UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q

(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 
For the period ended September 29, 2001
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

CERAMICS PROCESS SYSTEMS CORPORATION

(Exact Name of Registrant as Specified in its Charter)



|Delaware(State or Other Jurisdiction
of Incorporation or Organization                      | 04-2832409(I.R.S. Employer
Identification No.)
|------------------------------------------------------------------------------------------ | ----------------------------------------------
|111 South Worcester Street
P.O. Box 338Chartley MA(Address of principal executive offices) | 02712-0338(Zip Code)                          

(508) 222-0614



Not ApplicableFormer 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 29, 2001: 12,292,338.



PART I  FINANCIAL INFORMATION
ITEM 1  FINANCIAL STATEMENTS (Unaudited)
CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Balance Sheets (Unaudited)
(continued on next page)

|                               | September 29, |  | December 30, 
|------------------------------ | ------------- |  | -------------
|                               | 2001          |  | 2000         
|ASSETS                         | ------------  |  | ------------ 
|                               |               |  |              
|Current assets:                |               |  |              
|Cash and cash equivalents      | $  350,066    |  | $  672,391   
|Accounts receivable-trade      | 805,064       |  | 800,223      
|Inventories                    | 537,175       |  | 567,132      
|Prepaid expenses               | 24,706        |  | 5,142        
|                               | ------------- |  | -------------
|Total current assets           | 1,717,011     |  | 2,044,888    
|                               |               |  |              
|Property and equipment:        |               |  |              
|Production equipment           | 2,064,076     |  | 1,880,486    
|Furniture and office equipment | 188,010       |  | 188,010      
|Accumulated depreciation       |               |  |              
|and amortization               | (1,278,542)   |  | (1,029,006)  
|                               | ------------- |  | -------------
|Net property and equipment     | 973,544       |  | 1,039,490    
|                               | ------------- |  | -------------
|Total Assets                   | $2,690,555    |  | $3,084,378   
|                               | ============= |  | =============

See accompanying notes to consolidated financial statements.



CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Balance Sheets (Unaudited)
(continued)



|                                      | September 29, |  | December 30, 
|------------------------------------- | ------------- |  | -------------
|LIABILITIES AND STOCKHOLDERS'         | 2001          |  | 2000         
|EQUITY                                | ------------  |  | ------------ 
|                                      |               |  |              
|Current liabilities:                  |               |  |              
|Accounts payable                      | $  138,366    |  | $  299,656   
|Accrued expenses                      | 170,037       |  | 144,440      
|Deferred revenue                      | 9,884         |  | 9,884        
|Current portion of obligations        |               |  |              
|under capital leases                  | 48,160        |  | 52,061       
|                                      | ------------- |  | -------------
|Total current liabilities             | 366,447       |  | 506,041      
|                                      |               |  |              
|Deferred revenue                      | 124,000       |  | 124,000      
|Obligations under capital             |               |  |              
|leases less current portion           | 98,451        |  | 20,762       
|                                      | ------------- |  | -------------
|Total liabilities                     | 588,898       |  | 650,803      
|                                      | ------------- |  | -------------
|Stockholders' Equity                  |               |  |              
|Common stock, $0.01 par value.        |               |  |              
|Authorized 15,000,000 shares;         |               |  |              
|Issued 12,315,221 shares at           |               |  |              
|September 29, 2001 and 12,310,352 at  |               |  |              
|December 30, 2000                     | 123,152       |  | 123,104      
|                                      |               |  |              
|Additional paid-in capital            | 32,657,436    |  | 32,656,608   
|                                      |               |  |              
|Accumulated deficit                   | (30,618,096)  |  | (30,285,302) 
|                                      |               |  |              
|Less treasury stock, at cost,         |               |  |              
|22,883 common shares at September 29, |               |  |              
|2001 and December 30, 2000            | (60,835)      |  | (60,835)     
|                                      | ------------- |  | -------------
|Total stockholders' equity            | 2,101,657     |  | 2,433,575    
|                                      | ------------- |  | -------------
|Total liabilities and stockholders'   |               |  |              
|equity                                | $2,690,555    |  | $3,084,378   
|                                      | ============= |  | =============

See accompanying notes to consolidated financial statements.



CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Statements of Operations (Unaudited)

|                           | Fiscal         |  | Nine-Month   
|-------------------------- | -------------- |  | -------------
|                           | Quarters Ended |  | Periods Ended
|                           | Sept. 29,      |  | Sept. 30,    
|                           | 2001           |  | 2000         
|                           |                |  |              
|Product sales              | $1,324,424     |  | $1,056,557   
|                           | ============   |  | ============ 
|Operating expenses:        |                |  |              
|Cost of product sales      | 890,458        |  | 1,149,696    
|Selling, general, and      |                |  |              
|administrative             | 211,086        |  | 224,258      
|                           | ------------   |  | ------------ 
|Total operating expenses   | 1,101,544      |  | 1,373,954    
|                           | ------------   |  | ------------ 
|Operating income (loss)    | 222,880        |  | (317,397)    
|                           |                |  |              
|Other income(expense), net | (17,539)       |  | 19,302       
|                           | ------------   |  | ------------ 
|Net income (loss)          | $  205,341     |  | $ (298,095)  
|                           | ============   |  | ============ 
|Net income (loss) per      |                |  |              
|basic common share         | $     0.02     |  | $    (0.02)  
|                           | ------------   |  | ------------ 
|                           |                |  |              
|Weighted average number of |                |  |              
|basic common shares        |                |  |              
|outstanding                | 12,292,338     |  | 12,287,469   
|                           | ============   |  | ============ 
|Net income (loss) per      |                |  |              
|diluted common share       | $     0.02     |  | $    (0.02)  
|                           | ------------   |  | ------------ 
|Weighted average number of |                |  |              
|diluted common shares      |                |  |              
|outstanding                | 12,389,583     |  | 12,287,469   
|                           | ============   |  | ============ 

See accompanying notes to consolidated financial statements.



CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Statements of Cash Flows (Unaudited)

|                                            |                                               |                                |                                |                      | Nine-Month Periods Ended
|------------------------------------------- | --------------------------------------------- | ------------------------------ | ------------------------------ | -------------------- | ------------------------
|                                            |                                               |                                |                                |                      | September 29,           
|                                            |                                               |                                |                                |                      | 2001                    
|                                            |                                               |                                |                                |                      | ------------            
|                                            |                                               |                                |                                |                      |                         
|Cash flows from operating activities:       |                                               |                                |                               
|                                            | Net loss                                      | $   (332,794)                  |                                | $   (119,402)       
|                                            | Adjustments to reconcile net                  |                                |                                |                     
|                                            |                                               | loss to cash used in operating |                                |                      |                         
|                                            |                                               | activities:                    |                                |                      |                         
|                                            |                                               |                                | Depreciation & amortization    | 252,197              |                         
|                                            |                                               |                                | Gain on disposal of equipment  | (8,934)              |                         
|                                            | Changes in assets and liabilities:            |                                |                                |                     
|                                            |                                               | Accounts receivable            | (4,841)                        |                      | (76,631)                
|                                            |                                               | Inventories                    | 29,957                         |                      | (118,318)               
|                                            |                                               | Prepaid expenses               | (19,564)                       |                      | 9,359                   
|                                            |                                               | Accounts payable               | (161,290)                      |                      | (14,381)                
|                                            |                                               | Accrued expenses               | 25,597                         |                      | (26,828)                
|                                            |                                               |                                |                                |                      | ------------            
|                                            |                                               |                                | Net cash used in operating     | $   (219,672)        |                         
|                                            |                                               |                                |                                | activities           |                         
|                                            |                                               |                                |                                |                      | ------------            
|Cash flows from investing activities:       |                                               |                                |                               
|                                            | Proceeds from sale of assets                  | $       8,934                  |                                | $     127,865       
|                                            | Additions to property and equipment           | $    (60,614)                  |                                | $   (236,266)       
|                                            | Marketable securities                         | -                              |                                | 306,672             
|                                            |                                               |                                |                                |                      | ------------            
|                                            |                                               |                                | Net cash provided by (used in) |                      |                         
|                                            |                                               |                                |                                | investing activities | $    (51,680)           
|                                            |                                               |                                |                                |                      | ------------            
|Cash flows from financing activities:       |                                               |                                |                               
|                                            | Payment of capital lease obligations          | $    (51,849)                  |                                | $    (38,663)       
|                                            | Proceeds from issuance of common              |                                |                                |                     
|                                            |                                               | Stock                          | 876                            |                      | 270                     
|                                            |                                               |                                |                                |                      | ------------            
|                                            |                                               |                                | Net cash used in               |                      |                         
|                                            |                                               |                                |                                | Financing activities | (50,973)                
|                                            |                                               |                                |                                |                      | ------------            
|Net decrease in cash                        | (322,325)                                     |                                | (39,254)                      
|Cash at beginning of period                 | 672,391                                       |                                | 1,033,522                     
|                                            |                                               |                                |                                |                      | ------------            
|Cash at end of period                       | $    350,066                                  |                                | $    994,268                  
|                                            |                                               |                                |                                |                      | ============            
|Non-cash financing and investing activities |                                               |                                |                               
|                                            | Acquisition of machinery under capital leases | 125,637                        |                                | -                   

See accompanying notes to consolidated financial statements.



CERAMICS PROCESS SYSTEMS CORPORATION
Notes to Consolidated Financial Statement
(Unaudited)

(1)  Nature of Business

Ceramics Process Systems Corporation  (the Company or CPS) serves the microprocessor, wireless communications, satellite communications, motor controller and other microelectronic markets by developing, manufacturing, and marketing advanced metal-matrix composite and ceramic 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 has an accumulated deficit of $30,618,096 at September 29, 2001 and a net loss for the year to date totaling $332,794.  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.  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 continue as a going concern and achieve its business objective.

(2)  Interim Consolidated Financial Statements

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

The accompanying financial statements for the fiscal quarters and nine month periods ended September 29, 2001 and September 30, 2000 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.

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.

(3)  Net Income/Loss Per Common and Common Equivalent Share

Basic EPS excludes the effect of any dilutive options, warrants or convertible securities and is computed by dividing income available to common stockholders 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 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.

|                         |                   | Fiscal         |              | Nine month   
|------------------------ | ----------------- | -------------- | ------------ | -------------
|                         |                   | Quarters Ended |              | Periods Ended
|                         |                   | Sept. 29,      |              | Sept. 30,    
|                         |                   | 2001           |              | 2000         
|                         |                   | ------------   |              | ------------ 
|Basic EPS Computation:   |                   |                |              |              
|Numerator:               |                   |                |              |              
|                         | Net income (loss) | $   205,341    |              | $  (298,095) 
|                         |                   |                |              |              
|Denominator:             |                   |                |              |              
|                         | Weighted average  |                |              |              
|                         | common shares     |                |              |              
|                         | outstanding       | 12,292,338     |              | 12,287,469   
|                         |                   |                |              |              
|Basic EPS                | $      0.02       |                | $     (0.02) |              
|                         |                   |                |              |              
|Diluted EPS Computation: |                   |                |              |              
|Numerator:               |                   |                |              |              
|                         | Net income (loss) | 205,341        |              | (298,095)    
|                         |                   |                |              |              
|Denominator:             |                   |                |              |              
|                         | Weighted average  |                |              |              
|                         | common shares     |                |              |              
|                         | outstanding       | 12,389,583     |              | 12,287,469   
|                         |                   | ------------   |              | ------------ 
|                         |                   |                |              |              
|                         | Total Shares      | 12,389,583     |              | 12,287,469   
|                         |                   |                |              |              
|Diluted EPS              | $      0.02       |                | $     (0.02) |              
|                         |                   |                |              |              

The diluted share base for the three months ended September 29, 2001 excludes approximately 551,000 potential shares of common stock.  These options were not included in the calculation of diluted net income per common share because the options' exercise price was greater than the average market price of the common shares during those periods. The diluted share base for the three months ended September 30, 2000 excludes approximately 774,000 potential shares of common stock that are antidilutive as a result of the Company`s net loss during that quarter.  The diluted share base for the nine months ended September 29, 2001 and September 30, 2000 excludes approximately 748,000 and 774,000 potential shares respectively  related to employee stock options.  These shares are excluded due to their antidilutive effect as a result of the Company`s loss from continuing operations during 2001 and 2000.

(4)	Inventory

|Inventories consist of the following:
|-------------------------------------
|                                     
|                                     
|                                     
|                                     
|Raw materials                        
|Work in process                      
|Finished Goods                       
|                                     
|                                     
|                                     

(5)	Accrued Expenses

|Accrued expenses consist of the following:
|------------------------------------------
|                                          
|                                          
|                                          
|                                          
|Accrued legal and                         
|accounting                                
|Accrued payroll                           
|Accrued other                             
|                                          
|                                          
|                                          

(6)	Recent Accounting Pronouncements

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets" effective January 1, 2002.  SFAS 142 requires, among other things, the cessation of the amortization of goodwill.  In addition, the standard includes provisions for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill and the identification of reporting units for purposes of assessing potential future impairments of goodwill.  SFAS 142 also requires us to complete a transitional goodwill impairment test nine months from the date of adoption.  We do not expect the impact of the adoption of this new statement to materially impact our combined statements of financial position and results of operations.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."  SFAS 144 supercedes FASB Statement No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived Assets and for Long Lived Assets to Be Disposed of ."  SFAS 144 applies to all long-lived assets (including discontinued operations) and consequently amends Accounting Principles Board Opinion No. 30 (APB 30), "Reporting Results of Operations - Reporting the Effects of Disposal of a Segment of a Business." SFAS 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001, and will thus be adopted by the Company, as required, on January 1, 2002.  Management is currently determining what effect, if any, SFAS 144 will have on its financial position and results of operations.

ITEM 2       MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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.

Results of Operations for Third Fiscal Quarter of 2001 (Q3 2001) Compared to the Third Fiscal Quarter of 2000 (Q3 2000)

Total revenue was $1,324 thousand in Q3 2001, a 25% increase from total revenue of $1,057 thousand in Q3 2000.  The increase in revenue was the result of two factors: 1) certain prototype products which have been in qualification were released by our customers for production beginning in Q3 2001, and 2) several customers who had put orders for existing products on hold earlier this year released orders for shipment beginning in Q3 2001.

Gross profit on product sales in Q3 2001 was 33% compared to a negative gross profit on product sales in Q3 2000 of (9%).  This substantial difference is primarily the result of two factors:  1) higher product sales in Q3 2001 compared to Q3 2000 resulting in fixed costs being spread over a larger base, and 2)reduced fixed and variable costs in Q3 2001 compared to Q3 2000 as a result of cost reduction actions taken in Q1 and Q2 2001.

Selling, general and administrative expenses declined 6% in Q3 2001 compared to Q3 2000 primarily as a result of reduced headcount which was implemented in Q1 2001 and reduced travel expenses.

Results of Operations for First Nine months 2001 Compared to First Nine months of 2000

Total revenue was $3,135 thousand in the first nine months of 2001, a 17% decrease from total revenue of $3,757 thousand in the first nine months of 2000.  Demand in the first two quarters of 2001 was significantly below the forecasts customers provided to the Company at the end of 2000.  Demand increased at the beginning of Q3 2001, but the increased demand in Q3 was not sufficient to offset the reduced demand in Q1 and Q2 2001.

Towards the end of Q1 2001 management reduced costs in the Company to a level appropriate for short-term demand.  Cost reduction actions included reducing employment levels, particularly in manufacturing, and placing tighter controls on expenses.  In addition, capital expenditures were reduced to conserve cash.   These actions were completed by the end of the Q1 so their effects were seen in Q2 and Q3 2001.

Total operating expenses of $3,464 thousand in the first nine months of 2001 decreased by 12% from total operating expenses of $3,937 thousand in the first nine months of 2000.  Cost of product sales of $2,687 thousand in the first nine months of 2001 decreased by 16% from cost of product sales of $3,214 thousand in the first nine months of 2000.  Cost of product sales declined primarily as a result of cost reduction actions taken in Q1 2001, as well as changes in product mix.

Gross profit on product sales was below 14% in Q1 and Q2 2001 as a result of product sales lower than forecast, and gross profit on product sales was above 14% in Q3 2001 as a result of higher product sales and the cost reductions described above.  The result of these two offsetting trends is that gross profit on product sales in the first nine months of 2001 was 14%, the same as gross profit in the first nine months of 2000.

Selling, general and administrative expenses increased by 7% or $53 thousand in the first nine months of 2001 compared to the first nine months of 2000 primarily as a result of higher staffing in Q1 2001 compared to Q1 2000.

Financial Liquidity

The Company`s cash and cash equivalents balance as of September 29, 2001 was $350 thousand compared to the cash and cash equivalents balance as of December 30, 2000 of $672 thousand, a 48% decline. In the first nine months of 2001 operations consumed cash of $220 thousand,  the sale of assets provided cash of $9 thousand, and additions to property, plant and equipment consumed cash of $61 thousand.

Trade Accounts Receivable increased to $805 thousand at September 29, 2001 from $800 thousand at December 30, 2000.

Inventories decreased slightly to $537 thousand at September 29, 2001 from $567 thousand at December 30, 2000. The Company does not build inventory in advance of customer demand; all work in process and finished goods inventory represent production for which the Company has purchase orders from customers.

The Company financed its working capital requirements during Q3 2001 and the first nine months of 2001 with funds from existing cash balances and funds provided by product sales.  The Company has an accumulated deficit of $30,618,096 at September 29, 2001 and a net loss for the year to date totaling $332,794.  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.  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 continue as a going concern and achieve its business objective.  The Company continues to sell to a limited number of customers and loss of any one of these customers could cause the Company to require external financing.

RecentAccounting Pronouncements

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets" effective January 1, 2002.  SFAS 142 requires, among other things, the cessation of the amortization of goodwill.  In addition, the standard includes provisions for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill and the identification of reporting units for purposes of assessing potential future impairments of goodwill.  SFAS 142 also requires us to complete a transitional goodwill impairment test nine months from the date of adoption.  We do not expect the impact of the adoption of this new statement to materially impact our combined statements of financial position and results of operations.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."  SFAS 144 supercedes FASB Statement No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived Assets and for Long Lived Assets to Be Disposed of ."  SFAS 144 applies to all long-lived assets (including discontinued operations) and consequently amends Accounting Principles Board Opinion No. 30 (APB 30), "Reporting Results of Operations - Reporting the Effects of Disposal of a Segment of a Business." SFAS 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001, and will thus be adopted by the Company, as required, on January 1, 2002.  Management is currently determining what effect, if any, SFAS 144 will have on its financial position and results of operations.

PART II OTHER INFORMATION

Item 1 through Item 5:   None
Item 6: Exhibits and Reports on Form 8-K
(a)     Exhibits:  None
(b)     Reports on Form 8-K:   None

SIGNATURES

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 9, 2001