<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period
ended September 30, 1995
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or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to
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Commission File Number 0-12742
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SPIRE CORPORATION
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Exact name of registrant as specified in its charter
Massachusetts 04-2457335
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State or other jurisdiction (I.R.S. Employer
of incorporation or organization Identification No.)
One Patriots Park, Bedford, Massachusetts 01730-2396
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Address of principal executive offices Zip Code
Registrant's telephone number, including area code: 617-275-6000
---------------------------
Check whether the issuer (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 that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
----- -----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of October 31, 1995, there were
outstanding 3,065,200 shares of the issuer's common stock, $.01 par value.
<PAGE> 2
SPIRE CORPORATION
INDEX
<TABLE>
<CAPTION>
Page Number
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<S> <C>
PART I - FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets 3
September 30, 1995 and December 31, 1994
Condensed Consolidated Statements of Operations 4
For the Three Months Ended September 30, 1995 and 1994 and
For the Nine Months Ended September 30, 1995 and 1994
Condensed Consolidated Statements of Cash Flows 5
For the Nine Months Ended September 30, 1995 and 1994
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial 7 & 8
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. 9
Item 6. Exhibits and Reports on Form 8-K. 9
</TABLE>
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<PAGE> 3
SPIRE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
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(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 87,631 $ 166,567
Short-term investments 531,399 0
Accounts receivable:
Amounts billed 2,381,043 3,136,544
Retainage 133,708 143,614
Unbilled costs 655,541 701,468
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3,170,292 3,981,626
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Less allowance for doubtful accounts 95,000 45,000
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Net accounts receivable 3,075,292 3,936,626
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Inventories (Note 2) 681,246 888,747
Prepaid expenses and other current assets 372,305 411,816
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Total current assets 4,747,873 5,403,756
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Property and equipment 21,877,058 21,590,475
Less accumulated depreciation and amortization 17,048,002 16,134,705
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Net property and equipment 4,829,056 5,455,770
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Computer software costs (less accumulated amortization,
$782,006 in 1995 and $776,524 in 1994) 66,978 26,381
Patents (less accumulated amortization,
$361,822 in 1995 and $319,060 in 1994) 512,476 475,015
Other assets 247,585 378,745
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827,039 880,141
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$10,403,968 $11,739,667
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable - bank $ 0 $ 750,000
Current portion of capital lease obligation 13,917 47,838
Accounts payable 975,572 1,788,215
Accrued liabilities 574,742 890,532
Federal and State taxes payable 47,700 0
Advances on contracts in progress 755,565 229,710
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Total current liabilities 2,367,496 3,706,295
Capital lease obligation, net of current portion 0 9,635
Stockholders' equity:
Common Stock, $.01 par value; shares authorized
6,000,000; issued 3,560,360 shares in 1995 and
3,559,860 shares in 1994 35,604 35,604
Additional paid-in capital 8,468,903 8,468,903
Retained earnings 629,153 563,293
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Treasury stock at cost, 512,160 shares in 1995
and 495,160 in 1994 1,097,188 1,044,063
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Total stockholders' equity 8,036,472 8,023,737
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$10,403,968 $11,739,667
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</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 4
SPIRE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- --------------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales and revenues:
Contract research and service revenues $ 3,260,683 $ 3,881,985 $ 10,074,365 $ 11,467,943
Sales of manufacturing equipment 1,014,441 501,117 3,442,611 1,797,433
------------ ------------ ------------ ------------
4,275,124 4,383,102 13,516,976 13,265,376
------------ ------------ ------------ ------------
Costs and expenses:
Cost of contract research and service 2,241,946 2,750,750 7,115,970 8,235,961
Cost of manufacturing equipment 847,147 401,585 2,993,315 1,373,155
Research and development expenses 5,257 13,976 5,082 85,028
Selling, general and administrative expenses 1,079,650 1,189,046 3,258,343 3,740,175
------------ ------------ ------------ ------------
4,174,000 4,355,357 13,372,710 13,434,319
------------ ------------ ------------ ------------
Earnings (loss) from operations 101,124 27,745 144,266 (168,943)
Interest income (expense), net 7,468 (7,224) (30,706) 63,701
------------ ------------ ------------ ------------
Earnings (loss) before income taxes 108,592 20,521 113,560 (232,644)
Income tax expense 47,700 0 47,700 0
------------ ------------ ------------ ------------
Net earnings (loss) $ 60,892 $ 20,521 $ 65,860 $ (232,644)
============ ============ ============ ============
Earnings (loss) per share of Common Stock $ 0.02 $ 0.01 $ 0.02 $ (0.08)
============ ============ ============ ============
Weighted average number of common and
common equivalent shares outstanding 3,067,462 3,103,103 3,068,043 3,102,223
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 5
SPIRE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1995 1994
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<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 65,860 $ (232,644)
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 986,179 1,029,802
Changes in assets and liabilities:
Accounts receivable 861,334 748,563
Inventories 207,501 (397,614)
Prepaid expense and other current assets 39,511 (186,310)
Accounts payable and accrued liabilities (1,128,433) (356,519)
Federal and State taxes payable 47,700 0
Advances on contracts in progress 525,855 861,612
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Net cash provided by operating activities 1,605,507 1,466,890
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Cash flows from investing activities:
Additions to property and equipment (286,583) (1,308,022)
Increase in patent costs (80,223) (51,646)
Other assets 60,442 (191,206)
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Net cash used for investing activities (306,364) (1,550,874)
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Cash flows from financing activities:
Net payments on short-term debt (750,000) 805,000
Payments on long-term borrowing (43,555) (756,794)
Repurchase of common stock (53,125) 0
Exercise of stock options 0 1,250
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Net cash provided by (used for) financing activities (846,680) 49,456
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Net increase (decrease) in cash and cash equivalents 452,463 (34,528)
Cash and cash equivalents, beginning of period 166,567 46,543
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Cash and cash equivalents, end of period $ 619,030 $ 12,015
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the quarter for:
Interest expense $ 43,731 $ 23,993
=========== ===========
Income taxes $ 0 $ 0
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 6
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 1995 and 1994
(1) Interim Financial Statements
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
fairly present the Company's financial position as of September 30, 1995
and December 31, 1994 and the results of operations and changes in cash
flows for the nine months ended September 30, 1995 and 1994. The results
of operations for the nine months ended September 30, 1995 are not
necessarily indicative of the results to be expected for the fiscal year
ended December 31, 1995.
The accounting policies followed by the Company are set forth in Note 2
to the Company's consolidated financial statements in its Annual Report
on Form 10-KSB for the year ended December 31, 1994.
The financial statements, with the exception of the December 31, 1994
balance sheet, are unaudited and have not been examined by independent
public accountants.
(2) Inventories
<TABLE>
<CAPTION>
Inventories consist of the following: September 30, December 31,
1995 1994
------------- ------------
(Unaudited)
<S> <C> <C>
Raw materials $322,556 $400,519
Work in process 358,690 488,228
-------- --------
$681,246 $888,747
======== ========
</TABLE>
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<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Results of Operations
Net sales and revenues for the quarter ended September 30, 1995 decreased 2% to
$4,275,000 compared to $4,383,000 for the quarter ended September 30, 1994. For
the quarter ended September 30, 1995, the Company had net earnings of $61,000
compared to net earnings of $21,000 for the quarter ended September 30, 1994.
Retained earnings were $629,000 as of September 30, 1995 compared to $563,000 as
of December 31, 1994. Working capital as of September 30, 1995 was $2,380,000
compared to $1,697,000 as of December 31, 1994.
<TABLE>
<CAPTION>
September 30, September 30, %
Revenues for the quarter ended: 1995 1994 Change
- ------------------------------ ------------- ------------- ------
<S> <C> <C> <C>
Contract research and service revenues $3,261,000 $3,882,000 (16%)
Manufacturing equipment sales 1,014,000 501,000 102%
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Net sales and revenues $4,275,000 $4,383,000 (2%)
========== ==========
</TABLE>
<TABLE>
<CAPTION>
September 30, September 30, %
Revenues for the nine months ended: 1995 1994 Change
- ---------------------------------- ------------- ------------ ------
<S> <C> <C> <C>
Contract research and service revenues $10,074,000 $11,468,000 (12%)
Manufacturing equipment sales 3,443,000 1,797,000 92%
----------- -----------
Net sales and revenues $13,517,000 $13,265,000 2%
=========== ===========
</TABLE>
Net sales and revenues for contract research and services declined 16% in 1995
to $3,261,000 compared to $3,882,000 in 1994. The decline in contract revenues
is largely the result of the government's move toward programs requiring
significant cost sharing, which management has elected to pursue cautiously. The
orthopaedic processing service business has experienced price pressures due to
competition and changes in the health care market which have negatively affected
revenues and margins. Manufacturing equipment sales increased 102% to $1,014,000
compared to $501,000 in the same period of 1994 primarily due to increased
interest in photovoltaic lines.
<TABLE>
<CAPTION>
September 30, % of September 30, % of %
Cost of Sales for the quarter ended: 1995 Revenues 1994 Revenues Change
- ----------------------------------- ------------ -------- ------------ -------- ------
<S> <C> <C> <C> <C> <C>
Contract research and service
cost of sales $2,242,000 69% $2,751,000 71% (2%)
Manufacturing equipment
cost of sales 847,000 84% 402,000 80% 4%
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Total cost of sales $3,089,000 72% $3,153,000 72% 0%
========== ==========
</TABLE>
<TABLE>
<CAPTION>
September 30, % of September 30, % of %
Cost of Sales for the nine months ended: 1995 Revenues 1994 Revenues Change
- --------------------------------------- ------------ -------- ------------- -------- ------
<S> <C> <C> <C> <C> <C>
Contract research and service
cost of sales $ 7,116,000 71% $8,236,000 72% (1%)
Manufacturing equipment
cost of sales 2,993,000 87% 1,373,000 76% 11%
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Total cost of sales $10,109,000 75% $9,609,000 72% 3%
=========== ==========
</TABLE>
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<PAGE> 8
The cost of contract research and service revenues decreased to 71% for the nine
months ended September 30, 1995 compared to 72% for the nine months ended
September 30, 1994. Cost of manufacturing equipment was 84% compared to 76% for
the nine months ended September 30, 1994 due to a changed product mix.
Selling, general and administrative expenses for the nine months ended September
30, 1995 were 24% of sales compared to 27% of sales for the nine months ended
September 30, 1994. The decrease in selling, general and administrative expenses
as a percentage of sales is attributable to cost reduction steps management
implemented in 1994 and 1995. Depreciation and amortization expenses for the
nine months ended September 30, 1995 decreased 4% to $986,000 compared to
$1,030,000 in 1994. Expenditures for capital equipment were $287,000 for the
nine months ended September 30, 1995 compared to $1,308,000 for the nine months
ended September 30, 1994. Management continues its efforts to control capital
spending. The Company incurred interest expense of $43,000 in the first nine
months of 1995 and $94,000 in the same period of 1994, of which $500 was
capitalized in 1995 compared to $29,000 in 1994 in connection with internally
constructed machinery and equipment.
Liquidity and Capital Resources
On September 30, 1993, the Company entered into a revolving credit facility with
a bank. This agreement established a $2 million revolving credit agreement,
subject to the availability of eligible accounts receivable. This line of credit
has been established to provide the Company with resources for general working
capital purposes and Standby Letter of Credit guarantees for foreign customers.
The loan is secured by all assets of the Company. This loan has been extended
through April 5, 1996. Interest on the loan is now at the prime rate. The note
contains restrictive covenants including provisions relating to profitability
and net worth. As of September 30, 1995, the Company had no outstanding balance
under this revolving credit line.
The Company believes it has sufficient resources to finance its anticipated
capital expenditures through working capital, existing lines of credit or
available lease arrangements.
Impact of Inflation and Changing Prices
Historically, the Company's business has not been materially impacted by
inflation. Manufacturing equipment sales are generally quoted, manufactured and
shipped within a cycle of less than six months, allowing for orderly pricing
adjustments to the cost of labor and purchased parts. The Company has not
experienced any negative effects from the impact of inflation on long-term
contracts. The Company's service business is not expected to be seriously
affected by inflation, with typically a two-week to several month
procurement-production cycle and prices generally not fixed for more than one
year. Contracted research and development usually includes cost escalation
provisions.
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<PAGE> 9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
In May, 1985, Electronic Space Systems Corporation ("ESSCO") filed suit against
the Company in the Commonwealth of Massachusetts, Middlesex County, Civil Action
No. 85-3126. ESSCO sought to recover for, inter alia, alleged breach of
contract, breach of implied covenant of good faith and fair dealing, breach of
fiduciary duty and for alleged unfair or deceptive acts or practices in
violation of Massachusetts General Laws Chapter 93A ("M.G.L. Ch. 93A") in
connection with ESSCO's allegation that the Company wrongfully repudiated
certain contractual obligations and a partnership agreement for the marketing of
photovoltaic products in the People's Republic of China and certain other
markets. The Company filed an answer denying liability to ESSCO and also filed
counterclaims against ESSCO alleging, inter alia, ESSCO's breach of contract,
misrepresentation, breach of fiduciary duty, tortious interference with the
Company's contracts, interference with the Company's advantageous business
relationships and unfair or deceptive practices in violation of M.G.L. Ch. 93A
and seeking a declaratory judgment that certain agreements between the Company
and ESSCO relating to the marketing of photovoltaic products are void. The trial
to determine the liability of the parties commenced on March 11, 1992, and on
March 27, 1992, the jury returned a verdict that, inter alia, each party had
breached various obligations to the other. Various post-trial motions by both
parties were rejected in all material respects by the Court.
A trial to assess the compensation due as a result of the liability
determinations made by the first jury was held from September 27, 1993 to
October 15, 1993. The Company was awarded compensation on one claim; ESSCO's
previously agreed upon base compensation was reduced by the full amount of the
Company's counterclaim on a second issue; and the jury was unable to reach a
verdict on the third issue, involving ESSCO's misuse of the Company's
proprietary information. The Company intends to pursue vigorously its claim for
damages resulting from ESSCO's misuse of the Company's proprietary information.
A retrial date has not yet been established. The net result of the two trials to
date is that neither party has a material liability to the other, although the
Company's claim for damages resulting from ESSCO's misuse of the Company's
proprietary information and the parties' M.G.L. Ch. 93A claims against each
other have yet to be decided. A hearing on the M.G.L. Ch. 93A issues was held in
December 1993, but the Court has not yet ruled on those issues. Based on the
proceedings to date and discussion with legal counsel, the Company believes that
the outcome of this matter will not have a material negative effect on the
Company's financial position and results of operations but may have a positive
impact.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. Exhibits - No exhibits have been included.
B. The Company filed no reports on Form 8-K during the quarter ended
September 30, 1995.
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<PAGE> 10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SPIRE CORPORATION
(Registrant)
By: /s/ Roger G. Little 13 November 1995
---------------------------------- ----------------
Roger G. Little Date
President & CEO and
Chairman of the Board
By: /s/ Richard S. Gregorio 13 November 1995
---------------------------------- ----------------
Richard S. Gregorio Date
Vice President & CFO, Treasurer
Assistant Clerk and Principal
Accounting Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
(A) Unaudited condensed consolidated balance sheets and statements of
operations on Form 10-QSB and is qualified in its entirety by reference to
such (B) Form 10-QSB.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
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<SECURITIES> 531399
<RECEIVABLES> 3170292
<ALLOWANCES> 95000
<INVENTORY> 681246
<CURRENT-ASSETS> 4747873
<PP&E> 21877058
<DEPRECIATION> 17048002
<TOTAL-ASSETS> 10403968
<CURRENT-LIABILITIES> 2367496
<BONDS> 0
<COMMON> 35604
0
0
<OTHER-SE> 8000868
<TOTAL-LIABILITY-AND-EQUITY> 10403968
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<TOTAL-REVENUES> 4275124
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</TABLE>
