898	)		(196,859	)
Cash flows from financing activities:
Payment of capital lease obligations		(71,986	)		(138,143	)
Proceeds from equipment lease line		163,155			—
Repayment of line of credit, net		(500,000	)		—
Proceeds from issuance of common stock		73,469			9,178
Excess tax benefit from stock options exercised		117,273			—
Repurchase of common stock		(73,470	)		—
Net cash used in
financing activities		(291,559	)		(128,965	)
Net decrease in cash and cash equivalents		(14,655	)		(768,101	)
Cash and cash equivalents at beginning of period		306,854			1,142,429
Cash and cash equivalents at end of period	$	292,199		$	374,328
Supplemental cash flow information:
Cash paid for taxes	$	—		$	—
Interest paid	$	22,895		$	11,466

See accompanying notes to financial statements.

CPS TECHNOLOGIES CORPORATION
Notes to Financial 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.

In 2008 the Company also entered into a cooperative agreement with the U.S. Army to further develop its composite technology to produce armor.

(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 29, 2012 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. Certain items in the 2012 financial statements have been reclassified to conform with the 2013 presentation.

For further information, refer to the financial statements and footnotes thereto included in the Registrant’s Annual Report Report on Form 10-K for the year ended December 29, 2012.

The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

The Company’s second fiscal quarter end is the Saturday closest to June 30^th, which could result in a 13 or 14 week fiscal quarter. The second quarters for fiscal 2012 and 2013 each consisted of 13 weeks.

(3) Net Income (Loss) 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 (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 earnings per share (“EPS”):

	Three Months Ended					Six Months Ended
	June 29,		June 30,			June 29,		June 30,
	2013		2012			2013		2012
Basic EPS Computation:
Numerator:
Net income (loss)	$	236,502	$	(372,724	)	$	239,112	$	(907,059	)
Denominator:
Weighted average
Common shares
Outstanding		12,961,506		12,869,483			12,916,633		12,867,571
Basic EPS	$	0.02	$	(0.03	)	$	0.02	$	(0.07	)
Diluted EPS Computation:
Numerator:
Net income (loss)	$	236,502	$	(372,724	)	$	239,112	$	(907,059	)
Denominator:
Weighted average
Common shares
Outstanding		12,961,506		12,869,483			12,916,633		12,867,571
Dilutive effect of stock options		129,578		—			185,222		—
Total Shares		13,091,084		12,869,483			13,101,855		12,867,571
Diluted EPS	$	0.02	$	(0.03	)	$	0.02	$	(0.07	)

(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 quarter ended June 29, 2013, a total of 201,000 stock options were granted to employees under the Company’s 2009 Stock Incentive Plan (the “Plan”) and a total of 30,000 stock options were granted to outside directors. There were no shares granted under the Plan during the quarters ended June 30, 2012.

During the quarters ended June 29, 2013 and June 30, 2012 the Company issued 237,000 and 6,000 shares, respectively, as a result of option exercises. During the quarter ended June 29, 2013, 33,000 stock options expired related to previously granted shares under the 1999 Stock Incentive Plan. No stock option expired during the quarter ended June 30, 2012.

During the quarter ended June 29, 2013 the Company repurchased 46,785 shares from employees to facilitate their exercise of stock options.

During the three and six months ended June 29, 2013, the Company recognized $62,133 and $115,765, respectively, as shared-based compensation expense related to previously granted shares under the Plan. A tax benefit of $117,273 was recognized as additional paid in capital in the quarter ended June 29, 2013, resulting from the excess tax benefit of option exercises.

During the three and six months ended June 30, 2012, the Company recognized $55,217 and $113,251, respectively, as shared-based compensation expense related to previously granted shares under the Plan.

(5) Inventories

Inventories consist of the following:

	June 29,			December 29,
	2013			2012
Raw materials	$	365,054		$	312,213
Work in process		1,017,397			1,145,843
Finished goods		1,014,966			1,306,259
Total inventory		2,397,417			2,764,315
Reserve for obsolescence		(317,000	)		(307,000	)
Inventories, net	$	2,080,417		$	2,457,315

(6) Accrued Expenses

Accrued expenses consist of the following:

	June 29,		December 29,
	2013		2012
Accrued legal and accounting	$	84,576	$	92,000
Accrued payroll		551,106		388,029
Accrued other		198,285		458,014
	$	833,967	$	938,043

(7) Line of Credit and Equipment Lease Facility Agreements

In early May 2013, the Company renewed its $2 million revolving line of credit (“LOC”) and $500 thousand of an equipment finance facility (“Lease Line”) with Sovereign Bank.   Both agreements mature in May 2014.  The LOC is secured by the accounts receivable and other assets of the Company, has an interest rate of prime plus one percent (1%) and a one-year term.

At June 29, 2013, the Company had no borrowings under this LOC while its borrowing base at the time would have permitted borrowings of $ 1,973 thousand. The balance due under the lease line was $163 thousand at June 29, 2013. Under the terms of the agreement, the Company is required to maintain its operating accounts with Sovereign Bank and restricted cash of $70,000. 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 line of credit that require the Company to maintain a targeted coverage ratio as well as targeted debt to equity and current ratios. At June 29, 2013, the Company was in compliance with existing covenants. 

At June 29, 2013, the Company had $ 291 thousand of capital equipment financed by advances and capital lease obligations related to the Lease Line and $ 209 thousand of credit remaining under the lease line. Equipment financed by the Sovereign equipment lease generally will qualify for treatment as a capital lease once converted from the Lease Line to a lease. 

(8) Income Taxes

At December 29, 2012, the Company had approximately $3,303,000 of net operating loss carryforwards available to offset future income for U.S. Federal income tax purpose.

The Company recorded a tax expense of $82,000 and $83,340 for federal income taxes and a tax expense of $24,000 and $24,380 for state income taxes during the three and six months ended June 29, 2013, respectively. The Company recorded a tax benefit of $227,000 and $467,000 for federal income taxes and a tax benefit of $58,000 and $132,000 for state income taxes during the three and six months ended June 30, 2012, respectively.

The Company has a current and non-current deferred tax asset aggregating $2,797 thousand and $2,787 thousand on the Company`s balance sheet at June 29, 2013 and December 29, 2012, respectively. 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.

(9) Commitments

In July 2006, the Company entered into a lease for its current operating facilities of approximately 37,520 square feet of rentable space located on approximately seven acres at its current site in Norton, MA. The term of the lease is ten years. 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 $100,000 in year one increasing to $150,000 in year ten.

In February 2011, the Company entered into a one-year lease, with five options to renew for one year periods, for approximately 13,800 square feet of rentable space inside a larger building located at 79 Walton Street, Attleboro, Massachusetts. Monthly rent, which includes utilities, is $6,900. In October 2012, the Company renewed the lease through February, 2014.

ITEM 2 MANAGEMENTS 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, 2012.

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, 2012, 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, 2012.

Overview

CPS Technologies Corporation (the `Company` or `CPS`) provides advanced material solutions to the electronics, power generation, automotive and other industries. In 2008 the Company also entered into a cooperative agreement with the U.S. Army to further develop its composite technology to produce armor.

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. The Company recently 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. An example of such a market is the market for armor. In 2008 the Company entered into a cooperative agreement with the Army Research Laboratory to further develop large hybrid metal matrix composite modules which integrally combine metal matrix composites and ceramics by enveloping ceramic tiles with MMCs. This system offers a lighter weight, durable, multi-hit capable and cost competitive alternative to conventional steel, aluminum and ceramic based armor systems. CPS hybrid hard face armor modules are comprised of multiple materials completely enveloped within and mechanically and chemically bonded to lightweight and stiff aluminum metal matrix composites.

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 Second Fiscal Quarter of 2013 (Q2 2013) Compared to the Second Fiscal Quarter of 2012 (Q2 2012); (all $ in 000’s)

Total revenue was $5,301 in Q2 2013, a 46% increase compared with total revenue of $3,628

generated in Q2 2012. This increase was due in large part to the sales of baseplates for traction products and, to a lesser degree, the sales of hermetic packages.

Gross margin in Q2 2013 totaled $1,363 or 26% of sales.  In Q2 2012, gross margin was $ 193, or 5% of sales.   This improvement was due to two primary factors:  first, the increase in sales volume and secondly, to a lesser extent, improvements in manufacturing efficiencies.

Selling, general and administrative (SG&A) expenses were $1,008 in Q2 2013, up 19% compared with SG&A expenses of $845 in Q2 2012.  This increase was due in large part to an increase in sales commissions associated with the higher sales volume and an accrual for a 401K match which had been suspended in early 2012.

As a result of the higher revenues and improved manufacturing efficiencies, the Company earned an operating profit of $355, compared with an operating loss of $652 in the same quarter last year.  Interest expense increased to $13 in Q2 2013, from $6 in Q2 2012, reflecting higher average borrowings in Q2 2013.  The net income for Q2 2013 totaled $ 237 versus a net loss of $373 in Q2 2012.

Results of Operations for the First Six Months of 2013 Compared to the First Six Months of 2012 (all $ in 000’s)

Total revenue was $10,332 in the first half of 2013, a 44% increase compared with total revenue of $7,183 generated in the first six months of 2012. This increase was due in large part to the sales of baseplates for traction products.

Gross margin in the first six months of 2013 totaled $ 2,278 or 22% of sales.  In the first six months of 2012, gross margin totaled $159 or 2% of sales.   This improvement was due to two primary factors:  first, the increase in sales volume and secondly, to a lesser extent, improvement in manufacturing efficiencies.  

Selling, general and administrative (SG&A) expenses were $ 1,908 during the first six months of 2013, up 15% compared with SG&A expenses of $ 1,654 in the first six months of 2012.  This increase was due principally to an increase in sales commissions associated with the higher sales volume and, to a lesser degree, higher legal expenses associated with an overseas patent issue.

Primarily as a result of the higher revenues and, to a lesser extent, manufacturing efficiencies, the Company earned an operating profit of $370 in the first six months of 2013, compared with an operating loss of $ 1,495 in the same period last year.  Interest expense increased to $23 in the first six months of 2013, from $ 11 in the first six months of 2012, reflecting a higher level of borrowings in 2013.  The net income for the first six months of 2013 totaled $ 239 versus a net loss of $907 in the first six months of 2012.

Liquidity and Capital Resources (all $ in 000’s unless noted)

The Company’s cash and cash equivalents at June 29, 2013 totaled $292 with no borrowings on the Company’s line of credit. $70 thousand of this total was restricted under the credit agreement with Sovereign Bank. This restriction will be removed when the Company reports Net Income in the second quarter. This compares with cash and cash equivalents of $307 and bank borrowings of $500 on its credit line at December 29, 2012. This improvement in the Company’s net cash position (i.e. cash less borrowing on the credit line), was primarily due to earnings from operations. During the first half of 2013, the Company’s investment in receivables, inventories and prepaid expenses, less accounts payables and accruals, was approximately flat with year end 2012.

Accounts receivable at June 29, 2013 totaled $3.7 million compared with $2.9 million at December 29, 2012. Days Sales Outstanding (DSOs) decreased to 62 days in Q2 2013 from 63 days in Q4 2012.  The accounts receivable balances at December 29, 2012, and June 29, 2013 were both net of an allowance for doubtful accounts of $10.

Inventories decreased to $2.1 million at June 29, 2013, from $2.5 million at December 29, 2012.

During 2011, the Company increased inventories to meet forecasts provided by a key customer; actual demand was short of the forecasts.  During 2012, primarily in the Fourth Quarter of 2012, the Company was able to draw down on this inventory as sales from this customer increased and this trend continued into 2013. The Company did not experience any obsolescence as a result of this situation. The inventory balance at quarter ended June 29, 2013, was net of an obsolescence reserve $317 thousand. The turnover in 2012 was 4.4 and improved to 5.6 for the most recent four quarters.

All consigned inventory is shipped under existing purchase orders and per customers’ requests. Of the inventory of $2.1 million at June 29, 2013, $ 892 thousand was located at customers’ locations

pursuant to consigned inventory agreements. Of the total inventory of $2.5 million at December 29, 2012, $1.4 million was located at customers’ locations pursuant to consigned inventory agreements.

The Company financed its working capital during Q2 2013 with a combination of beginning cash balances and cash flow generated from operations.  The Company expects it will continue to be able to fund its working capital requirements for the remainder of 2013 from a combination of operating cash flow, existing cash balances and borrowings under its line of credit, when necessary.

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

In early May 2013, the Company renewed its $2 million revolving line of credit (“LOC”) and $500 thousand of an equipment finance facility (“Lease Line”) with Sovereign Bank.   Both agreements mature in May 2014.  The LOC is secured by the accounts receivable and other assets of the Company, has an interest rate of prime plus one percent (1%) and a one-year term. Under the terms of the agreement, the Company is required to maintain its operating accounts and restricted cash of $70,000 with Sovereign 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 line of credit that require the Company to maintain a targeted coverage ratio as well as targeted debt to equity and current ratios. At June 29, 2013, the Company was in compliance with existing covenants.  At June 29, 2013, the Company had $ 291 thousand net carrying value of capital equipment financed by advances and capital lease obligations under the Lease Line and $ 209 thousand available remaining. Equipment financed by the Sovereign equipment lease qualifies for treatment as a capital lease once converted from the Lease Line to a lease.  At June 29, 2013 the Company had no borrowings under this LOC while its borrowing base at the time would have permitted borrowings of $ 1,973 thousand.

The covenants with Sovereign Bank are identical for the line of credit and equipment financing facility. The covenant requirements are shown below together with the actual ratios achieved for the Second Quarter of 2013:

Covenant	Requirement	Actual
Quarterly Net Income	Minimum of $1.00	$ 237
Current Ratio	minimum of 1.5X	2.5
Liabilities to Net Worth	maximum of 1.0X	0.3
Capital Expenditures for 2013	maximum of $900K	$ 279K
Borrowings under the lease line	maximum of $500K	$ 291K
Borrowings under the line of credit	maximum of $1,973K*	$ 0
*(based on receivables at 6/29/13)

Management believes that cash flows from operations, existing cash balances and the leasing and credit line in place with Sovereign Bank 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.

As of June 29, 2013 the Company had $362thousand of construction in progress and outstanding commitments to purchase $51 thousand of production equipment.  The Company intends to finance production equipment in construction in progress and outstanding commitments with a combination of existing cash balances, funds generated by operations and lease financing.

In July 2006, the Company entered into a 10-year lease for its current operating facilities of approximately 37,520 square feet of rentable space located on approximately seven acres at its current site in Norton, MA. 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 were $100 thousand in year one increasing to $150 thousand in year ten.

In February 2011, the Company entered into a lease for an additional 13.8 thousand square feet in Attleboro, MA for monthly rent, including utilities of $6,900.  The lease term was for one year and had an option to extend the lease for five additional one year periods. In October 2012 the Company renewed the lease for one additional year through February, 2014.

The Company’s contractual obligations at June 29, 2013 consist of the following:

			Payments Due by Period
			Remaining in		FY 2014 -
	Total		FY 2016		FY 2016		FY 2017
Capital lease obligations including interest	$	131,716	$	53,650	$	78,066	$	—
Purchase commitments for production equipment	$	50,645	$	50,645	$	—	$	—
Operating lease obligation for facilities	$	454,133	$	111,400	$	342,733	$	—

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`s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company`s disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 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 officer has concluded that, as of the Evaluation Date, 1) the Company`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`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 2012 Form 10-K

ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF 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

(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 May 10, 2013 the Company filed a report on Form 8-K of its earnings report for the fiscal first quarter ended March 30, 2013.

On May 10, 2013 the Company filed a report on Form 8-K which included a transcript of the Company’s conference call held on May 8, 2013.

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: August 12, 2013
/s/ Grant C. Bennett
Grant C. Bennett
Chief Executive Officer

Date: August 12, 2013

/s/ Ralph M. Norwood

Ralph M. Norwood

Chief Financial Officer

EX-31.1

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

I, Grant C. Bennett, certify that:

1. I have reviewed this quarterly report on Form 10-Q;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant`s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant`s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this quarterly report based on such evaluation (the "Evaluation Date"); and

d) Disclosed in this quarterly report any change in the registrant`s internal control over financial reporting that occurred during the registrant`s most recent fiscal quarter that has materially affected or is reasonably like to materially affect, the registrant`s internal control over financial reporting.

5. The registrant`s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant`s auditors and the audit committee of the registrant`s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant`s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant`s internal control over financial reporting.

Date: August 12, 2013
/s/ Grant C. Bennett
Grant C. Bennett
President and Chief Executive Officer

EX-31.2

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

I, Ralph M. Norwood, certify that:

1. I have reviewed this quarterly report on Form 10-Q;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant`s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant`s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this quarterly report based on such evaluation (the "Evaluation Date"); and

d) Disclosed in this quarterly report any change in the registrant`s internal control over financial reporting that occurred during the registrant`s most recent fiscal quarter that has materially affected or is reasonably like to materially affect, the registrant`s internal control over financial reporting.

5. The registrant`s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant`s auditors and the audit committee of the registrant`s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant`s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant`s internal control over financial reporting.

Date: August 12, 2013
/s/ Ralph M. Norwood
Ralph M. Norwood
Chief Financial Officer

EX-32.1

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

In connection with the Quarterly Report of CPS Technologies Corporation (the "Company") on Form 10-Q for the three month period ended June 29, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Grant C. Bennett, President and Chief Executive Officer of the Company, and I, Ralph M. Norwood, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 12, 2013
/s/ Grant C. Bennett
Grant C. Bennett
President and Chief Executive Officer

Date: August 12, 2013
/s/ Ralph M. Norwood
Ralph M. Norwood
Chief Financial Officer

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Accrued Expenses (Tables)

6 Months Ended

Jun. 29, 2013

Payables and Accruals [Abstract]

Accrued Liabilities

	June 29,		December 29,
	2013		2012
Accrued legal and accounting	$	84,576	$	92,000
Accrued payroll		551,106		388,029
Accrued other		198,285		458,014
	$	833,967	$	938,043

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Statements of Operations (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Jun. 29, 2013	Jun. 30, 2012	Jun. 29, 2013	Jun. 30, 2012
Income Statement [Abstract]
Product sales	$ 5,240,817	$ 3,529,672	$ 10,154,164	$ 6,872,325
Research and development under cooperative agreement	59,725	98,593	177,456	310,716
Total revenues	5,300,542	3,628,265	10,331,620	7,183,041
Cost of product sales	3,887,713	3,352,442	7,906,468	6,758,017
Cost of research and development under cooperative agreement	49,531	82,844	147,418	265,885
Gross Margin	1,363,298	192,979	2,277,734	159,139
Selling, general, and administrative expense	1,008,118	845,009	1,908,032	1,653,732
Operating income (loss)	355,180	(652,030)	369,702	(1,494,593)
Interest expense, net	(12,678)	(5,694)	(22,870)	(11,466)
Net income (loss) before income tax expense (benefit)	342,502	(657,724)	346,832	(1,506,059)
Income tax expense (benefit)	106,000	(285,000)	107,720	(599,000)
Net income (loss)	$ 236,502	$ (372,724)	$ 239,112	$ (907,059)
Net income (loss) per basic common share	$ 0.02	$ (0.03)	$ 0.02	$ (0.07)
Weighted average number of basic common shares outstanding	12,961,506	12,869,483	12,916,633	12,867,571
Net income (loss) per diluted common share	$ 0.02	$ (0.03)	$ 0.02	$ (0.07)
Weighted average number of diluted common shares outstanding	13,091,084	12,869,483	13,101,855	12,867,571

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Inventories

6 Months Ended

Jun. 29, 2013

Inventory Disclosure [Abstract]

Inventories

(5) Inventories

Inventories consist of the following:

	June 29,			December 29,
	2013			2012
Raw materials	$	365,054		$	312,213
Work in process		1,017,397			1,145,843
Finished goods		1,014,966			1,306,259
Total inventory		2,397,417			2,764,315
Reserve for obsolescence		(317,000	)		(307,000	)
Inventories, net	$	2,080,417		$	2,457,315

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Net Income (Loss) Per Common and Common Equivalent Share - Calculation of both basic and diluted earnings per share ("EPS") (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 29, 2013	Jun. 30, 2012	Jun. 29, 2013	Jun. 30, 2012
Basic EPS Computation:
Net income (loss)	$ 236,502	$ (372,724)	$ 239,112	$ (907,059)
Weighted average Common Shares Outstanding	12,961,506	12,869,483	12,916,633	12,867,571
Basic EPS	$ 0.02	$ (0.03)	$ 0.02	$ (0.07)
Diluted EPS Computation:
Net income (loss)	236,502	(372,724)	239,112	(907,059)
Weighted average Common Shares Outstanding	12,961,506	12,869,483	12,916,633	12,867,571
Dilutive effect of stock options	$ 129,578		$ 185,222
Total Shares	13,091,084	12,869,483	13,101,855	12,867,571
Diluted EPS	$ 0.02	$ (0.03)	$ 0.02	$ (0.07)

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Nature of Business

6 Months Ended

Jun. 29, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

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.

In 2008 the Company also entered into a cooperative agreement with the U.S. Army to further develop its composite technology to produce armor.

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Net Income (Loss) Per Common and Common Equivalent Share

6 Months Ended

Jun. 29, 2013

Earnings Per Share [Abstract]

Net Income (Loss) Per Common and Common Equivalent Share

(3) Net Income (Loss) 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 (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 earnings per share (“EPS”):

	Three Months Ended					Six Months Ended
	June 29,		June 30,			June 29,		June 30,
	2013		2012			2013		2012
Basic EPS Computation:
Numerator:
Net income (loss)	$	236,502	$	(372,724	)	$	239,112	$	(907,059	)
Denominator:
Weighted average
Common shares
Outstanding		12,961,506		12,869,483			12,916,633		12,867,571
Basic EPS	$	0.02	$	(0.03	)	$	0.02	$	(0.07	)
Diluted EPS Computation:
Numerator:
Net income (loss)	$	236,502	$	(372,724	)	$	239,112	$	(907,059	)
Denominator:
Weighted average
Common shares
Outstanding		12,961,506		12,869,483			12,916,633		12,867,571
Dilutive effect of stock options		129,578		—			185,222		—
Total Shares		13,091,084		12,869,483			13,101,855		12,867,571
Diluted EPS	$	0.02	$	(0.03	)	$	0.02	$	(0.07	)

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Accrued Expenses

6 Months Ended

Jun. 29, 2013

Payables and Accruals [Abstract]

Accrued Expenses

(6) Accrued Expenses

Accrued expenses consist of the following:

	June 29,		December 29,
	2013		2012
Accrued legal and accounting	$	84,576	$	92,000
Accrued payroll		551,106		388,029
Accrued other		198,285		458,014
	$	833,967	$	938,043

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Share-Based Payments

6 Months Ended

Jun. 29, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

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 quarter ended June 29, 2013, a total of 201,000 stock options were granted to employees under the Company’s 2009 Stock Incentive Plan (the “Plan”) and a total of 30,000 stock options were granted to outside directors. There were no shares granted under the Plan during the quarters ended June 30, 2012.

During the quarters ended June 29, 2013 and June 30, 2012 the Company issued 237,000 and 6,000 shares, respectively, as a result of option exercises. During the quarter ended June 29, 2013, 33,000 stock options expired related to previously granted shares under the 1999 Stock Incentive Plan. No stock option expired during the quarter ended June 30, 2012.

During the quarter ended June 29, 2013 the Company repurchased 46,785 shares from employees to facilitate their exercise of stock options.

During the three and six months ended June 29, 2013, the Company recognized $62,133 and $115,765, respectively, as shared-based compensation expense related to previously granted shares under the Plan. A tax benefit of $117,273 was recognized as additional paid in capital in the quarter ended June 29, 2013, resulting from the excess tax benefit of option exercises.

During the three and six months ended June 30, 2012, the Company recognized $55,217 and $113,251, respectively, as shared-based compensation expense related to previously granted shares under the Plan.

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Balance Sheets (Parenthetical) (USD $)	Jun. 29, 2013	Dec. 29, 2012
Statement of Financial Position [Abstract]
Common Stock, authorized shares	15,000,000	15,000,000
Common Stock, issued shares	13,165,042	12,928,042
Common Stock, outstanding shares	13,061,974	12,871,759
Common Stock, par value	$ 0.01	$ 0.01

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Commitments

6 Months Ended

Jun. 29, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments

(9) Commitments

In July 2006, the Company entered into a lease for its current operating facilities of approximately 37,520 square feet of rentable space located on approximately seven acres at its current site in Norton, MA. The term of the lease is ten years. 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 $100,000 in year one increasing to $150,000 in year ten.

In February 2011, the Company entered into a one-year lease, with five options to renew for one year periods, for approximately 13,800 square feet of rentable space inside a larger building located at 79 Walton Street, Attleboro, Massachusetts. Monthly rent, which includes utilities, is $6,900. In October 2012, the Company renewed the lease through February, 2014.

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Statements of Cash Flows (Unaudited) (USD $)	6 Months Ended
	Jun. 29, 2013	Jun. 30, 2012
Cash flows from operating activities:
Net income (loss)	$ 239,112	$ (907,059)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation and amortization	317,788	398,039
Share-based compensation	115,765	113,251
Deferred taxes	(107,720)	(599,000)
Excess tax benefit from stock options exercised	(117,273)
Accounts receivable-trade, net	(785,583)	1,363,249
Inventories	376,898	(221,798)
Prepaid expenses and other current assets	20,343	41,812
Accounts payable	385,108	(483,131)
Accrued expenses	(104,076)	(147,640)
Net cash provided by (used in) operating activities	555,802	(442,277)
Cash flows from investing activities:
Purchases of property and equipment	(278,898)	(196,859)
Net cash used in investing activities	(278,898)	(196,859)
Cash flows from financing activities:
Payment of capital lease obligations	(71,986)	(138,143)
Proceeds from equipment lease line	163,155
Repayment of line of credit, net	(500,000)
Proceeds from issuance of common stock	73,469	9,178
Excess tax benefit from stock options exercised	117,273
Repurchase of common stock	(73,470)
Net cash used in financing activities	(291,559)	(128,965)
Net decrease in cash and cash equivalents	(14,655)	(768,101)
Cash and cash equivalents at beginning of period	306,854	1,142,429
Cash and cash equivalents at end of period	292,199	374,328
Supplemental cash flow information:
Cash paid for taxes
Interest paid	$ 22,895	$ 11,466

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Balance Sheets (Unaudited) (USD $)	Jun. 29, 2013	Dec. 29, 2012
Current assets:
Cash and cash equivalents	$ 222,199	$ 306,854
Restricted cash	70,000
Accounts receivable-trade, net	3,661,732	2,876,149
Inventories, net	2,080,417	2,457,315
Prepaid expenses and other current assets	120,380	140,723
Deferred taxes	364,378	354,825
Total current assets	6,519,106	6,135,866
Property and equipment:
Production equipment	7,484,700	7,430,783
Furniture and office equipment	355,547	354,490
Leasehold improvements	735,099	735,099
Total cost	8,575,346	8,520,372
Accumulated depreciation and amortization	(7,195,073)	(6,877,285)
Construction in progress	362,057	138,133
Net property and equipment	1,742,330	1,781,220
Deferred taxes, non-current portion	2,432,148	2,432,148
Total assets	10,693,584	10,349,234
Current liabilities:
Line of credit		500,000
Equipment lease line of credit	163,155
Accounts payable	1,564,421	1,179,313
Accrued expenses	833,967	938,043
Current portion of obligations under capital leases	92,655	123,366
Total current liabilities	2,654,198	2,740,722
Obligations under capital leases	35,097	76,372
Total liabilities	2,689,295	2,817,094
Stockholders equity:
Common stock, $0.01 par value, authorized 15,000,000 shares; issued 13,165,042 and 12,928,042 shares; outstanding 13,061,974 and 12,871,759 shares; at June 29, 2013 and December 29, 2012, respectively	131,650	129,281
Additional paid-in capital	34,126,099	33,821,961
Accumulated deficit	(26,045,675)	(26,284,787)
Less cost of 103,068 and 56,283 common shares repurchased at June 29, 2013 and December 29, 2012, respectively	(207,785)	(134,315)
Total stockholders equity	8,004,289	7,532,140
Total liabilities and stockholders` equity	$ 10,693,584	$ 10,349,234

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Income Taxes

6 Months Ended

Jun. 29, 2013

Income Tax Disclosure [Abstract]

Income Taxes

(8) Income Taxes

At December 29, 2012, the Company had approximately $3,303,000 of net operating loss carryforwards available to offset future income for U.S. Federal income tax purpose.

The Company recorded a tax expense of $82,000 and $83,340 for federal income taxes and a tax expense of $24,000 and $24,380 for state income taxes during the three and six months ended June 29, 2013, respectively. The Company recorded a tax benefit of $227,000 and $467,000 for federal income taxes and a tax benefit of $58,000 and $132,000 for state income taxes during the three and six months ended June 30, 2012, respectively.

The Company has a current and non-current deferred tax asset aggregating $2,797 thousand and $2,787 thousand on the Company`s balance sheet at June 29, 2013 and December 29, 2012, respectively. 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.

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Inventories (Tables)

6 Months Ended

Jun. 29, 2013

Inventory Disclosure [Abstract]

Inventories

	June 29,			December 29,
	2013			2012
Raw materials	$	365,054		$	312,213
Work in process		1,017,397			1,145,843
Finished goods		1,014,966			1,306,259
Total inventory		2,397,417			2,764,315
Reserve for obsolescence		(317,000	)		(307,000	)
Inventories, net	$	2,080,417		$	2,457,315

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Line of Credit and Equipment Lease Facility Agreements

6 Months Ended

Jun. 29, 2013

Debt Disclosure [Abstract]

Line of Credit and Equipment Lease Facility Agreements

(7) Line of Credit and Equipment Lease Facility Agreements

In early May 2013, the Company renewed its $2 million revolving line of credit (“LOC”) and $500 thousand of an equipment finance facility (“Lease Line”) with Sovereign Bank.   Both agreements mature in May 2014.  The LOC is secured by the accounts receivable and other assets of the Company, has an interest rate of prime plus one percent (1%) and a one-year term.

At June 29, 2013, the Company had no borrowings under this LOC while its borrowing base at the time would have permitted borrowings of $ 1,973 thousand. The balance due under the lease line was $163 thousand at June 29, 2013. Under the terms of the agreement, the Company is required to maintain its operating accounts with Sovereign Bank and restricted cash of $70,000. 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 line of credit that require the Company to maintain a targeted coverage ratio as well as targeted debt to equity and current ratios. At June 29, 2013, the Company was in compliance with existing covenants. 

At June 29, 2013, the Company had $ 291 thousand of capital equipment financed by advances and capital lease obligations related to the Lease Line and $ 209 thousand of credit remaining under the lease line. Equipment financed by the Sovereign equipment lease generally will qualify for treatment as a capital lease once converted from the Lease Line to a lease. 

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Interim Financial Statements

6 Months Ended

Jun. 29, 2013

Quarterly Financial Information Disclosure [Abstract]

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 29, 2012 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. Certain items in the 2012 financial statements have been reclassified to conform with the 2013 presentation.

For further information, refer to the financial statements and footnotes thereto included in the Registrant’s Annual Report Report on Form 10-K for the year ended December 29, 2012.

The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

The Company’s second fiscal quarter end is the Saturday closest to June 30^th, which could result in a 13 or 14 week fiscal quarter. The second quarters for fiscal 2012 and 2013 each consisted of 13 weeks.

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Inventories - Inventories (Details) (USD $)	Jun. 29, 2013	Dec. 29, 2012
Inventories, net
Raw materials	$ 365,054	$ 312,213
Work in process	1,017,397	1,145,843
Finished goods	1,014,966	1,306,259
Total inventory	2,397,417	2,764,315
Reserve for obsolescence	(317,000)	(307,000)
Inventories, net	$ 2,080,417	$ 2,457,315

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Net Income (Loss) Per Common and Common Equivalent Share (Tables)

6 Months Ended

Jun. 29, 2013

Earnings Per Share [Abstract]

Calculation of both basic and diluted earnings per share ("EPS")

	Three Months Ended					Six Months Ended
	June 29,		June 30,			June 29,		June 30,
	2013		2012			2013		2012
Basic EPS Computation:
Numerator:
Net income (loss)	$	236,502	$	(372,724	)	$	239,112	$	(907,059	)
Denominator:
Weighted average
Common shares
Outstanding		12,961,506		12,869,483			12,916,633		12,867,571
Basic EPS	$	0.02	$	(0.03	)	$	0.02	$	(0.07	)
Diluted EPS Computation:
Numerator:
Net income (loss)	$	236,502	$	(372,724	)	$	239,112	$	(907,059	)
Denominator:
Weighted average
Common shares
Outstanding		12,961,506		12,869,483			12,916,633		12,867,571
Dilutive effect of stock options		129,578		—			185,222		—
Total Shares		13,091,084		12,869,483			13,101,855		12,867,571
Diluted EPS	$	0.02	$	(0.03	)	$	0.02	$	(0.07	)

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Accrued Expenses - Accrued Liabilities (Details) (USD $)	Jun. 29, 2013	Dec. 29, 2012
Payables and Accruals [Abstract]
Accrued legal and accounting	$ 84,576	$ 92,000
Accrued payroll	551,106	388,029
Accrued other	198,285	458,014
Total Accrued Expenses	$ 833,967	$ 938,043

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Document and Entity Information (USD $)	6 Months Ended
	Jun. 29, 2013	Aug. 05, 2013
Document And Entity Information
Entity Registrant Name	CPS Technologies Corp/DE/
Entity Central Index Key	0000814676
Document Type	10-Q
Document Period End Date	Jun. 29, 2013
Amendment Flag	false
Current Fiscal Year End Date	--12-28
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		$ 14,900,000
Entity Common Stock, Shares Outstanding		13,061,974
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2013