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<SEC-DOCUMENT>0000814676-05-000005.txt : 20050328
<SEC-HEADER>0000814676-05-000005.hdr.sgml : 20050328
<ACCEPTANCE-DATETIME>20050325184615
ACCESSION NUMBER:		0000814676-05-000005
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20041225
FILED AS OF DATE:		20050328
DATE AS OF CHANGE:		20050325

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-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-16088
		FILM NUMBER:		05705104

	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-K
<SEQUENCE>1
<FILENAME>k8a.htm
<DESCRIPTION>10-K
<TEXT>
<HTML>
<HEAD>
<META NAME="Generator" CONTENT="Microsoft Word 97">
<TITLE>UNITED STATES</TITLE>
</HEAD>
<BODY>

<B><FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION<BR>
</B>Washington, D.C.  20549<BR>
FORM 10-K<BR>
</P>
<P>(Mark One)<BR>
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 25, 2004<BR>
or<BR>
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the transition period from  to  </P>
<P ALIGN="CENTER"><BR>
Commission file number: 0-16088</P>
<B><P ALIGN="CENTER">CERAMICS PROCESS SYSTEMS CORPORATION</B><BR>
(Exact Name of Registrant as Specified in its Charter)<BR>
</P></FONT>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=639>
<TR><TD WIDTH="50%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Delaware<BR>
(State or Other Jurisdiction<BR>
of Incorporation or Organization)</FONT></TD>
<TD WIDTH="50%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">04-2832409<BR>
(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>
Chartley MA<BR>
(Address of principal executive offices)</FONT></TD>
<TD WIDTH="50%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2>
<P ALIGN="CENTER">02712-0338<BR>
(Zip Code)</P>
</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">Registrant`s telephone no., including area code:  508-222-0614<BR>
Securities registered pursuant to Section 12(b) of the Act: None<BR>
Securities registered pursuant to Section 12(g) of the Act:</P>
<U><P ALIGN="CENTER"><BR>
Common Stock, par value, $0.01 per share<BR>
</U>(Title of class)</P>
<P><BR>
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. <BR>
[X] Yes       [ ] No<BR>
</P>
<P>Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant`s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. [ ]</P>

<P>Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes  No  [ ] Yes       [X] No</P>

<P>The aggregate market value of the voting Common Stock held by non-affiliates of the Registrant was $5,111,383 based on the average of the reported closing bid and asked prices for the Common Stock as of the last business day of the registrant`s most recently completed second fiscal quarter as reported on the OTC Bulletin Board.<BR>
</P>
<P>Number of shares of Common Stock outstanding as of March 21, 2005: 12,293,209 shares.<BR>
</P>
<P>Documents incorporated by reference.<BR>
</P>
</FONT><B><FONT FACE="Arial" SIZE=5><P>Part I</P>
</B></FONT><FONT FACE="Arial" SIZE=2><P>Item 1.  Business.</P>
<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, heat spreaders or baseplates, and are used in applications where thermal management and/or weight are important considerations.</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`).</P>

<P>Although the Company`s focus is manufacturing components, the Company has sold licenses to portions of its technology to strategic partners such as Hitachi Metals Ltd. In 2004, 2003 and 2002,  greater than 99% of the Company`s total revenue was derived from manufactured products and less than 1% from licensing revenues.</P>

<P>The Company was incorporated in Massachusetts in 1984. The Company reincorporated in Delaware in April 1987, through a merger into its wholly-owned Delaware subsidiary organized for purposes of the reincorporation.  In July 1987, the Company completed its initial public offering of 1.5 million shares of its Common Stock. </P>

<U><P>Overview of Markets and Products<BR>
</P>
</U><P>Consumer demand continues to motivate the electronics industry to produce products which:<BR>
- - operate at higher speeds;<BR>
- - are smaller in size; and<BR>
- - operate with higher reliability.</P>

<P>While these three requirements result in products of ever-increasing performance, these requirements also create a fundamental challenge for the designer to manage the heat generated by the system moving at higher speeds.  Smaller assemblies further concentrate the heat and increase the difficulty of removing it.</P>

<P>This challenge is found at each level in an electronic assembly: at the integrated circuit level speeds are increasing and line widths are decreasing; at the circuit board level higher density devices are placed closer together on circuit boards; and at the system level higher density circuit boards are being assembled closer together.</P>

<P>The designer must resolve the thermal management issues or the system will fail.  For every 10 degree Celsius rise in temperature, the reliability of a circuit is decreased by approximately half.  In addition, heat usually causes changes in parameters which degrade the performance of both active and passive electronic components.</P>

<P>To resolve thermal management issues the designer is primarily concerned with two properties of the materials which comprise the system:  1) thermal conductivity, which is the rate at which heat moves through materials, and 2) thermal expansion rate (Coefficient of Thermal Expansion or CTE) which is the rate at which materials expand or contract as temperature changes.  The designer must ensure that the temperature of an electronic assembly stays within a range in which the differences in the expansion rates of the materials in the assembly do not cause a failure from breaking, delaminating, etc.</P>

<P>CPS combines at the microstructural level a ceramic with a metal to produce a composite material which has the thermal conductivity needed to remove heat, and a thermal expansion rate which is sufficiently close to other components in the assembly to ensure the assembly is reliable.  The ceramic is silicon carbide (SiC), the metal is aluminum (Al), and the composite is aluminum silicon carbide (AlSiC), a metal-matrix composite.  CPS can adjust the thermal expansion rate of AlSiC components to match the specific application by modifying the amount of SiC compared to the amount of Al in the component.</P>

<P>CPS produces products made of AlSiC in the shapes and configurations required for each application - i.e., in the form of lids, substrates, housings, etc.  Every product is made to a customers blueprint.  The CPS process technology allows most products to be made to net shape, requiring no or little final machining.</P>

<P>Although the Company`s focus today is on AlSiC components, the Company believes its proprietary Quickset- Quickcast process technology can be used to produce other metal-matrix composites which may meet future market needs.</P>

<P>Today, the problem of thermal management is most acute in high-performance, high-density applications such as cellular basestations, high-performance microprocessors, motor controllers and components for satellite communications.  However, as the trends towards faster speeds, reduced size and increased reliability continue, and as high-density circuitry is used in a larger number of applications, the Company believes that the Company`s products will be used in additional market segments.</P>

<U><P>Specific Markets and Products<BR>
</P>
<P>Lids and Heat Spreaders for High-Performance Microprocessors and Other Integrated Circuits (&quot;Flip-chip Applications&quot;)<BR>
</P>
</U><P>Increases in speed, circuit density, and the number of connections in microprocessor chips (MPUs) and application specific integrated circuits (ASICs) are accelerating a transition in the way in which these circuits are packaged.  Packages provide mechanical protection to the integrated circuit (IC), enable the IC to be connected to other circuits via pins, solder bumps or other connectors, and allow attachment of a heat sink or fan to ensure the IC does not overheat.  In the past most high-performance ICs were electrically connected to the package by fine wires in a process known as wire bonding.  Increasingly high-performance semiconductors are connected to the package by placing metal bumps on the connection points of the die, turning the die upside down in the package, and directly connecting the bumps on the die with corresponding bumps on the package base by reflowing the bumps.  This is referred to as a "flip-chip package".  Flip chip packages allow for connection of a larger number of leads in
 a smaller space, and can provide other electrical performance advantages compared to wire bonded packages.</P>

<P>In many flip chip configurations a lid or heat spreader is placed over the die to protect the die from mechanical damage and to facilitate the removal of heat from the die.  Often a heat sink or fan is then attached to the lid.  For a high-density die the package designer must ensure that the lid has sufficient thermal conductivity to remove heat from the die and that all components of the package assembly - the die itself, the package base, and the package lid - are made from materials with sufficiently similar thermal expansion rates to ensure the assembly will not break itself apart over time as it thermally cycles.</P>

<P>The Company`s composite material, AlSiC, has been developed to meet these two needs: it is engineered to have sufficient thermal conductivity to allow the heat generated by the die to be removed through the lid, and it is engineered to expand upon heating at a rate similar to other materials used in the package assembly in order to ensure reliability of the package over time as it thermally cycles.  The Company produces lids made of AlSiC for high performance microprocessors used in servers and other applications.</P>

<P>Most participants in the semiconductor industry believe the densities of ICs will continue to increase following the well-known "Moore`s Law".  As IC densities increase, generally so does the IC size, and the amount of heat generated by the IC.  The company believes the need for thermal management will continue to grow rapidly. </P>

<U><P>Wireless Communications Infrastructure Market (&quot;Cellular Basestation Applications&quot;)<BR>
</P>
</U><P>The demand for wireless telecommunications services such as cellular telephone service has grown significantly during the past decade, driven by reduced costs for wireless handsets, a more favorable regulatory environment, increasing competition among service providers and a greater availability of services and microwave spectrum.</P>

<P>In developing countries wireless telephone networks are being installed as an alternative to installing or upgrading traditional wireline networks.  The growth in wireless communications has required, and will continue to require, substantial investment by service providers in infrastructure equipment such as basestations. </P>

<P>The Company manufactures substrates and heat spreaders on which high-performance and high power circuits such as power amplifiers and power supplies are mounted in wireless basestations.  Use of the company`s products allows the basestation manufacturer to reduce overall basestation size, increase the number of calls a basestation can handle, and to improve reliability.</P>

<U><P>Motor Controller Market (&quot;IGBT Applications&quot;)<BR>
</P>
</U><P>The use of power modules to control electric motors of all sizes is growing.  This growth is the result of several factors including emerging high-power applications which demand power controllers such as trains, subways and certain industrial equipment, and cost declines in power modules which increasingly make variable speed drives cost effective.  Power semiconductors are a very significant portion of the cost of variable speed drives, and the cost of the module housing and thermal management system are also significant; declines in the costs of all these components is driving increased use of variable speed drives. </P>

<P>The Company provides substrates, baseplates and heat spreaders on which power semiconductors are mounted to produce modules for motor control.   The power semiconductors are typically insulated gate bipolar transistors and these applications are often referred to as IGBT applications. The Company`s AlSiC baseplates have sufficient thermal conductivity to allow for removal of heat through the baseplate, and have a thermal expansion rate sufficiently similar to the other components in the assembly to ensure reliability over time as the assembly thermally cycles.  The Company believes this market will continue to grow as the use of power modules penetrates additional motor applications, and as electric motors themselves penetrate new applications such as the hybrid electric vehicle.</P>

<U><P>Other Markets<BR>
</P>
</U><P>&#9;The Company believes there are several other applications within the microelectronics marketplace where the Company`s products address real needs, and which represent future growth potential.   In 2004, the Company produced prototype products for, among other applications, the optoelectronics market, the high brightness light emitting diode market (&quot;HB LED&quot;), and the radar market.</P>

<U><P>Customers<BR>
</P>
</U><P>The Company sells primarily to major microelectronics systems houses in the United States, Europe and Asia.  The Company began selling and marketing in Western Europe in 1999 and in Japan in 2000 through representatives in those areas.  The Company`s customers typically purchase prototype and evaluation quantities of the Company`s products over a one to three year period before purchasing production volumes.</P>

<P>In 2004, the Company`s four largest customers accounted for 42%, 27%, 7% and 7% of total revenues, respectively.  In 2003, the Company`s four largest customers accounted for 57%, 19%, 11% and 2% of total revenues, respectively.  In 2002, the Company`s four largest customers accounted for 31%, 22%, 12% and 4% of total revenues, respectively.   </P>

<P>In 2004 and 2003, 96% of the Company`s revenues were derived from commercial applications and 4% from defense related applications.  In 2002, 88% of the Company`s revenues were derived from commercial applications and 12% from defense related applications. </P>

<U><P>Research and Development<BR>
</P>
</U><P>The Company continues to perform product development under prototype manufacturing agreements with customers.  </P>

<U><P>Availability of Raw Materials<BR>
</P>
</U><P>The Company uses a variety of raw materials from numerous domestic and foreign suppliers.  These materials are primarily aluminum ingots, ceramic powders and chemicals.  The raw materials used by the Company are available from domestic and foreign sources and none is believed to be scarce or restricted for national security reasons. </P>

<U><P>Patents and Trade Secrets<BR>
</P>
</U><P>As of December 25, 2004, the Company had 12 United States patents and one United States patent pending.   The Company also has several international patents covering the same subject matter as the U.S. patents.  The Company`s licensees have rights to use certain patents as defined in their respective license agreements. </P>

<P>The Company intends to continue to apply for domestic and foreign patent protection in appropriate cases.  In other cases, the Company believes it may be better served by reliance on trade secret protection. In all cases, the Company intends to seek protection for its technological developments to preserve its competitive position. </P>

<U><P>Backlog and Contracts<BR>
</P>
</U><P>As of December 25, 2004, the Company had a product backlog of approximately $2.6 million compared with a product backlog of approximately $2.3 million as of December 27, 2003.  The Company shipped 100% of the year-end 2003 product backlog in 2004.</P>

<U><P>Competition<BR>
</P>
</U><P>The Company has developed and expects to continue to develop products for a number of different markets and will encounter competition from different producers of metal-matrix composites and other competing materials.</P>

<P>The Company believes that the principal competitive factors in its markets include technical competence, product performance, quality, reliability, price, corporate reputation, and strength of sales and marketing resources.  The Company believes its proprietary processes, reputation, and the price at which it can offer products for sale will enable it to compete successfully in the advanced microelectronics markets. However, many of the American and foreign companies now producing or developing metal-matrix composites have far greater financial and sales and marketing resources than the Company, which may enable them to develop and market products which would compete against those developed by the Company. </P>

<U><P>Government Regulation<BR>
</P>
</U><P>The Company produces non-nuclear, non-medical hazardous waste in its development and manufacturing operations.  The disposal of such waste is governed by state and federal regulations.  Various customers, vendors, and collaborative development agreement partners of the Company may reside abroad, thereby possibly involving export and import of raw materials, intermediate products, and finished products, as well as potential technology transfer abroad under collaborative development agreements.  These types of activities are regulated by the Bureau of Export Administration of the United States Department of Commerce. </P>

<U><P>Employees<BR>
</P>
</U><P>As of December 25, 2004, the Company had 80 full-time employees and 2 part-time employees, of whom 76 were engaged in manufacturing and engineering and 6 in sales and administration.  The Company also employs temporary employees as needed to support production and program requirements. </P>

<P>None of the Company`s employees is covered by a collective bargaining agreement.  The Company considers its relations with its employees to be excellent.</P>

<P>Item 2.  Properties.<BR>
</P>
<P>All of the Company`s manufacturing, engineering, sales and administrative operations are located in a leased facility in Chartley, Massachusetts. The Company is operating at the Chartley facility as a tenant-at-will. </P>

<P>The Company`s rental expense for operating leases was $97 thousand,  $103 thousand and $110 thousand for 2004,  2003 and 2002 respectively.</P>

<P>Item 3.  Legal Proceedings.<BR>
</P>
<P>The Company is not a party to any litigation which could have a material adverse effect on the Company or its business and is not aware of any pending or threatened material litigation against the Company.</P>

<P>Item 4.  Submission of Matters to a Vote of Security Holders.<BR>
</P>
<P>No matters were submitted to a vote of security holders during the fourth quarter of the year ended December 25, 2004.<BR>
</P>

<P>&nbsp;</P>
</FONT><B><FONT FACE="Arial" SIZE=5><P>&nbsp;</P>
<P>Part II</P>

</B></FONT><FONT FACE="Arial" SIZE=2><P>Item 5.  Market for Registrant`s Common Stock and Related Stockholder Matters<BR>
</P>
<P>On December 25, 2004, the Company had approximately 850 shareholders.  The high and low closing bid prices of the Company`s common stock for each quarter during the years ended December 25, 2004 and December 27, 2003 are shown below. </P>
</FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=626>
<TR><TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="38%" VALIGN="TOP" COLSPAN=2 HEIGHT=17>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">2004</U></FONT></TD>
<TD WIDTH="38%" VALIGN="TOP" COLSPAN=2 HEIGHT=17>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">2003</U></FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">High</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Low</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">High</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Low</U></FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P>1st Quarter</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.85</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.35</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$  0.45</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$  0.32</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P>2nd Quarter</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.66</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.53</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$  0.45</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$  0.31</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P>3rd Quarter</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 1.01</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.58</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$  0.45 </FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$  0.30</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P>4th Quarter</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 2.00</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.65</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$  0.40</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$  0.32</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>The Company has never paid cash dividends on its Common Stock.  The Company currently plans to reinvest its earnings, if any, for use in the business and does not intend to pay cash dividends in the foreseeable future.  Future dividend policy will depend, among other factors, upon the Company`s earnings and financial condition.</P>

<P>The Company`s Common Stock is traded on NASD`s Over-the-Counter Bulletin Board (OTCBB) under the symbol CPSX.</P>

<P>Item 6.  Selected Consolidated Financial Data</P>

<P>The following selected financial data of the Company should be read in conjunction with the consolidated financial statements and related notes filed as part of this Annual Report on Form 10-K. Units are in thousands except per share amounts.</P>

<U><P>SELECTED CONSOLIDATED FINANCIAL DATA ($000)<BR>
</P></U></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=625>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2>
<P>For the Fiscal Year:</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2004</U></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2003</U></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2002</U></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2001</U></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2000</U></FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2>
<P>Summary of Operations</U></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2>
<P>Product Sales</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 6,835</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 3,969 </FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 4,457 </FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 4,438 </FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 5,036 </FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=33>
<FONT FACE="Arial" SIZE=2><P>License and Royalty Revenue</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=33>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">8</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=33>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">25</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=33>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">37</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=33>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">23</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=33>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">9</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2>
<P>Operating Expenses</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">5,775</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">3,975</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">5,241</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">4,934</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">5,331</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2>
<P>Operating Income (Loss)</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">1,068</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> 19</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(747)</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(473)</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(286)</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2>
<P>Other Income (expense), net</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(28)</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(38) </FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">13 </FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(7)</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">92 </FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2>
<P>Net Income (Loss)</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 1,040</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">($ 19)</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">($ 734)</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">($ 480)</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">($ 194)</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=33>
<FONT FACE="Arial" SIZE=2><P>Net Income (Loss) Per Basic Common Share</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=33>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.08</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=33>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">($ 0.00)</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=33>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">($ 0.06)</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=33>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">($ 0.04)</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=33>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">($ 0.02)</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=33>
<FONT FACE="Arial" SIZE=2><P>Weighted Average Basic Number of Common Shares Outstanding</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=33>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">12,293</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=33>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">12,293</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=33>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">12,293</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=33>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">12,292</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=33>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">12,287</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=33>
<FONT FACE="Arial" SIZE=2><P>Net Income (Loss) Per Diluted Common Share</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=33>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.08</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=33>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">($ 0.00)</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=33>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">($ 0.06)</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=33>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">($ 0.04)</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=33>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">($ 0.02)</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=49>
<FONT FACE="Arial" SIZE=2><P>Weighted Average Diluted Number of Common Shares Outstanding</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=49>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">12,761</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=49>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">12,293</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=49>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">12,293</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=49>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">12,292</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=49>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">12,287</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=====</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Year-End Position:</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2>
<P>Working Capital</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$1,660</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$856 </FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$580 </FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$1,157 </FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$1,539 </FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2>
<P>Total Assets</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">3,246</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">1,917</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">1,956</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2,746</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">3,084</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2>
<P>Long-term Obligations</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">243</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">330</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">418</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">217</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">145</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2>
<P>Stockholders` Equity</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$2,242</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$1,202 </FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$1,221 </FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$1,955 </FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$2,434 </FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>&nbsp;</P>
<U><P>&nbsp;</P>
<P>SELECTED QUARTERLY FINANCIAL DATA</P>
</U></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=632>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">First</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Second</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Third</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Fourth</FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Fiscal</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Fiscal</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Fiscal</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Fiscal</FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">2004</U></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Quarter</U></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Quarter</U></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Quarter</U></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Quarter</U></FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2>
<P>Total revenues</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 1,664</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 1,417</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 1,805</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 1,957</FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2>
<P>Gross profit</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 434</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 444</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 482</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 907</FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2>
<P>Net income (loss)</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 169</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 141</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 181</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 549</FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2>
<P>Net income (loss) per</P>
<P>   basic common share</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.01</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.01</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.01</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.04</FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2>
<P>Net income (loss) per</P>
<P>   diluted common share</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.01</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.01</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.01</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.04</FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">2003</U></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2>
<P>Total revenues</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 595</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 1,107</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 868</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 1,424</FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2>
<P>Gross profit</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">($ 11)</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 283</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 218</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 357</FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2>
<P>Net income (loss)</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">($ 206)</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 29</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 7</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 151</FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2>
<P>Net income (loss) per</P>
<P>   basic common share</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">($ 0.02)</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.00</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.00</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.01</FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<FONT FACE="Arial" SIZE=2>
<P>Net income (loss) per</P>
<P>   diluted common share</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">($ 0.02)</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.00</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.00</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.01</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>The Company`s results of operations fluctuate from quarter to quarter.  The fluctuations are caused by various factors, primarily customer demand for the Company`s products.</P>

<P>In the fourth fiscal quarter of 2004, gross profit increased at a significantly higher rate than total revenues as a result of several factors, some of which are non-recurring.  These factors include increased production and inventory levels under consigned inventory agreements, revenue from cancellation charges, a more profitable product mix driven by specific customer near-term needs,  elimination of a reserve for obsolete inventory, and fixed costs being spread over a larger revenue base.   </P>

<P>Item 7.  Management`s Discussion and Analysis of Financial Condition and Results of Operations<BR>
</P>
<P>&#9;This document contains forward-looking statements, based on numerous assumptions and subject to risks and uncertainties.  Although the Company believes that the forward-looking statements are reasonable, it does not and cannot give any assurance that its beliefs and expectations will prove to be correct.  Many factors could significantly affect the Company`s operations and cause the Company`s actual results to be substantially different from the Company`s expectations.  Those factors include, but are not limited to: (I) general economic and business conditions; (ii) customer acceptance of the Company`s products; (iii) materials and manufacturing costs; (iv) the financial condition of customers, competitors and suppliers; (v) technological developments; (vi) increased competition; (vii) changes in capital market conditions; (viii) governmental and business conditions in countries where the Company`s products are manufactured and sold; (ix) changes in trade regulations; (x) the effect of acquisition act
ivity; (xi) changes in the Company`s plans, strategies, objectives, expectations or intentions; and (xii) other risks and uncertainties indicated from time to time in the Company`s filings with the Securities and Exchange Commission.  Actual results might differ materially from results suggested by any forward-looking statements in this report.  The Company does not have an obligation to publicly update any forward-looking statements, whether as a result of the receipt of new information, the occurrence of future events or otherwise.</P>

<U><P>Overview<BR>
</P>
</U><P>&#9;The Company 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 always made to customers` blueprints and are used as components in systems built and sold by its customers.  At any point in time the Company`s product mix will consist of some products with on-going production demand, and some products which are in the prototyping or evaluation stage at the Company`s customers.  The Company`s growth is dependent upon the level of demand for those products already in production, as well as the success of the Company in achieving new &quot;design wins&quot; for future products.</P>

<P>&#9;As a manufacturer of highly technical and custom products, the Company incurs fixed costs needed to support the business, but which do not vary significantly with changes in sales volume.  These costs include the fixed costs of applications engineering, tooling design and fabrication, process engineering, etc.  Accordingly, particularly given the Company`s current size, changes in sales volume generally result in even greater changes in financial performance on a percentage basis as fixed costs are spread over a larger or smaller base.  Sales volume is therefore a key financial metric used by management.</P>

<P>&#9;Revenue in 2004 was 71% higher than revenue in 2003.   Revenue grew in all three product areas (flip-chip applications, cellular basestation applications and IGBT applications).   This growth in revenues is the result of increased demand for existing products and the result of the Company`s customers introducing new products into the marketplace which incorporate the Company`s components.  In 2004, management continued to work with customers to determine, to the extent possible, real underlying demand, and to smooth the volatility in month-to-month demand.  This had a positive effect in 2004 on reducing manufacturing inefficiencies and improving financial performance. </P>

<P>&#9;Management believes the underlying demand for thermal management solutions is growing as the marketplace desires integrated circuits and electronics systems with higher speed and higher performance.  Management believes that the Company is well positioned to offer its solutions to current and new customers as these demands grow.  In 2004, the Company`s top four customers accounted for 83% of revenue, and the remaining 17% of revenue was derived from approximately 33 other customers, many of which bought prototypes in 2004 for evaluation in systems that they will introduce into the market in the future.</P>

<U><P>Application of Critical Accounting Policies<BR>
</P>
</U><P>Management prepares the consolidated financial statements of the Company in conformity with accounting principles generally accepted in the United States of America.  As such, we are required to make certain estimates, judgments and assumptions that we believe are reasonable based upon the information available.  These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented.  The Company`s significant accounting policies are presented within Note 2 to the consolidated financial statements; the significant accounting policies which management believes are most critical to aid in fully understanding and evaluating or reported financial results include the following:</P>

<P>Revenue Recognition<BR>
</P>
<P>The Company recognizes revenue in accordance with the provision of the Securities and Exchange Commission Staff Accounting Bulletin ("SAB") No. 104 which establishes guidance in applying generally accepted accounting principles to revenue recognition in financial statements. SAB No. 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the price to the buyer is fixed and determinable; and (4) collectibility is reasonably assured. </P>

<P>The Company`s shipping terms are customarily FOB shipping point. Revenues for products sold in the normal course of business are recognized upon shipment when delivery terms are FOB shipping point and all other revenue recognition criteria have been met.&nbsp;</P>

<P>Revenue related to license agreements is recognized upon receipt of the license payment or over the license period, if the Company has continuing obligations under the agreement.  Advance payments in excess of revenue recognized are recorded as deferred revenue.</P>

<P>Accounts Receivable<BR>
</P>
<P>The Company performs ongoing monitoring of the status of its receivables based on the payment history and the credit worthiness of its customers, as determined by a review of their current credit information. Management continuously monitor collections and payments from customers and maintains a provision for estimated credit losses based upon historical experience and any specific customer collection issues that have been identified.  While such credit losses have historically been low and within expectations, there is no guarantee that the Company will continue to experience the same credit loss rates as in the past.  A significant change in the liquidity or financial position of one of the major customers could have a material adverse impact on the collectibility of accounts receivable and future operating results.</P>

<P>Inventory<BR>
</P>
<P>The Company values its inventory at the lower of cost to manufacture or current estimated market value, whichever is less. </P>

<P>The Company follows a build to order business model; we only manufacture product to ship against specific purchase orders. In addition, 100% of the Company`s products are custom, meaning they are produced to a customer`s blueprint and generally cannot be used for any other purpose. Purchase orders generally have cancellation provisions which vary from customer to customer, but which can result occasionally in the Company producing product which the customer is not obligated to purchase.  </P>

<P>The level of inventory fluctuates for several reasons.  Some customers place a blanket purchase order and then request that the Company maintain certain inventory levels so the Company can ship immediately upon receiving a shipment release from them.  In other cases to more efficiently schedule production resources the Company may deliberately produce product for which the customers` shipment dates are in the future.</P>

<P>In determining inventory value the Company uses the first-in, first-out method and states inventory at the lower of cost or market.  As a result of the fact that the Company`s inventory is customer specific, if a customer order is cancelled it is likely that the Company would be unable to sell inventory manufactured to meet that order to another customer.  The value of the Company`s work in process and finished goods is based on the assumption that specific customers will take delivery of specific items of inventory.</P>

<P> Property and Equipment<BR>
</P>
<P>Property and equipment are stated at cost.  Depreciation of equipment is calculated on a straight-line basis over the estimated useful life, generally five years for production equipment and three to five years for furniture and office equipment.  Amortization of equipment under capital leases is calculated on a straight-line basis over the life of the lease.  Maintenance and repairs are charged to expense as incurred. Upon retirement or sale, the cost and related accumulated depreciation or amortization are removed from their respective accounts. Any gains or losses on the disposition of property and equipment are included in the results of operations in the period in which they occur.</P>

<P>Income Taxes<BR>
</P>
<P>The Company records deferred tax assets and liabilities based on the net tax effects of tax credits, operating loss carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we establish a valuation allowance.  The valuation allowance is based on our estimates of taxable income by jurisdiction in which we operate and the period over which our deferred tax assets will be recoverable.  We believe it is more likely than not that all of our deferred tax assets will not be realized and, accordingly, we have recorded a valuation allowance against all of our net deferred tax assets.   If results of operations in the future indicate that some or all of the deferred tax assets will be recovered, the valuation allowance will be adjusted acco
rdingly.</P>
<U>
<P>Results of Operations<BR>
</P>
</U><P>Revenue in 2004 of $6.8 million increased by 71% from 2003 revenue of $4.0 million.   Revenue grew in all three product areas (flip-chip applications, cellular basestation applications and IGBT applications).   This growth in revenues is the result of increased demand for existing products and the result of the Company`s customers introducing new products into the marketplace which incorporate the Company`s components. </P>

<P>Revenue in 2003 of $4.0 million declined by 11% from 2002 revenue of $4.5 million.  This decline in revenue was caused primarily by two factors:  1) continued weakness in demand across the electronics sector, and 2) declining revenue from a large customer (as their system which incorporates several of the Company`s products reached its end of life) which was not fully offset by revenue from new applications and new customers.</P>

<P>Operating Costs<BR>
</P>
<P>Total operating costs were $5.8 million, $4.0 million and $5.2 million for the fiscal years 2004, 2003 and 2002 respectively.</P>

<P>Operating costs increased in 2004 compared to 2003 by $1.8 million or 45%.  This increase was primarily due to increased material and labor costs associated with the 71% increase in revenue for the same period.</P>

<P>Operating costs decreased in 2003 compared to 2002 by $1.2 million or 24%.  This decrease was primarily the result of three factors:  1) reduced inventory write-downs:  operating costs in 2002 included a write-down in the value of inventory of $197 thousand and the establishment of a reserve of $132 thousand for inventory for which future demand was uncertain; operating costs in 2003 include a reserve of $10 thousand for inventory for which future demand was uncertain, 2) management cut costs when demand declined and had been cautious in adding costs as demand has increased, and 3) changes in the product mix towards higher margin products. </P>

<P>Cost of sales for 2004, 2003, and 2002 were $4.6 million, $3.1 million and $4.0 million respectively.   The increase in cost of sales in 2004 compared to 2003 was the result of increased revenue in 2004.  </P>

<P>The decrease in cost of sales in 2003 compared to 2002 was the result of the three factors described above under operating expenses as well as a result of the decrease in revenues for 2003 compared to 2002.</P>

<P>Gross margins on product revenue for 2004,  2003 and 2002 were 33%, 21%, and 11% respectively.  The increase in gross margins in 2004 compared to 2003 is the result of fixed costs being spread over a larger sales volume, product mix and improved yields in certain higher-volume products.   </P>
<P>In the fourth fiscal quarter of 2004, gross profit increased at a significantly higher rate than total revenues as a result of several factors, some of which are non-recurring.  These factors include increased production and inventory levels under consigned inventory agreements, revenue from cancellation charges, a more profitable product mix driven by specific customer near-term needs,  elimination of a reserve for obsolete inventory, and fixed costs being spread over a larger revenue base.   </P>

<P>The increase in gross margins in 2003 compared to 2002 is primarily the result of the three factors described above under operating expenses.</P>

<P>Selling, general and administrative (SG&amp;A) expenses for 2004, 2003 and 2002 were $1.2 million, $829 thousand, and $1.3 million respectively.  The increase in SG&amp;A in 2004 compared to 2003 primarily results from increased commissions paid due to increased sales and higher travel and sales promotions expenses.</P>

<P>The decrease in SG&amp;A expenses in 2003 compared to 2002 primarily resulted from lower commissions paid due to lower sales of certain products, reduced travel expenses, and lower salary expenses. </P>

<P>Other Income and Expense, Net<BR>
</P>
<P>The Company had net other income (expense) of  ($28 thousand), ($38 thousand) and $13 thousand for 2004,  2003 and 2002 respectively.   </P>

<P>The other expense in 2004 was primarily interest expense for production equipment on capital leases, offset partially by interest income on cash balances.</P>

<P>The other expense in 2003 is primarily interest expense for production equipment on capital leases, as well as interest paid to the Company`s President on outstanding borrowings under the line-of-credit as discussed below. </P>

<P>In 2002, the interest expense for production equipment on capital leases was offset by other income from resolution with a customer of the status of a payment made for tooling charges for which the Company was reimbursed.  </P>

<P>Income Taxes<BR>
</P>
<P>The Company provided for no income tax expense or benefit due to the utilization of net operating loss carryforwards in 2004 and due to its net operating losses in 2003 and 2002.</P>

<P>Certain provisions of the Internal Revenue Code limit the annual utilization of net operating loss carryforwards if, over a three-year period, a greater than 50% change in ownership occurs.  The Company believes that it did not exceed the 50% ownership change in the three-year period ending  December 25, 2004; therefore, at December 25, 2004 all net operating loss carryforwards are available to offset future taxable income.</P>

<U><P>Liquidity and Capital Resources<BR>
</P>
</U><P>Cash on hand of $458 thousand at year-end 2004 reflects an increase of $268 thousand or 142% from cash on hand of $190 thousand at year-end 2003.  This increase in cash was generated by operations throughout 2004.</P>

<P>Cash on hand of $190 thousand at year-end 2003 reflects an increase of $39 thousand or 26% from cash on hand of $151 thousand at year-end 2002.  This increase in cash was generated by operations in Q4 2003 as revenue increased.  </P>

<P>&#9;In 2004, operations generated cash of $812 thousand.   Investing activities, namely the purchase of equipment, consumed net cash of $447 thousand, and financing activities, namely principal payments of capital lease obligations, consumed cash of $97 thousand.</P>

<P>Management believes that cash flows from operations and existing cash balances will be sufficient to fund the Company`s cash requirements for the foreseeable future.  However, there is no assurance that the Company will be able to generate sufficient revenues or reduce certain discretionary spending in the event that planned operational goals are not met such that the Company will be able to meet its obligations as they become due.</P>

<P>In March 2003, the Company entered into a line-of-credit agreement with the Company`s President, with maximum available borrowings of $200,000; no amount was outstanding on this line- of-credit at year-end 2004 or 2003.  The line-of-credit agreement expired on January 16, 2005.</P>
<P> </P>
<P>In 2004,  2003 and 2002 the Company financed its operations through funds generated from operations, sales of fixed assets, consumption of available cash balances, and drawing on the line of credit described above.</P>

<P>Contractual Obligations<BR>
</P>
<P>&#9;The Company`s contractual obligations at year-end 2004 consist of the following:</P>
</FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=637>
<TR><TD WIDTH="27%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="73%" VALIGN="BOTTOM" COLSPAN=5>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Payments Due by Period</U></FONT></TD>
</TR>
<TR><TD WIDTH="27%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<U><FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Total</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Less than <U>one</U> <U>year</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<U><FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">1-3 years</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<U><FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">3-5 years</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">More than 5 <U>years</U></FONT></TD>
</TR>
<TR><TD WIDTH="27%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P>Capital Lease Obligations, including interest</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">$ 220,170</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">$ 102,476</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">$ 117,694</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">None</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">None</FONT></TD>
</TR>
<TR><TD WIDTH="27%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P>Purchase commitments for production equipment</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">$270,000</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">$270,000</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">--</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">--</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">--</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<U><P>Off-Balance Sheet Arrangements<BR>
</P>
</U><P>&#9;The Company has no off-balance sheet arrangements.</P>

<U><P>Newly Issued Accounting Pronouncements and Future Accounting Changes<BR>
</P>
</U><P>&#9;In November 2004, the  Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 151, &quot;Inventory Costs, An Amendment of ARB No. 43, Chapter 4,&quot; which clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage). The Company is required to adopt SFAS No. 151 in 2006 and does not expect adoption to have a significant impact on results of operations or financial condition.</P>

<P>&#9;In December 2004, the FASB issued SFAS No. 123(R), &quot;Share-Based Payment, an Amendment of FASB Statements No. 123 and 95.&quot; SFAS No. 123(R) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services or incurs liabilities in exchange for goods or services that are based on the fair value of the entity`s equity instruments. SFAS No. 123(R) requires public entities to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions) and recognize the cost over the period during which an employee is required to provide service in exchange for the award. Adoption requires a modified prospective application whereby compensation expense is recognized on or after the required effective date for the portion of the outstanding awards for which the requisite service has not yet been rendered, based on the grant-date fair value of th
ose awards calculated on a basis consistent with the SFAS No. 123 pro forma disclosures (see Note 2n). The Company will adopt SFAS No. 123 (R) on its effective date, commencing with the quarter ending September 24, 2005.    Actual expense recorded related to these options would be reduced by future forfeitures.  </P>
<P>&#9;</P>
<U><P>Inflation<BR>
</P>
</U><P>Inflation had no material effect on the results of operations or financial condition during 2004, 2003 or 2002. There can be no assurance however, that inflation will not affect the Company`s operations or business in the future.</P>

<U><P>Certain Factors That May Affect Future Results<BR>
</U><BR>
<B>The Company is heavily dependent on the electronics industry and changes in the industry could harm the Company`s business and operating results.  </P>
</B>
<P>&#9;The electronics industry is subject to economic cycles and has in the past experienced, and is likely in the future to experience, recessionary periods.  In particular, some sectors of the electronics industry are currently experiencing the effects of a downturn in economic conditions.  This downturn is leading to reduced demand for the products provided by component suppliers like the Company.  These changes in demand and in economic conditions have resulted and may continue to result in customer cancellation or rescheduling of orders, which could affect the Company`s results of operations.  In addition, a protracted general recession in the electronics industry could have a material adverse effect on the Company`s business, financial condition and results of operations.</P>

<B><P>The Company`s operating results may fluctuate substantially, which may cause its stock price to fall.</P>
</B>
<P>&#9;The Company`s quarterly and annual results of operations have varied in the past, and the Company`s operating results may vary significantly in the future due to a number of factors including, but not limited to, the following:  timing of orders from major customers; mix of products and services; pricing and other competitive pressures; delays in prototype shipments, economic conditions in the electronics industry, and the Company`s ability to time expenditures in anticipation of future revenues.</P>

<B><P>Some executive officers and key personnel are critical to the Company`s business and these key personnel may not remain with the Company in the future.</P>
</B>
<P>&#9;The Company`s success depends upon the continued service of some executive officers and other key personnel.  The Company`s employees are not bound by employment agreements, and there can be no assurance that the Company will retain its officers and key employees.</P>

<B><P>The Company may need additional capital in the future, which may not be available.</P>
</B>
<P>&#9;If the Company`s capital resources are insufficient to meet future capital requirements, the Company will have to raise additional funds.  The sale of equity or convertible debt securities in the future may be dilutive to the Company`s shareholders.  If the Company is unable to obtain adequate funds on reasonable terms, the Company may be required to curtail operations significantly or to obtain funds by entering into financing agreements on unattractive terms.  </P>

<B><P>The Company`s operating results are subject to fluctuations.</P>
</B>
<P>&#9;The Company has historically experienced significant fluctuations in its quarterly operating results and anticipates such fluctuations in the future.  The Company`s quarterly revenues and operating results depend on the volume and timing of orders which are difficult to forecast.   </P>

<B><P>The trading price of the Company`s common stock may be volatile.</P>
</B>
<P>&#9;The trading prices of the Company`s common stock has been and could in the future be subject to significant fluctuations in response to variations in quarterly operating results, developments in the electronics industry, changes in general economic conditions and economic conditions in the electronics industry, and other factors.  In addition, the stock market in recent years has experienced significant price and volume fluctuations which have affected the market prices of technology companies and which have been unrelated to or disproportionately impacted by the operating performance of those companies.  These broad market fluctuations may cause the market price of the Company`s common stock to decline.</P>

<P>Item 7.a.&#9;Quantitative and Qualitative Disclosure about Market Risk<BR>
</P>
<P>&#9;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 8.  Financial Statements and Supplementary Data<BR>
</P>
<P>See Index to the Company`s Financial Statements and the accompanying financial statements and notes which are filed as part of this Annual Report on Form 10-K.</P>

<P>Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure<BR>
</P>
<P>&#9;On November 15, 2004,  Sansiveri, Kimball &amp; McNamee, LLP resigned as the Company`s independent public accountants solely as a result of their decision to exit the business of auditing publicly-traded companies.  On February 8, 2005, the Company`s Board of Directions, upon the recommendation of the Company`s Audit Committee, engaged Wolf &amp; Company, P.C. as its independent public accountants to audit the Company`s consolidated financial statements for the year ended December 25, 2004.    </P>

<P>&#9;In connection with the audits for the years ended December 27, 2003 and December 28, 2002, and through November 15, 2004 (the date of the resignation by Sansiveri, Kimball &amp; McNamee, LLP), there were no disagreements with Sansiveri, Kimball &amp; McNamee on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures,  which disagreements, if not resolved to their satisfaction would have caused them to make reference in connection with their opinion on the subject matter of the disagreements.</P>

<P>&#9;The report of Sansiveri, Kimball &amp; McNamee LLP on the Company`s consolidated financial statements for the years ended December 27, 2003 and December 28, 2002 did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles.</P>

<P>Item 9a.  Controls and Procedures<BR>
</P>
<P>(a) Evaluation of Disclosure Controls and Procedures.  As of the end of our year ended December 25, 2004, an evaluation of the effectiveness of our &quot;disclosure controls and procedures&quot; (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the &quot;Exchange Act&quot;)) was carried out by our principal executive officer and principal financial officer.  Based upon that evaluation, our principal executive officer and principal financial officer have concluded that as of the end of that fiscal year, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.</P>

<P>It should be noted that while our management believes that our disclosure controls and procedures provide a reasonable level of assurance, they do not expect that our disclosure controls and procedures or internal financial controls will prevent all errors and fraud.  A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.</P>

<P>(b) Changes in Internal Control Over Financial Reporting.   During the year ended December 25,  2004, there were no changes in our internal control structure that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. <BR>
</P>

</FONT><B><FONT FACE="Arial" SIZE=5><P>Part III</P>
</B></FONT><FONT FACE="Arial" SIZE=2>
<P>Item 10.  Directors and Executive Officers of the Registrant<BR>
</P>
<P>Directors of the Company are elected annually and hold office until the next annual meeting of stockholders and until their respective successors are duly elected and qualified. The executive officers of the Company are appointed by the Board of Directors and hold office until their respective successors are duly elected and qualified. </P>

<P>The directors and executive officers of the Company as of December 25, 2004 are listed below.  </P>
</FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=637>
<TR><TD WIDTH="33%" VALIGN="TOP">
<U><FONT FACE="Arial" SIZE=2><P>Name</U></FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">
<U><FONT FACE="Arial" SIZE=2><P>Age</U></FONT></TD>
<TD WIDTH="58%" VALIGN="TOP">
<U><FONT FACE="Arial" SIZE=2><P>Position</P>
</U></FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Grant C. Bennett</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>50</FONT></TD>
<TD WIDTH="58%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>President, Chief Executive Officer, Treasurer and Director</FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>H. Kent Bowen</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>63</FONT></TD>
<TD WIDTH="58%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Director</FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Francis J. Hughes, Jr.</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>54</FONT></TD>
<TD WIDTH="58%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Director</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>Mr. Grant C. Bennett has held the positions of President, Chief Executive Officer and Director and Treasurer of the Company since September, 1992.  Prior to that time, he served as Vice President-Marketing and Sales of the Company from November, 1985 to September, 1992.  Before joining CPS, Mr. Bennett was a consultant at Bain &amp; Company, a Boston-based management consulting firm. </P>

<P>Dr. H. Kent Bowen has served as a Professor at Harvard Business School since July, 1992.  Prior to that time, he held the position of Ford Professor of Engineering at the Massachusetts Institute of Technology (`MIT`) from 1981 to 1992.  Dr. Bowen served as Co-Founder of the Leaders for Manufacturing Program at MIT.  Dr. Bowen has been a Director of the Company since 1984 and served as Chairman of the Board of Directors of the Company from 1984 to August, 1988. Dr. Bowen is also a Director of Align Technology and Allegheny Technologies.</P>

<P>Mr. Francis J. Hughes, Jr. has served as President of American Research and Development Corporation (`ARD`), a venture capital firm, since 1992. Mr. Hughes joined ARD`s predecessor organization in 1982, and became Chief Operating Officer in 1990. Mr. Hughes has co-founded and served as a General Partner of the following venture capital funds: ARD I, L.P., ARD II, L.P. (July, 1985), ARD III, L.P. (April, 1988), Hospitality Technology Fund, L.P.(June, 1991) and Egan-Managed Capital, L.P. (February, 1997). Mr. Hughes has served as a Director of the Company since 1993. Mr. Hughes is also a director of RF Monolithics, Inc.</P>

<P>There are no family relationships between or among any executive officers or directors of the Company.</P>

<P>Selection of New Directors<BR>
</P>
<P>&#9;The Board itself is responsible for selecting its own members and recommending them for election by the shareholders.  </P>

<P>Audit Committee<BR>
</P>
<P>&#9;The Company has a separately designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act.  The members of the Audit Committee are H.  Kent Bowen and Francis J. Hughes, Jr.  </P>

<P>Audit Committee Financial Expert<BR>
</P>
<P>&#9;The Board of Directors has determined that Francis J. Hughes, Jr. is an audit committee financial expert as defined by Item 401(h) of Regulations S-K of the Securities Exchange Act of 1934, as amended (the &quot;Exchange Act&quot;) and is independent within the meaning of Item 7(d)(3)(iv) of Schedule 14A of the Exchange Act.</P>

<P>Code of Ethics<BR>
</P>
<P>&#9;The Company has adopted a code of business conduct and ethics for directors, officers, (including the principal executive officer, principal financial officer and treasurer) and employees, known as the CPS Code of Conduct.  The CPS Code of Conduct is available by contacting the Company`s human resource department.</P>

<P>Shareholder Communication with the Board of Directors<BR>
</P>
<P>&#9;Any shareholder who desires to communicate with the Board, non-management directors as a group, or any individual director, may send a letter addressed to the same, c/o Accounting Manager, Ceramics Process Systems Corporation,  111 South Worcester Street, Chartley, MA 02712.  The Accounting Manager has been instructed by the Board to forward such communication directly to the addressee(s) unopened.</P>

<P>Item 11.  Executive Compensation<BR>
</P>
<P>The following table sets forth certain information with respect to the annual and long-term compensation of the Company`s Chief Executive Officer for the three fiscal years ended December 25, 2004.  No other executive officer of the Company during these years received total annual salary and bonus in excess of $100,000. </P>

<P>SUMMARY COMPENSATION TABLE<BR>
</P></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=619>
<TR><TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP" COLSPAN=3>
<U><FONT FACE="Arial" SIZE=2><P>Annual Compensation</U></FONT></TD>
<TD WIDTH="34%" VALIGN="TOP" COLSPAN=3>
<U><FONT FACE="Arial" SIZE=2><P>Long Term Compensation</U></FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="BOTTOM">
<U><FONT FACE="Arial" SIZE=2><P>Name &amp; Position</U></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Year</U></FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Salary</U></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<U><FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Bonus</U></FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Other Com-pensa-<U>tion</U></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Options / <U>SARs</U></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">LTIP Pay-<U>outs</U></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">All Other Compen-sa<U>tion</U></FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Grant C. Bennett</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2004</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$112,952</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">$55,000</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">$0</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">$0</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">`$0</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">$0</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>President &amp; Chief</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2003</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$80,669</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">$0</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">$0</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">$0</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">`$0</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">$0</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Executive Officer</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2002</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$103,491</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">$0</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">$0</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">$0</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">$0</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">$0</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>The Company`s President and Chief Executive Officer did not receive option grants during fiscal year 2004.  During fiscal year 2004 no options were exercised by him, and at the end of fiscal year 2004 no options were held by him.</P>

<U><P>Directors` Fees<BR>
</P>
</U><P>The Company adopted the 1999 Stock Incentive Plan ("1999 Plan") on January 22, 1999.  Under the terms of the 1999 Plan, all of the Company`s employees, officers, directors, consultants and advisors are eligible to be granted options, restricted stock awards, or other stock-based awards.  In 2004, no options to purchase shares of the Company`s Common Stock were granted to either of the non-employee directors, namely Dr. Bowen and Mr. Hughes.  All options granted are nonstatutory stock options granted at the fair market value of the stock, are exercisable one year from the date of grant, and expire ten years from the date of grant.  The 1999 Plan includes provisions for the acceleration of vesting in the event of a change in control of the Company.  </P>

<P>Outside directors may receive expense reimbursements for attending board and committee meetings.  Directors who are officers or employees of the Company do not receive any additional compensation for their services as directors.</P>

<P>Item 12.  Security Ownership of Certain Beneficial Owners and Management<BR>
</P>
<P>The following table sets forth certain information, as of December 25, 2004, with respect to the beneficial ownership of the Company`s Common Stock by (i) each person known by the Company to own beneficially more than 5% of the outstanding shares of Common Stock, (ii) each Director of the Company, (iii) each Executive Officer of the Company named above in the Summary Compensation Table, and (iv) all Directors and Officers as a group:<BR>
</P></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=589>
<TR><TD WIDTH="39%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P>Name and Address of<BR>
<U>Beneficial Owner</P>
</U></FONT></TD>
<TD WIDTH="21%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Common Stock Beneficially <U>Owned</P>
</U><P ALIGN="RIGHT"></FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Notes (1)</P>
</U><P ALIGN="RIGHT"></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Percentage of Shares of Common Stock<U> Outstanding</P>
</U><P ALIGN="RIGHT"></FONT></TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="BOTTOM" HEIGHT=45>
<FONT FACE="Arial" SIZE=2><P>ARD Master, L.P.<BR>
30 Federal Street<BR>
Boston, MA 02110-2508 </FONT></TD>
<TD WIDTH="21%" VALIGN="BOTTOM" HEIGHT=45>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2,184,789</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=45>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(2)</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=45>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">17.8%</FONT></TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="BOTTOM" HEIGHT=76>
<FONT FACE="Arial" SIZE=2>
<P>Waco Partners<BR>
c/o Wechsler &amp; Co., Inc.<BR>
105 South Bedford Road,<BR>
Suite 30<BR>
Mt. Kisco, NY 10549</FONT></TD>
<TD WIDTH="21%" VALIGN="BOTTOM" HEIGHT=76>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">1,669,980</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=76><P></P></TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=76>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">13.6%</FONT></TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="BOTTOM" HEIGHT=30>
<FONT FACE="Arial" SIZE=2><P>DIRECTORS AND OFFICERS:</FONT></TD>
<TD WIDTH="21%" VALIGN="BOTTOM" HEIGHT=30><P></P></TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=30><P></P></TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=30><P></P></TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="BOTTOM" HEIGHT=30>
<FONT FACE="Arial" SIZE=2>
<P>Grant C. Bennett<BR>
Director &amp; Officer</FONT></TD>
<TD WIDTH="21%" VALIGN="BOTTOM" HEIGHT=30>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">1,612,331</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=30><P></P></TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=30>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">13.1%</FONT></TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="BOTTOM" HEIGHT=32>
<FONT FACE="Arial" SIZE=2>
<P>H. Kent Bowen<BR>
Director</FONT></TD>
<TD WIDTH="21%" VALIGN="BOTTOM" HEIGHT=32>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">40,000</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=32>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(3)</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=32>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">*</FONT></TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="BOTTOM" HEIGHT=32>
<FONT FACE="Arial" SIZE=2>
<P>Francis J. Hughes, Jr.<BR>
Director</FONT></TD>
<TD WIDTH="21%" VALIGN="BOTTOM" HEIGHT=32>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2,224,789</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=32>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(4)</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=32>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">18.1%</FONT></TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="BOTTOM" HEIGHT=5><P></P></TD>
<TD WIDTH="21%" VALIGN="BOTTOM" HEIGHT=5>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">--------------</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=5><P></P></TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=5>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">--------------</FONT></TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="BOTTOM" HEIGHT=32>
<FONT FACE="Arial" SIZE=2>
<P>All directors and officers<BR>
as a group (three persons)</FONT></TD>
<TD WIDTH="21%" VALIGN="BOTTOM" HEIGHT=32>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">3,877,120</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=32>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(5)</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=32>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">31.5%</FONT></TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="BOTTOM" HEIGHT=5><P></P></TD>
<TD WIDTH="21%" VALIGN="BOTTOM" HEIGHT=5>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">========</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=5><P></P></TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=5>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">========</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>*Less than 1% of the total number of outstanding shares of Common Stock.</P>

<P>1. The inclusion herein of any shares of Common Stock deemed beneficially owned does not constitute an admission of beneficial ownership of those shares.  Unless otherwise indicated, each stockholder referred to above has sole voting and investment power with respect to the shares listed.</P>

<P>2. Consists of 2,184,789 shares owned by ARD Master L.P., Excludes options to purchase 40,000 shares of common stock held by Mr. Hughes.</P>

<P>3. Consists of options to purchase 40,000 shares of common stock.</P>

<P>4. Consists of shares described in Footnote 2 above owned by ARD Master, L.P., and options to purchase 40,000 shares of common stock held by Mr. Hughes.</P>

<P>5. Consists of all shares and options to purchase shares described in Footnotes 3, 4 and 5 above, and shares owned by Grant C. Bennett listed in above table.</P>

<P>Item 13.  Certain Relationships and Related Transactions<BR>
</P>
<P>&#9;The Company`s President has provided the Company with a line-of-credit which expired on January 16, 2005.  Such agreement provides for maximum available borrowings of $200,000, and is secured by the Company`s trade accounts receivable.  There were no amounts outstanding under such agreement at December 25, 2004.</P>

<P>Item 14.  Principal Accounting Fees and Services.<BR>
</P>
<P>&#9;Fees paid to the Company`s independent accountants in the last two fiscal years are:</P>
<P>&#9;&#9;</P></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=554>
<TR><TD WIDTH="26%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="37%" VALIGN="TOP" COLSPAN=2 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Sansiveri, Kimball</FONT></TD>
<TD WIDTH="37%" VALIGN="TOP" COLSPAN=2 HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="37%" VALIGN="TOP" COLSPAN=2 HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">&amp; McNamee, LLP</U></FONT></TD>
<TD WIDTH="37%" VALIGN="TOP" COLSPAN=2 HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Wolf &amp; Company PC</U></FONT></TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2004</U></FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2003</U></FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2004</U></FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2003</U></FONT></TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Audit fees</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">       $ 11,619 </FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">       $ 45,400 </FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">        $ 38,500 </FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=======</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=======</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=======</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=======</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>&#9;Audit Fees consist of aggregate fees for professional services rendered for the audit of our annual financial statements and review of the interim financial statements included in quarterly reports or services that are normally provided by the independent auditor in connection with statutory and regulatory filings or engagements for the fiscal years ended December 25, 2004 and December 27, 2003, respectively.</P>
</FONT><FONT FACE="Courier New" SIZE=2>
</FONT><FONT FACE="Arial" SIZE=2><P>Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors</P>
<P>&#9;At present, our audit committee approves each engagement for audit or non-audit services before we engage Wolf &amp; Company to provide those services. Our audit committee has not established any pre-approval policies or procedures that would allow our management to engage Wolf &amp; Company to provide any specified services with only an obligation to notify the audit committee of the engagement for those services. None of the services provided by Wolf &amp; Company for fiscal 2004 was obtained in reliance on the waiver of the pre-approval requirement afforded in SEC regulations.</P>
</FONT><FONT FACE="Courier New" SIZE=2>
</FONT><FONT FACE="Arial" SIZE=2><P>&nbsp;</P>
</FONT><B><FONT FACE="Arial" SIZE=5><P>&nbsp;</P>
<P>Part IV</P>
</B></FONT><FONT FACE="Arial" SIZE=2>
<P>Item 15.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.</P>
<P>(a)  Documents filed as part of this Form 10-K.</P>

<U><P>1. Financial Statements<BR>
</U>The financial statements filed as part of this Form 10-K are listed on the Index to Consolidated Financial Statements of this Form 10-K.</P>

<U><P>2. Financial Statement Schedules:<BR>
</U>Schedule II   Valuation and Qualifying Account for the three years in the period ended December 25, 2004.</P>

<U><P>3. Exhibits<BR>
</U>The exhibits to this Form 10-K are listed on the Exhibit Index of this Form 10-K.</P>

<P>&nbsp;</P>
<P>SIGNATURES</P>

<P>Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.</P>
</FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=589>
<TR><TD VALIGN="TOP" COLSPAN=2>
<FONT FACE="Arial" SIZE=2><P>CERAMICS PROCESS SYSTEMS CORPORATION</FONT></TD>
</TR>
<TR><TD WIDTH="8%" VALIGN="TOP" HEIGHT=45>
<FONT FACE="Arial" SIZE=2><P>By:</FONT></TD>
<TD WIDTH="92%" VALIGN="TOP" HEIGHT=45>
<FONT FACE="Arial" SIZE=2><P>/s/ Grant C. Bennett<BR>
President<BR>
March 24, 2005</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>Pursuant to the Requirements of the Securities Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. </P>
</FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=589>
<TR><TD WIDTH="34%" VALIGN="TOP">
<U><FONT FACE="Arial" SIZE=2><P>Signature</U></FONT></TD>
<TD WIDTH="41%" VALIGN="TOP">
<U><FONT FACE="Arial" SIZE=2><P>Title</U></FONT></TD>
<TD WIDTH="25%" VALIGN="TOP">
<U><FONT FACE="Arial" SIZE=2><P>Date</P>
</U></FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="BOTTOM">
<U><FONT FACE="Arial" SIZE=2><P>/s/ Grant C. Bennett</U></FONT></TD>
<TD WIDTH="41%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>President, Treasurer and Director (Principal Executive Officer)</FONT></TD>
<TD WIDTH="25%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>March 24, 2005</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Grant C. Bennett</FONT></TD>
<TD WIDTH="41%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="41%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP">
<U><FONT FACE="Arial" SIZE=2><P>/s/ H. Kent Bowen</U></FONT></TD>
<TD WIDTH="41%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Director</FONT></TD>
<TD WIDTH="25%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>March 24, 2005</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>H. Kent Bowen</FONT></TD>
<TD WIDTH="41%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="41%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP">
<U><FONT FACE="Arial" SIZE=2><P>/s/ Francis J. Hughes, Jr.</U></FONT></TD>
<TD WIDTH="41%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Director</FONT></TD>
<TD WIDTH="25%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>March 24, 2005</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Francis J. Hughes</FONT></TD>
<TD WIDTH="41%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">CERAMICS PROCESS SYSTEMS CORPORATION<BR>
EXHIBIT INDEX<BR>
</P></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=589>
<TR><TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Exhibit</P>
<P>No.</FONT></TD>
<TD WIDTH="89%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Description</FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>3.1*</FONT></TD>
<TD WIDTH="89%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Restated Certificate of Incorporation of the Company, as amended, is incorporated herein by reference to Exhibit 3 to the Company`s Registration Statement on Form 8-A (File No. 0-16088)</FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>3.2*</FONT></TD>
<TD WIDTH="89%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>By-laws of the Company, as amended, are incorporated herein by reference to Exhibit 3.2 to the Company`s Registration Statement on Form S-1 (File No. 33-14616)(the `1987 S-1Registration Statement`)</FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>4.1*</FONT></TD>
<TD WIDTH="89%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Specimen certificate for shares of Common Stock of the Company is incorporated herein by reference to Exhibit 4 to the 1987 S-1 Registration Statement</FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>4.2*</FONT></TD>
<TD WIDTH="89%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Description of Capital Stock contained in the Restated Certificate of Incorporation of the Company, as amended, filed as Exhibit 3.1</FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>10.1*</P>
<P>(1)</FONT></TD>
<TD WIDTH="89%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>1984 Stock Option Plan of the Company, as amended, is incorporated herein by reference to Exhibit 10(b) to the Company`s Annual Report on Form 10-K for the year ended December 31, 1988</FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>10.2*</P>
<P>(1)</FONT></TD>
<TD WIDTH="89%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>1989 Stock Option Plan of the Company, is incorporated by reference to Exhibit 10.6 to the Company`s 1989 S-1 Registration Statement</FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>10.3*</P>
<P>(1)</FONT></TD>
<TD WIDTH="89%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>1992 Director Stock Option Plan is incorporated by reference to Exhibit 10.5 to the Company`s Annual Report on Form 10-K for the fiscal year ended December 28, 1991</FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>10.4*</FONT></TD>
<TD WIDTH="89%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Participation Agreement, dated February 14, 1991, between the Company and Sopretac, a French societe anonyme, is incorporated by reference to Exhibit 10.10 to the Company`s Annual Report on Form 10-K for the year ended December 28, 1991</FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>10.5*</P>
<P>(1)</FONT></TD>
<TD WIDTH="89%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Retirement Savings Plan, effective September 1, 1987 is incorporated by reference to Exhibit 10.35 to the Company`s 1989 S-1 Registration Statement</FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>10.7*</FONT></TD>
<TD WIDTH="89%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Research and Development Agreement, dated as of June 26, 1991, between the Company and Carpenter Technology Corporation (`CarTech`) is incorporated by reference to Exhibit 10.17 to the Company`s Annual Report on Form 10-K for the year ended December 28, 1991</FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>10.8*</FONT></TD>
<TD WIDTH="89%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Option and License Agreement, dated as of June 26, 1991, between the Company and CarTech is incorporated by reference to Exhibit 10.19 to the Company`s Annual Report on Form 10-K for the year ended December 28, 1991</FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>10.9*</FONT></TD>
<TD WIDTH="89%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>License Agreement, dated as of December 11, 1992, between the Company and CarTech is incorporated by reference to Exhibit 10.19 to the Company`s Annual Report on Form 10-K for the fiscal year ended January 2, 1993</FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>10.10*</FONT></TD>
<TD WIDTH="89%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Amendment to Research and Development Agreement, dated as of December 11, 1992, between the Company and CarTech is incorporated by reference to Exhibit 10.20 to the Company`s Annual Report on Form 10-K for the fiscal year ended January 2, 1993</FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>10.11*</FONT></TD>
<TD WIDTH="89%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Amendment to Option and License Agreement, dated as of December 11, 1992, between the Company and CarTech is incorporated by reference to Exhibit 10.21 to the Company`s Annual Report on Form 10-K for the fiscal year ended January 2, 1993</FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>10.14*</FONT></TD>
<TD WIDTH="89%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Form of 10% Convertible Subordinated Note Due June 30, 1995 and related Common Stock Purchase Warrant between the Company and noteholder is incorporated by reference to Exhibit 10.22 to the Company`s Annual Report for the fiscal year ended January 1, 1994</FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>10.15*</FONT></TD>
<TD WIDTH="89%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>10% Convertible Subordinated Note Due April 21, 2001 between the Company and Waco Partners and related Subordinated Convertible Note Purchase Agreement between the Company and Wechsler &amp; Co., Inc. is incorporated by reference to Exhibit 10.21 to the Company`s Annual Report for the fiscal year ended December 31, 1994</FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>10.16*</FONT></TD>
<TD WIDTH="89%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>10% Convertible Subordinated Note Due January 31, 1996 and related Common Stock Purchase Warrant between the Company and Ampersand Specialty Materials Ventures Limited Partnership is incorporated by reference to Exhibit 10.22 to the Company`s Annual Report for the fiscal year ended December 31, 1994</FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>10.17*</FONT></TD>
<TD WIDTH="89%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Form of 10% Convertible Subordinated Note Due April 24, 1996 and related Common Stock Purchase Warrant between the Company and noteholder is incorporated by reference to Exhibit 10.23 to the Company`s Annual Report for the fiscal year ended December 31, 1994 </FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>10.19*</FONT></TD>
<TD WIDTH="89%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Secured Line of Credit Note Due June 30, 1996 and related Security Agreement between the Company and Kilburn Isotronics, Inc.</FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>10.21*</FONT></TD>
<TD WIDTH="89%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>1999 Stock Incentive Plan adopted by the Company`s Board of Directors on January 22, 1999</FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>21*</FONT></TD>
<TD WIDTH="89%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Subsidiaries of the Registrant are incorporated herein by reference to Exhibit 22 to the Company`s Annual Report on Form 10-K for the year ended December 31, 1988</FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>31.1</FONT></TD>
<TD WIDTH="89%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Certification Pursuant to Exchange Act Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>32.1</FONT></TD>
<TD WIDTH="89%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>*   Incorporated herein by reference.</P>

<P>(1) Management Contract or compensatory plan or arrangement filed as an exhibit to this Form pursuant to Items 14(a) and 14(c) of Form 10-K. </P>

<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">INDEX TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
OF<BR>
CERAMICS PROCESS SYSTEMS CORPORATION<BR>
</P></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=589>
<TR><TD WIDTH="84%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P>Reports of Independent Registered Public Accounting Firms</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">25</FONT></TD>
</TR>
<TR><TD WIDTH="84%" VALIGN="BOTTOM" HEIGHT=30>
<FONT FACE="Arial" SIZE=2><P><BR>
Consolidated Balance Sheets as of December 25, 2004 and December 27, 2003</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=30>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">27</FONT></TD>
</TR>
<TR><TD WIDTH="84%" VALIGN="BOTTOM" HEIGHT=45>
<FONT FACE="Arial" SIZE=2><P><BR>
Consolidated Statements of Operations for the years ended December 25, 2004,  December 27, 2003 and December 28, 2002</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=45>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">29</FONT></TD>
</TR>
<TR><TD WIDTH="84%" VALIGN="BOTTOM" HEIGHT=45>
<FONT FACE="Arial" SIZE=2><P><BR>
Consolidated Statements of Stockholders` Equity <BR>
for the years ended December 25, 2004,  December 27, 2003 and December 28, 2002</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=45>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">30</FONT></TD>
</TR>
<TR><TD WIDTH="84%" VALIGN="BOTTOM" HEIGHT=45>
<FONT FACE="Arial" SIZE=2><P><BR>
Consolidated Statements of Cash Flows for the years <BR>
ended December 25, 2004, December 27, 2003 and December 28, 2002</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=45>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">31</FONT></TD>
</TR>
<TR><TD WIDTH="84%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P><BR>
Notes to Consolidated Financial Statements</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">32</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>All schedules, other than Schedule II, are omitted because they are not applicable or the required information is included in the financial statements or notes thereto.</P>

<P>&nbsp;</P>
<P>&nbsp;</P>
</FONT><FONT FACE="Courier New" SIZE=2><P>&nbsp;</P>
</FONT><FONT FACE="Arial" SIZE=2><P>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</FONT><FONT FACE="Courier New" SIZE=2><BR>
</P>
</FONT><FONT FACE="Arial" SIZE=2>
<P>To the Board of Directors and Stockholders,<BR>
Ceramics Process Systems Corporation<BR>
Chartley, Massachusetts</P>

<P>We have audited the accompanying consolidated balance sheet of Ceramics Process Systems Corporation and subsidiary as of December 25, 2004 and the related consolidated statements of operations, stockholders` equity and cash flows for the year then ended. These financial statements are the responsibility of the Corporation`s management. Our responsibility is to express an opinion on these financial statements based on our audit. The consolidated financial statements of Ceramics Process Systems Corporation and subsidiary as of December 27, 2003 and for the years ended December 27, 2003 and December 28, 2002 were audited by other auditors. Those auditors expressed an unqualified opinion on those financial statements in their report dated March 8, 2004.</P>

<P>We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.</P>

<P>In our opinion, the 2004 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ceramics Process Systems Corporation and subsidiary as of December 25, 2004, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. </P>

<P>Also, in our opinion, the related financial statement schedule, when considered in relation to the December 25, 2004 basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.</P>

<P>/s/   Wolf &amp; Company, P.C.<BR>
Boston, Massachusetts<BR>
March 4, 2005</P>

<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
</FONT><FONT FACE="Courier New" SIZE=2><P>&nbsp;</P>
<P>&nbsp;</P>
</FONT><FONT FACE="Arial" SIZE=2><P>INDEPENDENT AUDITOR`S REPORT</FONT><FONT FACE="Courier New" SIZE=2><BR>
</P>
</FONT><FONT FACE="Arial" SIZE=2>
<P>To the Board of Directors and Stockholders of<BR>
&#9;Ceramics Process Systems Corporation:</P>

<P>We have audited the accompanying consolidated balance sheet of Ceramics Process Systems Corporation and subsidiary as of December 27, 2003 and the related consolidated statements of operations, stockholders` equity (deficit), and cash flows for the years ended December 27, 2003 and December 28, 2002.  These consolidated financial statements are the responsibility of the Company`s management.  Our responsibility is to express an opinion on the consolidated financial statements based on our audits. </P>

<P>We conducted our audits in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.</P>

<P>In our opinion, based on our audits, the consolidated financial statements present fairly, in all material respects, the financial position of Ceramics Process Systems Corporation and subsidiary as of December 27, 2003 and the results of their operations and their cash flows for the years ended December 27, 2003 and December 28, 2002 in conformity with accounting principles generally accepted in the United States of America.  Also, in our opinion, the related financial statement schedule, when considered in relation to the December 27, 2003 and December 28, 2002 basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.</P>

<P>/s/  Sansiveri, Kimball &amp; McNamee, L.L.P.<BR>
</P>
<P>Providence, Rhode Island<BR>
March 8, 2004</P>

<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P ALIGN="CENTER">CERAMICS PROCESS SYSTEMS CORPORATION<BR>
CONSOLIDATED BALANCE SHEETS</P>
<P ALIGN="CENTER"></P>
<P ALIGN="CENTER">&nbsp;</P></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">December 25,</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>
<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"> $ 457,947 </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,</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>     net of allowance for doubtful accounts</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>     of $12,099 and $1,099</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">1,311,851</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">623,095</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">27,376</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">2,420,269</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>
<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:</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">3,042,139</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">211,424</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><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 Cost</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">3,253,563</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">2,810,546</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><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>    and amortization</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(2,427,934)</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><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>        Net property and equipment</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">825,629</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"> $ 3,245,898 </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 ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">CERAMICS PROCESS SYSTEMS CORPORATION<BR>
CONSOLIDATED BALANCE SHEETS</P>
</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">December 25,</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">-------------</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> </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>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"> $ 498,683 </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">175,274</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">115,791</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">86,532</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">760,489</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">385,742</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">109,332</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">1,003,705</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">715,420</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>
<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>
<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>
<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">(30,477,717)</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">(31,518,149)</FONT></TD>
</TR>
<TR><TD WIDTH="57%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>  Less cost of 22,883 common</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>    shares repurchased </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">2,242,193</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">1,201,761</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"> $ 3,245,898 </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>&nbsp;</P>
<P>See accompanying notes to financial statements.</P>

<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">CERAMICS PROCESS SYSTEMS CORPORATION<BR>
CONSOLIDATED STATEMENTS OF OPERATIONS</P>
<P ALIGN="CENTER"></P></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=623>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">December 25,</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">December 27,</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">December 28,</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" 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="18%" 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="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2002</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" 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="18%" 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="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Revenues:</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>   Product sales</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 6,834,787 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 3,968,488 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 4,456,983 </FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>   License and royalty revenue</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">               8,031 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">             25,202 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">36,917</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" 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="18%" 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="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>      Total Revenues</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">        6,842,818 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">        3,993,690 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">        4,493,900 </FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>   Cost of product sales</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">4,576,037</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">3,146,354</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">3,957,599</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" 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="18%" 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="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>   Gross Margin</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2,266,781</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">847,336</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">536,301</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>   Selling, general, and</FONT></TD>
<TD WIDTH="19%" 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="18%" 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="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> </FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>    administrative</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">1,198,795</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">828,829</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">1,283,796</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" 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="18%" 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="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Income (loss) from operations</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">1,067,986 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">18,507 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(747,495)</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Other income (expense), net</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(27,554)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(37,536)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">13,186 </FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" 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="18%" 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="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>     Net income (loss) </FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 1,040,432 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ (19,029)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ (734,309)</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" 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="18%" 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="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">========</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Net income (loss) per </FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>    basic common share </FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 0.08 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" 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="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ (0.06)</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" 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="18%" 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="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Weighted average number of</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>    basic common shares</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>    outstanding</FONT></TD>
<TD WIDTH="19%" 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="18%" 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="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">12,292,716</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" 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="18%" 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="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">========</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Net income (loss) per</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>     diluted common share </FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 0.08 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" 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="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ (0.06)</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" 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="18%" 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="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Weighted average number of</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>    diluted common shares</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>    outstanding</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">12,761,159</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" 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="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">12,292,716</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" 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="18%" 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="18%" 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 financial statements.</P>

<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">CERAMICS PROCESS SYSTEMS CORPORATION<BR>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS` EQUITY <BR>
FOR THE YEARS ENDED DECEMBER 25, 2004, DECEMBER 27, 2003, <BR>
AND DECEMBER 28, 2002</P>
<P ALIGN="CENTER"></P></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=620>
<TR><TD WIDTH="18%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">Common stock</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14><P></P></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">----------</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">Additional</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">Stock-</FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">Number </FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">Par</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">Paid-in</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">Accumulated</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">Stock</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">holders`</FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">of shares</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">Value</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">capital</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">deficit</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">Repurchased</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">equity</FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">----------</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">-----</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">----------</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">----------</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">------</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">--------</FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P>Balance at</P>
<P>December 29, 2001</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">12,315,221 </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">$ 123,152 </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">$ 32,657,436 </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">$ (30,764,811)</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">$ (60,835)</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">$ 1,954,942 </FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P>Issuance of common stock pursuant to exercise of stock options</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">871 </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">9 </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">148 </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT"> -- </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT"> -- </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">157 </FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P>Net loss</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT"> -- </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT"> -- </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT"> -- </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT"> (734,309)</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT"> -- </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">(734,309)</FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P>Balance at</P>
<P>December 28, 2002</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">12,316,092 </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT"> 123,161 </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">32,657,584 </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT"> (31,499,120)</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">(60,835)</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">1,220,790 </FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P>Net loss</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT"> -- </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT"> -- </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT"> -- </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT"> (19,029)</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT"> -- </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">(19,029)</FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">---------------</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">-----------</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">---------------</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">-----------------</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">-----------</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">-------------</FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P>Balance at </P>
<P>December 27, 2003</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">12,316,092 </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">123,161 </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">32,657,584 </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT"> (31,518,149)</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">(60,835)</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">1,201,761 </FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P>Net income</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT"> -- </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT"> -- </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT"> -- </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">1,040,432 </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT"> -- </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">1,040,432 </FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">---------------</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">-----------</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">---------------</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">-----------------</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">-----------</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">-------------</FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P>Balance at </P>
<P>December 25, 2004</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">12,316,092 </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">$ 123,161 </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">$ 32,657,584 </FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">$ (30,477,717)</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">$ (60,835)</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">$ 2,242,193 </FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">==========</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">========</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">===========</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">===========</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">========</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=14>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">==========</FONT></TD>
</TR>
</TABLE>

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

<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">CERAMICS PROCESS SYSTEMS CORPORATION<BR>
CONSOLIDATED STATEMENTS OF CASH FLOWS</P>
<P ALIGN="CENTER"></P></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=621>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">December 25,</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">December 27,</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">December 28,</FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="38%" 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="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2003</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2002</FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="38%" 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="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
</TR>
<TR><TD WIDTH="51%" VALIGN="TOP" COLSPAN=5 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Cash flows from operating activities:</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" COLSPAN=4 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Net income (loss)</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 1,040,432 </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ (19,029)</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ (734,309)</FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" COLSPAN=4 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Adjustments to reconcile net income</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="44%" VALIGN="TOP" COLSPAN=3 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>(loss) to cash provided by operating</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="44%" VALIGN="TOP" COLSPAN=3 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>activities:</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="41%" VALIGN="TOP" COLSPAN=2 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Depreciation and amortization</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">296,186 </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">400,579 </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">371,097 </FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="41%" VALIGN="TOP" COLSPAN=2 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Provision for inventory write-down</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(10,000)</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">10,000 </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">328,919 </FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="41%" VALIGN="TOP" COLSPAN=2 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Loss on sale of property and equipment</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">248</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-- </FONT></TD>
<TD WIDTH="16%" 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="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="41%" VALIGN="TOP" COLSPAN=2 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Bad debt expense</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">11,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">24,791 </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">20,000 </FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" COLSPAN=4 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Changes in operating assets and liabilities:</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="44%" VALIGN="TOP" COLSPAN=3 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Accounts receivable - trade</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(663,533)</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(292,843)</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">373,374 </FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="44%" VALIGN="TOP" COLSPAN=3 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Inventories</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(265,400)</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(10,948)</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(47,797)</FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="44%" VALIGN="TOP" COLSPAN=3 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Prepaid expenses</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">17,808 </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(36,468)</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">10,596 </FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="44%" VALIGN="TOP" COLSPAN=3 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Accounts payable</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">325,381 </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">38,692 </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(273,413)</FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="44%" VALIGN="TOP" COLSPAN=3 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Accrued expenses</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">59,483 </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2,883 </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(3,686)</FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="38%" 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="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="16%" 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="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="41%" VALIGN="TOP" COLSPAN=2 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Net cash provided by operating</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> 811,605 </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">  117,657 </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">  44,781 </FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>activities</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="16%" 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="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="51%" VALIGN="TOP" COLSPAN=5 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Cash flows from investing activities:</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" COLSPAN=4 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Purchases of property and equipment</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(449,112)</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(9,427)</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(136,792)</FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" COLSPAN=4 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Proceeds from sales of property and equipment</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2,500 </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">--</FONT></TD>
<TD WIDTH="16%" 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="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="38%" 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="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="16%" 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="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="41%" VALIGN="TOP" COLSPAN=2 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Net cash used in</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>investing activities</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(446,612)</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(9,427)</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(136,792)</FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="38%" 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="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
</TR>
<TR><TD WIDTH="51%" VALIGN="TOP" COLSPAN=5 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Cash flows from financing activities:</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" COLSPAN=4 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Payment of capital lease obligations</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(96,579)</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(69,469)</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(57,120)</FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" COLSPAN=4 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Proceeds from issuance of common</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="6%" VALIGN="TOP" COLSPAN=2 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>stock</FONT></TD>
<TD WIDTH="38%" 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="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">--</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">157 </FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="38%" 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="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="16%" 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="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="41%" VALIGN="TOP" COLSPAN=2 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Net cash used in </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="38%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>financing activities</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(96,579)</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(69,469)</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(56,963)</FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="38%" 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="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
</TR>
<TR><TD WIDTH="51%" VALIGN="TOP" COLSPAN=5 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Net increase (decrease) in cash and cash</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" COLSPAN=4 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>equivalents</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">268,414 </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">38,761 </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(148,974)</FONT></TD>
</TR>
<TR><TD WIDTH="51%" VALIGN="TOP" COLSPAN=5 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Cash and cash equivalents at beginning </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" COLSPAN=4 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>of the year</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">189,533 </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">150,772 </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">299,746 </FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="38%" 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="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
</TR>
<TR><TD WIDTH="51%" VALIGN="TOP" COLSPAN=5 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Cash and cash equivalents at end of year</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 457,947 </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 189,533 </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 150,772 </FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="38%" 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="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=======</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=======</FONT></TD>
</TR>
<TR><TD WIDTH="51%" VALIGN="TOP" COLSPAN=5 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Supplemental cash flow information</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" COLSPAN=4 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Acquisition of machinery under capital leases</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$           --</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $    8,100 </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 278,133 </FONT></TD>
</TR>
<TR><TD WIDTH="4%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> </FONT></TD>
<TD WIDTH="47%" VALIGN="TOP" COLSPAN=4 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Interest paid</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$   29,450</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$  37,391</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$   21,101</FONT></TD>
</TR>
</TABLE>

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

<P>Ceramics Process Systems Corporation <BR>
Years Ended December 25, 2004, December 27, 2003, and December 28, 2002 <BR>
Notes to Consolidated Financial Statements</P>

<OL>

<U><LI>Nature of Business</LI>
</U><P>The Company 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.</P>

<U><LI>Summary of Significant Accounting Policies</LI></OL>

</U>
<U><P>(2)(a) Principles of Consolidation</P>
</U><P>The consolidated financial statements include the accounts of Ceramics Process Systems Corporation (the "Company") and its wholly-owned subsidiary, CPS Superconductor Corporation(`CPSS`).  All intercompany balances and transactions have been eliminated in consolidation. </P>

<U><P>(2)(b) Cash and Cash Equivalents</P>
</U><P>The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.</P>

<U><P>(2)(c) Accounts Receivable</P>
</U><P>&#9;The Company reports it accounts receivable at the invoiced amount less an allowance for doubtful accounts.  The Company`s management provides appropriate provisions for uncollectible accounts based upon factors surrounding the credit risk and activity of specific customers, historical trends, economic conditions and other information.   Adjustments to the allowance are charged to operations in the period in which information becomes available that may affect the allowance.</P>

<U><P>(2)(d) Inventories</P>
</U><P>Inventories are stated at the lower of cost, as determined under the first-in, first-out method (FIFO), or market.  A reserve for obsolete inventories, if any, is based on factors regarding the sales and usage of such inventories, including inventories manufactured for specific customers.</P>
<U>
<P> (2)(e) Property and Equipment</P>
</U><P>Property and equipment are stated at cost.  Depreciation of equipment is calculated on a straight-line basis over the estimated useful life, generally five years for production equipment and three to five years for furniture and office equipment.  Amortization of equipment under capital leases is calculated on a straight-line basis over the life of the lease.  Maintenance and repairs are charged to expense as incurred. Upon retirement or sale, the cost and related accumulated depreciation or amortization are removed from their respective accounts. Any gains or losses on the disposition of property and equipment are included in the results of operations in the period in which they occur.</P>

<U><P>(2)(f) Revenue Recognition</P>
</U><P>The Company recognizes revenue in accordance with the provision of the Securities and Exchange Commission Staff Accounting Bulletin ("SAB") No. 104 which establishes guidance in applying generally accepted accounting principles to revenue recognition in financial statements. SAB No. 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the price to the buyer is fixed and determinable; and (4) collectibility is reasonably assured. </P>

<P>The Company`s shipping terms are customarily FOB shipping point. Revenues for products sold in the normal course of business are recognized upon shipment when delivery terms are FOB shipping point and all other revenue recognition criteria have been met.&nbsp;</P>

<P>Revenue related to license agreements is recognized upon receipt of the license payment or over the license period, if the Company has continuing obligations under the agreement.  Advance payments in excess of revenue recognized are recorded as deferred revenue.</P>

<U><P>(2)(g) Research and Development Costs</P>
</U><P>The Company continues to perform product development under prototype manufacturing agreements with customers.  In fiscal 2004, 2003 and 2002 the Company did not incur any costs for research and development and did not perform any externally funded research and development programs.  Research and development costs, if any, are charged to expense as incurred.</P>

<U><P>(2)(h) Income Taxes</P>
</U><P>The Company accounts for income taxes utilizing the asset and liability method which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between tax and financial statement bases of assets and liabilities, measured using enacted tax rates expected to be in effect in the period which the temporary differences reverse.</P>

<P>Management considers historical results of operations and the current operating environment in assessing the likelihood of utilization of existing deferred tax assets.</P>

<U><P>(2)(i) Net Income and Net Loss Per Common Share</P>
</U><P>Basic net income or net loss per common share is calculated by dividing net income or loss by the weighted average number of common shares outstanding during the period.  Diluted net income per common share is calculated by dividing net income by the sum of the weighted average number of common shares plus additional common shares that would have been outstanding if potential dilutive common shares had been issued for granted stock option and stock purchase rights.  Common stock equivalents are excluded from the diluted calculations if a net loss is incurred as they would be anti-dilutive.</P>

<U><P>(2)(j) Comprehensive Income</P>
</U><P>The Company has no items of comprehensive income, and therefore net income is equal to comprehensive income. </P>

<U><P>(2)(k) Recent Accounting Pronouncements</P>
</U><P>&#9;In November 2004, the  Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 151, &quot;Inventory Costs, An Amendment of ARB No. 43, Chapter 4,&quot; which clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage). The Company is required to adopt SFAS No. 151 in 2006 and does not expect adoption to have a significant impact on results of operations or financial condition.</P>

<P>&#9;In December 2004, the FASB issued SFAS No. 123(R), &quot;Share-Based Payment, an Amendment of FASB Statements No. 123 and 95.&quot; SFAS No. 123(R) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services or incurs liabilities in exchange for goods or services that are based on the fair value of the entity`s equity instruments. SFAS No. 123(R) requires public entities to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions) and recognize the cost over the period during which an employee is required to provide service in exchange for the award. Adoption requires a modified prospective application whereby compensation expense is recognized on or after the required effective date for the portion of the outstanding awards for which the requisite service has not yet been rendered, based on the grant-date fair value of th
ose awards calculated on a basis consistent with the SFAS No. 123 pro forma disclosures (see Note 2n). The Company will adopt SFAS No. 123 (R) on its effective date, commencing with the quarter ending September 24, 2005.    Actual expense recorded related to these options would be reduced by future forfeitures.  </P>
<P>&#9;</P>
<U><P>(2)(l) Use of Estimates in the Preparation of Financial Statements</P>
</U><P>The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses recorded during the reporting period.  Significant accounting estimates made by the Company`s management include the allowance for doubtful accounts receivable, the reserve for obsolete inventories, and the valuation allowance for deferred tax assets.  Such estimates are adjusted by management periodically as a result of existing or anticipated economic changes which effect, or may effect, the Company`s consolidated financial statements.  Actual results could differ from these estimates.</P>

<U><P> (2)(m) Fiscal Year-End</P>
</U><P>The Company`s fiscal year end is the last Saturday in December which could result in a 52 or 53 week year.  Fiscal years 2004, 2003, and 2002 consisted of 52 weeks.</P>

<U><P> (2)(n) Stock-Based Compensation Plans</P>
</U><P>The Company has adopted the disclosure requirements of Statements of Financial Accounting Standards (SFAS) No.123, `Accounting for Stock-Based Compensation`.  The Company continues to recognize compensation costs using the intrinsic value based method described in Accounting Principles Board Opinion No. 25, `Accounting for Stock Issued to Employees`.  No stock-based compensation costs were recognized in 2004, 2003 and 2002 as all options granted had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income (loss) and net income (loss) per share as if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation:</P>
</FONT>
<TABLE BORDER CELLSPACING=1 CELLPADDING=7 WIDTH=637>
<TR><TD WIDTH="41%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2004</U></FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2003</U></FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2002</U></FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Net income (loss), as reported</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 1,040,432</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">($ 19,029)</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">($ 734,309)</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">  Total stock-based employee compensation expense determined  under fair value based method for all awards</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"></P>
<P ALIGN="RIGHT">&nbsp;</P>
<P ALIGN="RIGHT">( 73,358)</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"></P>
<P ALIGN="RIGHT">&nbsp;</P>
<P ALIGN="RIGHT">(68,556)</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"></P>
<P ALIGN="RIGHT">&nbsp;</P>
<P ALIGN="RIGHT">(98,908)</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Pro forma net income (loss)</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$   967,074</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> ($ 87,585)</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">($ 833,217)</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">======</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">======</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=======</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Net income (loss) per share:</P>
<P ALIGN="RIGHT">  As reported - basic and diluted</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"></P>
<P ALIGN="RIGHT">$ 0.08</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$       --</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"></P>
<P ALIGN="RIGHT">($ 0.06)</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">  Pro forma - basic and diluted</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.08</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">($ 0.01)</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">($ 0.07)</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>The fair value of each option grant under SFAS 123 is estimated on the date of grant using the Black-Scholes option-pricing model.  The following table presents the annualized weighted average values of the significant assumptions used to estimate the fair values of the options:</P>
</FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=632>
<TR><TD WIDTH="40%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2004</U></FONT></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2003</U></FONT></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2002</U></FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Risk-free interest rate</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP" BGCOLOR="#ffffff" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">3.03%</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">3.04%</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">5.04%</FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> Expected life in years </FONT></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">7</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">7</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">7</FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Expected volatility</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP" BGCOLOR="#ffffff" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">163%</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">174%</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">176%</FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Expected dividend yield</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">0</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">0</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">0</FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Weighted average fair value of grants</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$  0.62</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$  0.57</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">  $  0.74</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2><P ALIGN="JUSTIFY"></P>
<P>All options are granted with an exercise price equal to the fair market value of the underlying common stock on the date of grant.</P>

<U><P>(2)(o) Segment Reporting</P>
</U><P>SFAS No. 131, <I>Disclosures About Segments of an Enterprise and Related Information,</I> establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. SFAS No. 131 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision making group, in making decisions about how to allocate resources and assess performance. To date, the Company has viewed its operations and manages its business as principally one segment. </P>
<U>
<P>(3)  Inventories</P>
</U><P>&#9;As of  December 25, 2004 and December 27, 2003 inventories consisted of the following:</P>
</FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=494>
<TR><TD WIDTH="33%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="7%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="30%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">December 25,</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">December 27,</FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="7%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="30%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2004</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2003</FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P> </FONT></TD>
<TD WIDTH="7%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="30%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="7%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="30%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Raw materials</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="30%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $  40,831 </FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $  23,413 </FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Work in process</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="30%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">               146,715 </FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">               136,124 </FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Finished Goods</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="30%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">               435,549 </FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">               198,158 </FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="7%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="30%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>   Subtotal </FONT></TD>
<TD WIDTH="7%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="30%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">             623,095 </FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">             357,695 </FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P> Less reserve for  </FONT></TD>
<TD WIDTH="7%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="30%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>   obsolete inventories </FONT></TD>
<TD WIDTH="7%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="30%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">--</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">   10,000</FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="7%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="30%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="7%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="30%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $  623,095 </FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $  347,695 </FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="7%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="30%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">========</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">========</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<U><P>(4)  Leases and Commitments</P>
</U><P>At December 25, 2004, the Company had production equipment with a cost of $411,869 and accumulated amortization of $229,442 under capital leases.  At December 27, 2003, the Company had production equipment with a cost of $411,869 and accumulated amortization of $144,068 under capital leases.</P>

<P>Future payments required under capital lease obligations are as follows at December 25, 2004: </P>
</FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=428>
<TR><TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>2005</FONT></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="29%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">            $  102,476 </FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>2006</FONT></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="29%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">              67,839 </FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>2007</FONT></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="29%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">              49,855 </FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P> </FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="29%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
</TR>
<TR><TD WIDTH="56%" VALIGN="TOP" COLSPAN=3 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Total future minimum lease payments</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="29%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">            220,170 </FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="59%" VALIGN="TOP" COLSPAN=3 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Less amount representing interest</FONT></TD>
<TD WIDTH="29%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">              24,306 </FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="29%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
</TR>
<TR><TD WIDTH="71%" VALIGN="TOP" COLSPAN=4 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Present value of net future lease payments</FONT></TD>
<TD WIDTH="29%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">            195,864 </FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="44%" VALIGN="TOP" COLSPAN=2 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Less current portion</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="29%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">              86,532 </FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="29%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
</TR>
<TR><TD WIDTH="71%" VALIGN="TOP" COLSPAN=4 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Long-term obligation under capital leases</FONT></TD>
<TD WIDTH="29%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">            $  109,332 </FONT></TD>
</TR>
<TR><TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="29%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=======</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>The Company operates as a tenant-at-will in its sole location. Total rental expense for this operating lease was $96,718, $103,290, and $109,538 for fiscal years 2004, 2003 and 2002, respectively.</P>

<P>At December 25, 2004, the Company had outstanding commitments to purchase $270,000 of production equipment.  At December 25, 2004, production equipment included $268,000 of construction in progress.</P>
<P> </P>
<OL START=5>

<U><LI>Stock-Based Compensation Plans</LI></OL>


</U><P>The Company adopted the 1999 Stock Incentive Plan ("1999 Plan") on January 22, 1999.  Under the terms of the 1999 Plan all of the Company`s employees, officers, directors, consultants and advisors are eligible to be granted options, restricted stock awards, or other stock-based awards. All options were nonstatutory stock options granted at the fair market value of the stock, and expire ten years from the date of grant.  The options granted to employees vest in equal annual installments over a five-year period.  The options granted to directors vest one year from date of grant. </P>

<P>Under the 1999 Plan a total of 1,250,000 shares of common stock is available for issuance, of which 163,750 shares remain available for grant as of December 25, 2004.</P>

<P>As of December 25, 2004, the 1999 Plan is the only stock option plan from which awards can be made as all other options plans have expired.  The 1989 Stock Option Plan expired on February 22, 1999 and no additional grants can be made from this plan.  The 1992 Director Stock Option Plan expired on April 16, 1998 and no additional grants can be made from this plan.  A total of 241,113 options granted under the 1989 Stock Option Plan prior to its expiration date were outstanding as of December 25, 2004.</P>
<U>
</U><P>In 2004, the Company granted 173,250 options at exercise prices ranging from $0.53 to $1.25 under the 1999 Plan.  In 2003, the Company granted 420,000 options at an exercise price of $0.31 under the 1999 Plan.  In 2002, the Company granted 16,000 options at an exercise price of $0.58 under the 1999 Plan.   As of December 25, 2004, the total number of options outstanding under all option plans was 1,327,363.</P>

<P>The following is a summary of stock option activity for all of the above plans for the fiscal years 2004, 2003 and 2002.</P>
</FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=592>
<TR><TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2004</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2003</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2002</FONT></TD>
</TR>
<TR><TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------</FONT></TD>
</TR>
<TR><TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Weighted</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Weighted</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Weighted</FONT></TD>
</TR>
<TR><TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Average</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Average</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Average</FONT></TD>
</TR>
<TR><TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Exercise</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Exercise</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Exercise</FONT></TD>
</TR>
<TR><TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Shares</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Price</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Shares</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Price</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Shares</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Price</FONT></TD>
</TR>
<TR><TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">---------</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------</FONT></TD>
</TR>
<TR><TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Outstanding at</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
</TR>
<TR><TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">beginning of year</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">1,166,113</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.57</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">880,513</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.74</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">1,015,484</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.80</FONT></TD>
</TR>
<TR><TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Granted at</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
</TR>
<TR><TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">fair market value</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">173,250</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.67</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">420,000</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.31</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">16,000</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.58</FONT></TD>
</TR>
<TR><TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Exercised</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">--</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">--</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(871)</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.18</FONT></TD>
</TR>
<TR><TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Cancelled</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(12,000)</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.50</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(134,400)</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.86</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(150,100)</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 1.14</FONT></TD>
</TR>
<TR><TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
</TR>
<TR><TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Outstanding at</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
</TR>
<TR><TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">end of year</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">1,327,363</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.57</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">1,166,113</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.57</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">880,513</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.74</FONT></TD>
</TR>
<TR><TD WIDTH="21%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=======</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=======</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">======</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP" COLSPAN=2 HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P>Options exercisable</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13><P></P></TD>
</TR>
<TR><TD WIDTH="21%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">at year-end</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">768,363</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 0.68</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">592,963</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.73</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">568,330</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=13>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.76</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>&nbsp;</P>
<P>The following table summarizes information about stock options outstanding at <BR>
December 25, 2004:<BR>
</P></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=621>
<TR><TD WIDTH="32%" VALIGN="TOP" COLSPAN=3 HEIGHT=19>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Range of Exercise Prices </U></FONT></TD>
<TD WIDTH="40%" VALIGN="TOP" COLSPAN=3 HEIGHT=19>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="CENTER"> Options Outstanding </U></FONT></TD>
<TD WIDTH="28%" VALIGN="TOP" COLSPAN=2 HEIGHT=19>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="CENTER"> Options Exercisable </U></FONT></TD>
</TR>
<TR><TD WIDTH="12%" VALIGN="TOP" HEIGHT=66>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">From</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=66><P></P></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=66>
<FONT FACE="Arial" SIZE=2><P>to</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=66>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Number Outstanding</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=66>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Weighted Remaining Contractual Life</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=66>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Weighted Exercise Price</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=66>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Number Outstanding</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=66>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Weighted Exercise Price</FONT></TD>
</TR>
<TR><TD WIDTH="12%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 0.18</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">to</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">$0.20 </FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">      196,113 </FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">           1.43 </FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 0.18 </FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">       196,113 </FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $  0.18 </FONT></TD>
</TR>
<TR><TD WIDTH="12%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">0.20 </FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">to</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">0.50 </FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">      589,250 </FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">           7.93 </FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">        0.31 </FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">       223,950 </FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">         0.30 </FONT></TD>
</TR>
<TR><TD WIDTH="12%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">0.51 </FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">to</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">0.80 </FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">      189,250 </FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">           9.81 </FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">        0.64 </FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">         16,000 </FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">         0.58 </FONT></TD>
</TR>
<TR><TD WIDTH="12%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">0.81 </FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">to</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">1.10 </FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">      178,000 </FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">           4.81 </FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">        1.00 </FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">       173,000 </FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">         1.00 </FONT></TD>
</TR>
<TR><TD WIDTH="12%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">1.10 </FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">to</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">1.40 </FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">      125,750 </FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">           5.36 </FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">       1.27 </FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">       110,300 </FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">        1.27 </FONT></TD>
</TR>
<TR><TD WIDTH="12%" VALIGN="TOP" HEIGHT=19>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">1.41 </FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" HEIGHT=19>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">to</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=19>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">2.19</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=19>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">        49,000 </U></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=19>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">           3.30 </U></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=19>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">        2.06 </U></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=19>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">         49,000 </U></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=19>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">        2.06 </U></FONT></TD>
</TR>
<TR><TD WIDTH="32%" VALIGN="TOP" COLSPAN=3 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Total</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">    1,327,363 </FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">           6.40 </FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 0.57 </FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">       768,363 </FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $  0.68 </FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>&nbsp;</P>
<U><P>(6) Accrued Expenses</P>
</U><P>Accrued expenses consist of the following:<BR>
</P></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=596>
<TR><TD WIDTH="40%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">December 25,</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">December 27,</FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2004</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2003</FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P> </FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Accrued legal and</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>  accounting</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 43,151 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 38,724 </FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Accrued payroll</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">               109,233 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">                 75,815 </FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Accrued other</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">                 22,890 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">                   1,252 </FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>   </FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-------------</FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 175,274 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 115,791 </FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=======</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=======</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<U><P>(7) Line of Credit - Officer</P>
</U><P>&#9;In March 2003, the Company`s President executed a line-of-credit agreement to provide the Company up to $200,000.  Such agreement, which expired on February 16, 2005, required monthly payments of interest only at 1.5% above the prime rate, with all unpaid principal and accrued interest due on February 16, 2005.  The agreement was collateralized by the Company`s trade accounts receivable.  There were no amounts outstanding under such agreement at December 25, 2004 or December 27, 2003.</P>

<U><P>(8) Income Taxes</P>
</U><P>Deferred tax assets (liabilities) as of December 25, 2004 and December 27, 2003 are as follows:</P>
</FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=597>
<TR><TD WIDTH="44%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">December 25, 2004</U></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">December 27, 2003</U></FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Deferred Tax Assets:</FONT></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>      Net operating loss</FONT></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>         carryforwards</FONT></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 8,094,000 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 8,563,000 </FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>     Credit carryforwards</FONT></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">50,000</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">121,723 </FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>     Deferred revenue</FONT></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">47,000</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">45,520 </FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>     Reserve for obsolete inventory</FONT></TD>
<TD WIDTH="26%" 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="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">3,400 </FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>     Other</FONT></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">5,000</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">--</FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" 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="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-----------------</FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP" HEIGHT=18>
<FONT FACE="Arial" SIZE=2><P>Gross deferred tax assets</FONT></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=18>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">8,196,000 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=18><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=18>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">8,733,643 </FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Valuation allowance</FONT></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> (8,154,000)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> (8,603,758)</FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" 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="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> ----------------- </FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Net deferred tax assets</FONT></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 42,000   </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 129,885   </FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" 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="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=========</FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Deferred Tax Liabilities:</FONT></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>     Depreciation</FONT></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">($ 42,000)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">($ 129,885)</FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" 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="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-----------------</FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Gross deferred tax liability</FONT></TD>
<TD WIDTH="26%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> ($ 42,000)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> ($ 129,885)</FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" 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="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> ----------------- </FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Net deferred tax liability</FONT></TD>
<TD WIDTH="26%" 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="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">--</FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="26%" 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="28%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">=========</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>Due to the uncertainty related to the realization of the net deferred tax asset, a valuation allowance has been provided.  At December 25, 2004, the Company had net operating loss carryforwards of approximately $24,000,000 available to offset future income for U.S. Federal income tax purposes.  These operating loss carryforwards expire in various amounts from 2006 through 2024.  The decrease in the valuation reserve of $449,758 results from the change in net operating loss and credit carryforwards.</P>

<P>&#9;Income tax (benefit) expense is different from the amounts computed by applying the U.S. federal income tax rate of 34 percent to pretax income as a result of the following:</P>
</FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=638>
<TR><TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="75%" VALIGN="TOP" COLSPAN=3>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Years Ended</P>
<P ALIGN="CENTER"></U></FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="25%" VALIGN="TOP">
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">December 25, 2004</U></FONT></TD>
<TD WIDTH="25%" VALIGN="TOP">
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">December 27, 2003</U></FONT></TD>
<TD WIDTH="25%" VALIGN="TOP">
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">December 28, 2002</U></FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>Tax (benefit) at statutory rate</FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 353,750</FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ (6,500)</FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $  (249,600)</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P>State tax (benefit), net of federal tax benefit</FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">65,200</FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(500)</FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(18,000)</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2>
<P>Benefit derived from net operating loss carryforwards not previously provided for</FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">(418,950)</FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">7,000</FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">267,600</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-----------</FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-----------</FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">-----------</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2>
<P>Total</FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $        --</FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $        --</FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $        --</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">======</FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">======</FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">======</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>Certain provisions of the Internal Revenue Code limit the annual utilization of net operating loss carryforwards if, over a three-year period, a greater than 50% change in ownership occurs, as defined. The Company believes that it did not exceed the 50% ownership change in the three-year period ended December 25, 2004.  Therefore, as of year-end 2004 all net operating loss carryforwards should be available to offset future taxable income.</P>

<U><P>(9) Retirement Savings Plan</P>
</U><P>Effective September 1, 1987, the Company established the Retirement Savings Plan (the `Plan`) under the provisions of Section 401 of the Internal Revenue Code.  Employees, as defined in the Plan, are eligible to participate in the Plan after 30 days of employment.  Under the terms of the Plan, the Company may match employee contributions under such method as described in the Plan and as determined each year by the Board of Directors.  Through December 25, 2004, no employer matching contributions had been made to the Plan since inception.</P>

<U><P>(10) Concentrations of Credit Risk, Significant Customers and Geographic Information</P>
</U><P>&#9;Financial instruments which subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable.  As of December 25, 2004, the Company had $357,947 of cash deposits which exceed the Federal Deposit Insurance Corporation (FDIC) limit of $100,000.  The Company maintains such cash deposits in a high credit quality financial institution.</P>

<P>&#9;The Company extends credit to customers which consist principally of microelectronics systems companies in the United States, Europe and Asia.  The Company generally does not require collateral or other security as a condition of sale rather relying on credit approval, balance limitation and monitoring procedures to control credit risk of trade accounts receivable. Management conducts on-going credit evaluations of its customers, and historically the Company has not experienced any significant credit-related losses with respect to its trade accounts receivable.  As of December 25, 2004, the Company had trade accounts receivable due from four customers that accounted for 81% of total trade accounts receivable as of that date.  Management believes that any credit risks have been properly provided for in the accompanying financial statements. </P>

<P>Revenues from significant customers as a percentage of total revenues in 2004, 2003 and 2002 were as follows:</P>
</FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=434>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="62%" VALIGN="TOP" COLSPAN=3 HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Percent of Total Revenues</P>
<P ALIGN="CENTER"></U></FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Significant Customer</U></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2004</U></FONT></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> 2003</U></FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> 2002</U></FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">A</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">42%</FONT></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">57%</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">31%</FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">B</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">27%</FONT></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">19%</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">22%</FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">C</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">7%</FONT></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">11%</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">12%</FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">D</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">7%</FONT></TD>
<TD WIDTH="24%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2%</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">4%</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>&nbsp;</P>
<P>The Company`s revenue was derived from the following countries in fiscal 2004:</P>
</FONT>
<TABLE BORDER CELLSPACING=1 CELLPADDING=7 WIDTH=445>
<TR><TD WIDTH="47%" VALIGN="TOP">
<U><FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Country</P>
</U><P ALIGN="CENTER"></FONT></TD>
<TD WIDTH="53%" VALIGN="TOP">
<U><FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Percent of 2004 Revenue</U></FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">United States of America</FONT></TD>
<TD WIDTH="53%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">84%</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Canada</FONT></TD>
<TD WIDTH="53%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">8%</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Germany</FONT></TD>
<TD WIDTH="53%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">7%</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Other</FONT></TD>
<TD WIDTH="53%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">1%</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Arial" SIZE=2>
<P>Many of the Company`s customers who are based in the United States conduct design, purchasing and payable functions in the United States, but do manufacturing overseas, therefore instructing the Company to ship to overseas locations. Revenue generated from shipments made to customers` locations outside the United States accounted for  60%, 74% and 38% of total revenue in 2004, 2003 and 2002, respectively.</P>
<U>
</U><P>All of the Company`s long-lived assets and operations are located in the United States.</P>
<U>
<P>(12) Net Income (Loss) Per Share </P>
</U><P>The following reconciles the basic and diluted net income (loss) per share calculations.</P>
<U></U></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=555>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="36%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=3 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">For the years ended</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="36%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Dec. 25,</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Dec. 27,</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">Dec. 28,</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="36%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" 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="19%" 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="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">2002</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="36%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" 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="19%" 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="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="TOP" COLSPAN=2 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Basic Computation:</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="TOP" COLSPAN=2 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Numerator:</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="36%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P> Net income (loss) </FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 1,040,432 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ (19,029)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ (734,309)</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="36%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="TOP" COLSPAN=2 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Denominator:</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="36%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Weighted average</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="36%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>common shares</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="36%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>outstanding</FONT></TD>
<TD WIDTH="18%" 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="19%" 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="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">       12,292,716 </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="36%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="TOP" COLSPAN=2 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Basic net income (loss) per share</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 0.08 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" 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="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ (0.06)</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="36%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="TOP" COLSPAN=2 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Diluted Computation:</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="TOP" COLSPAN=2 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Numerator:</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="36%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Net income (loss)</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 1,040,432 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ (19,029)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ (734,308)</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="36%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="TOP" COLSPAN=2 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Denominator:</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="36%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Weighted average</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="36%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>common shares </FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="36%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>outstanding</FONT></TD>
<TD WIDTH="18%" 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="19%" 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="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">12,292,716</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="36%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Stock options</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">467,950</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" 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="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">--</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="36%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" 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="19%" 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="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">------------</FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="36%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="36%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Total Shares</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">       12,761,159 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" 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="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">       12,292,716 </FONT></TD>
</TR>
<TR><TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="36%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">==========</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">==========</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=1><P ALIGN="RIGHT">==========</FONT></TD>
</TR>
<TR><TD WIDTH="39%" VALIGN="TOP" COLSPAN=2 HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Diluted net income (loss) per share</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ 0.08 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="19%" 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="19%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT"> $ (0.06)</FONT></TD>
</TR>
</TABLE>

<U><FONT FACE="Arial" SIZE=2>
</U><P>The computation of diluted earnings per common share in 2004, 2003, and 2002 excludes the effect of the potential exercise of options to purchase approximately 352,750 shares,  1,166,113 and  880,513 shares respectively, because the effect would be anti-dilutive.</P>

<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">SCHEDULE II<BR>
CERAMICS PROCESS SYSTEMS CORPORATION<BR>
VALUATION AND QUALIFYING ACCOUNTS<BR>
For the years ended December 25, 2004, December 27, 2003 and December 28, 2002<BR>
</P></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=591>
<TR><TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Balance at</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Charged to</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Beginning of</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Costs and</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Charged to</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Balance at End</FONT></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P>Period</U></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P>Expenses</U></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P>Other Accounts</U></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P>Deductions</U></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P>of Year</U></FONT></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P>2002</U></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Allowance for</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>doubtful</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>accounts</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 12,585 </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 20,000 </FONT></TD>
<TD WIDTH="17%" 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">$ 8,387 </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 24,198 </FONT></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P>2003</U></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Allowance for</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>doubtful</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>accounts</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 24,198 </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 24,791 </FONT></TD>
<TD WIDTH="17%" 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">$ 47,890 </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 1,099 </FONT></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Reserve for</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>obsolete</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="17%" 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">$132,000 </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$10,000 </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">--</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 132,000 </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 10,000 </FONT></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<U><FONT FACE="Arial" SIZE=2><P>2004</U></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Allowance for</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>doubtful</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>accounts</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$1,099 </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$11,000 </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">--</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">--</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 12,099 </FONT></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>Reserve for</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P>obsolete</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="17%" 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">$10,000 </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">--</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">--</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">$ 10,000 </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=16>
<FONT FACE="Arial" SIZE=2><P ALIGN="RIGHT">--</FONT></TD>
</TR>
</TABLE>

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<FONT FACE="Arial" SIZE=2><P>EXHIBIT 23.3</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCCOUNTING FIRM</P>
<P>We consent to the incorporation by reference in Ceramics Process Systems Corporation`s Registration Statement Nos. 33-25690, 33-18398, 33-42556, and 33-47587 on Forms S-8 of our report dated March 4, 2005, relating to the consolidated financial statements of Ceramics Process Systems Corporation and subsidiary as of December 25, 2004 and for the year then ended appearing in this Annual Report on Form 10-K.</P>
<P>/s/ Wolf &amp; Company, P.C.</P>
<P>Boston, Massachusetts<BR>
March 24, 2005</P>
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<TITLE>EXHIBIT 23</TITLE>
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<FONT FACE="Arial" SIZE=2><P>EXHIBIT 23.3</P>

<P ALIGN="CENTER">CONSENT OF INDEPENDENT AUDITORS</P>
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<P>The Board of Directors and Stockholders<BR>
    Of Ceramics Process Systems Corporation:</P>

<P>We consent to the incorporation by reference in the Registration Statement on Form S-8 (No.33-25690, 33-18398, 33-42556, 33-47587) of Ceramics Process Systems Corporation of our report dated March 8, 2004, relating to the consolidated financial statements of Ceramics Process Systems Corporation appearing in and incorporated by reference in this Annual Report on Form 10-K for the year ended December 27, 2003.</P>

<P>/s/ Sansiveri, Kimball &amp; McNamee, L.L.P.</P>

<P>Providence, Rhode Island<BR>
March 24, 2005</P>
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<TYPE>EX-31
<SEQUENCE>4
<FILENAME>k8d.htm
<DESCRIPTION>BENNETT CERTIFICATION SECTION 306
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<TITLE>EXHIBIT 31</TITLE>
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<FONT FACE="Arial" SIZE=2><P>EXHIBIT 31.1</P>
<P ALIGN="CENTER">Certification Pursuant to Exchange Act<BR>
Rule 13a-14(a), as Adopted Pursuant to Section 302 of the<BR>
Sarbanes-Oxley Act of 2002</P>
<P ALIGN="CENTER"></P>
<P>I, Grant C. Bennett, President and Treasurer, certify that:<BR>
</P>
<OL>

<LI>I have reviewed this annual report on Form 10K of Ceramics Process Systems Corporation;<BR>
</LI>
<LI>Based on my knowledge, this annual 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 annual report;<BR>
</LI>
<LI>Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual 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-15e and 15d-15e) for the registrant and have: </LI></OL>

<OL TYPE="a">

<LI>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 other within those entities, particularly during the period in which this annual report is being prepared; </LI>
<LI>omitted;</LI>
<LI>evaluated the effectiveness of the registrant`s disclosure controls and procedures  and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and </LI>
<LI>disclosed in this report any change in the registrant`s internal control over financial reporting that occurred during the registrant`s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant`s internal control over financial reporting.</LI></OL>


<OL>

<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 registrant`s board of directors (or persons performing the equivalent functions):  (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant`s ability to record, process, summarize and report financial information and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant`s internal controls over financial reporting.<BR>
</LI></OL>


<P>&nbsp;</P></FONT>
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<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Dated:  March 24, 2005</FONT></TD>
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<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">/s/ Grant C. Bennett<BR>
Grant C. Bennett<BR>
President and Treasurer<BR>
(Principal Executive Officer and Principal Financial Officer)</FONT></TD>
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<TYPE>EX-31
<SEQUENCE>5
<FILENAME>k8e.htm
<DESCRIPTION>BENNETT CERTIFICATION SECTION
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<META NAME="Generator" CONTENT="Microsoft Word 97">
<TITLE>EXHIBIT 31</TITLE>
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<FONT FACE="Arial" SIZE=2><P>EXHIBIT 31.1</P>

<B><P ALIGN="CENTER">Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant<BR>
 to Section 906 of the Sarbanes-Oxley Act of 2002</P>
</B>
<P>In connection with the annual report on Form 10K of Ceramics Process Systems Corporation (the &quot;Company&quot;) for the period ended December 25, 2004, as filed with the Securities and Exchange Commission on the date hereof (the &quot;Report&quot;), the undersigned, Grant C. Bennett, Chief Executive Officer and Controller of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:<BR>
</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>

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<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">Dated:  March 24, 2005</FONT></TD>
<TD WIDTH="49%" VALIGN="TOP">
<FONT FACE="Arial" SIZE=2><P ALIGN="CENTER">/s/ Grant C. Bennett<BR>
Grant C. Bennett<BR>
President and Treasurer<BR>
(Principal Executive Officer and Principal Financial Officer)</FONT></TD>
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