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<SEC-DOCUMENT>0000814676-02-000003.txt : 20020516
<SEC-HEADER>0000814676-02-000003.hdr.sgml : 20020516
<ACCEPTANCE-DATETIME>20020516135916
ACCESSION NUMBER:		0000814676-02-000003
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20020330
FILED AS OF DATE:		20020516

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CERAMICS PROCESS SYSTEMS CORP/DE/
		CENTRAL INDEX KEY:			0000814676
		STANDARD INDUSTRIAL CLASSIFICATION:	POTTERY & RELATED PRODUCTS [3260]
		IRS NUMBER:				042832509
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1229

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-16088
		FILM NUMBER:		02654681

	BUSINESS ADDRESS:	
		STREET 1:		111 SOUTH WORCESTER STREET
		STREET 2:		PO BOX 338
		CITY:			CHARTLEY
		STATE:			MA
		ZIP:			02712
		BUSINESS PHONE:		508-222-0614

	MAIL ADDRESS:	
		STREET 1:		111 SOUTH WORCESTER STREET
		STREET 2:		PO BOX 338
		CITY:			CHARTLEY
		STATE:			MA
		ZIP:			02712
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>q102.htm
<TEXT>
<HTML>
<HEAD>
<META NAME="Generator" CONTENT="Microsoft Word 97">
<TITLE>                           UNITED STATES</TITLE>
</HEAD>
<BODY TEXT="#0000ff">

<B><FONT FACE="Courier New"><P ALIGN="CENTER">UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION<BR>
Washington, D.C.  20549</P>
<P ALIGN="CENTER">FORM 10-Q</P>
</B></FONT><FONT FACE="Courier New" SIZE=2><P>(Mark One)<BR>
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 <BR>
For the period ended March 30, 2002<BR>
or</P>
<P>[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934<BR>
For the transition period from          to</P>

<P>Commission file number          0-16088</P>

</FONT><B><FONT FACE="Courier New"><P ALIGN="CENTER">CERAMICS PROCESS SYSTEMS CORPORATION</P>
</B></FONT><FONT FACE="Courier New" SIZE=2><P ALIGN="CENTER">(Exact Name of Registrant as Specified in its Charter)</P>
</FONT>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=638>
<TR><TD WIDTH="50%" VALIGN="TOP">
<U><FONT FACE="Courier New" SIZE=2><P ALIGN="CENTER">Delaware<BR>
</U>(State or Other Jurisdiction<BR>
of Incorporation or Organization</FONT></TD>
<TD WIDTH="50%" VALIGN="TOP">
<U><FONT FACE="Courier New" SIZE=2><P ALIGN="CENTER">04-2832409<BR>
</U>(I.R.S Employer<BR>
Identification No.)</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP">
<FONT FACE="Courier New" SIZE=2>
<P ALIGN="CENTER">111 South Worcester Street<BR>
P.O. Box 338<BR>
<U>Chartley MA<BR>
</U>(Address of principal executive offices)</P>
</FONT></TD>
<TD WIDTH="50%" VALIGN="TOP">
<FONT FACE="Courier New" SIZE=2><P>&nbsp;</P>
<U><P ALIGN="CENTER">02712-0338<BR>
</U>(Zip Code)</P>
</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<U><FONT FACE="Courier New" SIZE=2><P ALIGN="CENTER">(508) 222-0614<BR>
</U>Registrants Telephone Number, including Area Code:</P>
<P ALIGN="CENTER"></P>
<U><P ALIGN="CENTER">Not Applicable<BR>
</U>Former Name, Former Address and Former Fiscal Year if Changed since Last Report:</P>
<P>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</P>

<P ALIGN="CENTER">APPLICABLE ONLY TO CORPORATE ISSUERS:</P>
<P>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 March 30, 2002:  12,315,221.</P>
</FONT><FONT FACE="Courier" SIZE=2>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">CERAMICS PROCESS SYSTEMS CORPORATION<BR>
Form 10-Q<BR>
For The Fiscal Quarter Ended March 30, 2002<BR>
Index<BR>
</P></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=626>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT FACE="Courier" SIZE=2><P>PART I:  FINANCIAL INFORMATION</P>
</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Courier" SIZE=2><P ALIGN="RIGHT">Page</FONT></TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT FACE="Courier" SIZE=2><P>Item 1: Consolidated Financial Statements<BR>
</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT FACE="Courier" SIZE=2><P>Consolidated Balance Sheets as of March 30, 2002 and December 29, 2001 (unaudited)<BR>
</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Courier" SIZE=2><P ALIGN="RIGHT">3</FONT></TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT FACE="Courier" SIZE=2><P>Consolidated Statements of Operations for the fiscal quarters ended March 30, 2002 and March 31, 2001 (unaudited)<BR>
</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Courier" SIZE=2><P ALIGN="RIGHT">5</FONT></TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT FACE="Courier" SIZE=2><P>Consolidated Statements of Cash Flows for the fiscal quarters ended March 31, 2001 and March 31, 2001 (unaudited)<BR>
</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Courier" SIZE=2><P ALIGN="RIGHT">6</FONT></TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT FACE="Courier" SIZE=2><P>Notes to Consolidated Financial Statements<BR>
</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Courier" SIZE=2><P ALIGN="RIGHT">7</FONT></TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT FACE="Courier" SIZE=2><P>Item 2:  Management`s Discussion and Analysis of Financial Condition and Results of Operations<BR>
</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Courier" SIZE=2><P ALIGN="RIGHT">9</FONT></TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT FACE="Courier" SIZE=2><P>PART II: OTHER INFORMATION</P>
</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT FACE="Courier" SIZE=2><P>Items 1-6 <BR>
</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Courier" SIZE=2><P ALIGN="RIGHT">11</FONT></TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT FACE="Courier" SIZE=2><P>Signatures<BR>
</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Courier" SIZE=2><P ALIGN="RIGHT">11</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Courier" SIZE=2>
<P ALIGN="CENTER">&nbsp;</P>
</FONT><B><FONT FACE="Courier New" SIZE=2><P ALIGN="CENTER">PART I  FINANCIAL INFORMATION<BR>
<BR>
ITEM 1  FINANCIAL STATEMENTS (Unaudited)<BR>
<BR>
CERAMICS PROCESS SYSTEMS CORPORATION<BR>
Consolidated Balance Sheets (Unaudited)<BR>
(continued on next page)</P></B></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=653>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">March 30,</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">December 29,</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">2002</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">2001</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>ASSETS</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Current assets:</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>  Cash and cash equivalents </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $  140,693 </FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $  299,746 </FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>  Accounts receivable-trade</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">1,061,202</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">784,640</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>  Inventories</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">688,764</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">627,869</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>  Prepaid expenses</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">76,156</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">19,312</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>     Total current assets</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">1,966,815</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">1,731,567</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Property and equipment:</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>  Production equipment</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">2,394,372</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">2,201,465</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>  Furniture and office equipment</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">191,270</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">191,270</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>  Accumulated depreciaton</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">(1,457,926)</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">(1,378,060)</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>    and amortization</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>        Net property and equipment</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">1,127,716</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">1,014,675</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P> Total Assets </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $3,094,531 </FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $2,746,242 </FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">=============</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">=============</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Courier" SIZE=2>
<P>See accompanying notes to consolidated financial statements.</P>
<P ALIGN="CENTER"></P>
</FONT><B><FONT FACE="Courier New" SIZE=2><P ALIGN="CENTER">CERAMICS PROCESS SYSTEMS CORPORATION<BR>
Consolidated Balance Sheets (Unaudited)<BR>
(continued)</P>
</B><P ALIGN="CENTER"></P></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=653>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">March 30,</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">December 29,</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>LIABILITIES AND STOCKHOLDERS'</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">2002</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">2001</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>  EQUITY</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P> </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Current liabilities:</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>  Accounts payable</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $  571,058 </FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $  408,023 </FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>  Accrued expenses</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">219,701</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">116,595</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>  Current portion of obligations</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>    under capital leases</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">30,335</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">39,958</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Total current liabilities</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">821,094</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">564,576</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Deferred revenue</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">133,884</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">133,884</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Obligations under capital</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>  leases less current portion</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">87,225</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">92,840</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Total liabilities</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">1,042,203</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">791,300</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Stockholders' Equity</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>  Common stock, $0.01 par value,</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>    authorized 15,000,000 shares;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>    issued  12,315,221 shares</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>    at March 30, 2002 and</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>    December 29, 2001</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">123,152</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">123,152</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>  Additional paid-in capital</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">32,657,436</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">32,657,436</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>  Accumulated deficit</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">(30,667,425)</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">(30,764,811)</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>  Less treasury stock, at cost,</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>  22,883 common shares </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">(60,835)</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">(60,835)</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Total stockholders' equity</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">2,052,328</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">1,954,942</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Total liabilities and stockholders'</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>   equity </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $3,094,531 </FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $2,746,242 </FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">=============</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">=============</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Courier" SIZE=2>
<P>See accompanying notes to consolidated financial statements.</P>
<P ALIGN="CENTER"></P>
</FONT><B><FONT FACE="Courier New" SIZE=2><P ALIGN="CENTER">CERAMICS PROCESS SYSTEMS CORPORATION<BR>
Consolidated Statements of Operations (Unaudited)<BR>
</P></B></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=483>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="50%" VALIGN="TOP" COLSPAN=3 HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">Fiscal Quarters Ended</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">March 30,</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">March 31,</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">2002</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">2001</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Product sales</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $1,749,277 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $  964,579 </FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">============</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">============</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Operating expenses:</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>   Cost of product sales</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">1,223,210</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">991,141</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>   Selling, general, and</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> </FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>    administrative</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">424,508</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">312,482</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Total operating expenses</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">1,647,718</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">1,303,623</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Operating income (loss)</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">101,559 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">(339,044)</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Other income(expense), net</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">(4,173)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">4,521 </FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>    Net income (loss)</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>        before taxes</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">97,386 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">(334,523)</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Provision for income taxes</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=1><P ALIGN="RIGHT">          -   </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=1><P ALIGN="RIGHT">          -   </FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>     Net income (loss) </FONT></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $   97,386 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $ (334,523)</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">============</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">============</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Net income (loss) per </FONT></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>    basic common share </FONT></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $     0.01 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $    (0.03)</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Weighted average number of</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>    basic common shares</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>    outstanding</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">12,292,338</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">12,289,653</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">============</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">============</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Net income (loss) per</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>     diluted common share </FONT></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $     0.01 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $    (0.03)</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Weighted average number of</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>    diluted common shares</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>    outstanding</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">12,575,289</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">12,289,653</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">============</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">============</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Courier" SIZE=2>
<P>See accompanying notes to consolidated financial statements.</P>
<P ALIGN="CENTER"></P>
</FONT><B><FONT FACE="Courier New" SIZE=2><P ALIGN="CENTER">CERAMICS PROCESS SYSTEMS CORPORATION<BR>
Consolidated Statements of Cash Flows (Unaudited)<BR>
</P></B></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=513>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="45%" VALIGN="TOP" COLSPAN=2 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">Fiscal Quarter Ended</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">March 30,</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">March 31,</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">2002 </FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">2001 </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14><P></P></TD>
</TR>
<TR><TD WIDTH="78%" VALIGN="TOP" COLSPAN=6 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>Cash flows from operating activities:</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="52%" VALIGN="TOP" COLSPAN=4 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>Net income (loss)</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $ 97,386 </FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $ (334,523)</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="52%" VALIGN="TOP" COLSPAN=4 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>Adjustments to reconcile net </FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="71%" VALIGN="TOP" COLSPAN=4 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>income (loss) to cash used in</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="49%" VALIGN="TOP" COLSPAN=3 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>operating activities:</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="46%" VALIGN="TOP" COLSPAN=2 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>Depreciation &amp; amortization</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">79,866 </FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">83,534 </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="74%" VALIGN="TOP" COLSPAN=5 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>Changes in assets and liabilities:</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="49%" VALIGN="TOP" COLSPAN=3 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>Accounts receivable - trade</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">(276,562)</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">113,628 </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="49%" VALIGN="TOP" COLSPAN=3 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>Inventories</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">(60,895)</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">(75,459)</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="49%" VALIGN="TOP" COLSPAN=3 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>Prepaid expenses</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">(56,844)</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">(39,684)</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="49%" VALIGN="TOP" COLSPAN=3 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>Accounts payable</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">163,035 </FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">(54,763)</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="49%" VALIGN="TOP" COLSPAN=3 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>Accrued expenses</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">103,106 </FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">35,127 </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="46%" VALIGN="TOP" COLSPAN=2 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>Net cash provided by (used </FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $ 49,092 </FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $ (272,140)</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>in) operating activities</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
</TR>
<TR><TD WIDTH="78%" VALIGN="TOP" COLSPAN=6 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>Cash flows from investing activities:</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="52%" VALIGN="TOP" COLSPAN=4 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>Proceeds from sale of assets</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">0</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">(73,335)</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="52%" VALIGN="TOP" COLSPAN=4 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>Additions to property and equipment</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">(192,907)</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">0 </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="46%" VALIGN="TOP" COLSPAN=2 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>Net cash used in investing </FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>activities</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $ (192,907)</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $ (73,335)</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
</TR>
<TR><TD WIDTH="78%" VALIGN="TOP" COLSPAN=6 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>Cash flows from financing activities:</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="52%" VALIGN="TOP" COLSPAN=4 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>Payment of capital lease obligations</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">(15,238)</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">(13,884)</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="74%" VALIGN="TOP" COLSPAN=5 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>Proceeds from issuance of common</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="49%" VALIGN="TOP" COLSPAN=3 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>stock</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">0 </FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">675 </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="46%" VALIGN="TOP" COLSPAN=2 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>Net cash used in </FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>financing activities</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $ (15,238)</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $ (13,209)</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP" COLSPAN=5 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>Net decrease in cash</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">(159,053)</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">(358,684)</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP" COLSPAN=5 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>Cash at beginning of period</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">299,746 </FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">672,391 </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP" COLSPAN=5 HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P>Cash at end of period</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $ 140,693 </FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $ 313,707 </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">=========</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">=========</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Courier" SIZE=2>
<P>See accompanying notes to consolidated financial statements.</P>
<P ALIGN="CENTER"></P>
</FONT><B><FONT FACE="Courier New" SIZE=2><P ALIGN="CENTER">CERAMICS PROCESS SYSTEMS CORPORATION<BR>
Notes to Consolidated Financial Statement<BR>
(Unaudited)</P>
</B></FONT><U><FONT FACE="Courier" SIZE=2><P>(1)  Nature of Business</P>
</U><P>Ceramics Process Systems Corporation  (the `Company` or `CPS`) serves the wireless communications infrastructure market, high-performance microprocessor market, motor controller market, and other microelectronic markets by developing, manufacturing, and marketing advanced metal-matrix composite components to house, interconnect and thermally manage microelectronic devices.  The Company's products are typically in the form of housings, packages, lids, substrates, thermal planes, or heat sinks, and are used in applications where thermal management and/or weight are important considerations.<BR>
</P>
<P>The Company`s products are manufactured by proprietary processes the Company has developed including the QuicksetTM Injection Molding Process (`Quickset Process`) and the QuickCastTM Pressure Infiltration Process (`QuickCast Process`).<BR>
</P>
<P>The Company was incorporated on June 19, 1984. The Company continues to sell to a limited number of customers and loss of any one of these customers could cause the Company to require 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.<BR>
</P>
<U><P>(2)  Interim Consolidated Financial Statements</P>
</U><P>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.<BR>
</P>
<P>The accompanying financial statements for the fiscal quarters ended March 30, 2002 and March 31, 2001 are unaudited.  In the opinion of management, the unaudited consolidated financial statements of CPS reflect all adjustments necessary to present fairly the financial position and results of operations for such periods.<BR>
</P>
<P>The consolidated financial statements include the accounts of CPS and its wholly-owned subsidiary, CPS Superconductor Corporation.  All significant intercompany balances and transactions have been eliminated.   The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.<BR>
</P>
<U><P>(3)  Net Income (Loss) Per Common and Common Equivalent Share</P>
</U><P>Basic EPS excludes the effect of any dilutive options, warrants or convertible securities and is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period.  Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.  Diluted EPS is computed by dividing net income (loss) by the sum of the weighted average number of common shares and common share equivalents computed using the average market price for the period under the treasury stock method requirements.<BR>
</P>
<P>The following table presents the calculation of both basic and diluted EPS:</P>
</FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=473>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">For periods ended</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">March 30,</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">March 31,</FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">2002</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">2001</FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP" COLSPAN=2 HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Basic EPS Computation:</FONT></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP" COLSPAN=2 HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Numerator:</FONT></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P> Net income (loss) </FONT></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $    97,386 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $  (334,523)</FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP" COLSPAN=2 HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Denominator:</FONT></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Weighted average</FONT></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>common shares</FONT></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>outstanding</FONT></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">  12,292,338 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">  12,289,653 </FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP" COLSPAN=2 HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Basic EPS</FONT></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $      0.01 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $     (0.03)</FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP" COLSPAN=2 HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Diluted EPS Computation:</FONT></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP" COLSPAN=2 HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Numerator:</FONT></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Net income (loss)</FONT></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">97,386 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">    (334,523)</FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP" COLSPAN=2 HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Denominator:</FONT></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Weighted average</FONT></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>common shares </FONT></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>outstanding</FONT></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">  12,292,338 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">  12,289,653 </FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Stock options</FONT></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">282,951</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>   </FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Total Shares</FONT></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">  12,575,289 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">  12,289,653 </FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="43%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP" COLSPAN=2 HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Diluted EPS</FONT></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $      0.01 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $     (0.03)</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Courier" SIZE=2>
<P>Options to purchase 1,015,484 shares of common stock at a weighted-average price of $0.80 were outstanding at March 30, 2002.  As of March 30, 2002, the Company had 732,533 options to purchase common stock that were antidilutive and as such have been excluded from the calculation of diluted net income. Options to purchase 779,603 shares of common stock at a weighted-average price of $0.98 were outstanding at March 31, 2001.  The Company was in a net loss position at March 31, 2001, therefore stock options were not used to compute diluted loss per share since the effect would have been antidilutive. </P>

<U><P>(4)  Inventory</P>
</U><P>Inventories consist of the following:</P>
</FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=539>
<TR><TD WIDTH="24%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">March 30,</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">December 29,</FONT></TD>
</TR>
<TR><TD WIDTH="24%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">2002</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">2001</FONT></TD>
</TR>
<TR><TD WIDTH="24%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P> </FONT></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
</TR>
<TR><TD WIDTH="24%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="24%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Raw materials</FONT></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $   15,755 </FONT></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $   36,179 </FONT></TD>
</TR>
<TR><TD WIDTH="24%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Work in process</FONT></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">    281,911 </FONT></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">    220,497 </FONT></TD>
</TR>
<TR><TD WIDTH="24%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Finished Goods</FONT></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">    391,098 </FONT></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">    371,193 </FONT></TD>
</TR>
<TR><TD WIDTH="24%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
</TR>
<TR><TD WIDTH="24%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>   </FONT></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $  688,764 </FONT></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $  627,869 </FONT></TD>
</TR>
<TR><TD WIDTH="24%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">=============</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">=============</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Courier" SIZE=2>
<U><P>(5)&#9;Accrued Expenses</P>
</U><P>Accrued expenses consist of the following:</P>
</FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=568>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">March 30,</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">December 29,</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">2002</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">2001</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P> </FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Accrued legal and</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>  accounting</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $   34,897 </FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $   39,998 </FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Accrued payroll</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">    136,353 </FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">     61,290 </FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>Accrued other</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">     48,451 </FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">     15,307 </FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>   </FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P>-------------</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $  219,701 </FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT"> $  116,595 </FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">=============</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Courier New" SIZE=2><P ALIGN="RIGHT">=============</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Courier" SIZE=2>
<P>&nbsp;</P>
<B><P ALIGN="CENTER">ITEM 2</P>
<P ALIGN="CENTER">MANAGEMENT`S DISCUSSION AND ANALYSIS OF FINANCIAL<BR>
CONDITION AND RESULTS OF OPERATIONS<BR>
</P>
</B><P>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.</P>

<U><P>Results of Operations: First Quarter of 2002 Compared to First Quarter of 2001</P>
</U><P>&#9;Revenues in Q1 2002 of $1.75 million were 81% higher than revenues in Q1 2001 of $965 thousand.  The higher revenues were the result of increased demand from both existing and new customers.  The higher revenues result from volume increases rather than price increases. Based on current backlog, current order releases and our assessment of the forecasts some customers have provided,  we expect Q2 2002 revenues will be lower than Q1 2002 revenues.<BR>
</P>
<P>Gross margins in Q1 2002 of 30% compare with Q1 2001 gross margin of negative (3%).  The improvement in gross margins is primarily attributable to the fixed costs being spread over a larger production volume and improved efficiencies in production.<BR>
</P>
<P>Sales, General and Administrative expenses (SG&amp;A) increased to $425 thousand in Q1 2002 from $312 thousand in the Q1 2001, a 36% increase.  The increase in SG&amp;A expenses is primarily attributable to increased headcount in the sales function and increased sales commissions.<BR>
</P>
<P>Total operating expenses in Q1 2002 were $1,648 thousand, a 26% increase over operating expenses in Q1 2001 of $1,304 thousand.  The increase in total operating expenses was primarily attributable to 1) increased material, labor, overhead which in turn was driven by increased production volume, and 2) increased SG&amp;A expenses.  While operating expenses in Q1 2002 increased 26% from the same period a year ago, revenues in Q1 2002 increased 81% from the same period a year ago.<BR>
</P>
<P>In Q1 2002 other expense was ($4) thousand compared to Q1 2001 other income of $5 thousand.<BR>
</P>
<P>The Company recorded no tax provision during the quarter ended March 30, 2002 due to the expected utilization of net operating loss carryforwards.<BR>
</P>
<P>The cumulative effect of these revenues and costs resulted in net income of $97 thousand or $0.01 per basic and dilutive common share in Q1 2002 compared with a net loss of $335 thousand or ($0.03) per basic and dilutive common share in Q1 2001.<BR>
</P>
<U><P>Liquidity</P>
</U><P>The Company`s cash balance and cash equivalents at March 30, 2002 was $141 thousand compared to cash balance and cash equivalents at December 29, 2001 of $300 thousand, a decrease of $159 thousand or 53%.</P>

<P>Accounts receivable increased to $1,061 thousand at March 30, 2002 from $785 thousand at December 29, 2001.  This change reflects higher shipments in Q1 2002 compared to Q4 2001, as well as an increase in shipments to Europe in Q1 2002 compared to Q4 2001.  European customers tend to pay more slowly than U.S. customers.  The accounts receivable balance at March 30, 2002 and December 29, 2001 is net of allowance for doubtful accounts of $12,586.</P>

<P>Inventory increased to $689 thousand at March 30, 2002 from $628 thousand at December 29, 2001.  The higher inventory level is primarily a result of increased safety stock necessary to accommodate higher shipments in Q1 2002 compared to Q 4 2001. The level of inventory is likely to fluctuate in line with expected shipment volumes.</P>

<P>In the first quarter of 2002 the Company purchased $193 thousand of production equipment.</P>

<P>The Company financed its working capital during Q1 2002 with funds generated by operations and existing cash balances.  The Company expects it will continue to be able to fund its working capital requirements for the remainder of 2002 from its existing cash balance and from funds generated by operations.</P>

<P>The Company continues to sell to a limited number of customers and loss of any one of these customers could cause the Company to require 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.</P>

<B><P ALIGN="CENTER">PART II OTHER INFORMATION<BR>
</P>
</B><P>Item 1 through Item 5:  None</P>

<P>Item 6: Exhibits and Reports on Form 8-K:  None<BR>
</P>
</FONT><B><FONT FACE="Courier New" SIZE=2><P ALIGN="CENTER">SIGNATURES</P>
</B><P>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.</P>
</FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=638>
<TR><TD VALIGN="TOP" COLSPAN=2>
<B><U><FONT FACE="Courier New" SIZE=2><P ALIGN="CENTER">Ceramics Process Systems Corporation</B><BR>
</U>(Registrant)</P>
<P ALIGN="CENTER"></FONT></TD>
</TR>
<TR><TD WIDTH="51%" VALIGN="TOP">
<FONT FACE="Courier New" SIZE=2><P ALIGN="CENTER">Date:  May 13, 2002</FONT></TD>
<TD WIDTH="49%" VALIGN="TOP">
<FONT FACE="Courier New" SIZE=2><P ALIGN="CENTER">/s/ Grant C. Bennett<BR>
Grant C. Bennett<BR>
President and Treasurer<BR>
(Principal Executive Officer)</FONT></TD>
</TR>
</TABLE>

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