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<SEC-DOCUMENT>0000814676-04-000006.txt : 20040806
<SEC-HEADER>0000814676-04-000006.hdr.sgml : 20040806
<ACCEPTANCE-DATETIME>20040806092058
ACCESSION NUMBER:		0000814676-04-000006
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20040626
FILED AS OF DATE:		20040806

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:		04956269

	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>q20410q.htm
<TEXT>
<HTML>
<HEAD>
<TITLE>&lt;SUBMISSION&gt;</TITLE>
</HEAD>
<BODY LINK="#0000ff">

<B><FONT FACE="Arial"><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="Arial" 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 June 26, 2004<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="Arial"><P ALIGN="CENTER">CERAMICS PROCESS SYSTEMS CORPORATION</P>
</B></FONT><FONT FACE="Arial" 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="Arial" 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="Arial" 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="Arial" 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="Arial" SIZE=2><P>&nbsp;</P>
<U><P ALIGN="CENTER">02712-0338<BR>
</U>(Zip Code)</P>
<P ALIGN="CENTER"></P>
<P>&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<U><FONT FACE="Arial" 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 June 26, 2004: 12,293,209.</P>

<P ALIGN="CENTER">&nbsp;</P>
<B><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=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">June 26,</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">December 27,</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2004</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2003</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(unaudited)</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>ASSETS</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Current assets:</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>  Cash and cash equivalents </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $          363,023 </FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $          189,533 </FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>  Accounts receivable-trade, net of allowance</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>    for doubtful accounts of $1,100 as of</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>    June 26, 2004 and December 27, 2003</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">783,373</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">659,318</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>  Inventories</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">403,191</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">347,695</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>  Prepaid expenses</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">41,919</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">45,184</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>     Total current assets</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">1,591,506</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">1,241,730</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Property and equipment:</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>  Production equipment</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2,781,410</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2,613,235</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>  Furniture and office equipment</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">200,852</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">197,311</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>  Accumulated depreciation</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(2,279,182)</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(2,135,095)</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>    and amortization</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">--------------</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">--------------</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>        Property and equipment, net</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">703,080</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">675,451</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P> Total assets </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $       2,294,586 </FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $       1,917,181 </FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=============</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=============</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>See accompanying notes to consolidated financial statements.</P>

<B><P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">CERAMICS PROCESS SYSTEMS CORPORATION<BR>
Consolidated Balance Sheets (Unaudited)<BR>
(continued)</P></B></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=653>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">June 26,</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">December 27,</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>LIABILITIES AND STOCKHOLDERS'</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2004</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2003*</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>  EQUITY</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(unaudited)</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Current liabilities:</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>  Accounts payable</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $          222,528 </FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $          173,302 </FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>  Accrued expenses</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">180,438</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">115,792</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>  Current portion of obligations</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>    under capital leases</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">96,492</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">96,649</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Total current liabilities</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">499,458</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">385,743</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Deferred revenue</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">133,884</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">133,884</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Obligations under capital</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>  Leases, less current portion</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">149,057</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">195,794</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Total liabilities</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">782,399</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">715,421</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Stockholders' equity:</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>  Common stock, $0.01 par value,</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>    authorized 15,000,000 shares;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>    issued  12,316,092 shares</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>    at June 26, 2004 and December 27, 2003</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">123,161</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">123,161</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>  Additional paid-in capital</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">32,657,584</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">32,657,584 </FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>  Accumulated deficit</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(31,207,723)</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(31,518,150)</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>  Less treasury stock, at cost,</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>  22,883 common shares </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(60,835)</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(60,835)</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Total stockholders' equity</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">1,512,187</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">1,201,760</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=============</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Total liabilities and stockholders'</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>   equity </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $       2,294,586 </FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $       1,917,181 </FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=============</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=============</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>*The balance sheet at December 27, 2003 has been derived from the audited consolidated financial statements at that date.</P>

<P>See accompanying notes to consolidated financial statements.</P>
<P ALIGN="CENTER"></P>
<B><P ALIGN="CENTER">CERAMICS PROCESS SYSTEMS CORPORATION<BR>
Consolidated Statements of Operations (Unaudited)</P>
</B></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=669>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=3 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Fiscal Quarters Ended</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="34%" VALIGN="TOP" COLSPAN=3 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Six month Periods Ended</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">June 26,</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">June 28,</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">June 26,</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">June 28,</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2004</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2003</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2004</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2003</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Product sales</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $       1,417,219 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $       1,106,713 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $      3,081,609 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $      1,702,178 </FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=======</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=======</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=======</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=======</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Operating expenses:</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>   Cost of product sales</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">973,663</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">823,659</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2,204,018</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">1,429,824</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>   Selling, general, and</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> </FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>    administrative</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">293,807</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">244,929</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">550,442</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">429,809</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Total operating expenses</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">1,267,470</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">1,068,588</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2,754,460</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">1,859,633</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Operating income (loss)</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">149,749 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">38,125 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">327,149 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(157,455)</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Other expenses, net</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(8,011)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(9,106)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(16,722)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(19,762)</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>     Net income (loss) </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $          141,738 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $            29,019 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $         310,427 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $        (177,217)</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=======</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=======</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=======</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=======</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Net income (loss) per </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>    basic common share </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $               0.01 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $                   -   </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $              0.03 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $             (0.01)</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Weighted average number of</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>    basic common shares</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>    outstanding</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">12,293,209</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">12,293,209</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">12,293,209</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">12,293,209</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">========</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">========</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">========</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">========</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Net income (loss) per</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>     diluted common share </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $               0.01 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $                   -   </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $              0.02 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $             (0.01)</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Weighted average number of</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>    diluted common shares</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>    outstanding</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">12,723,096</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">12,484,200</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">12,723,389</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">12,293,209</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">========</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">========</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">========</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">========</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>See accompanying notes to consolidated financial statements.</P>
<P ALIGN="CENTER"></P>
<B><P ALIGN="CENTER">CERAMICS PROCESS SYSTEMS CORPORATION<BR>
Consolidated Statements of Cash Flows (Unaudited)</P></B></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=555>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="41%" VALIGN="TOP" COLSPAN=2 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Six-Month Period Ended</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">June 26,</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">June 28,</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2004</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2003</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
</TR>
<TR><TD WIDTH="59%" VALIGN="TOP" COLSPAN=5 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>Cash flows from operating activities:</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="56%" VALIGN="TOP" COLSPAN=4 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>Net income (loss)</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 310,427 </FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ (177,217)</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="56%" VALIGN="TOP" COLSPAN=4 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>Adjustments to reconcile net income </FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="53%" VALIGN="TOP" COLSPAN=3 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>(loss) to cash provided by (used in)</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="53%" VALIGN="TOP" COLSPAN=3 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>used in operating activities:</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="50%" VALIGN="TOP" COLSPAN=2 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>Depreciation &amp; amortization</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">147,845 </FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">199,608 </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="56%" VALIGN="TOP" COLSPAN=4 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>        Gain on sale of property and</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="56%" VALIGN="TOP" COLSPAN=4 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>             equipment</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(158)</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">0</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="56%" VALIGN="TOP" COLSPAN=4 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>Changes in assets and liabilities:</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="53%" VALIGN="TOP" COLSPAN=3 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>Accounts receivable - trade</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(124,056)</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(191,926)</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="53%" VALIGN="TOP" COLSPAN=3 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>Inventories</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(55,496)</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">18,165 </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="53%" VALIGN="TOP" COLSPAN=3 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>Prepaid expenses</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">3,265 </FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(29,547)</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="53%" VALIGN="TOP" COLSPAN=3 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>Accounts payable</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">49,226 </FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">60,625 </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="53%" VALIGN="TOP" COLSPAN=3 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>Accrued expenses</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">64,646 </FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">7,050 </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="50%" VALIGN="TOP" COLSPAN=2 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>Net cash provided (used) by</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 395,699 </FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ (113,242)</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>operating activities</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
</TR>
<TR><TD WIDTH="59%" VALIGN="TOP" COLSPAN=5 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>Cash flows from investing activities:</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="56%" VALIGN="TOP" COLSPAN=4 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>Additions to property and equipment</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(177,816)</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">0 </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="56%" VALIGN="TOP" COLSPAN=4 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>Proceeds from sale of property and equipment</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2,500</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">0 </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="50%" VALIGN="TOP" COLSPAN=2 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>Net cash used in investing </FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>activities</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(175,316)</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">0 </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
</TR>
<TR><TD WIDTH="59%" VALIGN="TOP" COLSPAN=5 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>Cash flows from financing activities:</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="56%" VALIGN="TOP" COLSPAN=4 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>Payment of capital lease obligations</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(46,893)</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(25,859)</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="56%" VALIGN="TOP" COLSPAN=4 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>Proceeds from note payable-related party</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">0 </FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">40,000 </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="50%" VALIGN="TOP" COLSPAN=2 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>Net cash provided (used) by </FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>financing activities</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ (46,893)</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 14,141 </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
</TR>
<TR><TD WIDTH="59%" VALIGN="TOP" COLSPAN=5 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>Net increase (decrease) in cash and cash equivalents</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">173,490 </FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(99,101)</FONT></TD>
</TR>
<TR><TD WIDTH="59%" VALIGN="TOP" COLSPAN=5 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>Cash and cash equivalents at beginning of period</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">189,533 </FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">150,772 </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
</TR>
<TR><TD WIDTH="59%" VALIGN="TOP" COLSPAN=5 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>Cash and cash equivalents at end of period</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 363,023 </FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 51,671 </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=========</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=========</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>See accompanying notes to consolidated financial statements.</P>
<P ALIGN="CENTER"></P>
<B><P ALIGN="CENTER">CERAMICS PROCESS SYSTEMS CORPORATION<BR>
Notes to Consolidated Financial Statement<BR>
(Unaudited)</P>
</B><U><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 the 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 accounting principles generally accepted in the United States of America.<BR>
</P>
<P>The accompanying consolidated financial statements for the fiscal quarters ended June 26, 2004 and June 28, 2003 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.</P>

<P>The Company`s consolidated balance sheet at December 27, 2003 has been derived from the audited consolidated 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.</P>

<P>For further information, refer to the consolidated financial statements and footnotes thereto included in the Registrant`s Annual Report on Form 10-K for the year ended December 27, 2003.<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=670>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Quarters Ended</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="32%" VALIGN="TOP" COLSPAN=3 HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Six-Month Periods Ended</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">June 26,</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">June 28,</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">June 26,</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">June 28,</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2004</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2003</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2004</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2003</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP" COLSPAN=2 HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P>Basic EPS Computation:</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP" COLSPAN=2 HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P>Numerator:</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P> Net income (loss) </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $            141,738 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $             29,019 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $         310,427 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P> $       (177,217)</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP" COLSPAN=2 HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P>Denominator:</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P>Weighted average</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P>common shares</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P>outstanding</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">          12,293,209 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">          12,293,209 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">       12,293,209 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">       12,293,209 </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP" COLSPAN=2 HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P>Basic EPS</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $                 0.01 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $                    -   </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $              0.03 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $             (0.01)</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP" COLSPAN=2 HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P>Diluted EPS Computation:</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP" COLSPAN=2 HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P>Numerator:</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P>Net income(loss)</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">141,738 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">29,019 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">310,427 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">          (177,217)</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP" COLSPAN=2 HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P>Denominator:</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P>Weighted average</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P>common shares </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P>outstanding</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">          12,293,209 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">          12,293,209 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">       12,293,209 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">       12,293,209 </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P>Stock options</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">              429,887 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">              191,862 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">            430,180 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">                    -   </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P>Total Shares</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">          12,723,096 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">          12,484,200 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">       12,723,389 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">       12,293,209 </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15><P></P></TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP" COLSPAN=2 HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P>Diluted EPS</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $                 0.01 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $                    -   </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $              0.02 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=15><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=15>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $             (0.01)</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>Options to purchase 1,156,113 shares of common stock at a weighted-average price of $0.57 were outstanding at June 26, 2004.  Options to purchase 1,214,613 shares of common stock at a weighted-average price of $0.57 were outstanding at June 28,  2003.  The Company incurred a net loss for the six months ended June 28, 2003, therefore stock options were not used to compute diluted loss per share since the effect would have been antidilutive.</P>

<P>The Company accounts for its stock-based compensation plans under Accounting Principles Board (APB) Opinion No. 25, &quot;Accounting for Stock Issued to Employees&quot;.  Accordingly, no stock-based employee compensation cost is reflected in net income as all options granted had an exercise price equal to or greater than the market value of the underlying common stock on the date of grant.  In accordance with SFAS No. 148, &quot;Accounting for Stock-Based Compensation - Transition and Disclosure,&quot; the following table illustrates the effect on net income and earnings per share as if the Company had applied the fair value recognition provisions of SFAS No. 123, &quot;Accounting for Stock-based Compensation,&quot; to stock-based employee compensation for the fiscal quarter ended June 26, 2004:</P>
</FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=483>
<TR><TD WIDTH="78%" VALIGN="TOP" COLSPAN=3 HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P>Net income, as reported</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $  141,738 </FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="69%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="78%" VALIGN="TOP" COLSPAN=3 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Deduct:  Total stock-based employee compensation</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="78%" VALIGN="TOP" COLSPAN=3 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>expense determined under fair value method for rewards</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">26,500</FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="69%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">--------------</FONT></TD>
</TR>
<TR><TD WIDTH="78%" VALIGN="TOP" COLSPAN=3 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Proforma net income</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">  $  115,238</FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="69%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">========</FONT></TD>
</TR>
<TR><TD WIDTH="78%" VALIGN="TOP" COLSPAN=3 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Earnings per share:</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="73%" VALIGN="TOP" COLSPAN=2 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Basic and diluted - as reported</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$   0.01</FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="73%" VALIGN="TOP" COLSPAN=2 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Basic and diluted - pro forma</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$   0.01</FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="73%" VALIGN="TOP" COLSPAN=2 HEIGHT=16><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">========</FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="73%" VALIGN="TOP" COLSPAN=2 HEIGHT=16><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>&nbsp;</P>
<U><P>(4)  Inventories</P>
</U><P>Inventories consist of the following:</P></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=565>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">June 26,</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">December 27,</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2004</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2003</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P> </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Raw materials</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $           12,714 </FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $           23,413 </FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Work in process</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">            135,202 </FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">            136,124 </FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Finished goods</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">            265,275 </FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">            198,158 </FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>  Subtotal </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $          413,191 </FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $          357,695 </FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Reserve for obsolete</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>  inventories</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">             (10,000)</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">             (10,000)</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>  Inventories, net</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $          403,191 </FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $          347,695 </FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=============</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=============</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>&nbsp;</P>
<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=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">  </FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">   June 26,</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">December 27,</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2004</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2003</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P> </FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Accrued payroll and payroll taxes</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $          137,143 </FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $           75,815 </FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Accrued legal and accounting</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">              21,825 </FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">              38,725 </FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Accrued other</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">              21,470 </FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">                1,252 </FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>   </FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $          180,438 </FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $          115,792 </FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=============</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=============</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<OL START=6>

<U><LI>Note Payable - Related Party</LI></OL>

</U><P>In March 2003, the President of the Company executed a line-of-credit agreement with the Company.  Such agreement provides for maximum available borrowings of $200,000, with interest on any outstanding borrowings payable monthly at 1.5% above the prime rate, as published in the Wall Street Journal.  The note is collateralized by a security interest in the Company`s accounts receivable, and such note expires on February 1, 2005, at which time all unpaid principal and accrued interest is due.  There have been no borrowings under such note in fiscal 2004, and there are no borrowings outstanding under the note as of June 26, 2004.</P>
<U>
</U><P>&nbsp;</P>
<B><P>ITEM 2       MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</P>
</B>
<P>The following discussion and analysis of financial condition and results of operations is based upon and should be read in conjunction with the consolidated 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 27, 2003.</P>

<U><P>Forward-Looking Statements</P>
</U><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>Critical Accounting Policies</P>
</U><P>&#9;The critical accounting policies utilized by the Company in preparation of the accompanying consolidated financial statements are set forth in Part I, Item 7 of the Company`s Annual Report on Form 10-K for the year ended December 27, 2003, under the heading &quot;Management`s Discussion and Analysis of Financial Condition and Results of Operations&quot;.  There have been no material changes to these policies since December 27, 2003.</P>

<U><P>Results of Operations for Second Fiscal Quarter of 2004 (Q2 2004) Compared to the Second Fiscal Quarter of 2003 (Q2 2003)</P>
</U><P>Total revenue was $1,417 thousand in Q2 2004, a 28% increase from total revenue of $1,107 thousand in Q2 2003.   The increase in revenues came both from higher demand for existing products and higher demand for new products.   The largest increase in demand was for lids and heatspreaders for application-specific integrated circuits. </P>

<P>Total operating expenses in Q2 2004 were $1,267 thousand, a 19% increase from total operating expenses in Q2 2003 of $1,069 thousand.   Cost of product sales in Q2 2004 were $974 thousand, an increase of 18% from cost of product sales in Q2 2003 of $824 thousand.   Cost of product sales increased as a result of increased shipments.   Gross profit on product sales in Q2 2004 was 31% compared to gross profit on products sales in Q2 2003 of 26%.   This increase in gross profit is primarily the result of fixed costs being spread over a larger shipment volume.</P>

<P> Selling, general and administrative (SG&amp;A) expenses were $294 thousand in Q2 2004, a 20% increase from SG&amp;A expenses of $244 thousand in Q2 2003.   The increase in SG&amp;A expenses is primarily the result of higher commissions paid to sales representatives and higher salary expenses resulting from salary adjustments.</P>

<U><P>Results of Operations for First Six Months 2004 Compared to First Six Months of 2003</P>
</U><P>Total revenue was $3,082 thousand in the first six months of 2004, an 81% increase from total revenue of $1,702 thousand in the first six months of 2003. The increase in revenues came both from higher demand for existing products and higher demand for new products.   The largest increase in demand was for lids and heatspreaders for application-specific integrated circuits. </P>

<P>Total operating expenses in the first six months of 2004 were $2,754 thousand, a 48% increase from total operating expenses of $1,430 thousand in the first six months of 2003.   Cost of product sales in the first six months of 2004 were $2,204 thousand, a 42% increase from cost of product sales in the first six months of 2003 of $1,430 thousand.   Cost of product sales increased as a result of increased shipments.   Gross profit on product sales in the first six months of 2004 was 28% compared to gross profit on product sales in the first six months of 2003 of 16%. This increase in gross profit is primarily the result fixed costs being spread over a larger shipment volume.</P>

<P> Selling, general and administrative (SG&amp;A) expenses were $550 thousand in the first six months of 2004, a 42% increase from SG&amp;A expenses in the first six months of 2003 of $430 thousand.  The increase in SG&amp;A expenses is the result of higher commissions paid to the sales representatives and higher salary expenses resulting from salary adjustments.</P>

<U><P>Liquidity and Capital Resources</P>
</U><P>The Company`s cash balance and cash equivalents at June 26, 2004 was $363 thousand compared to cash balance and cash equivalents at December 27, 2003 of $190 thousand, an increase of $173 thousand or 92%.  This increase is primarily the result of positive cash flows generated from operations during the first six months of 2004 of approximately $396 thousand.  There were approximately $178 thousand of fixed asset additions that were funded by cash generated from operations and approximately $47 thousand was used to pay down existing capital lease obligations.</P>

<P>Accounts receivable increased to $783 thousand at June 26, 2004 from $659 thousand at December 27, 2003.  This change reflects differences in timing of shipments in Q2 2004 compared to Q4 2003.  The accounts receivable balance at June 26, 2004 and December 27, 2003 is net of allowance for doubtful accounts of $1 thousand.</P>

<P>Inventories increased to $403 thousand at June 26, 2004 from $348 thousand at December 27, 2003; this increase is primarily the result of a large customer implementing a consigned inventory system during Q2 2004, as well as the fact that increased inventory levels are required to meet the future demand of customers.</P>

<P>The Company financed its working capital during Q2 2004 with existing cash balances, and funds generated by operations.   The Company expects it will continue to be able to fund its working capital requirements for the remainder of 2004 from these same sources.</P>

<P>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.</P>

<U><P>Contractual Obligations</P>
</U><P>As of June 26, 2004, there have been no significant changes in the Company`s contractual obligations, consisting principally of various operating and capital leases, as disclosed at December 27, 2003.</P>

<P>ITEM 3&#9;&#9;QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</P>
<P ALIGN="CENTER"></P>
<P>The Company is not significantly exposed to the impact of interest rate changes and foreign currency fluctuations.  The Company has not used derivative financial instruments.</P>

<P>ITEM 4&#9;&#9;CONTROLS AND PROCEDURES</P>

<P>(a)&#9;The Company`s Chief Executive Officer and Principal 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 &quot;Exchange Act&quot;)) as of a date within 90 days prior to the filing date of this quarterly report (the &quot;Evaluation Date&quot;).  Based on such evaluation, such officer has concluded that, as of the Evaluation Date, the Company`s disclosure controls and procedures are effective in alerting them, on a timely basis, to material information relating to the Company (included its consolidated subsidiary) required to be included in the Company`s periodic filings under the Exchange Act.</P>

<P>(b)&#9;Changes in Internal Controls.  Since the evaluation date, there have not been any significant changes in the Company`s internal controls or in other factors that could significantly affect such controls.</P>

<B><P ALIGN="CENTER">PART II OTHER INFORMATION<BR>
</P>
</B><P>ITEM 1&#9;&#9;LEGAL PROCEEDINGS</P>
<P>&#9;None.</P>

<P>ITEM 2&#9;&#9;CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES FO EQUITY SECURITIES.</P>
<P>&#9;None.</P>

<P>ITEM 3&#9;&#9;DEFAULTS UPON SENIOR SECURITIES</P>
<P>&#9;None.</P>

<P>ITEM 4&#9;&#9;SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</P>
<P>&#9;Not applicable.</P>

<P>ITEM 5&#9;&#9;OTHER INFORMATION</P>
<P>&#9;Not applicable.</P>

<P>ITEM 6&#9;&#9;EXHIBITS AND REPORTS ON FORM 8-K: <BR>
(a)&#9;Exhibits:   None</P>
<OL START=2 TYPE="a">

<LI>Reports on Form 8-K</LI></OL>

<DIR>
<DIR>

<P>On August 6, 2004, the Company filed a report on Form 8-K relating to the announcement of its financial results for the fiscal quarter ended June 26, 2004, as presented in a press release dated August 6, 2004.</P>
<B><P ALIGN="CENTER"></P>
<P ALIGN="CENTER">&nbsp;</P></DIR>
</DIR>

<P ALIGN="CENTER">SIGNATURES</P>
<P ALIGN="CENTER"></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>

<B><U><P>Ceramics Process Systems Corporation</B><BR>
</U>(Registrant)</P>
<P ALIGN="CENTER"></P>
<P>Date:&#9;August 6, 2004<BR>
/s/&#9;Grant C. Bennett<BR>
Grant C. Bennett<BR>
President<BR>
</P>
<B><P ALIGN="CENTER">CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002<BR>
</P>
</B><P>I, Grant C. Bennett, certify that:</P>

<OL>

<LI>I have reviewed this quarterly report on Form 10-Q;<BR>
</LI>
<LI>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;<BR>
</LI>
<LI>Based on my knowledge, the consolidated 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;<BR>
</LI>
<LI>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) for the registrant and have:<BR>
</LI></OL>
<DIR>
<DIR>

<P>a)&#9;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;<BR>
</P>
<P>b)&#9;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 &quot;Evaluation Date&quot;); and<BR>
</P>
<P>c)&#9;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; and<BR>
</P></DIR>
</DIR>

<OL START=5>

<LI>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):<BR>
</LI></OL>
<DIR>
<DIR>

<P>a)&#9;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<BR>
</P>
<P>b)&#9;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.</P>
</DIR>
</DIR>

<P>Date:&#9;August 6, 2004<BR>
/s/&#9;Grant C. Bennett<BR>
Grant C. Bennett<BR>
Treasurer<BR>
</P>
<B><P ALIGN="CENTER">CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002<BR>
</P>
</B><P>I, Grant C. Bennett, certify that:</P>

<OL>

<LI>I have reviewed this quarterly report on Form 10-Q;<BR>
</LI>
<LI>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;<BR>
</LI>
<LI>Based on my knowledge, the consolidated 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;<BR>
</LI>
<LI>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) for the registrant and have:<BR>
</LI></OL>
<DIR>
<DIR>

<P>a)&#9;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;<BR>
</P>
<P>b)&#9;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 &quot;Evaluation Date&quot;); and<BR>
</P>
<P>c)&#9;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; and<BR>
</P></DIR>
</DIR>

<OL START=5>

<LI>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):<BR>
</LI></OL>
<DIR>
<DIR>

<P>a)&#9;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<BR>
</P>
<P>b)&#9;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.</P>
</DIR>
</DIR>

<P>Date:&#9;August 6, 2004<BR>
/s/&#9;Grant C. Bennett<BR>
Grant C. Bennett<BR>
President and Treasurer<BR>
</P>
<B><P ALIGN="CENTER">CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002<BR>
</P>
</B><P>In connection with the Quarterly Report of Ceramics Process Systems Corporation (the &quot;Company&quot;) on Form 10-Q for the three and six month periods ended June 26, 2004 as filed with the Securities and Exchange Commission on the date hereof (the &quot;Report&quot;), I, Grant C. Bennett, President and Treasurer 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:</P>

<OL>

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

<DIR>
<DIR>

<P>Date:&#9;August 6, 2004<BR>
/s/&#9;Grant C. Bennett<BR>
Grant C. Bennett<BR>
President and Treasurer<BR>
</P></DIR>
</DIR>
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