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13D Filing: Horton Capital Partners, Llc and CPS Technologies Corp (NASDAQ:CPSH)

I am writing to you on behalf the Horton Capital Partners Fund, L.P. (the “Horton Fund” or “we”). As you know, we have been following CPS Technologies Corp. (“CPS” or the “Company”) quite closely for the past three years and currently hold approximately 4% of the outstanding shares; making us one of the Company’s largest outside shareholders and demonstrating our conviction in the opportunity present at CPS today. We are writing this letter to formally request the Company’s Board to:

 

1. Be More Proactive: Reassess the Company’s internal risk profile and encourage management to make calculated investments in growth and cost reduction initiatives.

 

2. Be More Transparent: Allow shareholders to hold management and the Board accountable by publishing performance goals and conveying confidence in the strategic plan.

 

3. Be Better Stewards of Capital: evaluate whether all options to maximize value for shareholders have been considered, including sound capital investments, share buybacks and M&A.

Included below are some thoughts as to how these goals can be accomplished, which by our estimates could result in a 150% increase in the stock price over the next 12 months from current levels.

Background

We have been strong believers in the Company’s long-term prospects. Our fund’s mandate is to make concentrated investments in high quality growth companies where we can partner to help execute on a company’s strategic plan. Over the past few years, we have visited CPS eight times, made several customer introductions, introduced potential manufacturing partners and digital marketing experts, and provided management with numerous possible acquisition ideas. We fully understand that opportunities in this industry take time to develop and that it has been a difficult business environment for the Company as of late. However, this type of environment creates opportunities on which CPS should be able to capitalize, and, as committed longer-term shareholder, we are deeply concerned by both the lack of strategic direction and the apparent absence of urgency on the Board’s part to pursue meaningful actions to enhance shareholder value.

In November 2015, Horton visited with management and implored the team to be more proactive in pursuing potential value creation opportunities. These opportunities included reducing manufacturing cost in order to get more price competitive, making drastic changes to the Company’s sales & marketing strategy, pursuing acquisition opportunities to more quickly diversify away from dependence upon a large pending contract, and improving transparency to shareholders by providing additional key performance indicators and disclosing compensation performance targets. As we do with all of our portfolio companies, we offered to work collaboratively with management in evaluating options while leveraging our network to aid in the execution of these initiatives. We left the meeting encouraged by management’s response and were hopeful that we could work together to effect change.

When little progress had been made on the foregoing recommended initiatives by April 2016 and most efforts to collaborate had been rebuffed by management, we had a meeting with the Board of Directors just prior to the Annual Shareholders’ Meeting. During this meeting, we expressed our frustration that there still appeared to be no concrete strategic plan and no progress on the initiatives we had discussed six months prior. In our presentation, we addressed the topic of “Improving Capital Stewardship, Accountability & Performance”, and proposed numerous initiatives for addressing shareholder concerns, including evaluating opportunities in additive manufacturing, repositioning CPS as a solutions provider to its customers, augmenting organic efforts and diversifying with M&A, and communicating a clear strategy to the market to instill confidence in management as well as methods to improve both transparency and accountability. Once again, we offered our decades of experience to aid in the evaluation and the execution of a plan; once again, we exited the meeting optimistic that the Company would be proactively moving forward on some of the initiatives discussed.

But now, almost eight months later, no obvious changes have been made except the loss of the significant contract, further weakness in the share price (down 51% since the initial November 2015 meeting), and the long overdue hiring of a senior sales and marketing executive. In our opinion, it is difficult for one person to change an entire culture and organization, and to date we have neither observed any tangible progress toward implementation of value-creating proposals nor have been made aware of internal initiatives that indicate a clear sense of direction going forward. We have therefore decided to outline more formally certain measures which we believe would create substantial value for CPS shareholders. We are communicating our thoughts to you, as the Board of Directors, with the hope that it spurs some corrective measures to address the current situation. We also believe other significant shareholders have similar sentiments to the thoughts expressed herein.

The CPS Opportunity

We recognize that the team is working hard and yet through all this, no tangible value has been generated for shareholders; we believe this has caused a profound loss of confidence amongst your investor base. Furthermore, there is little visibility as to how CPS will regain this lost ground.

Severe Underperformance. The share price has reflected this loss of confidence and the Company has significantly underperformed both its peers and the markets for the past 1, 3, 5 and 10 years.

Not only has the Company underperformed its peers, the lack of tangible progress has caused investors to lose confidence and de-rate CPS’s prospects. As a result, the Company currently trades at one of the lowest valuation multiples in its 30 year history.

Investor confidence is a delicate thing; it takes a long time to establish and a short time to destroy. We believe the Company can take several measures to improve its business, restore investor confidence and create significant value for shareholders. It is our belief that if the Company were to take some or all of the actions outlined herein, investor confidence would return and CPS would be valued more in line with its historical multiples – causing the share price to rise more than 100% on valuation metrics alone. Such measures are discussed in detail below.

 

1. Adopt a More Proactive Strategic Plan, Improve Accountability and Instill a Sense of Urgency. Despite the amount of time we have spent speaking with the Board and management, we do not get the sense that any material strategic shift has been made in light of ongoing poor performance. The Board and management should immediately get to work on a strategic plan that addresses ways to aggressively grow the Company’s sales, dramatically reduces costs, and improve capital management. This plan should be communicated to shareholders and key milestones should be established. All of this should be done with a sense of urgency, which we believe is needed help to restore shareholder confidence that the Board is willing to take action and is not satisfied with the status quo.

We understand that CPS is trying to grow its sales and has recently made more investment in sales & marketing and new product development. However, the Company has been talking about strengthening sales and marketing for three years and has added four people during that time. We know it takes time to get sales people up to speed but over those same three years, sales have declined by 27% as the amount spent on Selling, General and Administration (SG&A) as a percentage of revenue has increased by nearly 100%. In addition, we heard in 2015 that hiring a top executive level sales person was a key priority, yet the employment of Tom Breen as Senior Vice-President Sales and Marketing was only announced a few weeks ago, and it could take another six months before he is able to make meaningful impact. This timeframe is similar to the pace of development for the new website, which was announced in 2015 and finally went live a year later. These are just two examples, but we feel they highlight an endemic issue of overly conservative decision-making at the Company.

As a result, we believe the Board should implement a more proactive strategy that clearly lays out the Company’s plan to generate significant value for shareholders over the next five years while taking swift and concrete action to hold management accountable for delivering on a set of tangible milestones for progress. As is common practice with your peers, strategic initiatives should be disclosed in a revised CPS investor presentation (last revised in January 2014) and the associated annual performance targets should be disclosed to shareholders in the proxy statement.

 

2. Think outside the Box to become a Solution Provider, Reduce Costs and Win More Business. In many instances, the Company has successfully solved what appeared to have been an intractable problem for a customer only to have the CPS product supplanted by a competitive product with a lower price. Unfortunately AlSiC’s superior product performance does not assure a sustainable competitive advantage for CPS at its existing pricing structure. Horton believes this can be addressed by (a) diversifying its product offerings, and (b) reducing cost.

Since the Company has already done the difficult work of gaining the trust of a customer by solving their initial problem, CPS should consider diversifying its product set and becoming a total thermal management solutions provider. This can be achieved by solving its customers’ most pressing performance issues with AlSiC while also working with the customer over subsequent design phases to identify lower cost alternatives within an expanded CPS portfolio. With this approach, the Company could continue to pursue high performance applications but with better expected recurring revenues and diversification of its offering as a single composite material vendor. In a similar vein to what we are proposing, during the Annual Meeting of Shareholders in April, Grant stated that the Company is seeking to evolve the business from being an AlSiC products supplier to a metal matrix composite solutions provider. The Company’s new website launched this summer was a perfect opportunity to demonstrate this change in strategy – sadly, however, the Company did not fully seize the opportunity to re-brand since the domain www.AlSiC.com remains thereby pigeonholing the Company as a technology-push AlSiC products company. For all the talk, we have not seen any evidence that CPS is seriously entertaining possibilities to branch out in this way and are not aware of any performance targets levied by the Board to hold management accountable to these initiatives. If the Company is truly serious about becoming a thermal solution provider, it should do so properly and consider engaging in a formal exercise to evaluate opportunities to develop additional non-AlSiC thermal management products while pursuing strategic partnerships or acquisitions.

As CPS explores ways to increase revenue, it should also focus on something it can control: costs. As we have heard from Grant, if CPS products could be 20% to 30% cheaper, given the superiority of the product offering, the Company would win a lot more business. We recognize that the Company has embarked on lean manufacturing programs in an effort to increase

efficiency; however, more dramatic measures need to be explored to have a more meaningful impact. That is why we introduced several manufacturing partners to CPS who employ different production methods, such as Additive Manufacturing, which could dramatically reduce costs and increase efficiency over time. Despite some upfront expense, we that CPS should set a target to lower product cost by an aggregate of 25+% over the next three years; if successful, the resulting return would be significantly above the Company’s cost of capital. No cost component should be unexamined or untouched and the firm’s complete production process should be challenged if not re-thought. All elements of the supply/production chain (e.g., procurement, material management, scrap, rework, touch/direct labor & indirect/overhead labor, inspection, shipping) should be re-evaluated, including prior make vs. buy decisions. In order to accomplish this, we suggest that CPS retain relevant process consulting / design engineering expertise to help re-think its production process. Given the resources in Boston and Cambridge, sufficient talent should be available; if needed, Horton can provide names of reputable firms available.

The Board should also establish and communicate clear performance targets (e.g., 20% growth in design wins; two new product introductions; 10% reduction in product cost in 2017) to which the incentive compensation of the relevant members of management would be tied and the progress against pertinent KPIs should be reported as part of management’s quarterly earnings calls.

 

3. Evaluate Options for M&A. The obvious way to deal with revenue and margin fluctuations, customer/project concentration, and market uncertainty is through growth. Armed with a strong balance sheet, CPS has the ability to take advantage of a challenged market to acquire a complementary business(es) (as well as the associated market share, diversification, know how, talent, IP, etc.) to drive growth and value while the Company’s core organic strategies develop and evolve. We have encouraged the Company to consider acquisitions for over 18 months and provided management with over 25 potential ideas, but we continue to hear that M&A is not a high priority at this time. We don’t understand why this path for growth is not seriously being considered by the Board. Over the past five years, CPS’s peer group as identified by Horton has acquired 31 businesses, including 14 that disclosed financial information totaling $1.7 billion in aggregate acquired revenue. If the aversion to evaluating M&A options is a matter of limited resources at the Company, we have offered to help manage the process (which we have done for a number of other portfolio companies).

We have also discussed numerous times whether it makes sense for CPS to remain a stand-alone publicly traded Company. As you know, companies of CPS’s size typically need to gain scale to justify the effort and expense to remain a publicly-traded entity. If the business prospects are as robust as the Board believes, other strategic or private equity buyers should be interested in exploring partnerships that will provide the Company with a larger platform from which to operate while maximizing shareholder value by providing a near-term liquidity event and/or a better path for long-term value creation.

As a result, we strongly suggest that the Board immediately establish a strategic committee with the purpose of hiring a reputable investment bank to conduct a 360 degree evaluation (i.e., buy or sell) of the opportunities for mergers and acquisitions involving the Company.

 

4.

Survival Should Not be an End Goal. In business, if you are not moving ahead, then you are falling behind. The markets in which CPS operates have been growing at a double-digit pace and yet the Company’s sales growth persistently lags well behind. CPS currently has a very healthy balance sheet with $3.5 million of cash, no debt, and availability of $2.5 million on an undrawn line of credit. CPS generates positive cash flow and, according to management, the long-term outlook for the business is intact. We applaud the Company for navigating difficult waters over time while competitors have shut down, however, survival should not be an end goal in itself. Having a cash buffer to weather impending storms is a good thing, but if the cash is merely preserved and never reinvested for growth, it destroys value for shareholders. In fact, recent

troubles have caused the Company to spend some of its cash to fund operating losses. That cash could (and should) have been reinvested for the benefit of shareholders in any of the initiatives outlined in #2 and #3 above, and we encourage the Board to direct management to identify value creation opportunities for the excess capital in the business. More appropriate capital management not only will aid the Company in growth, profitability and diversification, but will also lower it’s excessively high cost of capital, which we estimate to be over 20%. Having such a high cost of capital creates paralysis at the Company because management must generate returns on investment in excess of 20% per annum (a high bar for any company). By not moving more proactively and creatively, CPS has destroyed – and will continue to destroy – shareholder value.
5. Affirm Confidence in Prospects by Initiating Share Buyback. Depending on the Board’s expectations for the upcoming five years, the best investment CPS can make might well be in its own stock. As a $15 million market capitalization company with $3.5 million in net cash, the Board has an excellent opportunity to show its confidence in the business’s future by using its capital to acquire shares, especially after the stock has weakened by over 60% year-to-date and the shares are trading at historically low valuation metrics. Investing in staff, facilities, new products and systems are always important, but our external estimate of what is required implies there is a fair amount of excess cash on the balance sheet. In addition, as we have communicated to management regularly in the past, shareholders such as Horton are always happy to provide additional capital to a company when a “bluebird” opportunity arises; especially if the company has a history of making good capital decisions and has generated returns in excess of its cost of capital. This concept is exactly why CPS is adeptly maintaining an active shelf registration statement and has an un-utilized line of credit that it is paying for. However, to hold significant cash reserves in addition to an active shelf and undrawn credit facility is value destructive and illustrates the extreme sense risk aversion present at the Company. Therefore, the Board should authorize a share repurchase plan for up to 10% of the common shares outstanding. If over the next 12 months the Company does not feel any viable internal initiatives or acquisition opportunities exist to utilize capital in an effective way, then the Board should expand the authorization to 20% of the shares outstanding. We believe that the benefit to shareholders by increasing earnings per share and instilling confidence greatly outweighs any reduction of liquidity as a result of a buyback.

 

6.

Strengthen the Board of Directors. One of the major responsibilities of a public company Board is to be a good steward of capital on behalf of shareholders. Another is to help management to think strategically by trying to foresee potential problems and opportunities then recommending appropriate action. Both of these activities require strong leadership; unfortunately we do not think that the Board has done good job on either front. This underperformance needs to be

proactively addressed and therefore we have offered the five potential action points above. Given the constitution of the current Board: a Venture Capitalist; a Professor of Business; a former Marketing Executive in the Defense industry; and the CEO, we see obvious gaps in the key skill set in areas like manufacturing and production, executive management, M&A, capital management and capital markets experience. As such, we are requesting that two candidates, including one Horton representative, be added to the Board immediately who can help fill these gaps and proactively consider and manage implementation of some or all of the foregoing recommendations.

We hope the ideas above are helpful in providing a better understanding of some of the topics we have spoken about previously. It is our firm belief that if the Company were to take these actions, confidence would return, CPS would be valued more in line with its historical multiples, and the Company would be back on track for growth in revenue and profitability. This should result in the share price appreciating by 150%, or creation of more than $20 million of incremental value to shareholders, for an estimated total cost of less than $1.5 million. We have reason to believe that other non-affiliated shareholders are equally frustrated and feel similarly about these recommendations described above.

We would appreciate the opportunity to continue the discussion with you on a collaborative basis. We know that there is no one right answer and undoubtedly there are many points of view. We are sharing our thoughts with you because we see this as an opportunity to begin a substantive dialogue that could help lead to improved results and value creation.

If we do not hear back from you within the next several days (i.e., by the close of business December 22, 2016), we plan to make these thoughts public to better inform all shareholders of our rationale and recommendations. In any event, we respectfully request the courtesy of a reply prior to January 20, 2017 so we can consider items for inclusion at the Annual Shareholders Meeting in April 2017. We look forward to your follow-up, and as always, please don’t hesitate to contact us with any questions or comments.

Sincerely,

Joe Manko Jr.

Ownership Summary Table

Name Sole Voting Power Shared Voting Power Sole Dispositive Power Shared Dispositive Power Aggregate Amount Owned Power Percent of Class
Horton Capital Partners Fund 8 661,800 10 661,800 661,800 5.01%
Horton Capital Partners 8 661,800 10 661,800 661,800 5.01%
Horton Capital Management 8 661,800 10 661,800 661,800 5.01%
Joseph M. Manko, Jr 8 661,800 10 661,800 661,800 5.01%

Page 1 of 13 – SEC Filing

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 13D

Under the Securities Exchange Act of 1934

(Amendment No.     )

 

 

CPS
TECHNOLOGIES CORPORATION

(Name of Issuer)

Common Stock, Par Value $0.01 Per Share

(Title of Class of Securities)

12619F104

(CUSIP Number)

JOSEPH M. MANKO, JR.

HORTON CAPITAL MANAGEMENT, LLC.

1717 Arch Street, Suite 3920

Philadelphia, PA 19103

(215) 399 5402

[With a
copy to]

ANDREW FREEDMAN, ESQ.

OLSHAN FROME WOLOSKY LLP

1325 AVENUE OF THE AMERICAS

NEW YORK, NY 10019

(212)
451 2250

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

March 22, 2017

(Date of
Event Which Requires Filing of this Statement)

 

 

If the filing
person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), Rule 13d-1(f) or Rule 13d-1(g), check the following
box.  ☐

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Page 2 of 13 – SEC Filing

NOTE: Schedules filed in paper format shall
include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting persons initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information
which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page
shall not be deemed to be filed for the purpose of Section 18 of the Securities Exchange Act of 1934 (Act) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the
Act (however, see the Notes).

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Page 3 of 13 – SEC Filing


CUSIP No. 12619F104
  1 

NAMES OF
REPORTING PERSONS:

Horton Capital Partners Fund, LP

  2

CHECK THE APPROPRIATE BOX IF A MEMBER
OF A GROUP (see instructions)

(a)  ☐        (b)  ☐

  3

SEC USE ONLY

  4

SOURCE OF FUNDS (see instructions)

    WC (See Item 3)

  5

CHECK IF DISCLOSURE OF LEGAL
PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)    ☐

  6

CITIZENSHIP OR PLACE OF
ORGANIZATION

    Delaware

NUMBER OF

SHARES

BENEFICIALLY

OWNED BY

EACH

REPORTING

PERSON

WITH:

  7 

SOLE VOTING POWER

  8

SHARED VOTING POWER

    661,800 (See Item 5)

  9

SOLE DISPOSITIVE POWER

10

SHARED DISPOSITIVE POWER

    661,800 (See Item 5)

11

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:

    661,800 (See Item 5)

12

CHECK IF THE AGGREGATE AMOUNT IN ROW
(11) EXCLUDES CERTAIN SHARES (See Instructions)    ☐

13

PERCENT OF CLASS REPRESENTED BY AMOUNT
IN ROW (11)

    5.01% (See Item 5)

14

TYPE OF REPORTING PERSON (See
Instructions):

    OO

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Page 4 of 13 – SEC Filing


CUSIP No. 12619F104
  1 

NAMES OF
REPORTING PERSONS:

Horton Capital Partners, LLC

  2

CHECK THE APPROPRIATE BOX IF A MEMBER
OF A GROUP (see instructions)

(a)  ☐        (b)  ☐

  3

SEC USE ONLY

  4

SOURCE OF FUNDS (see instructions)

    OO (See Item 3)

  5

CHECK IF DISCLOSURE OF LEGAL
PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)    ☐

  6

CITIZENSHIP OR PLACE OF
ORGANIZATION

    Delaware

NUMBER OF

SHARES

BENEFICIALLY

OWNED BY

EACH

REPORTING

PERSON

WITH:

  7 

SOLE VOTING POWER

  8

SHARED VOTING POWER

    661,800 (See Item 5)

  9

SOLE DISPOSITIVE POWER

10

SHARED DISPOSITIVE POWER

    661,800 (See Item 5)

11

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:

    661,800 (See Item 5)

12

CHECK IF THE AGGREGATE AMOUNT IN ROW
(11) EXCLUDES CERTAIN SHARES (See Instructions)    ☐

13

PERCENT OF CLASS REPRESENTED BY AMOUNT
IN ROW (11)

    5.01% (See Item 5)

14

TYPE OF REPORTING PERSON (See
Instructions):

    OO

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Page 5 of 13 – SEC Filing


CUSIP No. 12619F104
  1 

NAMES OF
REPORTING PERSONS:

Horton Capital Management, LLC

  2

CHECK THE APPROPRIATE BOX IF A MEMBER
OF A GROUP (see instructions)

(a)  ☐        (b)  ☐

  3

SEC USE ONLY

  4

SOURCE OF FUNDS (see instructions)

    OO (See Item 3)

  5

CHECK IF DISCLOSURE OF LEGAL
PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)    ☐

  6

CITIZENSHIP OR PLACE OF
ORGANIZATION

    Delaware

NUMBER OF

SHARES

BENEFICIALLY

OWNED BY

EACH

REPORTING

PERSON

WITH:

  7 

SOLE VOTING POWER

  8

SHARED VOTING POWER

    661,800 (See Item 5)

  9

SOLE DISPOSITIVE POWER

10

SHARED DISPOSITIVE POWER

    661,800 (See Item 5)

11

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:

    661,800 (See Item 5)

12

CHECK IF THE AGGREGATE AMOUNT IN ROW
(11) EXCLUDES CERTAIN SHARES (See Instructions)    ☐

13

PERCENT OF CLASS REPRESENTED BY AMOUNT
IN ROW (11)

    5.01% (See Item 5)

14

TYPE OF REPORTING PERSON (See
Instructions):

    IA

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Page 6 of 13 – SEC Filing


CUSIP No. 12619F104
  1 

NAMES OF
REPORTING PERSONS:

Joseph M. Manko, Jr.

  2

CHECK THE APPROPRIATE BOX IF A MEMBER
OF A GROUP (see instructions)

(a)  ☐        (b)  ☐

  3

SEC USE ONLY

  4

SOURCE OF FUNDS (see instructions)

    OO (See Item 3)

  5

CHECK IF DISCLOSURE OF LEGAL
PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)    ☐

  6

CITIZENSHIP OR PLACE OF
ORGANIZATION

    United States

NUMBER OF

SHARES

BENEFICIALLY

OWNED BY

EACH

REPORTING

PERSON

WITH:

  7 

SOLE VOTING POWER

  8

SHARED VOTING POWER

    661,800 (See Item 5)

  9

SOLE DISPOSITIVE POWER

10

SHARED DISPOSITIVE POWER

    661,800 (See Item 5)

11

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:

    661,800 (See Item 5)

12

CHECK IF THE AGGREGATE AMOUNT IN ROW
(11) EXCLUDES CERTAIN SHARES (See Instructions)    ☐

13

PERCENT OF CLASS REPRESENTED BY AMOUNT
IN ROW (11)

    5.01% (See Item 5)

14

TYPE OF REPORTING PERSON (See
Instructions):

    IN

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Page 7 of 13 – SEC Filing


Item 1. Security and Issuer.

This statement relates to shares of common stock, par value $0.01 per share (Common Stock), of CPS Technologies Corporation, a
Delaware corporation (the Issuer, the Company or CPS). The address of the principal executive offices of the Issuer is 111 South Worcester Street, Norton, MA 02766-2102.

Item 2. Identity and Background.

(a) This statement
is filed by Horton Capital Partners LLC, a Delaware limited liability company (HCP), Horton Capital Management, LLC, a Delaware limited liability company (HCM), and Joseph M. Manko, Jr. (Mr. Manko and
together with HCP and HCM, the Reporting Persons and each a Reporting Person), with respect to shares of Common Stock of the Issuer.

(b) The address of the principal office of HCP, HCM and Mr. Manko is 1717 Arch Street, Suite 3920, Philadelphia, PA 19103. The managing member of HCP and
HCM is Mr. Joseph M. Manko, Jr.

(c) The principal business of HCP is purchasing, holding and selling securities for investment purposes. The
principal business of HCM is serving as the investment manager of Horton Capital Partners Fund, LP, a Delaware limited partnership (HCPF). HCP is the general partner of HCPF. The principal occupation of Mr. Manko is serving as the
managing member of HCM and HCP.

(d) No Reporting Person has, during the last five years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).

(e) No Reporting Person has, during the last five years, been party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities
laws or finding any violation with respect to such laws.

(f) Mr. Manko is a citizen of the United States of America.

Item 3. Source and Amounts of Funds or other Consideration.

The shares of Common Stock acquired by the Reporting Persons were purchased with working capital of HCPF (which may, at any given time, include margin loans
made by brokerage firms in the ordinary course of business) in open market purchases. The net investment costs (including commissions, if any) of the Shares directly owned by the Reporting Persons is approximately $1,441,992, including the net cost
of Shares. The amounts paid were funded by working capital.

The responses to item 4, 5, and 6 of this Schedule 13D are incorporated herein by reference.

Item 4. Purpose of Transaction.

The responses
to item 3, 5, and 6 of this Schedule 13D are incorporated herein by reference.

The Reporting Persons acquired the shares of Common Stock based on the
Reporting Persons belief that the shares of Common Stock, when purchased, were undervalued and represented an attractive investment opportunity. Depending upon overall market conditions, other investment opportunities available to the

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Page 8 of 13 – SEC Filing


Reporting Persons, and the availability of shares of Common Stock at prices that would make the purchase or sale of such shares desirable, the Reporting Persons may endeavor to increase or
decrease their position in the Issuer through, among other things, the purchase or sale of shares of Common Stock on the open market or in private transactions or otherwise, on such terms and at such times as the Reporting Persons may deem
advisable.

As a shareholder of more than three years, HCPF has actively followed the Companys performance and engaged in over a dozen discussions
with the one or more members of the Issuers management and Board of Directors (the Board). These discussions reviewed various topics including, but not limited to, manufacturing and production, capital allocation, sales and
marketing, investor relations, and corporate governance.

As a result of these discussions and continued lack of progress, HCPF issued a letter on
December 16, 2016 to the Board advocating that the Company be more proactive, more transparent and take steps to strengthen its Board. A copy of the December 16, 2016 Letter and subsequent Press Release in connection therewith, are filed
as Exhibits 3 and 4, respectively, to this Schedule 13D and are incorporated herein by reference.

In subsequent communications, the Company indicated
that they are conducting a Board evaluation process and invited HCPF to suggest candidates for consideration. Therefore, on March 3, 2017, HCPF, in compliance with the bylaws of the Issuer, submitted its formal notice of intent (the
Notice or Nomination Letter) to nominate candidates for election to the Board and present a shareholder proposal at the 2017 annual meeting of shareholders of the Issuer. A copy of the Notice is filed herewith as Exhibit 5
and is incorporated herein by reference.

The Notice stated that, at the Annual Meeting, HCPF intended to nominate for election as directors of the
Issuer, (i) Thomas J. Coffey, (ii) Mitchell H. Herbets, (iii) Michael J. Howe (iv) Leo L. Linehan and (v) Matthew Moynihan (collectively, the Nominees). HCPF believes that the Nominees would help create value for
shareholders if they were elected to the Board because the Nominees have experience that the incumbent Board lacks, and will bring fresh perspectives and improve oversight of the Issuer. Importantly, the Nominees are proven business leaders who are
committed to working with current management to accelerate growth, reduce cost, improve governance and transparency, and ultimately create value for all shareholders of the Issuer.

In the Nomination Letter, HCPF noted that there are four (4) directors currently serving whose terms expire at the Annual Meeting. If this remains the
case, Horton intends to withdraw the one (1) of its Nominees. Notwithstanding the forgoing, HCPF reserved the right to further nominate, substitute or add additional persons in the event that the Issuer purports to increase the number of
directorships.

HCPF also submitted a shareholder proposal (the Shareholder Proposal) for consideration at the 2017 Annual Meeting proposing
an amendment to Section 1.9 of the Issuers By-Laws to establish a majority vote standard in uncontested director elections. Under the Companys current plurality vote standard, a director
nominee can be elected with as little as a single affirmative vote, even if a substantial majority of the withheld votes are cast against the nominee. HCPF believes that a majority vote standard in uncontested director elections
establishes an appropriate vote standard for nominees, enhances accountability, and improves the performance of boards and individual directors and better aligns the Companys corporate governance policies with that of 2017 ISS proxy voting
guidelines.

After submitting the Notice and Shareholder Proposal, HCPF received no feedback from the Company regarding the Nominees or the Shareholder
Proposal and was not aware of any outreach made from the Issuer to any of the Nominees. While some subsequent discussions were had between the Issuer and HCPF, these discussions terminated on March 16, 2017 with HCPFs rejection of the
Issuers only settlement proposal to nominate one new member at an undefined time in the future without Hortons input in exchange for a two year standstill.

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On March 27, 2017, the Company filed its preliminary proxy statement, a copy of which is filed herewith as
Exhibit 6 and is incorporated herein by reference. In that filing, the Company announced that on March 24, 2017, the Company amended its By-Laws to adopt a majority voting standard. Also in the
preliminary proxy, the Issuer maintained its current Board as candidates and recommended shareholders vote against the Nominees.

HCPF reviewed the filing
and, while it believes the preliminary proxy contains factual inaccuracies and potential breaches of the securities laws by the Issuer, it was very disappointed to learn that the Issuer was unable to identify anyone (including any of the Nominees)
who possesses experience that would fill gaps in the incumbent Boards composition. Recognizing the concentration of ownership within the entrenched Board and motivated to avoid the Issuers wasting significant shareholder funds in
fighting reasonable and practical advice, HCPF submitted a notice withdrawing its formal nomination of Directors ( the Withdrawal Notice) on March 31, 2017. A copy of the Withdrawal Notice is filed herewith as Exhibit 7 and is
incorporated herein by reference.

On March 31, 2017, HCPF also sent a letter (the March 31 Letter) to the Issuer accompanying its
Withdrawal Notice. A copy of the March 31 Letter is filed herewith as Exhibit 8 and is incorporated herein by reference.

No Reporting Person has any
present plan or proposal which would relate to or result in any of the matters set forth in subparagraphs (a) – (j) of Item 4 of Schedule 13D except as set forth herein or such as would occur upon or in connection with completion of, or following,
any of the actions discussed herein.

The Reporting Persons intend to review their investment in the Issuer on a continuing basis. Depending on various
factors including, without limitation, the Issuers financial position and investment strategy, the price levels of the Shares, conditions in the securities markets and general economic and industry conditions, the Reporting Persons may in the
future take such actions with respect to their investment in the Issuer as they deem appropriate including, without limitation, engaging in additional communications with management and the Board of the Issuer, engaging in discussions with
stockholders of the Issuer and others about the Issuer and the Reporting Persons investment, making proposals to the Issuer concerning changes to the capitalization, ownership structure, board structure (including board composition) or
operations of the Issuer, purchasing additional shares of Common Stock, selling some or all of their shares of Common Stock, or changing their intention with respect to any and all matters referred to in Item 4.

Item 5. Interest in Securities of the Issuer.

The
responses to item 3, 4, and 6 of this Schedule 13D are incorporated herein by reference.

The percentages used herein are calculated based upon 13,203,436
shares of Common Stock issued and outstanding as of March 7, 2017, pursuant to the Annual Report on Form 10-K filed by the Issuer with the SEC on March 8, 2017.

As of the close of business on March 30, 2017:

1. HCPF

(a) Amount beneficially owned: 661,800*

(b) Percent of
class: 5.01%*

(i) Sole power to vote or direct the vote: 0

(ii) Shared power to vote or direct the vote: 661,800*

(iii)
Sole power to dispose or direct the disposition: 0

(iv) Shared power to dispose or direct the disposition: 661,800*

2. HCP

(a) Amount beneficially owned: 661,800*

(b) Percent of class: 5.01%*

(i) Sole power to vote or direct
the vote: 0

(ii) Shared power to vote or direct the vote: 661,800*

(iii) Sole power to dispose or direct the disposition: 0

(iv)
Shared power to dispose or direct the disposition: 661,800*

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3. HCM

(a) Amount
beneficially owned: 661,800*

(b) Percent of class: 5.01%*

(i) Sole power to vote or direct the vote: 0

(ii) Shared power
to vote or direct the vote: 661,800*

(iii) Sole power to dispose or direct the disposition: 0

(iv) Shared power to dispose or direct the disposition: 661,800*

4. Mr. Manko

(a) Amount beneficially owned: 661,800*

(b) Percent of class: 5.01%*

(i) Sole power to vote or direct
the vote: 0

(ii) Shared power to vote or direct the vote: 661,800*

(iii) Sole power to dispose or direct the disposition: 0

(iv)
Shared power to dispose or direct the disposition: 661,800*

* HCPF owns directly 661,800 shares of Common Stock, including 1,000 shares that are held in record name. Pursuant to investment management agreements, HCM maintains investment and voting power with respect to the
securities held by HCPF. However, despite the delegation of investment and voting power to HCM, HCP may be deemed to be the beneficial owner of such securities under Rule 13d-3 of the Act because HCP has the
right to acquire investment and voting power through termination of investment management agreements with HCM. HCM also acts as an investment adviser to certain managed accounts. HCP is the general partner of HCPF. Mr. Manko is the managing
member of both HCM and HCP. By reason of the provisions of Rule 13d-3 of the Act, each of HCM and Mr. Manko may be deemed to beneficially own 661,800 shares of Common Stock, and HCP may be deemed to
beneficially own 661,800 shares of Common Stock held by HCPF. Each of the Reporting Persons disclaims beneficial ownership of any of the securities covered by this Schedule 13D except to the extent of his or its pecuniary interest therein.

(c) Schedule A attached to this Schedule 13D and incorporated herein by reference lists all transaction in the Shares effected by the
Reporting Persons during the past sixty days.

(d) No person other than the Reporting Persons is known to have the right to receive, or the power to
direct the receipt of dividends from, or proceeds from the sale of, the Shares.

(e) Not applicable.

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.

The
responses to item 3, 4, and 5 of this Schedule 13D are incorporated herein by reference.

Mr. Howe is a senior principal of HCM. Each of the Nominees
have given consent for their nomination and aside from the above have no other contracts, arrangements, understandings or relationships with the Reporting Persons.

On March 31, 2017, the Reporting Persons entered into a Joint Filing Agreement, attached hereto as Exhibit 2, pursuant to which they agreed to file this
Schedule 13D jointly in accordance with the provisions of Rule 13d-1(k) of the Act.

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Other than as described herein, there are no contracts, arrangements, understandings or relationships among the
Reporting Persons, or between the Reporting Persons and any other person, with respect to the securities of the Issuer.

Item 7. Material to be
Filed as Exhibits.

Exhibit 1 Schedule A
Exhibit 2 Joint Filing Agreement
Exhibit 3 Letter, dated December 16, 2016
Exhibit 4 Press Release, December 22, 2016
Exhibit 5 Notice, dated March 3, 2017
Exhibit 6 Preliminary Proxy Statement, incorporated by reference to Form PREC14A filed by the Issuer on March 27, 2017
Exhibit 7 Withdrawal Notice, dated March 31, 2017
Exhibit 8 Letter, dated March 31, 2017

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SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true,
complete and correct.

Dated: March 31, 2017 HORTON CAPITAL PARTNERS FUND, LP
By:

/s/ Joseph M. Manko, Jr.

Name: Joseph M. Manko, Jr.
Title: Managing Member
HORTON CAPITAL PARTNERS, LLC
By:

/s/ Joseph M. Manko, Jr.

Name: Joseph M. Manko, Jr.
Title: Managing Member
HORTON CAPITAL MANAGEMENT, LLC.
By:

/s/ Joseph M. Manko, Jr.

Name: Joseph M. Manko, Jr.
Title: Managing Member

/s/ Joseph M. Manko, Jr.

JOSEPH M. MANKO, JR.

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Page 13 of 13 – SEC Filing


EXHIBIT INDEX

Exhibit
No.

Description

1 Schedule A
2 Joint Filing Agreement
3 Letter, dated December 16, 2016
4 Press Release, December 22, 2016
5 Notice, dated March 3, 2017
6 Preliminary Proxy Statement, incorporated by reference to Form PREC14A filed by the Issuer on March 27, 2017
7 Withdrawal Notice, dated March 31, 2017
8 Letter, dated March 31, 2017
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