<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 (fee required) For the quarterly period ended
March 31, 1996
--------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (no fee required) For the transition period
from to
-------------------------------- ------------------------------------
Commission file number 0-12742
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SPIRE CORPORATION
- --------------------------------------------------------------------------------
Exact name of small business issuer in its charter
Massachusetts 04-2457335
- --------------------------------------------------------------------------------
State or other jurisdiction of I.R.S. employer
incorporation or organization identification number
One Patriots Park, Bedford, Massachusetts 01730-2396
- --------------------------------------------------------------------------------
Address of principal executive offices Zip code
Issuer's telephone number 617-275-6000
-------------------------------------------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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. There were 3,013,200 shares of the
issuer's only class of common equity, Common Stock, $.01 par value, on April 30,
1996.
Transitional Small Business Disclosure Format (check one) Yes No X
--- ---
<PAGE> 2
SPIRE CORPORATION
INDEX
Page Number
PART I - FINANCIAL INFORMATION
- ------------------------------
Consolidated Balance Sheets 3
March 31, 1996 and December 31, 1995
Consolidated Statements of Operations 4
For the Three Months Ended March 31, 1996 and 1995
Consolidated Statements of Cash Flows 5
For the Three Months Ended March 31, 1996 and 1995
Notes to 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. 8
Item 6. Exhibits and Reports on Form 8-K. 8
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<PAGE> 3
SPIRE CORPORATION AND SUBSIDIARY
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
ASSETS
------
March 31, December 31,
1996 1995
--------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
- ---------------
Cash and cash equivalents $ 290,861 $ 1,130,428
Accounts receivable:
Amounts billed 2,254,655 2,401,536
Retainage 96,864 97,350
Unbilled costs 490,896 449,188
----------- -----------
2,842,415 2,948,074
Less allowance for doubtful accounts 95,000 95,000
----------- -----------
Net accounts receivable 2,747,415 2,853,074
----------- -----------
Inventories (Note 2) 1,458,692 1,126,734
Prepaid expenses and other current assets 290,542 369,483
----------- -----------
Total current assets 4,787,510 5,479,719
----------- -----------
Property and equipment 22,091,574 21,980,123
Less accumulated depreciation and amortization 17,596,605 17,330,271
----------- -----------
Net property and equipment 4,494,969 4,649,852
----------- -----------
Computer software costs (less accumulated amortization,
$789,735 in 1996 and $778,708 in 1995) 88,578 36,719
Patents (less accumulated amortization,
$447,034 in 1996 and $434,490 in 1995) 511,640 518,087
Other assets 271,287 260,053
----------- -----------
871,505 814,859
----------- -----------
$10,153,984 $10,944,430
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of capital lease obligation $ 7,000 $ 10,401
Accounts payable 1,131,878 1,494,877
Accrued liabilities 552,507 789,153
Advances on contracts in progress 845,422 755,756
----------- -----------
Total current liabilities 2,536,807 3,050,187
Stockholders' equity:
Common Stock, $.01 par value; shares authorized
6,000,000; issued 3,560,360 shares in 1996 and 1995 35,604 35,604
Additional paid-in capital 8,468,903 8,468,903
Retained earnings 297,983 564,424
----------- -----------
Treasury stock at cost, 542,160 shares in 1996
and 537,160 in 1995 1,185,313 1,174,688
----------- -----------
Total stockholders' equity 7,617,177 7,894,243
----------- -----------
$10,153,984 $10,944,430
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 4
SPIRE CORPORATION AND SUBSIDIARY
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
---- ----
<S> <C> <C>
Net sales and revenues:
- -----------------------
Contract research and service revenues $2,601,909 $3,458,614
Sales of manufacturing equipment 1,235,990 1,124,607
---------- ----------
3,837,899 4,583,221
---------- ----------
Costs and expenses:
- -------------------
Cost of contract research and services 1,929,966 2,461,685
Cost of manufacturing equipment 1,075,971 994,276
Selling, general and administrative expenses 1,103,910 1,106,822
---------- ----------
4,109,847 4,562,783
---------- ----------
Earnings (loss) from operations (271,948) 20,438
- -------------------------------
Interest benefit (expense), net 5,507 (17,634)
---------- ----------
Earnings (loss) before income taxes (266,441) 2,804
Income tax expense -- --
---------- ----------
Net earnings (loss) $ (266,441) $ 2,804
- ------------------ ========== ==========
Earnings (loss) per share of common stock $ (0.09) $ 0.00
- ----------------------------------------- ========== ==========
Weighted average number of common and
common equivalent shares outstanding 3,025,219 3,066,166
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 5
SPIRE CORPORATION AND SUBSIDIARY
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (266,441) $ 2,804
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 291,574 338,811
Changes in assets and liabilities:
Accounts receivable 105,659 (149,316)
Inventories (331,958) (85,759)
Prepaid expense and other current assets 78,941 7,709
Accounts payable and accrued liabilities (599,645) (519,505)
Advances on contracts in progress 89,666 208,196
---------- ---------
Net cash provided by operating activities (632,204) (197,060)
---------- ---------
Cash flows from investing activities:
Additions to property and equipment (111,451) (102,222)
Increase in patent costs (6,097) (22,038)
Increase in software production costs (25,540) --
Other assets (50,249) (596)
---------- ---------
Net cash used for investing activities (193,337) (124,856)
---------- ---------
Cash flows from financing activities:
Net borrowings (payments) on short-term debt -- 175,000
Payments on long-term borrowing (3,401) (16,969)
Repurchase of common stock (10,625) --
---------- ---------
Net cash (used for) provided by financing activities (14,026) 158,031
---------- ---------
Net increase (decrease) in cash and cash equivalents (839,567) (163,885)
Cash and cash equivalents, beginning of period 1,130,428 166,567
---------- ---------
Cash and cash equivalents, end of period $ 290,861 $ 2,682
========== =========
Supplemental disclosures of cash flow information:
Cash paid during the quarter for:
Interest expense $ 0 $ 17,634
========== =========
Income taxes $ 0 $ 0
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 6
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 1996 and 1995
(1) Interim Financial Statements
----------------------------
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to fairly present
the Company's financial position as of March 31, 1996 and December 31, 1995
and the results of operations and changes in cash flows for the three
months ended March 31, 1996 and 1995. The results of operations for the
three months ended March 31, 1996 are not necessarily indicative of the
results to be expected for the fiscal year ending December 31, 1996.
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, 1995.
The financial statements, with the exception of the December 31, 1995
balance sheet, are unaudited and have not been examined by independent
public accountants.
(2) Inventories
-----------
<TABLE>
<CAPTION>
Inventories consist of the following: March 31, December 31,
1996 1995
--------- ------------
(Unaudited)
<S> <C> <C>
Raw materials $ 500,759 $ 487,255
Work in process 957,933 639,479
---------- ----------
$1,458,692 $1,126,734
========== ==========
</TABLE>
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<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------------------------------------------------------------------------
RESULTS OF OPERATIONS.
- ----------------------
Results of Operations
- ---------------------
<TABLE>
Net sales and revenues for the quarter ended March 31, 1996 decreased 16% to
$3,838,000 compared to $4,583,000 for the quarter ended March 31, 1995. For the
quarter ended March 31, 1996, the Company had net loss of $266,000 compared to
net earnings of $2,800 for the quarter ended March 31, 1995. Retained earnings
were $298,000 as of March 31, 1996 compared to $564,000 as of December 31, 1995.
Working capital as of March 31, 1996 was $2,251,000 compared to $2,430,000 as of
December 31, 1995.
<CAPTION>
March 31, March 31, %
Revenues for the quarter ended: 1996 1995 Change
- ------------------------------- --------- --------- ------
<S> <C> <C> <C>
Contract research and service revenue $2,602,000 $3,459,000 (25%)
Manufacturing equipment sales 1,236,000 1,124,000 10%
---------- ----------
Net sales and revenues $3,838,000 $4,583,000 (16%)
========== ==========
</TABLE>
<TABLE>
Net sales and revenues for contract research and services declined 25% to
$2,602,000 compared to $3,459,000 in 1995. The decline in contract revenues was
largely the result of the government's shutdown which resulted in contracts
being awarded late in the quarter. Manufacturing equipment sales increased 10%
to $1,236,000 compared to $1,124,000 in the same period of 1995, due to
increased market demand.
<CAPTION>
March 31, % of March 31, % of %
Cost of Sales for the quarter ended: 1996 Revenues 1995 Revenues Change
- ------------------------------------ --------- -------- --------- -------- ------
<S> <C> <C> <C> <C> <C>
Contract research and service
cost of sales $1,930,000 74% $2,463,000 71% 3%
Manufacturing equipment
cost of sales 1,076,000 87% 994,000 88% (1%)
---------- ----------
Total cost of sales $3,006,000 78% $3,457,000 75% 3%
========== ==========
</TABLE>
The cost of contract research and service revenues increased to 74% for the
three months ended March 31, 1996 compared to 71% for the three months ended
March 31, 1995. Cost of contract research and services increased as a percentage
of sales due to lower volume. Cost of manufacturing equipment decreased to 87%
for the three months ended March 31, 1996 compared to 88% for the three months
ended March 31, 1995.
Selling, general and administrative expenses for the three months ended March
31, 1996 were 29% of sales compared to 24% of sales for the three months ended
March 31, 1995. Selling, general and administration expenses increased as a
percentage of sales due to the lower volume. Depreciation and amortization
expenses for the three months ended March 31, 1996 decreased 14% to $292,000
compared to $339,000 in 1995. Expenditures for capital equipment were $111,000
for the three months ended March 31, 1996 compared to $102,000 for the three
months ended March 31, 1995. The Company incurred interest expense of zero in
the first three months of 1996 and $18,000 in the same period of 1995.
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<PAGE> 8
Liquidity and Capital Resources
- -------------------------------
On April 5, 1996, the Company extended its 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. Interest on the loan is at
prime. The note contains restrictive covenants including provisions relating to
profitability and net worth. As of March 31, 1996, 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.
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
March 31, 1996.
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<PAGE> 9
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SPIRE CORPORATION
(Registrant)
By: /s/ Roger G. Little 14 May 1996
---------------------------------- -----------
Roger G. Little Date
President, Chief Executive Officer
and Chairman of the Board
By: /s/ Richard S. Gregorio 14 May 1996
---------------------------------- -----------
Richard S. Gregorio Date
Vice President and Chief Financial
Officer, Treasurer, Clerk and
Principal Accounting Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SPIRE CORP FOR THE THREE MONTHS ENDED MARCH 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 290,861
<SECURITIES> 0
<RECEIVABLES> 2,842,415
<ALLOWANCES> 95,000
<INVENTORY> 1,458,692
<CURRENT-ASSETS> 4,787,510
<PP&E> 22,091,574
<DEPRECIATION> 17,596,605
<TOTAL-ASSETS> 10,153,984
<CURRENT-LIABILITIES> 2,536,807
<BONDS> 0
<COMMON> 35,604
0
0
<OTHER-SE> 7,581,573
<TOTAL-LIABILITY-AND-EQUITY> 10,153,984
<SALES> 0
<TOTAL-REVENUES> 3,837,899
<CGS> 0
<TOTAL-COSTS> 3,005,937
<OTHER-EXPENSES> 1,103,910
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,507
<INCOME-PRETAX> (266,441)
<INCOME-TAX> 0
<INCOME-CONTINUING> (266,441)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (266,441)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> 0
</TABLE>
