(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the period ended September 27, 2003
or

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to

Commission file number 0-16088

(Exact Name of Registrant as Specified in its Charter)

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

Not Applicable
Former Name, Former Address and Former Fiscal Year if Changed since Last Report:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period than the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. [X] Yes [ ] No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date. Number of shares of common stock outstanding as of September 27, 2003: 12,316,092.

See accompanying notes to consolidated financial statements.

Ceramics Process Systems Corporation (the `Company` or `CPS`) serves the wireless communications infrastructure market, high-performance microprocessor market, motor controller market, and other microelectronic markets by developing, manufacturing, and marketing advanced metal-matrix composite components to house, interconnect and thermally manage microelectronic devices. The Company`s products are typically in the form of housings, packages, lids, substrates, thermal planes, or heat sinks, and are used in applications where thermal management and/or weight are important considerations.

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`).

The Company was incorporated on June 19, 1984. The Company continues to sell to a limited number of customers and the loss of any one of these customers could cause the Company to require external financing. Failure to generate sufficient revenues, raise additional capital or reduce certain discretionary spending could have a material adverse effect on the Company`s ability to achieve its business objectives.

As permitted by the rules of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, these notes are condensed and do not contain all disclosures required by accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements for the fiscal quarters and the nine month periods ended September 27, 2003 and September 28, 2002 are unaudited. In the opinion of management, the unaudited consolidated financial statements of CPS reflect all adjustments necessary to present fairly the financial position and results of operations for such periods. All such adjustments are of a normal recurring nature. Operating results for the three and nine months ended September 27, 2003 are not necessarily indicative of the results that might be expected for the year ending December 27, 2003.

The Company`s consolidated balance sheet at December 28, 2002 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Registrant`s Annual Report on Form 10-K for the year ended December 28, 2002 and the Company`s quarterly report on Form 10-Q for the six months ended June 28, 2003.

The consolidated financial statements include the accounts of CPS and its wholly-owned subsidiary, CPS Superconductor Corporation. All significant intercompany balances and transactions have been eliminated. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

Basic EPS excludes the effect of any dilutive options, warrants or convertible securities and is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Diluted EPS is computed by dividing net income (loss) by the sum of the weighted average number of common shares and common share equivalents computed using the average market price for the period under the treasury stock method requirements.

The following table presents the calculation of both basic and diluted EPS:

Options to purchase 1,210,113 shares of common stock at a weighted-average price of $0.57 were outstanding at September 27, 2003. Options to purchase 956,713 shares of common stock at a weighted-average price of $0.77 were outstanding at September 28, 2002. The Company incurred a net loss for the quarter ended September 28, 2002, and the nine month periods ended September 28, 2002 and September 27, 2003, therefore stock options were not used to compute diluted loss per share in these periods since the effect would have been antidilutive.

The Company accounts for its stock-based compensation plans under Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees". Accordingly, no stock-based employee compensation cost is reflected in net income as all options granted had an exercise price equal to or greater than the market value of the underlying common stock on the date of grant. In accordance with SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure," the following table illustrates the effect on net income and earnings per share as if the Company had applied the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-based Compensation," to stock-based employee compensation for the fiscal quarter ended September 27, 2003:

4. Inventories

The following discussion and analysis of financial condition and results of operations is based upon and should be read in conjunction with the consolidated financial statements of the Company and notes thereto included in this report and the Company`s Annual Report on Form 10-K for the year ended December 28, 2002.

This Quarterly Report on Form 10-Q contains forward-looking statements that involve a number of risks and uncertainties. There are a number of factors that could cause the Company`s actual results to differ materially from those forecasted or projected in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements which may be made to reflect events or changed circumstances after the date hereof or to reflect the occurrence of unanticipated events.

The critical accounting policies utilized by the Company in preparation of the accompanying consolidated financial statements are set forth in Part I, Item 7 of the Company`s Annual Report on Form 10-K for the year ended December 28, 2002, under the heading "Management`s Discussion and Analysis of Financial Condition and Results of Operations". There have been no material changes to these policies since December 28, 2002.

Total revenue was $868 thousand in Q3 2003, an 80% increase from total revenue of $482 thousand in Q3 2002. The increase in revenues was due to increased demand from existing products, and from new products moving from the prototype stage into production. The largest increase in demand was for lids and heatspreaders for application-specific integrated circuits.

Total operating expenses in Q3 2003 were $852 thousand, a 2% decline from total operating expenses in Q3 2002 of $867 thousand. Cost of product sales in Q3 2003 were $650 thousand, a 4% increase from cost of product sales in Q3 2002 of $622 thousand. Cost of product sales increased primarily as a result of increased units shipped. Cost of product sales increased at a much lower rate than revenue because of changes in product mix and because of expense controls. Gross profit on product sales in Q3 2003 was 25% compared to negative gross profit on product sales in Q3 2002 of (29%). This increase in gross profit is primarily the result of spreading fixed expenses over a larger revenue base, as well as expense controls.

Selling, general and administrative (SG&A) expenses were $202 thousand in Q3 2003, a 17% reduction from SG&A expenses in Q2 2003 of $244 thousand. The decrease in SG&A expenses is the result of lower commissions paid to sales representatives and reduced travel expenses.

Total revenue was $2,570 thousand in the first nine months of 2003, a 31% decline from total revenue of $3,702 thousand in the first nine months of 2002. The decline in revenues was due to significantly reduced demand, particularly in the first quarter of 2003, compared to the first quarter of 2002. The largest decrease in demand was for baseplates for motor controllers, but generally demand declined across most of the Company`s products.

Total operating expenses in the first nine months of 2003 were $2,711 thousand, a 33% decline from total operating expenses in the first nine months of 2002 of $4,050 thousand. Cost of product sales in the first nine months of 2003 were $2,080 thousand, a 31% decline from cost of product sales in the first nine months of 2002 of $3,033 thousand. Cost of product sales decreased primarily as a result reduced shipments as well as expense controls and some reductions in fixed costs. Gross profit on product sales in the first nine months of 2003 was 19% compared to gross profit on product sales in the first nine months of 2002 of 18%. This increase in gross profit is primarily the result of expense controls implemented in 2003.

Selling, general and administrative (SG&A) expenses were $631 thousand in the first nine months of 2003, a 38% reduction from SG&A expenses in the first nine months of 2002 of $1,016 thousand. The decrease in SG&A expenses is the result of lower commissions paid to the sales representatives, lower payroll in the sales function, and reduced travel expenses.

The Company`s cash balance and cash equivalents at September 27, 2003 was $104 thousand compared to cash balance and cash equivalents at December 28, 2002 of $151 thousand, a decrease of $46 thousand or 31%. The decrease in cash is primarily the result of the utilization of cash to support operations.

Accounts receivable increased to $467 thousand at September 27, 2003 from $391 thousand at December 28, 2002. This change reflects higher shipments in Q3 2003 compared to Q4 2002. The accounts receivable balance at September 27, 2003 is net of allowance for doubtful accounts of $25 thousand and the accounts receivable balance at December 28, 2002 is net of allowance for doubtful accounts of $24 thousand.

Inventories increased to $475 thousand at September 27, 2003 from $347 thousand at December 28, 2002. The increase in inventories is due to the increase in shipments and in outstanding customer orders for the fiscal quarter Q3 2003 compared to the fiscal quarter Q4 2002.

The Company financed its working capital during Q3 2003 with existing cash balances, and with funds from the $200,000 line-of-credit agreement that was entered into with the Company`s President. At September 27, 2003, the Company had drawn down $20,000 of the maximum available borrowings of $200,000 on this line of credit. The Company expects it will continue to be able to fund its working capital requirements for the remainder of 2003 from these same sources and funds generated by operations.

The Company continues to sell to a limited number of customers and the loss of any one of these customers could cause the Company to require additional external financing. Failure to generate sufficient revenues, raise additional capital or reduce certain discretionary spending could have a material adverse effect on the Company`s ability to achieve its business objectives.

As of September 27, 2003, there have been no significant changes in the Company`s contractual obligations, consisting principally of various operating and capital leases, as disclosed at December 28, 2002.

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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.

ITEM 4 CONTROLS AND PROCEDURES

(a) The Company`s Chief Executive Officer and Principal Financial Officer have evaluated the effectiveness of the Company`s disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 15d - 14(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"). Based on such evaluation, such officer has concluded that, as of the Evaluation Date, the Company`s disclosure controls and procedures are effective in alerting them, on a timely basis, to material information relating to the Company (included its consolidated subsidiary) required to be included in the Company`s periodic filings under the Exchange Act.

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

ITEM 1 LEGAL PROCEEDINGS

None.

ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3 DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

ITEM 5 OTHER INFORMATION

Not applicable.

ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits: None

2. Reports on Form 8-K

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Ceramics Process Systems Corporation
(Registrant)

Date: November 6, 2003
/s/ Grant C. Bennett
Grant C. Bennett
President

I, Grant C. Bennett, certify that:

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

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

Date: November 6, 2003
/s/ Grant C. Bennett
Grant C. Bennett
Treasurer

I, Grant C. Bennett, certify that:

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

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

Date: November 6, 2003
/s/ Grant C. Bennett
Grant C. Bennett
President and Treasurer

In connection with the Quarterly Report of Ceramics Process Systems Corporation (the "Company") on Form 10-Q for the three and nine month periods ended September 27, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Grant C. Bennett, President and Treasurer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

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

Date: November 6, 2003
/s/ Grant C. Bennett
Grant C. Bennett
President and Treasurer