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 June 30, 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 June 30, 2001:  12,315,221.



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



|                        |                                |                            | June 30,      |              | December 30, 
|----------------------- | ------------------------------ | -------------------------- | ------------- | ------------ | -------------
|                        |                                |                            | 2001          |              | 2000         
|ASSETS                  | -------------                  |                            | -------------
|                        |                                |                            |               |              |              
|Current assets:         |                                |                            |              
|                        | Cash and cash equivalents      | $    244,600               |               | $    672,391
|                        | Accounts receivable-trade      | 529,200                    |               | 800,223     
|                        | Inventories                    | 575,280                    |               | 567,132     
|                        | Prepaid expenses               | 42,190                     |               | 5,142       
|                        |                                |                            | ------------- |              | -------------
|Total current assets    | 1,391,270                      |                            | 2,044,888    
|                        |                                |                            |               |              |              
|Property and equipment: |                                |                            |              
|                        | Production equipment           | 2,052,887                  |               | 1,880,486   
|                        | Furniture and office equipment | 188,010                    |               | 188,010     
|                        | Accumulated depreciaton        | (1,194,378)                |               | (1,029,006) 
|                        |                                | and amortization           |               |              |              
|                        |                                |                            | ------------- |              | -------------
|                        |                                | Net property and equipment | 1,046,519     |              | 1,039,490    
|                        |                                |                            | ------------- |              | -------------
|Total Assets            | $  2,437,789                   |                            | $  3,084,378 
|                        |                                |                            | ============= |              | =============

See accompanying notes to consolidated financial statements.

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





|                                        |                                  |                      |              |               |        |              
|--------------------------------------- | -------------------------------- | -------------------- | ------------ | ------------- | ------ | -------------
|Consolidated Balance Sheets (continued) |                                  |                      |             
|                                        |                                  |                      |              | June 30,      |        | December 30, 
|LIABILITIES AND STOCKHOLDERS            | 2001                             |                      | 2000        
|                                        | EQUITY                           | -------------        |              | -------------
|                                        |                                  |                      |              |               |        |              
|Current liabilities:                    |                                  |                      |             
|                                        | Accounts payable                 | $    110,787         |              | $    299,656 
|                                        | Accrued expenses                 | 129,389              |              | 144,440      
|                                        | Deferred revenue                 | 9,884                |              | 9,884        
|                                        | Current portion of obligations   |                      |              |              
|                                        |                                  | under capital leases | 58,844       |               | 52,061
|                                        |                                  |                      |              | ------------- |        | -------------
|Total current liabilities               | 308,904                          |                      | 506,041     
|                                        |                                  |                      |              |               |        |              
|Deferred revenue                        | 124,000                          |                      | 124,000     
|Obligations under capital               |                                  |                      |             
|                                        | leases less current portion      | 108,569              |              | 20,762       
|                                        |                                  |                      |              | ------------- |        | -------------
|Total liabilities                       | 541,473                          |                      | 650,803     
|                                        |                                  |                      |              | ------------- |        | -------------
|Stockholders Equity                     |                                  |                      |             
|Common stock, $0.01 par value.          |                                  |                      |             
|Authorized 15,000,000 shares;           |                                  |                      |             
|issued  12,315,221 shares at June 30,   |                                  |                      |             
|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                     | (30,823,437)                     |                      | (30,285,302)
|                                        |                                  |                      |              |               |        |              
|Less treasury stock, at cost,           |                                  |                      |             
|                                        | 22,883 common shares at June 30, |                      |              |              
|                                        | 2001 and December 30, 2000       | (60,835)             |              | (60,835)     
|                                        |                                  |                      |              | ------------- |        | -------------
|Total stockholders equity               | 1,896,316                        |                      | 2,433,575   
|                                        |                                  |                      |              | ------------- |        | -------------
|Total liabilities and stockholders      |                                  |                      |             
|                                        | equity                           | $  2,437,789         |              | $  3,084,378 
|                                        |                                  |                      |              | ============= |        | =============

See accompanying notes to consolidated financial statements.



CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Statements of Operations (Unaudited)





|                           |                       |                |                |              |               |             |             |            |            
|-------------------------- | --------------------- | -------------- | -------------- | ------------ | ------------- | ----------- | ----------- | ---------- | -----------
|                           |                       |                | Fiscal         |              |               |             | Six month   |            |            
|                           |                       |                | Quarters Ended |              | Periods Ended
|                           |                       |                | June 30,       |              | July 1,       |             | June 30,    |            | July 1,    
|                           |                       |                | 2001           |              | 2000          |             | 2001        |            | 2000       
|                           |                       |                | ------------   | ------------ | ------------  | -----------
|Revenue:                   |                       |                |                |              |               |             |            
|                           | Product sales         | $  846,194     |                | $1,346,076   |               | $1,810,774  |             | $2,700,534
|                           |                       |                | ------------   | ------------ | ------------  | -----------
|Total Revenue              | 846,194               |                | 1,346,076      |              | 1,810,774     |             | 2,700,534  
|                           |                       |                | ============   | ============ | ============  | ===========
|Operating expenses:        |                       |                |                |              |               |             |            
|                           | Cost of product sales | 805,405        |                | 1,036,608    |               | 1,796,546   |             | 2,064,318 
|                           | Selling, general, and |                |                |              |               |             |             |           
|                           |                       | administrative | 253,453        |              | 266,590       |             | 565,935     |            | 499,409    
|                           |                       |                | ------------   | ------------ | ------------  | -----------
|Total operating expenses   | 1,058,857             |                | 1,303,198      |              | 2,362,481     |             | 2,563,727  
|                           |                       |                | ------------   | ------------ | ------------  | -----------
|Operating income (loss)    | (212,663)             |                | 42,877         |              | (551,707)     |             | 136,807    
|                           |                       |                |                |              |               |             |             |            |            
|Other income, net          | 9,051                 |                | 26,923         |              | 13,572        |             | 41,887     
|                           |                       |                | ------------   | ------------ | ------------  | -----------
|                           | Net income (loss)     |                |                |              |               |             |             |           
|                           |                       | before taxes   | (203,611)      |              | 69,800        |             | (538,135)   |            | 178,693    
|                           |                       |                |                |              |               |             |             |            |            
|Provision for income taxes | -                     |                | -              |              | -             |             | -          
|                           |                       |                | -----------    |              | -----------   |             | ----------- |            | -----------
|                           | Net income (loss)     | $ (203,611)    |                | $   69,800   |               | $ (538,135) |             | $  178,693
|                           |                       |                | ============   | ============ | ============  | ===========
|Net income (loss) per      |                       |                |                |              |               |             |            
|                           | basic common share    | $    (0.02)    |                | $     0.01   |               | $    (0.04) |             | $     0.01
|                           |                       |                | ------------   | ------------ | ------------  | -----------
|                           |                       |                |                |              |               |             |             |            |            
|Weighted average number of |                       |                |                |              |               |             |            
|                           | basic common shares   |                |                |              |               |             |             |           
|                           | outstanding           | 12,291,785     |                | 12,287,073   |               | 12,290,719  |             | 12,286,626
|                           |                       |                | ============   | ============ | ============  | ===========
|Net income (loss)per       |                       |                |                |              |               |             |            
|                           | diluted common share  | $    (0.02)    |                | $     0.01   |               | $    (0.04) |             | $     0.01
|                           |                       |                | ------------   | ------------ | ------------  | -----------
|Weighted average number of |                       |                |                |              |               |             |            
|                           | diluted common shares |                |                |              |               |             |             |           
|                           | outstanding           | 12,291,785     |                | 12,604,115   |               | 12,290,719  |             | 12,592,951
|                           |                       |                | ============   | ============ | ============  | ===========

See accompanying notes to consolidated financial statements.



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



|                                            |                                               |                                  |                               |                      | Six month period ended
|------------------------------------------- | --------------------------------------------- | -------------------------------- | ----------------------------- | -------------------- | ----------------------
|                                            |                                               |                                  |                               |                      | June 30,              
|                                            |                                               |                                  |                               |                      | 2001                  
|                                            |                                               |                                  |                               |                      | ------------          
|                                            |                                               |                                  |                               |                      |                       
|Cash flows from operating activities:       |                                               |                                  |                              
|                                            | Net income (loss)                             | $   (538,135)                    |                               | $    178,963        
|                                            | Adjustments to reconcile net income           |                                  |                               |                     
|                                            |                                               | (loss) to cash used in operating |                               |                      |                       
|                                            |                                               | activities:                      |                               |                      |                       
|                                            |                                               |                                  | Depreciation & amortization   | 168,033              |                       
|                                            |                                               |                                  | Gain on disposal of equipment | (8,934)              |                       
|                                            | Changes in assets and liabilities:            |                                  |                               |                     
|                                            |                                               | Accounts receivable              | 271,023                       |                      | (124,111)             
|                                            |                                               | Inventories                      | (8,148)                       |                      | (221,724)             
|                                            |                                               | Prepaid expenses                 | (37,049)                      |                      | (7,883)               
|                                            |                                               | Accounts payable                 | (188,869)                     |                      | 64,491                
|                                            |                                               | Accrued expenses                 | (15,051)                      |                      | 1,176                 
|                                            |                                               |                                  |                               |                      | ------------          
|                                            |                                               |                                  | Net cash used in operating    | $   (357,129)        |                       
|                                            |                                               |                                  |                               | activities           |                       
|                                            |                                               |                                  |                               |                      | ------------          
|Cash flows from investing activities:       |                                               |                                  |                              
|                                            | Proceeds from sale of assets                  | $      8,934                     |                               | $    124,065        
|                                            | Additions to property and equipment           | $    (49,425)                    |                               | $   (172,701)       
|                                            | Marketable securities                         | -                                |                               | 306,672             
|                                            |                                               |                                  |                               |                      | ------------          
|                                            |                                               |                                  | Net cash used in investing    |                      |                       
|                                            |                                               |                                  |                               | activities           | $    (40,491)         
|                                            |                                               |                                  |                               |                      | ------------          
|Cash flows from financing activities:       |                                               |                                  |                              
|                                            | Payment of capital lease obligations          | $    (31,047)                    |                               | $    (25,429)       
|                                            | Proceeds from issuance of common              |                                  |                               |                     
|                                            |                                               | stock                            | 876                           |                      | 270                   
|                                            |                                               |                                  |                               |                      | ------------          
|                                            |                                               |                                  | Net cash used in              |                      |                       
|                                            |                                               |                                  |                               | financing activities | (30,171)              
|                                            |                                               |                                  |                               |                      | ------------          
|Net increase (decrease) in cash             | (427,791)                                     |                                  | 216,938                      
|Cash at beginning of period                 | 672,391                                       |                                  | 1,033,522                    
|                                            |                                               |                                  |                               |                      | ------------          
|Cash at end of period                       | $    244,600                                  |                                  | $  1,250,460                 
|                                            |                                               |                                  |                               |                      | ============          
|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 Companys 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 Companys 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 $30,823,437 at June 30, 2001 and a net loss for the year to date totaling $538,135.  Management believes that cash flows from operations and existing cash balances will be  sufficient to fund the Companys 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 Companys 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 six month periods ended June 30, 2001 and July 1, 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.

1. Inventory



|Inventories consist of the following: |             |  |            
|------------------------------------- | ----------- |  | -----------
|                                      | June 30,    |  | July 1,    
|                                      | 2001        |  | 2000       
|                                      | ----------- |  | -----------
|                                      |             |  |            
|Raw materials                         | $   41,397  |  | $   80,095 
|Work in process                       | 197,621     |  | 442,828    
|Finished Goods                        | 336,262     |  | 6,148      
|                                      | ----------- |  | -----------
|                                      | $  575,280  |  | $  529,071 
|                                      | =========== |  | ===========



1. Accrued Expenses

|Accrued expenses consist of the following: |             |  |            
|------------------------------------------ | ----------- |  | -----------
|                                           | June 30,    |  | July 1,    
|                                           | 2001        |  | 2000       
|                                           | ----------- |  | -----------
|                                           |             |  |            
|                                           |             |  |            
|Accrued legal and accounting               | $   16,709  |  | $   21,250 
|Accrued payroll                            | 100,199     |  | 99,097     
|Accrued other                              | 12,480      |  | 38,129     
|                                           | ----------- |  | -----------
|                                           | $  129,388  |  | $  158,476 
|                                           | =========== |  | ===========

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 six 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.

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 Companys 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 Second Fiscal Quarter of 2001 (Q2 2001) Compared to the Second Fiscal Quarter of 2000 (Q2 2000)

Total revenue was $846 thousand in Q2 2001, a 37% decrease from total revenue of $1,346 thousand in Q2 2000.  Customers continued to place prototype and evaluation orders for new products during Q2 2001, but generally delayed placing production orders or delayed releasing shipments on production orders.  However, towards the end of Q2 2001 the Company received several new production orders.

Towards the end of Q1 management took several actions to reduce costs; the effect of these cost reduction actions were seen in Q2 2001.  These actions included reducing employment levels, particularly in manufacturing, and placing tighter controls on expenses.  In addition, capital expenditures were reduced to conserve cash.  Total operating expenses in Q2 2001 were $1,059 thousand, a 19% decrease from total operating expenses of $1,303 thousand in Q2 2000.  Cost of product sales in Q2 2001 were $805 thousand, a 22% decrease from cost of product sales of $1,037 in Q2 2000. Cost of product sales declined primarily as a result of lower unit shipments.   Selling, general and administrative expenses were $253 thousand in Q2 2001, a 5% decline from selling, general and administrative expenses of $267 thousand in Q2 2000.

Gross profit on product sales in Q2 2001 were 5% compared to gross margins in Q2 2000 of 23%.  This decline in gross profit is primarily the result of spreading fixed costs over a lower production volume.

The decrease in selling, general and administrative expenses of $13 thousand is the result of tighter expense controls offset partially by increased salary cost from reassigning certain engineering personnel to sales during Q2 2001.

Results of Operations for First Six Months 2001 Compared to First Six Months of 2000

Total revenue declined to $1,811 thousand in the first six months of 2001 from $2,701 thousand in the first six months of 2000, a 33% decline.  Demand in the first six months of 2001 was significantly below the forecasts customers provided to the company at the end of 2000.

Towards the end of Q1 2001 management concluded that demand would remain weak at least through Q2 2001 and 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 2001.

Total operating expenses of $2,362 thousand in the first six months of 2001 decreased by 8% from total operating expenses of $2,564 thousand in the first six months of 2000.  Cost of product sales of $1,797 thousand in the first six months of 2001 decreased by 13% from total cost of product sales of $2,064 thousand in the first six months of 2000.  Cost of product sales declined primarily as a result of lower unit shipments.  Selling, general and administrative expenses increased by 13% or $67 thousand from the first six months of 2000 to the first six months of 2001.



Gross profit on product sales in the first six months of 2001 were 1% compared to gross profit in the first six months of 2000 of 24%.  This decline in gross profit is primarily the result of lower sales volume resulting in spreading fixed costs over a smaller base.

Financial Liquidity

The Companys cash and cash equivalents balance as of June 30, 2001 was $245 thousand compared to the cash and cash equivalents balance as of December 30, 2000 of $672 thousand, a 64% decline. In the first six months of 2001 operations consumed cash of $357 thousand,  the sale of assets provided cash of $9 thousand, and additions to property, plant and equipment consumed cash of $49 thousand.

Trade Accounts Receivable declined to $529 thousand at June 30, 2001 from $800 thousand at December 30, 2000 due to lower shipments in June 2001 compared to December 2000.

Inventories increased slightly to $575 thousand at June 30, 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 Q2 2001 and the first six months of 2001 with funds from existing cash balances and funds provided by product sales.  The Company has an accumulated deficit of $30,823,437 at June 30, 2001 and a net loss for the year to date totaling $538,135.  Management believes that cash flows from operations and existing cash balances will be  sufficient to fund the Companys 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 Companys 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 six 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.

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:  August 14, 2001